DEF 14A 1 s112663_def14a.htm DEF 14A

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 

Filed by the Registrant x

Filed by a Party other than the Registrant ¨

Check the appropriate box:

 

  ¨ Preliminary Proxy Statement
  ¨ Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
  x Definitive Proxy Statement
  ¨ Definitive Additional Materials
  ¨ Soliciting Material Pursuant to §240.14a-12

 

I-AM Capital Acquisition Company 

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

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  ¨ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

  (1) Title of each class of securities to which transaction applies: 
     
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  (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 

 

  (4) Proposed maximum aggregate value of transaction: 

 

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I-AM CAPITAL ACQUISITION COMPANY
1345 Avenue of the Americas, 11th Floor

New York, New York 10105

 

Dear I-AM Capital Acquisition Company Stockholders:

 

You are cordially invited to attend the special meeting in lieu of an annual meeting of stockholders (the “special meeting”) of I-AM Capital Acquisition Company, or I-AM Capital, on October 4, 2018, at 10:00 a.m., Eastern time, at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, 11th Floor, New York, New York.

 

At the special meeting, I-AM Capital’s stockholders will be asked to consider and vote upon a proposal, which is referred to herein as the “Business Combination Proposal,” to approve a share subscription agreement, dated May 3, 2018, by and among Smaaash Entertainment Private Limited, or Smaaash, I-AM Capital and the other parties thereto, as amended (the “Subscription Agreement”). If the Business Combination Proposal is approved and I-AM Capital consummates the transactions contemplated thereby, which we refer to collectively as the “Transaction,” I-AM Capital will invest in Smaaash the funds held in the trust account that holds the proceeds of its initial public offering, less certain transaction expenses, amounts used to pay I-AM Capital stockholders who properly exercise their redemption rights in connection with the vote to approve the Business Combination Proposal (the “Investment Amount”), in exchange for equity shares of Smaaash. We estimate that the equity shares issued by Smaaash in exchange for the Investment Amount (assuming an Investment Amount of $49.0 million) will constitute up to approximately 27.53% of the issued share capital of Smaaash, provided that such percentage shall decrease proportionately depending on the number of shares redeemed by I-AM Capital’s public stockholders. The contribution by I-AM Capital of the Investment Amount to Smaaash in exchange for Smaaash’s equity shares is referred to herein as the “Investment.”

 

In connection with the Investment, I-AM Capital shall change its name to “Smaaash Entertainment Inc.” and it shall receive the right under the master license and distribution agreement, by and between I-AM Capital and Smaaash (the “Master Distribution Agreement”), and the master franchise agreement, by and between I-AM Capital and Smaaash (the “Master Franchise Agreement”), to become (i) the sole distributor of Smaaash games in North America and South America and (ii) the master franchisee for Smaaash centers in North America and South America. After the Transaction, I-AM Capital shall also pursue acquisitions within the active entertainment industry in the United States with the objective of facilitating the transformation of Smaaash from an India focused company to a globally recognized brand within the active entertainment industry.

 

In connection with, and as a condition to the Investment, a Shareholders’ Agreement (the “Shareholders’ Agreement”) that I-AM Capital previously entered into with Smaaash and other significant shareholders of Smaaash, pursuant to which it will have the right, among other things, to appoint two directors and jointly consent to the appointment of three additional directors to the board of directors of Smaaash (which board may have up to 10 directors), will become effective.

 

Copies of the Subscription Agreement, the Master Distribution Agreement, the Master Franchise Agreement and the Shareholders’ Agreement are attached to the accompanying proxy statement as Annex A, Annex B, Annex C and Annex D, respectively.

 

I-AM Capital stockholders will also be asked to consider and vote upon the following proposals:

 

  The Certificate Amendment Proposal  — a proposal to amend and restate our second amended and restated certificate of incorporation, or “Restated Certificate,” to (i) change our name from “I-AM Capital Acquisition Company” to “Smaaash Entertainment Inc.” and (ii) change certain provisions related to our transition from a blank check company to an operating company, as reflected in the proposed third amended and restated certificate of incorporation, a copy of which is attached to the accompanying proxy statement as Annex E (the “Certificate Amendment Proposal”);

 

  The Director Election Proposal  — a proposal to re-elect four (4) current directors and elect a director nominee, each named in the accompanying proxy statement (the “Director Election Proposal”);

 

  Incentive Plan Proposal — a proposal to adopt and approve the I-AM Capital 2018 Equity Incentive Plan (the “Incentive Plan Proposal”). A copy of the I-AM Capital 2018 Equity Incentive Plan is attached to the accompanying proxy statement as Annex F;

 

  The Auditor Ratification Proposal  — a proposal to ratify the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm for the fiscal year ending May 31, 2019 (the “Auditor Ratification Proposal”); and

 

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  The Adjournment Proposal — a proposal to adjourn the special meeting to a later date or dates, if necessary or desirable, to permit further solicitation and vote of proxies, in the event that there are not sufficient votes to approve one or more proposals presented at the special meeting or that one or more closing conditions under the Subscription Agreement will not be satisfied (the “Adjournment Proposal”).

 

Each of these proposals is more fully described in the accompanying proxy statement.

 

Under the Subscription Agreement, the closing of the Transaction is subject to a number of conditions, including that I-AM Capital’s stockholders approve the Business Combination Proposal. If these conditions are not satisfied, then Smaaash will not be required to consummate the Transaction.

 

I-AM Capital’s common stock, rights and warrants are currently quoted on the NASDAQ Capital Market, or NASDAQ, under the symbols “IAM,” “IAMXR” and “IAMXW,” respectively. I-AM Capital intends to apply to change its ticker symbol to “SMSH” in connection with the closing of the Transaction, in which case its common stock and warrants will be quoted on NASDAQ under the symbols “SMSH,” and “SMSHW,” respectively. The rights expire upon the consummation of the Transaction.

 

Pursuant to I-AM Capital’s Restated Certificate, I-AM Capital is providing its public stockholders with the opportunity to redeem all or a portion of their shares of I-AM Capital common stock 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 Transaction, including interest, less taxes payable and up to $600,000 of working capital expenses, divided by the number of then outstanding shares of common stock that were sold as part of the units in I-AM Capital’s initial public offering, which are referred to collectively as public shares, subject to the limitations described herein. For illustrative purposes, based on funds in the trust account of approximately $52,780,000 on May 31, 2018 (excluding accrued interest set aside for working capital purposes), the estimated per share redemption price would have been approximately $10.15. Public stockholders are not required to affirmatively vote for or against the Transaction in order to redeem their shares for cash. This means that public stockholders who hold shares of I-AM Capital common stock on or before October 2, 2018 (two (2) business days before the special meeting) may elect to redeem their shares whether or not they are holders as of the record date, and whether or not they vote for the Business Combination Proposal. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming his, her or its shares with respect to more than an aggregate of 15% of the public shares. Holders of I-AM Capital’s outstanding public warrants do not have redemption rights in connection with the Transaction. The holder of I-AM Capital shares issued prior to its initial public offering, which are referred to as “founder shares,” has agreed to waive its redemption rights with respect to its founder shares and any other shares it may hold in connection with the consummation of the Transaction, and the founder shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, I-AM Capital Partners LLC, which is our founder and is referred to as the “Sponsor,” owns approximately 22.92% of I-AM Capital’s issued and outstanding shares of common stock.

 

I-AM Capital’s board of directors has determined to issue a common stock dividend on all shares of I-AM Capital common stock that are outstanding at the end of the day immediately prior to the date of the closing of the Transaction, to each stockholder who beneficially owns such shares as of such time, on the condition that the stockholder of any such shares remains a stockholder immediately after the closing (the “Special Dividend”). The Sponsor, Maxim Group LLC, the underwriter of I-AM Capital’s initial public offering (“Maxim”), and Maxim’s affiliates, all of whom own shares of I-AM Capital common stock, have each agreed to waive their respective rights to receive the Special Dividend. The number of shares to be issued in the Special Dividend for each outstanding share shall be equal to 600,000 divided by the number of shares of common stock eligible to receive such dividend, which shall not include the shares of common stock held by the Sponsor, Maxim and its affiliates. In connection with the Special Dividend, the Sponsor has agreed to cancel a number of founder shares equal to the aggregate number of shares issued in the dividend. The Special Dividend will only be paid if and when the Transaction closes.

 

I-AM Capital is providing the proxy statement and accompanying proxy card and our Annual Report on Form 10-K for the fiscal year ended May 31, 2018, to our stockholders in connection with the solicitation of proxies to be voted at the special meeting and at any adjournments or postponements of the special meeting. Beginning on page 1 of the proxy statement we provide answers to frequently asked questions about the meeting. Whether or not you plan to attend the special meeting, we urge you to read this proxy statement and our Annual Report on Form 10-K carefully. Please pay particular attention to the section entitled “Risk Factors," which begins on page 12.

 

After careful consideration, I-AM Capital’s board of directors has unanimously approved the Subscription Agreement, the Shareholders’ Agreement and the forms of the Master Distribution Agreement and the Master Franchise Agreement previously provided to the board of directors and unanimously recommends that its stockholders vote FOR the Business Combination Proposal, FOR the Certificate Amendment Proposal, FOR each director and director nominee set forth in the Director Election Proposal, FOR the Incentive Plan Proposal, FOR the Auditor Ratification Proposal, and, if presented, FOR the Adjournment Proposal. When you consider the board recommendation of these proposals, you should keep in mind that I-AM Capital’s directors and officers have interests in the Transaction that may conflict with your interests as a stockholder. See the section entitled “Proposal No. 1 — The Business Combination Proposal — Interests of I-AM Capital’s Directors or Executive Officers in the Transaction.”

 

Approval of each of the Business Combination Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the special meeting. Approval of the Certificate Amendment Proposal requires the affirmative vote of a majority of the outstanding shares of I-AM Capital’s common stock. Approval of the directors and the director nominee set forth in the Director Election Proposal requires the affirmative vote of a plurality of the votes cast by the stockholders present in person or represented by proxy at the special meeting and entitled to vote thereon. The boards of directors of I-AM Capital and Smaaash have already approved the Subscription Agreement and the Shareholders’ Agreement and the forms of the Master Distribution Agreement and the Master Franchise Agreement.

 

In no event, will I-AM Capital redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001 immediately prior to the Investment.

 

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The Sponsor and I-AM Capital’s executive officers and independent directors have agreed to vote their founder shares and any other shares held by them in favor of the Business Combination Proposal. Your vote is very important. If you are a registered stockholder, please submit proxies to have your shares voted as soon as possible by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided to ensure that your vote is counted, regardless of whether you expect to attend the special meeting in person. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares, are represented and voted at the special meeting. A failure to vote your shares is the equivalent of a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the other proposals for the special meeting.

 

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of each of the proposals presented at the special meeting. With respect to the proposals for the special meeting, if you fail to return your proxy card or fail to submit your proxy by telephone or over the Internet, or fail to instruct your bank, broker or other nominee how to vote, and do not attend the special meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the same effect as a vote against the Certificate Amendment Proposal, but will have no effect on the other proposals. If you are a stockholder of record and you attend the special meeting and wish to vote in person, you may withdraw your proxy and vote in person.

 

I-AM Capital’s board of directors has fixed the close of business on September 10, 2018, as the record date for the determination of stockholders entitled to notice of and to vote at the special meeting and at any adjournments or postponements thereof.

 

On behalf of the board of directors of I-AM Capital, I thank you for your support and we look forward to the successful completion of the Transaction.

 

    Sincerely,
     
September 19, 2018   /s/ F. Jacob Cherian
    F. Jacob Cherian
Chief Executive Officer

 

This proxy statement is dated September 19, 2018, and is first being mailed to stockholders of I-AM Capital on or about September 24, 2018.

 

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I-AM CAPITAL ACQUISITION COMPANY
1345 Avenue of the Americas, 11th Floor
New York, New York 10105

 

NOTICE OF SPECIAL MEETING IN LIEU OF AN ANNUAL MEETING OF STOCKHOLDERS
OF I-AM CAPITAL ACQUISITION COMPANY
TO BE HELD ON OCTOBER 4, 2018

 

To the Stockholders of I-AM Capital Acquisition Company:

 

NOTICE IS HEREBY GIVEN that a special meeting in lieu of an annual meeting of stockholders (the “special meeting”) of I-AM Capital Acquisition Company, a Delaware corporation, which we refer to as “we,” “us,” “our, “I-AM Capital” or the “Company”), will be held at 10:00 a.m., Eastern time, on October 4, 2018, at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, 11th Floor, New York, New York. You are cordially invited to attend the special meeting for the following purposes:

 

(1) The Business Combination Proposal  — to consider and vote upon a proposal to approve the share subscription agreement, dated May 3, 2018, by and between I-AM Capital, Smaaash Entertainment Private Limited, a company incorporated in the Republic of India (“Smaaash”) and the other parties thereto, as amended (the “Subscription Agreement”), the master license and distribution agreement, by and between I-AM Capital and Smaaash (the “Master Distribution Agreement”), and the master franchise agreement, by and between I-AM Capital and Smaaash (the “Master Franchise Agreement”) and the Shareholders’ Agreement with Smaaash, I-AM Capital and other significant shareholders of Smaaash (the “Shareholders’ Agreement”) and the transactions contemplated by such agreements (the “Transaction” and the proposal, the “Business Combination Proposal”). Copies of the Subscription Agreement, the Master Distribution Agreement, the Master Franchise Agreement and the Shareholders’ Agreement are attached to the accompanying proxy statement as Annex A, Annex B, Annex C and Annex D, respectively;

 

(2) The Certificate Amendment Proposal — to consider and vote upon a proposal to amend and restate our second amended and restated certificate of incorporation (the “Restated Certificate”) to (i) change our name from “I-AM Capital Acquisition Company” to “Smaaash Entertainment Inc.” and (ii) change certain provisions related to our transition from a blank check company to an operating company, as reflected in the proposed third amended and restated certificate of incorporation, a copy of which is attached to the accompanying proxy statement as Annex E (the “Certificate Amendment Proposal”);

 

(3) The Director Election Proposal — to re-elect four (4) directors and elect a fifth director, each named in the accompanying proxy statement (the “Director Election Proposal”);

 

(4) The Incentive Plan Proposal — to consider and vote upon a proposal to approve and adopt the I-AM Capital 2018 Equity Incentive Plan (the “Incentive Plan Proposal”). A copy of the I-AM Capital 2018 Equity Incentive Plan is attached to the accompanying proxy statement as Annex F;

 

(5) The Auditor Ratification Proposal  — to ratify the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm for the fiscal year ending May 31, 2019 (the “Auditor Ratification Proposal”);

 

(6) The Adjournment Proposal — to consider and vote upon a proposal to adjourn the special meeting to a later date or dates, if necessary or desirable, to permit further solicitation and vote of proxies, in the event that there are not sufficient votes to approve one or more proposals presented at the special meeting or that one or more closing conditions under the Subscription Agreement will not be satisfied (the “Adjournment Proposal”); and

 

(7) to consider and transact such other procedural matters as may properly come before the special meeting or any adjournment or postponement thereof.

 

Each of these proposals is more fully described in the accompanying proxy statement, which each stockholder is encouraged to review carefully.

 

Only holders of record of I-AM Capital’s common stock at the close of business on September 10, 2018, the record date, are entitled to notice of the special meeting and to vote at the special meeting and any adjournments or postponements of the special meeting. A complete list of I-AM Capital stockholders of record entitled to vote at the special meeting will be available for ten days before the special meeting at I-AM Capital’s principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting.

 

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Pursuant to I-AM Capital’s Restated Certificate, I-AM Capital is providing its public stockholders with the opportunity to redeem their shares of I-AM Capital common stock for cash equal to their pro rata share of the aggregate amount on deposit in the trust account which holds the proceeds of I-AM Capital’s initial public offering as of two business days prior to the consummation of the Transaction, including interest, less taxes payable and up to $600,000 of working capital expenses, upon the closing of the Transaction. For illustrative purposes, based on funds in the trust account of approximately $52,780,000 on May 31, 2018 (excluding accrued interest set aside for working capital purposes), and assuming that accrued interest and other funds set aside in a separate account are sufficient to pay estimated taxes payable of $10,000 and working capital expenses, the estimated per share redemption price would have been approximately $10.15. Public stockholders are not required to affirmatively vote for or against the Transaction in order to redeem their shares for cash. This means that public stockholders who hold shares of I-AM Capital common stock on or before October 2, 2018 (two (2) business days before the special meeting) may elect to redeem their shares whether or not they are holders as of the record date, and whether or not they vote for the Business Combination Proposal. A public stockholder, together with any of his, her or its affiliates or any other person with whom he, her or it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming his, her or its shares with respect to more than an aggregate of 15% of the public shares. The holder of I-AM Capital shares issued prior to its initial public offering (“founder shares”) has agreed to waive its redemption rights with respect to its founder shares and any other shares it may hold in connection with the consummation of the Transaction, and the founder shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, I-AM Capital Partners LLC, I-AM Capital’s sponsor and owner of the founder shares owns approximately 22.92% of I-AM Capital’s issued and outstanding shares of common stock.

 

I-AM Capital’s board of directors has determined to issue a common stock dividend on all shares of I-AM Capital common stock that are outstanding at the end of the day immediately prior to the date of the closing of the Transaction, to each stockholder who beneficially owns such shares as of such time, on the condition that the stockholder of any such shares remains a stockholder immediately after the closing (the “Special Dividend”). The Sponsor, Maxim Group LLC, the underwriter of I-AM Capital’s initial public offering (“Maxim”), and Maxim’s affiliates, all of whom own shares of I-AM Capital common stock, have each agreed to waive their respective rights to receive the Special Dividend. The number of shares to be issued in the Special Dividend for each outstanding share shall be equal to 600,000 divided by the number of shares of common stock eligible to receive such dividend, which shall not include the shares of common stock held by the Sponsor, Maxim and its affiliates. In connection with the Special Dividend, the Sponsor has agreed to cancel a number of founder shares equal to the aggregate number of shares issued in the dividend. The Special Dividend will only be paid if and when the Transaction closes.

 

The Transaction will be consummated only if a majority of the outstanding shares of I-AM Capital common stock are voted in favor of the Business Combination Proposal. I-AM Capital has no specified maximum redemption threshold under its Restated Certificate. Any redemptions of public shares by public stockholders will decrease the amount in I-AM Capital’s trust account. In no event, however, will I-AM Capital redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001 immediately prior to the Transaction.

 

Your attention is directed to the proxy statement accompanying this notice (including the annexes thereto) for a more complete description of the Transaction and related transactions and each of our proposals. We encourage you to carefully read the proxy statement and the accompanying Annual Report on Form 10-K for the fiscal year ended May 31, 2018.

 

  By Order of the Board of Directors
   
September 19, 2018 Sincerely,
   
   /s/ F. Jacob Cherian
  F. Jacob Cherian
  Chief Executive Officer

 

This notice was mailed on or about September 24, 2018.

 

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TABLE OF CONTENTS

 

  Page
CONVENTIONS WHICH APPLY TO THIS PROXY STATEMENT ix
IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES ix
INDUSTRY AND MARKET DATA ix
FREQUENTLY USED TERMS ix
QUESTIONS AND ANSWERS ABOUT THE PROPOSALS 1
SUMMARY OF THE PROXY STATEMENT 10
RISK FACTORS 15
SELECTED HISTORICAL FINANCIAL INFORMATION OF SMAAASH 41
EXCHANGE RATES 42
COMPARATIVE SHARE INFORMATION 42
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS 43
SPECIAL MEETING OF I-AM CAPITAL STOCKHOLDERS 45
PROPOSAL NO. 1 — THE BUSINESS COMBINATION PROPOSAL 50
PROPOSAL NO. 2 — THE CERTIFICATE AMENDMENT PROPOSAL 65
PROPOSAL NO. 3—THE DIRECTOR ELECTION PROPOSAL 67
PROPOSAL NO. 4 — THE INCENTIVE PLAN PROPOSAL 68
PROPOSAL NO. 5 — THE AUDITOR RATIFICATION PROPOSAL 74
PROPOSAL NO. 6 — THE ADJOURNMENT PROPOSAL 75
UNAUDITED PRO FORMA FINANCIAL INFORMATION 76
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS - REDEMPTION OF I-AM CAPITAL COMMON STOCK 78
MATERIAL INDIAN TAX CONSIDERATIONS 82
INFORMATION ABOUT I-AM CAPITAL 84
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF I-AM CAPITAL 94
INDUSTRY OVERVIEW 97
SMAAASH’S BUSINESS 102
SMAAASH MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 119
SMAAASH’S MANAGEMENT 133
MANAGEMENT AFTER THE TRANSACTION 135
COMPARISON OF RIGHTS AS A HOLDER OF I-AM CAPITAL COMMON STOCK AND THE RIGHTS OF THE COMPANY AS A HOLDER OF SMAAASH EQUITY SHARES 139
DESCRIPTION OF SMAAASH SHARE CAPITAL 153
BENEFICIAL OWNERSHIP OF SECURITIES 162
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 164
PRICE RANGE OF SECURITIES AND DIVIDENDS 165
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS 166
APPRAISAL RIGHTS 166
ENFORCEABILITY OF CIVIL LIABILITIES 166
DELIVERY OF DOCUMENTS TO STOCKHOLDERS 167
TRANSFER AGENT AND REGISTRAR 167
SUBMISSION OF STOCKHOLDER PROPOSALS 167
FUTURE STOCKHOLDER PROPOSALS 168
WHERE YOU CAN FIND MORE INFORMATION 168
INDEX TO FINANCIAL STATEMENTS F-1

 

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ANNEXES

 

Annex A — Subscription Agreement, as amended* A-1
Annex B — Master Distribution Agreement B-1
Annex C — Master Franchise Agreement C-1
Annex D — Shareholders’ Agreement D-1
Annex E — Third Amended and Restated Certificate of Incorporation E-1
Annex F — I-AM Capital 2018 Equity Incentive Plan F-1

 

* The schedules and exhibits to the Subscription Agreement have been omitted pursuant to Item 601(b)(2) of Regulation S-K. I-AM Capital hereby agrees to furnish supplementally a copy of any omitted schedules or exhibits to the staff of the SEC upon request.

 

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CONVENTIONS WHICH APPLY TO THIS PROXY STATEMENT

 

In this proxy statement, unless otherwise specified or the context otherwise requires:

 

  "$,” “US$” and “U.S. dollar” each refer to the United States dollar; and
  “Rs.” “INR” and “rupee” each refer to the Indian rupee, the official currency of the Republic of India.

 

IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

 

Smaaash’s audited financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and referred to in this proxy statement as “IFRS.” 

 

Smaaash refers in various places within this proxy statement to EBITDA which is a non-IFRS measure that is calculated as earnings before interest, tax and depreciation and amortization and more fully explained in “Smaaash’s Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The presentation of this non-IFRS information is not meant to be considered in isolation or as a substitute for Smaaash’s consolidated financial results prepared in accordance with IFRS.

 

INDUSTRY AND MARKET DATA

 

In this proxy statement, Smaaash relies on and refers to information and statistics regarding market shares in the sectors in which it competes and other industry data. Smaaash obtained this information and statistics from third-party sources, including reports by independent market research firms. Smaaash has supplemented this information where necessary with information from discussions with Smaaash customers and its own internal estimates, taking into account publicly available information about other industry participants and Smaaash’s management’s best view as to information that is not publicly available. 

 

FREQUENTLY USED TERMS

 

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “I-AM Capital” refer to I-AM Capital Acquisition Company.

 

In this document:

 

“CPC” refers to the Code of Civil Procedure, 1908 of India.

 

“equity shares” means the equity shares of Smaaash with a face value of Rs. 10 per equity share.

 

“founder shares” means the shares of I-AM Capital common stock issued to the initial stockholder prior to I-AM Capital’s initial public offering.

  

“GoI” refers to the Government of India.

 

“I-AM Capital” means I-AM Capital Acquisition Company, a Delaware corporation.

 

“I-AM Capital common stock” means common stock, par value $0.0001 per share, of I-AM Capital.

 

“IFRS” refers to International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB).

 

“initial stockholder” means the Sponsor.

 

“Investment” means the investment of cash by I-AM Capital in Smaaash in exchange for equity shares of Smaaash, pursuant to the terms of the Subscription Agreement.

 

“Investment Amount” means the amount of funds held in the trust account that holds the proceeds of I-AM Capital’s initial public offering, less certain transaction expenses and amounts used to pay I-AM Capital stockholders who properly exercise their redemption rights in connection with the vote to approve the Business Combination Proposal, that is invested into Smaaash in the Transaction.

 

“IPO” means the initial public offering of I-AM Capital.

 

“Master Distribution Agreement” means the Master License and Distribution Agreement by and between Smaaash and I-AM Capital.

 

“Master Franchise Agreement” means the Master Franchise Agreement by and between Smaaash and I-AM Capital.

 

“NASDAQ” means the NASDAQ Stock Market, LLC.

 

“private placement rights” means the rights included in the private placement units, each of which is exercisable for 1/10 of a share of I-AM Capital common stock, in accordance with its terms.

 

“private placement shares” means the shares of I-AM Capital common stock included in the private placement units.

 

“private placement units” means the units issued to the Sponsor in a private placement occurring simultaneously with the closing of I-AM Capital’s initial public offering.

 

“private placement warrants” means the warrants to purchase shares of I-AM Capital common stock included in the private placement units.

 

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“public rights” means the rights included in the public units, each of which is exercisable for 1/10 of a share of I-AM Capital common stock, in accordance with its terms.

 

“public shares” means shares of I-AM Capital common stock issued as part of the public units.

 

“public stockholders” means the holders of our public shares, including our initial stockholder and members of our management team to the extent our initial stockholder 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” shall only exist with respect to such public shares.

 

“public units” means the units sold in I-AM Capital’s initial public offering.

 

“public warrants” means the warrants included in the public units, each of which is exercisable for one share of I-AM Capital common stock, in accordance with its terms.

 

“RBI” means the Reserve Bank of India.

 

“Shareholders’ Agreement” means the Shareholders’ Agreement, dated as of May 3, 2018, by and among Smaaash, I-AM Capital and the other parties thereto.

 

“SEBI” means the Securities and Exchange Board of India.

 

“SEC” means the U.S. Securities Exchange Commission.

 

“Sponsor” means I-AM Capital Partners LLC, a Delaware limited liability company.

 

“Smaaash” means Smaaash Entertainment Private Limited, a private limited company organized under the laws of the Republic of India.

 

“Smaaash Founders” means AHA Holdings Private Limited and Mr. Shripal Morakhia.

 

“Subscription Agreement” means the Share Subscription Agreement, dated as of May 3, 2018, by and among Smaaash, I-AM Capital and the other parties thereto, as amended by the Amendment Cum Addendum to the Share Subscription Agreement dated May 3, 2018, entered into on June 22, 2018 and the Second Amendment Cum Addendum to the Share Subscription Agreement dated May 3, 2018, entered into on August 2, 2018.

 

“Transaction” means the transactions contemplated by the Subscription Agreement.

 

“trust account” means the trust account that holds a portion of the proceeds of I-AM Capital’s initial public offering and the concurrent sale of the private placement units to the Sponsor.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS

 

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the special meeting in lieu of an annual meeting of stockholders (the “special meeting”), including with respect to the proposed Transaction. The following questions and answers may not include all the information that is important to I-AM Capital stockholders. Stockholders are urged to read carefully this entire proxy statement, including the annexes and the other documents referred to herein. You should also carefully read the accompanying Annual Report on Form 10-K for the fiscal year ended May 31, 2018.

 

  Q: Why am I receiving this proxy statement?

 

  A:

I-AM Capital has entered into the Subscription Agreement with Smaaash and the other parties thereto pursuant to which I-AM Capital has agreed to invest the Investment Amount in exchange for equity shares of Smaaash. I-AM Capital estimates that the shares issued by Smaaash, assuming an Investment Amount of $49.0 million, will constitute up to approximately 27.53% of the issued share capital of Smaaash, provided that such percentage shall decrease proportionately depending on the number of shares redeemed by I-AM Capital’s public stockholders. See “Summary —Smaaash Equity Shares to be Issued in the Transaction” and “Unaudited Pro Forma Condensed Financial Information" for further information. A copy of the Subscription Agreement is attached to this proxy statement as Annex A.

 

In connection with the Investment, I-AM Capital shall change its name to “Smaaash Entertainment Inc.” and it shall receive the right under the master license and distribution agreement, by and between I-AM Capital and Smaaash (the “Master Distribution Agreement”), and the master franchise agreement, by and between I-AM Capital and Smaaash (the “Master Franchise Agreement”), to become (i) the sole distributor of Smaaash games in North America and South America and (ii) the master franchisee for Smaaash centers in North America and South America. After the Transaction, I-AM Capital shall also pursue acquisitions within the active entertainment industry in the United States with the objective of facilitating the transformation of Smaaash from an India focused company to a globally recognized brand within the active entertainment industry.

 

In connection with, and as a condition to, the Investment, the Shareholders’ Agreement that I-AM Capital previously entered into, pursuant to which it will have the right to, among other things, appoint two directors and jointly consent to the appointment of three additional directors to the board of directors of Smaaash (which board may have up to 10 directors), will become effective. Copies of the Master Distribution Agreement, the Master Franchise Agreement and the Shareholders’ Agreement are attached to this proxy statement as Annex B, Annex C, and Annex D, respectively. 

 

I-AM Capital stockholders are being asked to consider and vote upon a proposal to approve the Transaction, the Subscription Agreement, the Master Distribution Agreement and the Master Franchise Agreement and the transactions contemplated thereby, in addition to the other proposals set forth immediately below. This proxy statement and its annexes contain important information about the proposed Transaction and the other matters to be acted upon at the special meeting. You should read this proxy statement and its annexes carefully and in their entirety. You should also carefully read the accompanying Annual Report on Form 10-K for the year ended May 31, 2018.

 

In addition, I-AM Capital has agreed to issue a Special Dividend of common stock on all shares of I-AM Capital common stock that are outstanding at the end of the day immediately prior to the date of the closing of the Transaction, to each stockholder who beneficially owns such shares as of such time (other than the Sponsor, Maxim and its affiliates, who have agreed to waive their rights to such dividend) on the condition that the stockholder of any such shares remains a stockholder immediately after the closing. The number of shares to be issued in the Special Dividend for each outstanding share shall be equal to 600,000 divided by the number of shares of common stock eligible to receive such dividend, which shall not include the shares of common stock held by the Sponsor, Maxim and its affiliates. In connection with the Special Dividend, the Sponsor has agreed to cancel a number of founder shares equal to the aggregate number of shares issued in the Special Dividend. The Special Dividend will only be paid if and when the Transaction closes. To the extent you transfer or redeem your shares of I-AM Capital common stock prior to the date of the closing of the Transaction, you will not receive the Special Dividend.

 

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its annexes.

  

  Q: What is being voted on at the special meeting?

 

  A: Below are proposals on which I-AM Capital stockholders are being asked to vote:

 

  1. To approve the Subscription Agreement, the Shareholders’ Agreement, the Master Distribution Agreement, the Master Franchise Agreement and the transactions contemplated thereby (this proposal is referred to herein as the “Business Combination Proposal”);
  2. To approve an amendment to our Restated Certificate to (i) change our name from “I-AM Capital Acquisition Company” to “Smaaash Entertainment Inc.” and (ii) change certain provisions related to our transition from a blank check company to an operating company (this proposal is referred to herein as the “Certificate Amendment Proposal”);
  3. To re-elect four current directors and elect one new director nominee to the Board, to serve on our board of directors until the second succeeding annual meeting of stockholders in the case of the current directors, and until the next annual meeting of stockholders in the case of the director nominee (this proposal is referred to herein as the “Director Election Proposal”);
  4. To approve and adopt the I-AM Capital 2018 Equity Incentive Plan (this proposal is referred to herein as the “Incentive Plan Proposal”);

 

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  5. To ratify the appointment of Prager Metis CPAs, LLC as our independent registered public accounting firm for the fiscal year ending May 31, 2019 (this proposal is referred to herein as the “Auditor Ratification Proposal”); and
  6. To approve the adjournment of the special meeting to a later date or dates, if I-AM Capital determines that there are not sufficient votes to approve one or more proposals presented at the special meeting or that one or more closing conditions under the Subscription Agreement will not be satisfied (this proposal is referred to herein as the “Adjournment Proposal”).

 

  Q: Are the proposals conditioned on one another?

 

  A: The Certificate Amendment Proposal and the election of Shripal Morakhia, the director nominee, as a director are conditioned on the approval of the Business Combination Proposal.  The Incentive Plan Proposal, the Auditor Ratification Proposal and the Adjournment Proposal, do not require the approval of any other proposal to be effective.  It is important for you to note that in the event that the Business Combination Proposal is not approved, then I-AM Capital will not consummate the Transaction. If I-AM Capital does not consummate the Transaction and fails to complete an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period to consummate a business combination), we will be required to dissolve and liquidate our trust account.

 

  Q: Why is I-AM Capital proposing the Business Combination Proposal?

 

  A: I-AM Capital was organized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. In particular, it has sought to focus on companies in India, though it is not limited to any particular industry or sector.

 

I-AM Capital consummated its initial public offering on August 22, 2017. Approximately $50.8 million of the proceeds of its initial public offering and the private placement of private units was placed in a trust account immediately following the initial public offering (currently $52.8 million after the undewriter partially exercised its over-allotment option), in accordance with I-AM Capital’s Restated Certificate, will be released upon the consummation of the Transaction. See the question entitled “What happens to the funds held in the trust account upon consummation of the Transaction?”

 

The Transaction constitutes the initial business combination of I-AM Capital. Therefore, under I-AM Capital’s Restated Certificate, it is providing all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of the Transaction.

 

  Q: What will happen in the Transaction?

 

  A:

At the closing of the Transaction, I-AM Capital will invest the Investment Amount in Smaaash in exchange for equity shares of Smaaash. I-AM Capital estimates that the shares issued by Smaaash, assuming an Investment Amount of $49.0 million, will equal up to approximately 27.53% of the issued share capital of Smaaash depending on the number of shares redeemed by I-AM Capital’s public stockholders. As a result of the Transaction, I-AM Capital will become the largest outside shareholder of Smaaash, second only to the founder of Smaaash.

 

In connection with the Investment, I-AM Capital shall change its name to “Smaaash Entertainment Inc.” and it shall receive the right under the Master Distribution Agreement and the Master Franchise Agreement to become (i) the sole distributor of Smaaash games in North America and South America and (ii) the master franchisee for Smaaash centers in North America and South America. After the Transaction, I-AM Capital shall also pursue acquisitions within the active entertainment industry in the United States with the objective of facilitating the transformation of Smaaash from an India focused company to a globally recognized brand within the active entertainment industry.

 

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  Q: What equity stake will I-AM Capital hold in Smaaash after the closing?

 

  A: I-AM Capital estimates that, upon completion of the Transaction, I-AM Capital will receive an ownership interest of up to approximately 27.53% of the issued share capital of Smaaash, depending on the number of public shares that are redeemed. See “Summary — Smaaash Equity Shares to be Issued in the Transaction” and “Unaudited Pro Forma Condensed Financial Information" for further information. This percentage assumes that (a) I-AM Capital invests $49.0 million in Smaaash and 0% of I-AM Capital stockholders properly exercise their redemption rights in connection with the vote to approve the Business Combination Proposal. If the actual facts are different than these assumptions, the percentage ownership retained by I-AM Capital will be different.
     
    The Smaaash Founders have also agreed that within six (6) months following the Closing Date, they shall transfer all of their ownership interest in Smaaash (representing 33.6% of the share capital of Smaaash on a fully diluted basis as of June 22, 2018 and which will represent 24.34% of the share capital of Smaaash on a fully diluted basis immediately after the Investment) to I-AM Capital in exchange for newly issued shares of common stock of I-AM Capital in an amount which would enable the Smaaash Founders to retain their 24.34% post-Investment ownership interest in Smaaash through their interest in I-AM Capital. Copy of the Amendment cum Addendum to the Subscription Agreement which reflects the above agreement of I-AM Capital and Smaaash Founders is included in Annex A.

  

The following tables illustrate varying ownership levels of Smaaash based on the assumptions described above but assuming varying levels of investments and redemptions by I-AM Capital stockholders on the Closing Date and upon the transfer by the Smaaash Founders of their ownership in Smaaash six (6) months after the Closing Date:

 

On the Closing Date:                
Investment Amount (US Dollars in Millions)  $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders   96.27%   83.76%   78.66%   72.47%
I-AM Capital   3.73%   16.24%   21.34%   27.53%

 

After the Transfer by the Smaaash Founders

Six Months After the Closing Date:

                
Investment Amount (US Dollars in Millions)  $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders (Less Founders)   71.93%   59.42%   54.32%   48.13%
I-AM Capital   28.07%   40.58%   45.68%   51.87%

 

You should note that depending on the level of redemptions by the I-AM Capital stockholders, I-AM Capital may own less than 50% of the share capital of Smaaash on a fully diluted basis even after the transfer by the Smaaash Founders of all of their equity ownership to I-AM Capital.

 

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  Q: Has I-AM Capital obtained a fairness opinion in connection with the Investment?

 

  A: No.

 

  Q: What conditions must be satisfied to complete the Transaction?

 

  A: There are a number of closing conditions in the Subscription Agreement, including that I-AM Capital stockholders approve the Business Combination Proposal.  For a summary of the conditions that must be satisfied or waived prior to completion of the Transaction, see the section entitled “Proposal No. 1 —The Business Combination Proposal — The Subscription Agreement.”

 

  Q: Is there a limit on the number of shares I may redeem?

 

 

 

 

A: A public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) will be restricted from seeking redemption rights with respect to 15% or more of public shares of common stock. Accordingly, all shares in excess of 15% owned by a holder will not be redeemed for cash. On the other hand, a public stockholder who holds less than 15% of the public shares of common stock may redeem all of the public shares held by him for cash.

 

  Q: Why is I-AM Capital proposing the Director Election Proposal?

 

 

  

A: This special meeting is serving as I-AM Capital’s first annual meeting of stockholders. Under the By-laws of I-AM Capital the terms of four of our current directors will terminate at the special meeting and in connection with the Transaction, Shripal Morakhia will be nominated for election at the special meeting. I-AM Capital is proposing that you vote to re-elect the four current directors and elect the director nominee.

 

  Q: Why is I-AM Capital proposing the Incentive Plan Proposal?
     
  A: The purpose of the Incentive Plan is to enable us to offer eligible employees, directors and consultants, cash and stock-based incentive awards in order to attract, retain and reward these individuals and align their interests with the interests of our stockholders upon our transformation to an operating company upon consummation of the Transaction.

 

  Q: What happens if I sell my shares of I-AM Capital common stock before the special meeting?

 

  A: The record date for the special meeting is earlier than the date that the Transaction is expected to be completed. If you transfer your shares of I-AM Capital common stock after the record date, but before the special meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the special meeting. However, you will not be entitled to seek redemption of your shares because you will not be able to deliver them for cancellation upon consummation of the Transaction.

 

In addition, I-AM Capital has agreed to issue a Special Dividend of common stock on all shares of I-AM Capital common stock that are outstanding at the end of the day immediately prior to the date of the closing of the Transaction, to each stockholder who beneficially owns such shares as of such time (other than the Sponsor, Maxim and its affiliates, who have agreed to waive their rights to such dividend) on the condition that the stockholder of any such shares remains a stockholder immediately after the closing. The number of shares to be issued in the Special Dividend for each outstanding share shall be equal to 600,000 divided by the number of shares of common stock eligible to receive such dividend, which shall not include the shares of common stock held by the Sponsor, Maxim and its affiliates. In connection with the Special Dividend, the Sponsor has agreed to cancel a number of founder shares equal to the aggregate number of shares issued in the Special Dividend. The Special Dividend will only be paid if and when the Transaction closes. To the extent you transfer or redeem your shares of I-AM Capital common stock prior to the date of the closing of the Transaction, you will not receive the Special Dividend.

 

  Q: What vote is required to approve the proposals presented at the special meeting?

 

  A:

The approval of each of the Business Combination Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the special meeting and entitled to vote thereon. The approval of the Certificate Amendment Proposal requires the affirmative vote of a majority of the outstanding shares of I-AM Capital common stock. Accordingly, an I-AM Capital stockholder’s failure to vote by proxy or to vote in person at the special meeting, an abstention from voting, or the failure of an I-AM Capital stockholder who holds his or her shares in “street name” through a broker or other nominee to give voting instructions to such broker or other nominee (a “broker non-vote”) will result in that stockholder’s shares not being counted towards the number of I-AM Capital shares required to validly establish a quorum. Abstentions are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, or the Adjournment Proposal. Broker non-votes will have the effect of a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal or the Adjournment Proposal. We believe that the Auditor Ratification Proposal is a routine matter on which brokers and nominees can vote on behalf of their clients if clients do not furnish voting instructions.

 

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The affirmative vote of a plurality of the votes cast by the stockholders present in person or represented by proxy at the special meeting and entitled to vote thereon is required for the election of directors. A plurality means that the nominees receiving the most votes for election to a director position are elected as directors. Thus, the candidates with the most affirmative votes will be elected at the special meeting.

 

  Q: May I-AM Capital or the Sponsor, I-AM Capital’s directors, officers, advisors or their affiliates purchase shares in connection with the Transaction?

 

  A: In connection with the stockholder vote to approve the Transaction, our Sponsor, directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the consummation of the Transaction. However, they have no current commitments or plans to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares in such transactions. If they engage in such transactions, they will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act.

 

  Q: How many votes do I have at the special meeting of stockholder?

 

  A: I-AM Capital stockholders are entitled to one vote at the special meeting for each share of I-AM Capital common stock held of record as of the record date.  As of the close of business on the record date, there were 6,813,500 outstanding shares of I-AM Capital common stock.

 

  Q: What constitutes a quorum at the special meeting of stockholder?

 

  A: Holders of a majority of the voting power of all shares of capital stock of I-AM Capital issued and outstanding and entitled to vote at the special meeting, present in person or represented by proxy, constitute a quorum. In the absence of a quorum, a majority of I-AM Capital stockholders, present in person or represented by proxy, will have the power to adjourn the special meeting.

 

As of the record date for the special meeting, 3,406,751 shares of I-AM Capital common stock would be required to achieve a quorum.

 

  Q: How will I-AM Capital’s Sponsor, directors and officers vote with respect to the Business Combination Proposal?

 

  A: In connection with I-AM Capital’s initial public offering, I-AM Capital entered into agreements with our Sponsor and each of our directors and executive officers, pursuant to which each agreed to vote any shares of I-AM Capital common stock owned by them in favor of the Business Combination Proposal. Currently, our Sponsor, certain of its affiliates and our directors, together with the underwriter in our initial public offering, own approximately 23.68% of our issued and outstanding common stock, including all of the founder shares.  If holders of 100% of our shares of common stock are present in person or represented by proxy at the special meeting, we would need only an additional 1,793,250 shares of common stock, or 34.45% of our common stock issued and outstanding to our public stockholders, to be voted in favor of the Business Combination Proposal in order to have it approved (assuming no additional shares of common stock are purchased by our Sponsor on the market or in private transactions).

 

  Q: What interests do I-AM Capital’s current officers and directors have in the Transaction?

 

  A: I-AM Capital’s directors and executive officers may have interests in the Transaction that are different from, or in addition to or in conflict with, yours. These interests include:

 

  the appointment of Mr. F. Jacob Cherian and Mr. Suhel Kanuga, I-AM Capital’s executive officers and directors, as directors (but not officers) of Smaaash  even though Mr. Cherian and Mr. Kanuga will not receive any compensation for their services as directors of Smaaash;

 

  the continued indemnification of current directors and officers of I-AM Capital and the continuation of directors’ and officers’ liability insurance after the Transaction;

 

  unless I-AM Capital consummates an initial business combination, its officers, directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account;

 

  the Sponsor has agreed that the private placement units, and all of their underlying securities, will not be sold or transferred by it until I-AM Capital has completed a business combination;

 

  the Sponsor paid an aggregate of $25,000 for the founder shares and such securities will have a significantly higher value at the time of the Transaction;

 

  the Sponsor has agreed not to redeem any of the founder shares in connection with a stockholder vote to approve a proposed initial business combination;

 

  if I-AM Capital does not complete an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period of time to consummate a business combination), the proceeds from the sale of the private placement units will be included in the liquidating distribution to I-AM’s public stockholders and the private placement units, including the private placement shares, private placement rights and private placement warrants, purchased by the Sponsor will be worthless; and

 

  if the trust account is liquidated, including in the event I-AM Capital is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify I-AM Capital to ensure that the proceeds in the trust account are not reduced below (i) $10.15 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account by the claims of prospective target businesses with which I-AM has entered into an acquisition agreement or claims of any third party for services rendered or products sold to I-AM Capital, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the trust account.

 

These interests may influence I-AM Capital’s directors in making their recommendation that you vote in favor of the approval of the Transaction.

 

  Q: What happens if I vote against the Business Combination Proposal?

 

  A: If the Business Combination Proposal is not approved and I-AM Capital does not consummate a business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period to consummate a business combination), I-AM Capital will be required to dissolve and liquidate the trust account.

  

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  Q: Do I have redemption rights?

 

  A: If you are a holder of public shares, you may redeem your public shares for 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 Transaction, including interest, less taxes payable and up to $600,000 of working capital expenses, divided by the number of then outstanding public shares, subject to the limitations described herein. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming his, her or its shares with respect to more than an aggregate of 15% of the public shares. I-AM Capital’s founder, the Sponsor, has agreed to waive its redemption rights with respect to its founder shares and with respect to any other shares it may hold in connection with the consummation of the Transaction, and the founder shares will be excluded from the pro rata calculation used to determine the per-share redemption price. For illustrative purposes, based on funds in the trust account of approximately $52,780,000 on May 31, 2018 (excluding accrued interest set aside for working capital purposes) and assuming that accrued interest and other funds set aside in a separate account are sufficient to pay estimated taxes payable of $10,000 and working capital expenses, the estimated per share redemption price would have been approximately $10.15. Additionally, shares properly tendered for redemption will only be redeemed if the Transaction is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the trust account (including interest but net of taxes payable and up to $600,000 of working capital expenses (less up to $50,000 of such net interest to pay liquidation expenses)) in connection with the liquidation of the trust account.

 

  Q: Will how I vote affect my ability to exercise redemption rights?

 

  A: No. You may exercise your redemption rights whether you vote your shares for or against the Business Combination Proposal. As a result, the Transaction can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares with a less liquid trading market, and fewer stockholders. However, stockholder who choose not to redeem their shares will receive the Special Dividend.

 

  Q: How do I exercise my redemption rights?

 

  A: In order to exercise your redemption rights, you must, prior to 4:30 p.m. Eastern time on October 2, 2018 (two business days before the special meeting), (i) submit a written request to I-AM Capital’s transfer agent that I-AM Capital redeem your public shares for cash and (ii) deliver your stock to I-AM Capital’s transfer agent physically or electronically through the Depository Trust Company, or DTC. The address of the transfer agent, Continental Stock Transfer & Trust Company, is listed under the question “Who can help answer my questions?” below.

 

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with I-AM Capital’s consent, until the vote is taken with respect to the Transaction. If you delivered your shares for redemption to I-AM Capital’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that I-AM Capital’s transfer agent return the shares (physically or electronically). You may make such request by contacting I-AM Capital’s transfer agent at the email or physical address listed under the question “Who can help answer my questions?”.

 

  Q: What are the federal income tax consequences of exercising my redemption rights?

 

  A: I-AM Capital stockholders who exercise their redemption rights to receive cash from the trust account in exchange for their shares of I-AM Capital common stock generally will be required to treat the transaction as a sale of such shares and recognize gain or loss upon the redemption in an amount equal to the difference, if any, between the amount of cash received and the tax basis of the shares of I-AM Capital common stock redeemed. Such gain or loss should be treated as capital gain or loss if such shares were held as a capital asset on the date of the redemption. See the section entitled “Material U.S. Federal Income Tax Considerations — Redemption of I-AM Capital Common Stock.”

 

  Q: Do I have appraisal rights if I object to the proposed Transaction?

 

  A: No. There are no appraisal rights available to holders of I-AM Capital common stock in connection with the Transaction.

 

  Q: What happens to the funds held in the trust account upon consummation of the Transaction?

 

  A: If the Transaction is consummated, the funds held in the trust account will be released to pay (i) the cash consideration to Smaaash for the Investment, (ii) I-AM Capital stockholders who properly exercise their redemption rights, (iii) an estimated $1,820,000 relating to deferred underwriting compensation to the underwriters of I-AM Capital’s initial public offering and other designated persons and (iv) certain additional fees for advisory services, and all fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that were incurred by I-AM Capital in connection with the Transaction.

 

  Q: What happens if the Transaction is not consummated?

 

  A: There are certain circumstances under which the Subscription Agreement may be terminated. See the section entitled “Proposal No. 1 — The Business Combination Proposal — The Subscription Agreement” for information regarding the parties’ specific termination rights.

 

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If, as a result of the termination of the Subscription Agreement or otherwise, I-AM Capital is unable to complete the Transaction or another business combination transaction by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period to consummate a business combination), I-AM Capital’s Restated Certificate provides that it 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, subject to lawfully available funds therefor, redeem 100% of the public shares in consideration of a per-share price, payable in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the trust account, including interest (less up to $50,000 of such net interest to pay liquidation expenses) and up to $600,000 of working capital expenses, by (B) the total number of then outstanding public shares, which redemption will completely extinguish the rights of the public stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemptions, subject to the  approval of the remaining stockholders and the board of I-AM Capital in accordance with applicable law, dissolve and liquidate, subject in each case to I-AM Capital’s obligations under the General Corporation Law of the State of Delaware (“DGCL”) to provide for claims of creditors and other requirements of applicable law. 

 

I-AM Capital expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Transaction, subject in each case to I-AM Capital’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law. See the section entitled “Risk Factors — I-AM Capital’s Sponsor and certain of its officers and directors either directly or indirectly beneficially own shares of I-AM Capital common stock and have obligations and interests in the Transaction that are different from, or in addition to, I-AM Capital stockholders. If the Transaction is not approved, the securities held by the Sponsor will likely become worthless.” Holders of the founder shares have waived any right to any liquidation distribution with respect to those shares.

  

In the event of liquidation, there will be no distribution with respect to I-AM Capital’s outstanding warrants. Accordingly, the warrants will expire worthless.

 

  Q: When is the Transaction expected to be completed?

 

  A: It is currently anticipated that the Transaction will be consummated promptly following the special meeting, provided that all other conditions to the consummation of the Transaction have been satisfied or waived.  

 

For a description of the conditions to the completion of the Transaction, see the section entitled “Proposal No. 1 —The Business Combination Proposal.”

 

  Q: What will happen if I abstain from voting or fail to vote at the special meeting?

 

  A: At the special meeting, I-AM Capital will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote will have the same effect as a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the other proposals.

 

  Q: What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

  A: Signed and dated proxies received by I-AM Capital without an indication of how the stockholder intends to vote on a proposal will be voted in favor of each proposal presented to the stockholders and for the re-election of four current directors and the election of the director nominee.

 

  Q: If I am not going to attend the special meeting in person, should I return my proxy card instead?

  A: Yes. Whether you plan to attend the special meeting or not, please read this proxy statement carefully, and submit your proxy by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

  

  Q: If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

  A: No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. I-AM Capital believes the proposals presented to the stockholders will be considered non-discretionary (other than the Auditor Ratification Proposal) and therefore your broker, bank, or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purpose of determining the existence of a quorum or for purposes of determining the number of votes cast at the special meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

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  Q: May I change my vote after I have mailed my signed proxy card?

 

  A: Yes. You may change your vote by sending a later-dated, signed proxy card to I-AM Capital’s secretary at the address listed below so that it is received by I-AM Capital’s secretary prior to the special meeting or attend the special meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to I-AM Capital’s secretary, which must be received by I-AM Capital’s secretary prior to the special meeting.

  

  Q: What should I do if I receive more than one set of voting materials?

 

  A: You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

  Q: Who will solicit and pay the cost of soliciting proxies?

 

  A: I-AM Capital will pay the cost of soliciting proxies for the special meeting. I-AM Capital has engaged Morrow Sodali LLC (“Morrow”) to assist in the solicitation of proxies for the special meeting. I-AM Capital has agreed to pay Morrow a fee of $15,000. I-AM Capital will reimburse Morrow for reasonable out-of-pocket expenses and will indemnify Morrow and its affiliates against certain claims, liabilities, losses, damages and expenses. I-AM Capital also will reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of I-AM Capital’s common stock for their expenses in forwarding soliciting materials to beneficial owners of the I-AM Capital’s common stock and in obtaining voting instructions from those owners. I-AM Capital’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

  Q: What do I need to do now?

 

  A: You are urged to read carefully and consider the information contained in this proxy statement, including the annexes, and to consider how the Transaction and the other proposals will affect you as a stockholder. You should then submit your proxy as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

  Q: How do I vote?

 

  A: If you were a holder of record of I-AM Capital common stock on September 10, 2018, the record date for the special meeting, you may vote with respect to the applicable proposals in person at the meeting, or you may have your shares voted by proxy by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you are a registered stockholder as of the record date, and you have already submitted a proxy card or submitted a proxy by telephone or over the Internet, you do not need to do anything unless you wish to change your vote. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should contact your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the special meeting and vote in person, obtain a proxy from your broker, bank or nominee.

 

  Q: Who can help answer my questions?

 

  A: If you have questions about the proposals or if you need additional copies of this proxy statement or the enclosed proxy card you should contact:

 

  Suhel Kanuga
  I-AM Capital Acquisition Company
  1345 Avenue of the Americas, 11th Floor
  New York, New York 10105
  Tel: (212) 878-3684
  Email: sk@i-amcapital.com
   
  You may also contact I-AM Capital’s proxy solicitor at:
   
  Morrow Sodali LLC 
  470 West Avenue 
  Stamford, CT 06902 
  Tel: (800) 662-5200 
  or banks and brokers can call (203) 658-9400 
  Email: IAM.info@morrowsodali.com

 

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To obtain timely delivery, I-AM Capital stockholders must request the materials no later than five business days prior to the special meeting.

 

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

 

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to I-AM Capital’s transfer agent prior to 4:30 p.m. Eastern time on October 2, 2018 (two business days before the special meeting). If you have questions regarding the certification of your position or delivery of your stock, please contact: 

 

Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, New York 10004
Attn: Mark Zimkind
E-mail:mZimkind@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT

 

This summary highlights selected information from this proxy statement and may not contain all of the information that is important to you. To better understand the Transaction and the proposals to be considered at the special meeting, you should read this entire proxy statement carefully, including the annexes. See also the section entitled “Where You Can Find More Information.”

 

Unless otherwise specified, all share calculations (i) assume no exercise of redemption rights by I-AM Capital’s public stockholders, and (ii) do not include any shares of I-AM Capital common stock issuable upon exercise of I-AM Capital’s warrants or rights.

 

Parties to the Transaction

 

I-AM Capital Acquisition Company

 

I-AM Capital Acquisition Company (“I-AM Capital”) is a blank check company organized under the laws of the State of Delaware on April 17, 2017. I-AM Capital was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses that the Company will identify, with a focus on businesses with a connection to India. I-AM Capital is an early stage and emerging growth company and, as such, I-AM Capital is subject to all of the risks associated with early stage and emerging growth companies. The Company’s sponsor is I-AM Capital Partners LLC (the “Sponsor”). I-AM Capital’s common stock, rights, and warrants are quoted on the NASDAQ Capital Market under the ticker symbols “IAM,” “IAMXR,” and “IAMXW”.

 

The mailing address of I-AM Capital’s principal executive office is 1345 Avenue of the Americas, 11th Floor, New York, New York 10105.

 

Smaaash Entertainment Private Limited

 

Smaaash Entertainment Private Limited (“Smaaash”) is a private limited company incorporated in the year 2009 under the laws of India. Smaaash, is an unlisted company headquartered in Mumbai India, is in the virtual reality gaming and entertainment technology business in India. The mailing address of Smaaash’s principal executive office is 2nd Floor, Trade View Building, Oasis Complex, PB Marg, Lower Parel, Mumbai – 400013, Maharashtra.

 

The Transaction

 

Pursuant to the Subscription Agreement, I-AM Capital will invest into Smaaash the funds held in the trust account, less transaction expenses and amounts used to pay I-AM Capital stockholders who properly exercise their redemption rights in connection with the vote to approve the Business Combination Proposal in exchange for equity shares of Smaaash. I-AM Capital estimates that the equity shares issued to it by Smaaash, assuming an Investment Amount of $49.0 million, will constitute up to approximately 27.53% of the issued share capital of Smaaash, provided that such percentage shall decrease proportionately depending on the number of shares redeemed by I-AM Capital’s public stockholders.

 

In connection with the Investment, I-AM Capital shall change its name to “Smaaash Entertainment Inc.” and it shall receive the right under the Master Distribution Agreement and the Master Franchise Agreement to become (i) the sole distributor of Smaaash games in North America and South America and (ii) the master franchisee for Smaaash centers in North America and South America. After the Transaction, I-AM Capital shall also pursue acquisitions within the active entertainment industry in the United States with the objective of facilitating the transformation of Smaaash from an India focused company to a globally recognized brand within the active entertainment industry. In connection with, and as a condition to, the Investment the Shareholders’ Agreement that I-AM Capital previously entered into, pursuant to which it will have the right to, among other things, appoint two directors and jointly consent to the appointment of three additional directors to the board of directors of Smaaash (which board may have up to 10 directors), will become effective. Copies of the Subscription Agreement, the Master Distribution Agreement, the Master Franchise Agreement and the Shareholders’ Agreement are attached to this proxy statement as Annex A, Annex B, Annex C and Annex D, respectively.

 

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Redemption Rights

 

Pursuant to I-AM Capital’s Restated Certificate, holders of public shares may elect to have all or a portion of their shares redeemed 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 Transaction, including interest, divided by the number of then outstanding public shares, subject to the limitations described herein. As of May 31, 2018, this would have amounted to approximately $10.15 per share. If a holder exercises its redemption rights, then such holder will be exchanging its shares of I-AM Capital common stock for cash and will no longer own shares of I-AM Capital common stock. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to I-AM Capital’s transfer agent in accordance with the procedures described herein. See the section entitled “Special Meeting of I-AM Capital — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash. A holder who chooses to redeem its shares will not receive the Special Dividend.

  

Smaaash Equity Shares to be Issued in the Transaction

 

Under the Subscription Agreement, I-AM Capital expects to invest up to $49.0 million in Smaaash in exchange for equity shares constituting up to approximately 27.53% of the issued share capital of Smaaash, provided that such percentage shall decrease proportionately depending on the number of shares redeemed by I-AM Capital’s public stockholders.

 

The Smaaash Founders have also agreed that within six (6) months following the Closing Date, they shall transfer all of their ownership interest in Smaaash (representing 33.6% of the share capital of Smaaash on a fully diluted basis as of June 22, 2018 and which will represent 24.34% of the share capital of Smaaash on a fully diluted basis immediately after the Investment) to I-AM Capital in exchange for newly issued shares of common stock of I-AM Capital in an amount which would enable the Smaaash Founders to retain their 24.34% post-Investment ownership interest in Smaaash through their interest in I-AM Capital. You should read “Proposal No. 1 — The Business Combination Proposal” for further information.

 

The following tables illustrate varying ownership levels of Smaaash based on the assumptions described above but assuming varying levels of investments and redemptions by I-AM Capital stockholders on the Closing Date and upon the transfer by the Smaaash Founders of their ownership in Smaaash six (6) months after the Closing Date:

 

On the Closing Date:                
Investment Amount (US Dollars in Millions)  $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders   96.27%   83.76%   78.66%   72.47%
I-AM Capital   3.73%   16.24%   21.34%   27.53%

  

After the Transfer by the Smaaash Founders
Six Months After the Closing Date:
                
Investment Amount (US Dollars in Millions)  $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders (Less Founders)   71.93%   59.42%   54.32%   48.13%
I-AM Capital   28.07%   40.58%   45.68%   51.87%

  

You should note that depending on the level of redemptions by the I-AM Capital stockholders, I-AM Capital may own less than 50% of the share capital of Smaaash on a fully diluted basis even after the transfer by the Smaaash Founders of all of their equity ownership to I-AM Capital.

 

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Board of Directors of I-AM Capital Following the Transaction

 

Assuming all current board members up for re-election and the director nominee standing for election at the special meeting are elected, the board of directors of I-AM Capital following the Transaction will initially consist of nine members, including F. Jacob Cherian, Suhel Kanuga, Donald R. Caldwell, Roman Franklin, Max Hooper, Frank Leavy, Edward Leonard Jaroski, William H. Herrmann, Jr. and Shripal Morakhia. Messers. Caldwell, Franklin, Leavy and Jaroski will stand for re-election as their terms as directors will expire at the special meeting. Mr. Morakhia will be a nominee for election at the special meeting but will only be elected if the Business Combination Proposal is approved. See the sections entitled “Proposal No. 1 — The Business Combination Proposal”, “Proposal No. 3 — The Director Election Proposal” and “Management after the Transaction” for additional information.

 

Accounting Treatment

 

For accounting purposes I-AM Capital will treat the Transaction as an equity investment in Smaaash.

 

Appraisal Rights

 

Appraisal rights are not available to I-AM Capital stockholders in connection with the Transaction. Exercising the right to redeem I-AM Capital shares is the only remedy for a public stockholder.

 

Reasons for the Transaction

 

I-AM Capital was organized for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses. I-AM Capital has sought to capitalize on the substantial deal sourcing, investing and operating expertise of its management team to identify, acquire and operate a business with a connection to India, although I-AM Capital is not limited to a particular industry or sector.

 

In particular, I-AM Capital’s board considered the following positive factors, although not weighted or in any order of significance:

 

High growth company operating in highly scalable markets. Smaaash has a proven business model not only in India, but also globally. Smaaash can also grow quickly by making acquisitions globally, in addition to organic growth.

 

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Business with multiple and diverse s potential drivers of revenue and with earnings growth potential. Smaaash’s family entertainment centers draw customers from various backgrounds and age groups, as the interactive sports and virtual reality entertainment experience, combined with food and beverage options, creates an attractive place for customers. Smaaash games are also being sold to third-party customers, creating further growth opportunities.

 

Experienced and motivated management team. Smaaash’s founder is a visionary entrepreneur with a proven ability to build value for investors, and a track record of success.

 

I-AM Capital’s board also considered the following negative factors, although not weighted or in any order of significance:

 

Less than majority equity position in Smaaash. I-AM Captial will initially not acquire a majority interest in Smaaash and, as a result, may not have effective control over the operations of Smaaash.

 

Possibility of becoming an investment company pursuant to the Investment Company Act of 1940. Following the Transaction, I-AM Capital may become subject to the requirements of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which would limit I-AM Capital’s business operations and require it to spend significant resources to comply with such act.

 

Increase in Losses. The increase in Smaaash’s losses from the year ended March 31, 2017 to the nine month period ended December 31, 2017 was primarily due to Smaaash incurring significant high-cost debts to fund its acquisitions. Without further injection of capital, Smaaash may not be able to effectively reduce its costs and expenses, and thereby continue to suffer losses.

 

Quorum and Required Vote for Proposals for the Special Meeting

 

A quorum of I-AM Capital stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting if a majority of the I-AM Capital common stock outstanding and entitled to vote at the special meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

 

Under the rules of various national and regional securities exchanges your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. I-AM Capital believes the proposals presented to its stockholders (other than the Auditor Ratification Proposal) will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.”

 

The approval of the Certificate Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of I-AM Capital’s common stock. The approval of each of the Business Combination Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal requires the affirmative vote of the holders of a majority of the votes cast thereon at the special meeting. The affirmative vote of a plurality of the votes cast by the stockholders present in person or represented by proxy at the special meeting and entitled to vote thereon is required for the election of directors.

 

Abstentions are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, or the Adjournment Proposal. Broker non-votes will have the effect of a vote “AGAINST” the Certificate Amendment Proposal but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal or the Adjournment Proposal.

 

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The Certificate Amendment Proposal and the election of Shripal Morakhia, the director nominee, as a director are conditioned on the Business Combination Proposal. If the Business Combination Proposal is not approved, the Certificate Amendment Proposal and the election of Mr. Morakhia will have no effect, even if such proposals are approved by the requisite vote.

 

Recommendation to I-AM Capital Stockholders

 

I-AM Capital’s board of directors believes that each of the Business Combination Proposal, the Certificate Amendment Proposal, the Director Appointment Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal to be presented at the special meeting is in the best interests of I-AM Capital and its stockholders, and unanimously recommends that its stockholders, vote “FOR” each of the proposals and “FOR” the re-election of the four current directors and the election of the director nominee named in the Director Election Proposal.

 

When you consider the recommendation of I-AM Capital’s board of directors in favor of approval of these proposals, you should keep in mind that its directors and officers have interests in the Transaction that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

 

  the appointment of F. Jacob Cherian and Suhel Kanuga, I-AM Capital’s executive officers and directors, as directors (but not officers) of Smaaash even though Mr. Cherian and Mr. Kanuga will not receive any compensation for their services as directors of Smaaash; and

 

  the continued indemnification of current directors and officers of I-AM Capital and the continuation of directors’ and officers’ liability insurance after the Transaction.

 

  unless I-AM Capital consummates an initial business combination, its officers, directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account;

 

  the Sponsor has agreed that the private placement units, and all of their underlying securities, will not be sold or transferred by it until I-AM Capital has completed a business combination;

 

  the Sponsor paid an aggregate of $25,000 for the founder shares and such securities will have a significantly higher value at the time of the Transaction;

 

  the Sponsor has agreed not to redeem any of the founder shares in connection with a stockholder vote to approve a proposed initial business combination;

 

  if I-AM Capital does not complete an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period of time to consummate a business combination), the proceeds from the sale of the private placement units will be included in the liquidating distribution to I-AM’s public stockholders and the private placement units, including the private placement shares, private placement rights and private placement warrants, purchased by the Sponsor will be worthless; and

 

  if the trust account is liquidated, including in the event I-AM Capital is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify I-AM Capital to ensure that the proceeds in the trust account are not reduced below (i) $10.15 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account by the claims of prospective target businesses with which I-AM has entered into an acquisition agreement or claims of any third party for services rendered or products sold to I-AM Capital, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the trust account.

 

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RISK FACTORS

 

You should carefully consider the following risk factors, together with all of the other information included in this proxy statement, before you decide whether to vote or instruct your vote to be cast to approve the Business Combination Proposal.

 

Risks Related to Smaaash

 

Smaaash has significant indebtedness and the imposition of certain restrictive covenants in Smaaash debt financing arrangements may increase Smaaash’s susceptibility to interest rate fluctuations, adversely impact Smaaash’s financial condition and results of operations, as well as restrict Smaaash’s operational flexibility.

 

As on December 31, 2017, Smaaash’s outstanding indebtedness on a consolidated basis aggregated to $44.10 million, including $44.05 million of secured debt and $0.05 million of unsecured debt, Smaaash may incur additional indebtedness in the future.

 

Smaaash’s significant indebtedness and the imposition of certain restrictive covenants in Smaaash’s debt financing arrangements may increase Smaaash’s susceptibility to interest rate fluctuations, adversely impact Smaaash’s financial condition and results of operations, as well as restricting Smaaash’s operational flexibility.

 

The possible implications of Smaaash’s significant indebtedness may include, but are not limited to, the following:

 

a portion of Smaaash’s cash flows may be used towards repayment of Smaaash’s existing debt, which will reduce the availability of cash to fund Smaaash’s working capital requirements, capital expenditures, planned expansions or acquisitions or other strategic objectives, and general corporate purposes;

 

Smaaash’s ability to obtain additional funding in the future at reasonable, or less restrictive, terms may be restricted;

 

fluctuations in market interest rates may affect the cost of Smaaash’s borrowings, as Smaaash’s loans are, currently as well as typically, at variable interest rates;

 

Smaaash’s ability to declare dividends, while any actual payments are due under the terms of Smaaash’s borrowings;

 

Smaaash may be more vulnerable to economic downturns;

 

Smaaash’s ability to withstand competitive pressures may be limited;

 

Smaaash may have reduced operational flexibility in responding to business, regulatory and economic conditions and developments; and

 

Smaaash’s requirement to obtain lenders’ consents for various activities, including, but not limited to, any change in control or ownership of Smaaash.

 

Smaaash is continually expanding and so may need to continually raise capital. If Smaaash is unable to raise capital on commercially favorable terms, including due to Smaaash’s high debt-equity ratio, Smaaash’s growth trajectory might be affected.

 

Smaaash is in the process of expansion and may need additional capital despite the fact that it has a significant portion of debt on its books. Due, in part, to Smaaash’s significant debt there are various reasons for it not being able to raise capital on commercially favorable terms including, but not limited to (i) high to debt to equity ratio, (ii) trends in global capital and credit markets, and (iii) existing debt terms. Smaaash’s inability to maintain or obtain sufficient cash flow, credit facilities and other sources of funds, in a timely manner, or at all, to meet Smaaash’s expansion strategy requirements could adversely affect Smaaash’s growth trajectory.

 

The high fixed cost structure of Smaaash’s operations can result in significantly lower margins if Smaaash’s revenues should decline, which may adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

Smaaash’s total aggregate expenditure was $9.91 million and $18.90 million for fiscal years 2016 and 2017, respectively. A large proportion of Smaaash’s expenses are fixed expenses, including the cost of full-time employees, fixed rentals, interest costs, security and insurance, which do not vary significantly with retail traffic at Smaaash’s Centers. These expenses may continue to increase, in the aggregate, from year to year, particularly as Smaaash continue to expand its network of Centers in the future. In the event that Smaaash’s expenses increase at a faster rate than Smaaash’s revenues and if Smaaash is unable to rationalize Smaaash’s costs or realize efficiencies of scale, Smaaash may not be able to pass on such costs to Smaaash’s customers or offset its expenses. In such case, Smaaash may experience a decline in its profit margins and, in general, an adverse impact on its business, financial condition, results of operations and prospects.

 

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Smaaash has significant capital expenditure requirements, and inability to raise adequate financing on commercially acceptable terms may limit Smaaash’s strategic initiatives and growth prospects.

 

Smaaash’s business is inherently capital intensive. Smaaash’s total capital expenditure was $10.99 million and $19.23 million in fiscal years 2016 and 2017, respectively. Smaaash is required to undertake capital investments on a regular basis, to introduce new games and entertainment options, or to improve existing games and entertainment options and, particularly, when Smaaash opens new Centers. In addition, Smaaash must incur expenditures to maintain and improve supporting or complementary infrastructure and services at Smaaash’s Centers, including Smaaash’s food and beverage venues, parking and other facilities. The actual amounts and timing of Smaaash’s future capital expenditure may differ from Smaaash’s estimates, from time to time, including on account of, among other things, availability of land for future expansion, interest rates, future cash flows being less than Smaaash had estimated, fluctuations in currency exchange rates or commodity prices, unforeseen delays or cost overruns on Smaaash’s part or on the part of any of Smaaash’s equipment or technology supply or other vendors or partners, technological advances, design changes, inability to obtain or delay in obtaining requisite regulatory approvals or third party consents such as from lenders or lessors or others, unanticipated expenses, delays in Smaaash’s payments from corporate customers in Smaaash’s product sales business or issues with the credit worthiness of such customers, general economic conditions, market developments and new opportunities or challenges in the industry, or in the geographies in which Smaaash operate. Smaaash’s capital expenditures and investments may rise in the future, given Smaaash’s expansion plans as well as the scope of Smaaash’s existing operations. The financing required by Smaaash for such capital expenditures and investments may not be available to it on commercially acceptable terms or at all, or Smaaash’s ability to seek additional financing in the future may be restricted due to the terms of Smaaash’s existing or future borrowings, or regulatory constraints on equity or debt capital raising, or a range of macroeconomic factors, including interest rates.

 

Smaaash’s inability to raise adequate financing on commercially acceptable terms, or at all, in the future may limit Smaaash’s strategic initiatives and growth prospects. In addition, there can be no assurance that Smaaash’s capital investment will yield the planned returns at any time in the future, at expected rates, or at all. In any such event, Smaaash’s business, financial condition, results of operations and prospects may be adversely affected.

 

Smaaash, as well as its affiliated companies, have unsecured borrowings from time to time, which may be repayable on demand, including on the occurrence of an event of default in the terms of such financing agreements. Any unexpected calls for repayment of a significant amount of such borrowings may impact Smaaash’s ability to manage its debt service obligations.

 

Smaaash, as well as Smaaash’s affiliates, have unsecured borrowings from time to time, which may be repayable on demand, including on the occurrence of an actual or alleged event of default. Any unexpected calls for repayment of a significant amount of such borrowings may impact Smaaash’s ability to manage its debt service obligations. Any failure to service such indebtedness or comply with any obligations under such financing agreements may cause it to incur penalty interest or may result in the termination of one or more of Smaaash’s credit facilities or acceleration or cross-acceleration of payments under such credit facilities, as well as the declaration of an event of default or cross-default, which may adversely affect Smaaash’s business, financial condition, results of operation and prospects.

 

Smaaash’s operations are significantly dependent on changes in public and customer tastes and discretionary spending patterns. Smaaash’s inability to successfully anticipate customer preferences or to gain popularity for Smaaash’s games may negatively impact Smaaash’s profitability.

 

Smaaash’s success depends significantly on public and customer tastes and preferences, which can be unpredictable. If Smaaash is unable to successfully anticipate customer preferences or increase the popularity of its games, the per capita revenue and overall customer expenditures at Smaaash’s Centers may decrease, and thereby negatively impact Smaaash’s profitability. In response to such developments, Smaaash may need to increase its marketing and product development efforts and expenditures, adjust its game or product sale pricing, modify the games themselves, or take other actions, which may further erode Smaaash’s profit margins, or otherwise adversely affect Smaaash’s results of operations and financial condition. In particular, Smaaash may need to expend considerable cost and effort in carrying out extensive research and development to assess the potential interest in a game, testing and launching new games, and to remain abreast with continually evolving technology and trends, as well as the success and popularity of the sports icons, athletes and celebrities who act as Smaaash’s brand ambassadors or as part of the themes or simulation models for certain of Smaaash’s games.

 

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While Smaaash may incur significant expenditures of this nature, including in the future as Smaaash continues to expand Smaaash’s operations, there can be no assurance that any such expenditures or investments by it will yield expected or commensurate returns or results, within a reasonable or anticipated time, or at all. Among other things, although one of the factors on which Smaaash compete is Smaaash’s ability to continually launch new games or embrace new technology, Smaaash may also face the converse challenge of introducing new games or new technology to Smaaash’s customers through a user-friendly, intuitive, or attractive interface. For instance, Smaaash may face challenges in introducing new technology or games to customers who are not familiar with such new technology platforms or interfaces, or do not find such technology, platforms or interfaces convenient to use or easy to grasp. Moreover, there may be resistance to or a lack of enthusiastic customer response for Smaaash’s games, for instance, because of actual or perceived concerns that customers may not enjoy, or may encounter difficulties, or even suffer injuries or motion sickness, when playing Smaaash’s games, including Smaaash’s active games and interactive sports simulators and Smaaash’s Augmented Reality (“AR”) and Virtual Reality (“VR”) games, or the perception that immersive single-player VR games can cause feeling of isolation to the extent that they do not allow a multi-player interaction. Any such factors could adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

The nature of Smaaash’s business exposes it to negative publicity or customer complaints, including in relation to, among other things, accidents, injuries or thefts at Smaaash’s Centers, or health and safety concerns arising from improper use of Smaaash’s game equipment or at Smaaash’s food and beverage venues.

 

Smaaash’s business inherently exposes it to negative publicity or customer complaints as a result of accidents, injuries, or in extreme cases, deaths, arising from instances of air-borne, water-borne or food-borne contagion or illness, food contamination, spoilage, tampering, equipment failure, improper use of Smaaash’s equipment, fire, explosion, terrorist attacks or civil riots, and other safety or security issues, such as kidnapping, or associated risks arising from other actual or perceived non-compliance with safety, quality or service standards or norms in relation to the various game, entertainment and food and beverage attractions at Smaaash’s Centers. Even isolated or sporadic incidents or accidents may have a negative impact on Smaaash’s brand image and reputation, and Smaaash’s Centers’ or games’ or Smaaash’s own popularity with customers. The considerable expansion of social media in recent years has compounded the effect of any potential negative publicity.

 

Smaaash cannot guarantee that its employee training, internal controls and other precautions will be sufficient to prevent any such occurrence at Smaaash’s Centers, or in relation to the games developed by it for third party sales, or to control or mitigate any negative consequences. In addition, Smaaash relies on third-party security and housekeeping staff for certain non-core functions, as well as certain technology vendors and partners. Although Smaaash monitors vendors and partners and, in certain cases, may have a contractual indemnity or recourse in case of any default on their part, Smaaash’s ability to assure a safe and satisfactory experience to Smaaash’s customers is necessarily limited to the extent of Smaaash’s dependence on third parties, from time to time. Moreover, Smaaash may not be able to distance or insulate ourselves from any adverse publicity or reputational damage arising from any act, omission or negligence on the part of a vendor or other third party, which may negatively affect a customer’s experience at any of Smaaash’s Centers.

 

Smaaash’s business and operations are subject to various risks relating to the acquisitions of target companies. Smaaash’s inability to complete and successfully integrate the future acquisition targets may affect Smaaash’s growth strategy, market share, profitability or competitive position.

 

Smaaash’s plans to expand through future acquisitions of companies along with organic growth. There can be no assurance that Smaaash will be able to successfully integrate the acquired businesses into its existing operations as planned. Smaaash may be adversely impacted by liabilities that it assumes from these acquisitions, including known and unknown obligations, intellectual property or other assets, terminated employees, current or former clients, or other third parties, and it may fail to identify or adequately assess the magnitude of certain liabilities, shortcomings or other circumstances prior to the acquisitions, which could result in unexpected legal or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, or other adverse effects on its business.

 

Smaaash has a relatively limited operating history and may not be able to sustain Smaaash’s growth levels in the future.

 

Smaaash commenced commercial operations at Smaaash’s first Center in Mumbai in November 2012, and all of Smaaash’s other Centers have commenced commercial operations within the last three fiscal years. Smaaash’s first international Center, in the Mall of America, in Minnesota, U.S.A. was opened in December 2016. Consequently, Smaaash currently has relatively limited operating experience, particularly, overseas, and may encounter challenges in further expansion, including its proposed overseas expansion.

 

Consequently, it may be difficult to evaluate Smaaash’s past performance and prospects. For instance, Smaaash’s consolidated revenue increased from $8.65 million in fiscal year 2016 to $18.06 million in fiscal year 2017. Smaaash may not be able to sustain such growth rates in the future, and may not be able to leverage its experience in its existing markets in order to grow Smaaash’s business in new markets.

 

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Smaaash’s growth strategy to expand within India and in international markets exposes it to certain execution and other risks, which may adversely impact Smaaash’s business, financial condition, results of operations and prospects.

 

Smaaash’s growth strategy includes, expanding its network of Centers in India and overseas, growing Smaaash’s array of games and other attractions, increasing Smaaash’s product sales within India and in international markets, enhancing Smaaash’s marketing initiatives and brand value, and also increasing Smaaash’s sponsorship and other businesses. In pursuing Smaaash’s growth strategy, Smaaash may be exposed to several risks and uncertainties, including, but not limited to the following:

 

acquiring new customers, or encouraging repeat business;

 

challenges caused by distance, language and cultural differences, its lack of familiarity and understanding of the local economic conditions, demographics, differences in legal and regulatory jurisdictions and policy frameworks and customer preferences and trends;

 

making accurate assessments of the additional financing, technology,

 

adhering to expected quality and service parameters and satisfying Smaaash’s customers across Smaaash’s expanded operations;

 

difficulties in managing and staffing expanded operations and maintaining Smaaash’s values and culture as well as internal controls, as well as increasing costs of human resources due to wage inflation or increased human resource requirements across different and expanded locations, differences in general employment conditions and the degree of employee unionization and activism;

 

obtaining and complying with the terms of local or additional regulatory approvals, registrations and certifications, or the imposition of governmental controls and changes in laws, regulations or policies;

 

exchange rate fluctuations, currency devaluations and other conversion restrictions;

 

local restrictions on foreign investment and limits on the repatriation of funds;

 

local financial, political and economic instability;

 

potentially adverse tax consequences;

 

higher costs associated with doing business internationally;

 

developing and upgrading Smaaash’s administrative and operating infrastructure, including Smaaash’s technology, accounting, communications and other systems, and managing strain on existing management attention and resources; and

 

diminished ability to legally enforce Smaaash’s contractual rights overseas.

 

Smaaash’s inability to effectively pursue Smaaash’s growth strategy or manage Smaaash’s expanded operations, may lead to operational and financial inefficiencies, which may have an adverse effect on Smaaash’s business, financial condition, results of operations, prospects and reputation.

 

Smaaash’s registered and corporate office and the premises at which Smaaash’s Centers are located are leased. Smaaash’s inability to renew such leases on commercially acceptable terms, or at all, may adversely impact Smaaash’s operations.

 

Smaaash’s registered and corporate office is situated at 2nd Floor, Trade View Building, Oasis Complex, Kamala Mills, Gate No. 4, Pandurang Budhkar Marg, Lower Parel, Mumbai 400 013, within Smaaash’s flagship Mumbai Center premises. These premises are currently leased for a five year term which terminates on July 31, 2020.

 

In addition, the premises at which Smaaash’s Centers are located are all either leased or licensed from various parties (including third parties as well as, in some cases, related parties), for varying terms, generally for an initial period ranging between three, five, twelve and twenty years, and in certain cases are automatically renewable for further terms.

 

Smaaash has also entered into revenue sharing arrangements with the property developers for several of Smaaash’s Centers in India. Under such revenue sharing arrangements with property developers, Smaaash typically pays monthly rent at a fixed percentage of the monthly net retail sales amount (which is generally reset to a higher percentage after the completion of a specified initial duration within the rental period) or, in certain cases, either a monthly minimum guaranteed amount, or a fixed percentage of the monthly net retail sales amount (which is reset to a higher percentage after the completion of a specified initial duration within the rental period), whichever is higher. Certain of these rental and revenue sharing arrangements are subject to lock-up periods, during which time, Smaaash cannot terminate these arrangements early without payment of the agreed rent for the entire lock-up period. After the lapse of the lock-in period, Smaaash may terminate the arrangements with prior notice. In contrast, the licensors can typically terminate the arrangements at any time, with prior notice, with or without cause.

 

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In the event of any early termination by a licensor or rent escalation or any other difficulties arising in Smaaash’s arrangements with Smaaash’s lessors, Smaaash’s operations may be disrupted, or Smaaash may incur substantially increased costs in order to continue or renew Smaaash’s rental arrangements, or to make alternative arrangements in order to continue Smaaash’s operations, at one or more of Smaaash’s Centers, or Smaaash may be required to relocate Smaaash’s operations elsewhere, in the event Smaaash is unable to conclude Smaaash’s negotiations with any of Smaaash’s lessors in a timely manner and at a commercially viable cost.

 

Smaaash’s operations are subject to various national, state and local laws and regulations, including in relation to commercial operations, food safety and hygiene, liquor licensing, the protection of the environment, and occupational health and safety, which may limit Smaaash’s operational flexibility, or subject it to significant compliance costs, which may, in turn, adversely affect Smaaash’s financial condition.

 

Smaaash’s operations are subject to various national, state and local laws and regulations, including in relation to commercial operations, food safety and hygiene, liquor licensing, the protection of the environment, and occupational health and safety. While Smaaash, to its knowledge, is currently compliant with applicable laws in all respects known to it, Smaaash cannot be certain of the applicability, interpretation or implementation of all laws and policies. For instance, in the event that it is alleged or established that games and entertainment options at Smaaash’s Centers could be considered “gambling”, “betting”, or “wagering”, or the operation of a “casino”, or “lottery”, which activities are currently not legal across India, it may subject Smaaash to some form of regulatory taxation, licensing or approval that Smaaash does not already possess, or the prizes or discounts or other incentives awarded by it to the winners of skill-based or other games at Smaaash’s Centers may be taxable or require some form of regulatory licensing or approval that Smaaash does not already possess, in which case Smaaash’s operations could be adversely affected or disrupted, or Smaaash may be subject to penalty. If any such licenses or approvals are required there can be no assurance that the relevant authorities will issue or, where required, renew such approvals or registrations in the timeframes anticipated by it. Failure by it to obtain, maintain or renew the required approvals or registrations may result in the interruption of Smaaash’s operations and may have an adverse effect on Smaaash’s business, financial condition, results of operations and prospects. Additionally, Smaaash is required to adhere to certain terms and conditions provided under the statutory and regulatory approvals and registrations, in terms of which Smaaash operates, which may require it to undertake substantial compliance-related expenditures.

 

Any actual or alleged breach or non-compliance with specified conditions may result in the suspension, withdrawal or termination of Smaaash’s approvals and registrations or the imposition of penalties by the relevant authorities. While Smaaash is not currently aware of any such outstanding material claims or obligations, Smaaash may incur substantial costs, including clean up or remediation costs, fines and civil or criminal sanctions, and personal injury claims, as a result of violations of or liabilities under environmental or health and safety laws or noncompliance with permits required at Smaaash’s Centers, which, as a result, may have an adverse effect on Smaaash’s business and prospects. In addition, as Smaaash expanding into newer geographical markets, Smaaash may be required to comply with various environmental and health and safety laws and regulations within such jurisdictions. Further, any change in or expansion of the scope of the regulations governing Smaaash’s operations, would likely involve substantial additional costs, including costs relating to maintenance and inspection, development and implementation of emergency procedures and insurance coverage or other additional costs to address environmental incidents or external threats. Smaaash’s inability to control the costs involved in complying with these and other relevant laws and regulations

 

Smaaash depends significantly on its brand recognition and reputation. The ineffectiveness of Smaaash’s brand building, marketing and advertising initiatives, or failure on Smaaash’s part to enhance Smaaash’s brand image in the future, may adversely impact Smaaash’s product sales, sponsorship revenue and other revenues.

 

Smaaash believes that the recognition and reputation of its brand and associated marks, among customers of all ages, genders and backgrounds have contributed significantly to the growth and success of Smaaash’s business. Maintaining and enhancing the recognition and reputation of these brands and marks are, therefore, critical to Smaaash’s business and competitiveness. Smaaash’s brand investment and marketing and promotional activities may not be effective with customers, or may not yield commensurate returns on Smaaash’s investment. In particular, as Smaaash expands into new geographic or international markets, customers in these markets may not recognize or accept Smaaash’s brand and products, as well as Smaaash’s customers in existing markets have, in Smaaash’s past. Smaaash also anticipates that, as Smaaash’s business expands into new markets and as the market becomes increasingly competitive, maintaining and enhancing Smaaash’s brands may become increasingly difficult and expensive.

 

If Smaaash fails to enhance Smaaash’s brand recognition, reputation and positive awareness of its Centers and the products Smaaash sells to third parties, it may be difficult for it to grow Smaaash’s game, product sales, sponsorship and other revenues and customer bases. Further, the customers that visit Smaaash’s Centers, or that purchase game equipment and equipment sold by its directly or through Smaaash’s distributors, would typically expect a high level of quality and satisfaction from Smaaash’s games. Smaaash’s customers’ expectations may be subjective, going beyond technical specifications and internal factors within Smaaash’s control. Smaaash’s failure to deliver on such expectations may adversely impact Smaaash’s brand image, reputation, business, financial condition, results of operations and prospects.

 

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Smaaash incurs significant raw material costs, including import costs, and does not have long term purchase contracts with its vendors, as Smaaash typically relies on purchase orders. As a result, Smaaash may be susceptible to pricing pressures or disruptions in its relationships with its vendors, which may negatively impact Smaaash’s operations.

 

Smaaash’s cost of raw materials accounted for 20% of Smaaash’s total expenditure, during fiscal year 2017. As Smaaash incurs significant raw material costs, including import costs, and does not have long term purchase contracts with Smaaash’s vendors, as it typically relies on purchase orders, Smaaash may be susceptible to pricing pressures or disruptions in Smaaash’s relationships with Smaaash’s vendors, which may negatively impact Smaaash’s operations. Particularly, as Smaaash intends to expand the scale of Smaaash’s operations, Smaaash’s reliance on third party suppliers of various raw materials, products and services may rise. In addition, there may be limited alternate suppliers for certain of Smaaash’s equipment and raw material purchases. If Smaaash is unable to source equipment and raw materials meeting required specifications, in sufficient quantities, at the required time, at commercially acceptable costs, or at all, Smaaash’s business, financial condition, results of operations and prospects may be adversely affected, particularly to the extent Smaaash is unable to pass on increased costs to Smaaash’s customers.

 

Smaaash is a company with global operations, and is subject to the risks and uncertainties of conducting business outside India.

 

Smaaash conducts its business across emerging markets such as India, Middle East, Africa, South East Asia and Latin America, and derives a substantial amount of its revenues and profits from international sales, particularly from Africa and South East Asia. During the fiscal year 2017, and during the nine-month period ended December 31, 2017, Smaaash’s international operations contributed 24% and 18%, respectively, to Smaaash’s total revenue from operations including product sales. The markets in which Smaaash operates are diverse and fragmented, with varying levels of economic and infrastructure development and distinct legal and regulatory systems, and do not operate seamlessly across borders as a single or common market. Smaaash may require considerable management attention and resources for managing Smaaash’s growing business across these emerging markets. Going forward, Smaaash anticipates that international sales will continue to account for a significant portion of Smaaash’s total revenues and profits and moreover that sales in emerging markets in Asia, Africa and elsewhere will be an increasingly important part of Smaaash’s international sales. Further, Smaaash plans to continue the expansion of its game offerings to various other jurisdictions, where Smaaash has limited or no experience in marketing, developing and deploying Smaaash’s games. Therefore, Smaaash may be subject to risks inherent in doing business in countries other than India, including:

 

challenges caused by distance, language and cultural differences;

 

providing content and services that appeal to the tastes and preferences of users in multiple markets;

 

protectionist laws and business practices;

 

complex local tax regimes;

 

higher costs associated with doing business in multiple markets;

 

risks related to the legal and regulatory environment in non-Indian jurisdictions, including with respect to privacy and data, or in relation to taxation or repatriation of Smaaash’s revenues or profits from foreign jurisdictions to India;

 

security, and unexpected changes in laws, regulatory requirements and enforcement;

 

burdens of complying with a variety of foreign laws in multiple jurisdictions;

 

potential damage to Smaaash’s brand and reputation due to compliance with local laws, including requirements to provide player information to local authorities;

 

fluctuations in currency exchange rates;

 

political, social or economic instability; and

 

the potential need to recruit and work through local partners;

 

reduced protection for or increased violations of intellectual property rights in some countries.

 

Further, a number of agreements executed by Smaaash and by Smaaash’s subsidiaries, are governed by laws other than Indian law. In the event of a dispute under such agreements, Smaaash may not be able to successfully defend its position, and any adverse decision may adversely impact its financial position, results of operations and cash flows. If Smaaash is unable to manage its global operations successfully, Smaaash’s financial results could be adversely affected, which may impact profit margins or make it increasingly difficult for it to conduct business in foreign markets.

 

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Smaaash’s failure to keep pace with rapidly evolving technology may adversely impact Smaaash’s business, results of operations and prospects.

 

Smaaash’s future success will depend in large part on Smaaash’s ability to respond to technological advances and to emerging industry standards and practices, in a cost-effective and timely manner. The manufacture and sale of game equipment and components in general, and AR or VR games, in particular, is characterized by rapid and disruptive evolution and obsolescence, including as a result of trial and error. The development and implementation of technology and systems integration by it may entail significant technical and business risks. There can be no assurance that Smaaash will successfully implement new technologies or integrate different systems or platforms effectively, or that Smaaash will adapt its existing technology and systems to meet continually evolving customer expectations or preferences, or emerging industry standards and trends. Technology updates may result in significant costs.

 

Certain aspects of technological change may require constant testing and enhancement, for instance, the sensitivity and responsiveness of the display, sensors or controls of a game, or the associated hardware or software systems. For instance, over time, bulky headsets and consoles for VR games have given away to more convenient, user-friendly and sophisticated VR game systems with wearable devices, and earlier prototypes and models of several other kinds of game equipment and components that used to have basic functions and several limitations have increasingly been replaced by newer and lighter models with higher performance or functionality, including enhanced models that allow richer simulations or more realistic and, thus, immersive game experiences, or more efficient operation.

 

However, at times, what Smaaash considers to be a promising or transformative technological advance may not be attractive to Smaaash’s customers, or compatible with other systems that Smaaash has previously deployed, and Smaaash’s investment in such technology may not necessarily yield the expected returns within the estimated time, or at all. As a result of these and other factors, Smaaash would need to exercise constant vigilance to assess changing trends and customer response, and to devote financial, management and other resources towards adapting appropriately to such changes. If Smaaash is unable, for technical, legal, financial or other reasons, to adapt in a timely manner to technological changes, Smaaash’s business, future financial performance could be adversely affected.

 

Any future risks arising from any joint ventures or acquisitions or other strategic business alliances or initiatives could adversely impact Smaaash’s operations.

 

As a part of Smaaash’s business strategy, Smaaash intends to explore opportunities for overseas expansion, including through joint ventures or acquisitions. Similarly, Smaaash may engage in corporate reorganizations, where there are operational benefits expected to arise from such initiatives and opportunities.

 

Smaaash has entered, and may enter into, discussions regarding a wide array of potential strategic transactions, including corporate reorganization, acquisitions, investments, joint ventures or other business collaborations, divestments, or continuing operations following such strategic transactions.

 

The risks that Smaaash may face in connection with these transactions may include the following:

 

Smaaash’s management and employees may lose focus due to transition or integration activities;

 

Smaaash may not successfully identify appropriate targets and opportunities;

 

if Smaaash does identify suitable targets and opportunities, Smaaash may not be able to complete those transactions on terms commercially acceptable to it or at all;

 

Smaaash may not be able to achieve the strategic purpose and generate expected returns from such strategic transactions;

 

Smaaash’s due diligence process may fail to identify all the problems, liabilities or other shortcomings or challenges in respect of a proposed strategic transaction;

 

Smaaash may have higher than anticipated costs in continuing operations following a strategic transaction;

 

Smaaash may face cultural challenges associated with integrating employees from the acquired company into Smaaash’s organization;

 

Smaaash’s relationship with current and new employees, customers, partners and distributors could be impaired;

 

there may be unknown liabilities or issues that could have an adverse effect on Smaaash’s financial condition and results of operation;

 

Smaaash may face litigation or other claims in connection with, or may inherit claims or litigation as a result of a strategic transaction, including claims from terminated employees, customers, or other third parties; and

 

Smaaash may have problems extending and upgrading Smaaash’s accounting, management information, human resource and other administrative systems following such strategic transaction.

 

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If any of the foregoing risks materialize, they could have an adverse effect on Smaaash’s business, financial condition, results of operations and prospects. Moreover, acquisitions, mergers and consolidations at times require prior approval of the anti-trust regulator in the relevant jurisdiction. For example, in India, acquisitions, mergers and consolidations that exceed certain revenue and asset thresholds require prior approval of the Competition Commission of India (“CCI”). Any acquisitions, mergers or consolidations that have an appreciable adverse effect on competition in India may be subject to remedial measures proposed by the CCI. Smaaash cannot assure you that Smaaash will be able to obtain approval for any such future transactions on satisfactory terms, or at all.

 

If Smaaash is unable to retain key members of Smaaash’s senior management, or if Smaaash is unable to continue attracting and retaining talented personnel of the appropriate level and background, Smaaash’s business and prospects may be adversely affected.

 

Among other factors, Smaaash’s sustained growth depends on the continued involvement of members of Smaaash’s core management team. Smaaash has a young and dynamic and professionally skilled management team, various members of which have contributed to Smaaash’s track record of growth. In addition, from time to time, Smaaash actively recruits professionally qualified individuals with a professional and educational background that Smaaash considers appropriate to a business of Smaaash’s size and nature. Typically, the terms of employment with individuals would include a variable pay component linked to their performance during their engagement with Smaaash and generally evaluated on at least an annual basis.

 

There is no assurance that Smaaash will be able to continue its successful hiring of talented and key personnel as well as managing attrition and maintaining good employee relations in the future. Smaaash may incur significant costs in implementing Smaaash’s strategies towards retaining members of Smaaash’s core management team and motivating and training Smaaash’s employee base in general. Managing attrition in the future may divert significant management attention. Smaaash’s failure to attract new personnel of sufficient skill and experience, or to retain any or sufficient numbers of key individuals, or to avoid, mitigate or otherwise manage attrition or any future labor-related or industrial dispute or demonstration or deterioration in relations with Smaaash’s employees individually or collectively, may adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

Smaaash does not have single-entry tickets and has not fully automated its ticketing system. As a result, Smaaash’s ability to accurately determine retail traffic or customer numbers may be limited or subject to error.

 

Smaaash does not offer single-entry tickets to any of its Centers and it has not fully automated its ticketing system. As a result, visitors to Smaaash’s Centers must generally purchase separate tickets to enjoy the game attractions. In addition, Smaaash’s loyalty cards, are not uniquely tagged and electronically monitored, so Smaaash’s ability to determine the number of unique customers, or repeat customers, is currently limited, and may be subject to error, which may adversely affect Smaaash’s results of operations.

 

If Smaaash is required to rely significantly on third party game developers or vendors in the future, Smaaash may be required to incur significant license and royalty costs, which may impact Smaaash’s profitability and prospects.

 

Smaaash’s in-house R&D and value engineering capability supports Smaaash’s game business as well as Smaaash’s product sales business. While Smaaash is not currently heavily reliant on any single technology partner or vendor, there can be no assurance that Smaaash will not become reliant on external technology partners or vendors in the future. In the event that Smaaash is required, in the future, to rely on third party game developers or other technology partners or vendors, Smaaash may be required to incur significant license and royalty costs, which may impact Smaaash’s profitability and prospects.

 

Moreover, in the absence of long term vendor contracts, or regardless of the existence of any such long term vendor contracts, Smaaash may not be able to negotiate fixed cost procurements and, therefore, may be susceptible to periodic, or erratic price escalations, regardless of Smaaash’s own technical or other specifications and budgetary and other expectations. In such events, Smaaash cannot be assured of Smaaash’s ability to continue to procure equipment and component from the same reputed and trusted vendors in the future, as Smaaash may be required to make alternative arrangements for equipment and component supplies at lower cost, more flexible terms, or otherwise. Further, in such situations, in certain cases, Smaaash may incur losses due to acts, omissions or negligence of a vendor or partner, where Smaaash cannot seek or enforce sufficient warranty, indemnity, liquidated damages, penalties or other forms of recompense, mitigation or support.

 

As a consequence of any such factors, Smaaash’s business, financial condition, results of operations and prospects may be adversely affected.

 

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Any future allegation of intellectual property rights infringement by Smaaash, or its failure to protect and defend its own intellectual property rights may adversely affect Smaaash’s business and prospects.

 

Smaaash is significantly dependent on Smaaash’s in-house developed games, components and technology for its business. Smaaash’s general policy is to seek intellectual property protection for those innovations and improvements that Smaaash considers likely to be incorporated into Smaaash’s business or to give it a competitive advantage. Moreover, when Smaaash conducts product sales to third parties, Smaaash retains Smaaash’s intellectual property rights as a matter of practice and policy. In this relation, Smaaash relies on a variety of website domain names, trademark registrations and other proprietary information, as well as confidentiality agreements or arrangements with Smaaash’s employees and consultants or other third parties to protect Smaaash’s intellectual property rights. For instance, Smaaash’s corporate trade name and logo, were assigned to it by Star India Private Limited (“Star India”) pursuant to a deed of perpetual assignment dated effective as of November 30, 2013. Under this deed, Smaaash has perpetual rights to use 30 trademarks for the SMAAASH device and word mark, in various classes, throughout the territory of India, for which registration applications have been filed with the Indian Trademark Registry. Further, under this deed of assignment, Star India has confirmed that it has no right or claims to such trademark outside the territory of India. In addition, Smaaash has applied for 219 trademarks, in various classes. Should there be any claim regarding Smaaash’s right to use such trademarks, including during the period the above-mentioned registration applications remain pending with the Trademark Registry, Smaaash’s business and prospects may be adversely affected.

 

In addition, Smaaash may not be able to detect any unauthorized use or to take appropriate and timely steps to enforce or protect Smaaash’s intellectual property rights, trade secrets, or other confidential information, which may adversely affect Smaaash’s business, financial condition, results of operations and prospects. Any protective agreements and arrangements or measures taken by it may not sufficiently protect Smaaash’s intellectual property rights, including Smaaash’s trade secrets, and confidential information. In the event any of Smaaash’s employees or consultants or vendors or partners or customers, during or after their association with Smaaash’s Company, disclose crucial information regarding Smaaash’s intellectual property rights, trade secrets or other confidential information to Smaaash’s competitors, directly or indirectly, Smaaash may be required to resort to litigation or other proceedings to enforce, protect or determine the validity and scope of Smaaash’s intellectual property rights and to defend against third party infringement. Further, Smaaash may be subject to allegations or adverse publicity regarding violation of third party intellectual property rights. Involvement in any such proceedings or adverse publicity could divert management time and attention, and consume financial resources. Any intellectual property rights infringement claims that Smaaash may be required to initiate or defend may not be settled favorably, or within a reasonable time, or at all, or that no additional liability will arise out of these proceedings. An adverse outcome in any of these proceedings could have an adverse effect on Smaaash’s business, financial condition, results of operations, prospects and reputation.

 

Smaaash relies on distributors for Smaaash’s third party sales and does not have exclusive or long term arrangements with such distributors. As a result, Smaaash’s ability to expand its product sales or have visibility over future or repeat orders may be limited, or Smaaash may be susceptible to disruptions in its relationships with its distributors, which may negatively impact Smaaash’s operations.

 

As Smaaash relies on distributors for Smaaash’s third party sales and does not have exclusive or long term arrangements with such distributors, Smaaash’s ability to expand Smaaash’s product sales or have visibility over future or repeat orders may be limited, or Smaaash may be susceptible to disruptions in its relationships with its distributors, which may negatively impact Smaaash’s operations. If Smaaash’s distributor agreements are terminated or not renewed or replaced in a timely manner, this may result in a disruption of Smaaash’s operations. In particular, the loss of business from any significant distributors. Smaaash’s future product sales business growth may also depend on Smaaash’s ability to attract additional dealerships and widen Smaaash’s distributor network. There can be no assurance that Smaaash’s distributors will continue to do business with it or that Smaaash can attract additional distributors to Smaaash’s network. In addition, Smaaash’s distributors could change their business practices, or seek to modify their payment terms, which could negatively impact Smaaash’s business, financial condition, results of operations and prospects.

 

If Smaaash’s relationship with Shripal Morakhia, its founder, is disrupted in any way, Smaaash’s business and prospects may be adversely affected.

 

Shripal Morakhia, the founder of Smaaash, is an entrepreneur associated in the past with Sharekhan, SSKI and YoBoHo. Among other things, Smaaash benefits from Mr. Morakhia’s vision, strategic guidance, years of entrepreneurial and managerial experience, and his relationships in the industry. If Mr. Morakhia is unable or unwilling for any reason to continue his present association with Smaaash, or to devote as much time to Smaaash’s operations as he has in the past, or if he is required to take a prolonged leave of absence for any reason, Smaaash may not able to replace him easily, or at all. In particular, as Smaaash grows in the future, including internationally, it may be challenging for Mr. Morakhia to continue to devote as much time and attention to Smaaash’s operations in person, as he has in the past. As a result of any such factors, Smaaash’s business, financial condition, results of operations and prospects and, particularly, Smaaash’s brand value, reputation and expansion strategy, may be adversely affected.

 

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The nature of Smaaash’s business renders it susceptible to financial misappropriation, theft, negligence or similar activities or incidents on the part of Smaaash’s employees, which may adversely impact Smaaash’s operations, reputation and prospects.

 

Smaaash’s business is susceptible to acts of fraud, financial misappropriation, theft, negligence or other misconduct committed by Smaaash’s employees. Fraudulent and unauthorized conduct by Smaaash’s employees could also include binding it to transactions that exceed authorized limits or present unacceptable risks or concealing unauthorized or unlawful activities from it. Employee misconduct could also involve the improper use or disclosure of confidential information pertaining to it or to third parties such as equipment or technology vendors or partners, which could result in regulatory sanctions, legal or other proceedings and serious reputational or financial harm. It is not always possible to deter fraud or misconduct by employees and the precautions Smaaash take and the systems Smaaash has put in place to prevent and deter such activities may not be effective in all cases. Even isolated or sporadic incidents or accidents may have a negative impact on Smaaash’s brand image and reputation, as well as Smaaash’s business, financial condition, results of operation and prospects.

 

Smaaash has entered, and may continue to enter, into certain related party transactions. There can be no assurance that Smaaash could not have achieved more favorable terms, if such transactions had not been entered into with related parties, or that Smaaash will be able to maintain existing terms in the future, where the terms are or may be more favorable than if the transactions had not been entered into with related parties.

 

Smaaash has entered into various transactions with related parties. While Smaaash believes that all such transactions have been conducted on an arm’s length basis and contain commercially reasonable terms, Smaaash may have been able to achieve more favorable terms had such transactions been entered into with unrelated parties. It is also likely that Smaaash may enter into related party transactions in the future. Although all material related party transactions that Smaaash may enter into, will be subject to board or shareholder approval, as necessary under the Companies Act 2013, there can be no assurance that such transactions, individually or in the aggregate, will not have an adverse effect on Smaaash’s financial condition and results of operations or that Smaaash could not have achieved more favorable terms if such transactions had not been entered into with related parties. Such related party transactions may potentially involve conflicts of interest.

 

Such transactions, individually or in the aggregate, may not always be in the best interests of Smaaash’s minority shareholders and will not have an adverse effect on Smaaash’s business, results of operations, financial condition and cash flows

 

Smaaash’s financial results for any fiscal quarter, particularly during the first and third fiscal quarters of any given fiscal year, when Smaaash typically experiences increased revenues, may not be indicative of results achieved or achievable in any other or future period.

 

Smaaash does not consider its business to be generally seasonal in nature, as Smaaash’s Centers offer mostly indoor games and entertainment and food and beverage options. Unlike companies that operate outdoor water parks, theme parks or amusement parks, Smaaash does not expect to experience extreme fluctuations in the number of visitors or time spent or expenditure per capita at any of Smaaash’s Centers, on account of weather conditions such as high heat, bitter cold or heavy monsoons and other extreme weather. However, Smaaash typically experiences, or would expect to experience, increased revenues during the first fiscal quarter ending June 30 and third fiscal quarter ending December 31 of any given fiscal year, including as a result of school summer and winter vacations in India, resulting in higher numbers of families with children being able to visit Smaaash’s Centers. Similar temporary effects may be seen as a result of public holidays, long weekends, or other factors that may cause quarterly or monthly fluctuations in Smaaash’s results.

 

Consequently, Smaaash’s financial results for any given fiscal quarter or period may not be indicative of results achieved or achievable in any other or future fiscal quarter or period, or Smaaash’s annualized results for any given fiscal quarter or period may not be indicative of Smaaash’s actual results for the entire fiscal year.

 

Smaaash’s insurance coverage may not adequately protect it against all future risks, which may adversely affect Smaaash’s business and prospects.

 

Smaaash maintains insurance coverage, including for fire, acts of god and perils, terrorism, burglary, money, loss of profit, fidelity guarantee, fixed glass and sanitary fitting, electronic equipment, machinery breakdown, portable equipment, sign boards, commercial general liability, marine transit, and directors’ and officers’ liability insurance, as well as employee health and medical insurance, with standard exclusions in each instance. While Smaaash maintains insurance in amounts that Smaaash considers reasonably sufficient for a business of Smaaash’s nature and scale, with insurers that Smaaash consider reliable and credit worthy, Smaaash may face losses and liabilities that are uninsurable by their nature, or that are not covered, fully or at all, under Smaaash’s existing insurance policies. Moreover, coverage under such insurance policies would generally be subject to certain standard or negotiated exclusions or qualifications and, therefore, any future insurance claims by it may not be honored by Smaaash’s insurers in full, or at all. In addition, Smaaash’s premium payments under Smaaash’s insurance policies may require a significant investment by it.

 

To the extent that Smaaash suffers loss or damage for which it did not obtain insurance, that is not covered by insurance or that exceeds Smaaash’s insurance coverage, the loss will have to be borne by it and Smaaash’s business, cash flow, financial condition, results of operations and prospects may be adversely affected.

 

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Failure of, or disruption in, Smaaash’s information technology systems may adversely impact Smaaash’s business, reputation and prospects.

 

Smaaash relies on Smaaash’s information technology systems to provide it with connectivity and control across Smaaash’s business functions, through Smaaash’s software, hardware and network systems. Smaaash has also deployed what Smaaash consider to be adequate data backup and retrieval mechanisms. However, any major or sustained failure in Smaaash’s information technology systems or loss of connectivity or loss of data arising from such failure, including due to power outage, human error, hacking, espionage or sabotage, could disrupt Smaaash’s ability to track, record and analyses Smaaash’s work in progress, process financial information, manage creditors or debtors, or vendors or partners, or otherwise engage in normal business activities, which could have an adverse effect on Smaaash’s operations.

 

Smaaash relies on certain data from third parties in this proxy statement.

 

Smaaash relies on third party data including data from the GoI and industry publications for the information provided in this proxy. Such data may also be produced on a different basis from comparable information compiled with regard to other countries. Therefore, discussions of matters relating to India, its economy or the game industry herein are subject to the caveat that the statistical and other data upon which such discussions are based may be incomplete or unreliable. These facts and other statistics include the facts and statistics included in “Industry and Market Data” and “Industry Overview". Due to possibly flawed or ineffective data collection methods or discrepancies between published information and market practice and other problems, the statistics herein may be inaccurate or may not be comparable to statistics produced elsewhere. However, we are responsible for the accuracy and completeness of the disclosure herein including the data from third parties and investors are entitled to rely on such disclosure.

 

Risks Related to Smaaash’s Operations in India

 

General economic conditions in India could adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

Visiting games and entertainment centers is perceived as a leisure activity, or discretionary expenditure. In addition, Smaaash competes with other recreation categories, such as amusement parks, cinemas, fine dining and travel, involving customers’ discretionary expenditure. Consequently, Smaaash’s business is sensitive to a number of factors that influence the global and local economy in which Smaaash operate, as well as discretionary customer spending, including population, urbanization, income levels, recession, inflation, deflation, uncertainty regarding regulatory or policy developments, availability of credit, taxation, stock market and commodities markets performance, unemployment and other matters that influence customer confidence. In particular, Smaaash’s performance may decline during recessionary periods or in other periods where one or more macroeconomic factors, or potential macroeconomic factors, negatively affect the level of discretionary expenditure. In the past, the Indian economy has been affected by global economic uncertainties, liquidity crises, domestic policies, global political environment, volatility in interest rates, currency exchange rates, commodity and electricity prices, rising inflation rates, increase in banks’ stressed assets, and various other factors. There is no certainty that the Indian economy will continue to grow, or that business sentiment will remain buoyant or improve, or that India will not face high inflationary pressures in the future. Among other things, high rates of inflation may decrease demand for Smaaash’s services and increase employee costs, which may have an adverse effect on per capita and overall customer spends at Smaaash’s Centers, Smaaash’s profitability and competitive advantage. Additionally, an increase in trade deficit or a decline in India’s foreign exchange reserves could negatively affect interest rates and liquidity, which could adversely affect the Indian economy and Smaaash’s business. Delayed structural reform in the Indian banking and financial sector or fiscal policy, among other factors, could also have consequent negative impact on the larger economy. Any downturn in the macroeconomic environment in India could have an adverse effect on Smaaash’s business, financial condition, results of operations and prospects.

 

Political, economic or other factors beyond Smaaash’s control may have an adverse impact on Smaaash’s business, financial condition, results of operations and prospects.

 

The following external risks may have an adverse impact on Smaaash’s business, financial condition, results of operations and prospects, should any of them materialize:

 

the lingering effects of the global economic slowdown have generally dampened business confidence and made credit markets more volatile, as well as negatively impacting other industry players, including companies in Smaaash’s industry;

 

increase in interest rates may adversely affect Smaaash’s access to capital and increase Smaaash’s borrowing costs, which may constrain Smaaash’s ability to grow Smaaash’s business and operate profitably

 

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political instability, resulting from a change in governmental or economic and fiscal policies, may adversely affect economic conditions in India. In recent years, India has implemented various economic and political reforms. For instance, reforms in relation to land acquisition policies and trade barriers have led to social and civil unrest in India, and there may be such agitation in the future for reasons Smaaash may not be able to anticipate, and over which Smaaash would have no control;

 

terrorist attacks, regional conflicts or situations or war; and

 

If such events should impact the national or any regional economies, Smaaash’s business, financial condition, results of operations and prospects may be adversely affected. In addition, the occurrence of any of these events may result in a loss of investor confidence, which could potentially lead to economic recession and generally have an adverse effect on Smaaash’s business, financial condition, results of operations and prospects.

 

Changing laws, rules and regulations and legal uncertainties specifically relating to tax laws, may adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

Smaaash operates in a rapidly evolving regulatory and policy environment. Regulatory and policy changes may adversely affect Smaaash’s business, financial condition, results of operations and prospects, to the extent that Smaaash is unable to suitably respond to, and comply with, any changes in applicable law and policy. The Central or State Governments in the countries Smaaash operate in may implement new regulations and policies which will require us to obtain additional approvals and licenses from the government and other regulatory bodies or may impose onerous requirements and conditions on Smaaash’s operations.

 

The Competition Act, 2002 (the “Competition Act”) regulates practices that could have an appreciable adverse effect on competition in the relevant market in India. Any adverse application or interpretation of the Competition Act could adversely affect Smaaash’s business, financial condition, results of operations and prospects.

 

Under the Competition Act, any arrangement, understanding or action in concert, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on competition in India is void and may result in substantial monetary penalties and compensation to be paid to persons shown to have suffered losses. Any agreement among competitors, which, directly or indirectly, determines purchase or sale prices, results in bid rigging or collusive bidding, limits or controls production, supply, markets, technical development, investment or provision of services, or shares the market or source of production or provision of services in any manner, including by way of allocation of geographical area or types of goods or services or number of customers in the market, is presumed to have an appreciable adverse effect on competition.

 

Further, the Competition Act prohibits abuse of a dominant position by any enterprise, directly or indirectly, including by way of unfair or discriminatory pricing or conditions in sale of goods or services, limiting production of goods, provision of services, or technical or scientific developments relating to goods or services to the prejudice of consumers, using a dominant position in one relevant market to enter into, or protect, another relevant market, denial of market access, or making the conclusion of contracts subject to acceptance of unrelated supplementary obligations. Such practices are subject to substantial monetary penalties and may also be subject to compensation for losses and orders to divide the enterprise.

 

Although Smaaash has not historically undertaken any inorganic growth initiatives, as part of its expansion strategy Smaaash intends to do so in the future, if suitable opportunities arise. If Smaaash or any of its affiliates are affected, directly or indirectly, by the application or interpretation of any provision of the Competition Act, proceedings initiated by the CCI, any claim by any party under the Competition Act, or any adverse publicity due to scrutiny or prosecution under the Competition Act, including financial penalties, Smaaash’s business, financial condition, results of operations and prospects may be adversely affected. Acquisitions, mergers and consolidations that exceed certain revenue and asset thresholds require prior approval by the CCI. Any acquisitions, mergers or consolidations that have an appreciable adverse effect on competition in India may be subject to remedial measures proposed by the CCI. Smaaash may not obtain approval for any such future transactions on satisfactory terms, or at all.

 

Regional hostilities, terrorist attacks, communal disturbances, civil unrest and other acts of violence or war involving India and other countries may result in a loss of investor confidence and a decline in the value of Smaaash’s equity shares.

 

Terrorist attacks, civil unrest and other acts of violence or war may negatively affect the Indian markets in which Smaaash operates its business and also adversely affect the worldwide financial markets. In addition, Asia has from time to time experienced instances of civil unrest and hostilities among neighboring countries. Hostilities and tensions may occur in the future and on a wider scale. Military activity or terrorist attacks in India, such as the attacks in Mumbai in November 2008 and in July 2011, may result in investor concern about stability in the region, which may adversely affect the value of Smaaash’s equity shares. Events of this nature in the future, as well as social and civil unrest within other countries in Asia, could influence the Indian economy and could have an adverse effect on the Smaaash’s business, including the value of equity shares.

 

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The occurrence of natural disasters may adversely affect Smaaash’s business, financial condition and results of operations.

 

The occurrence of natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires and pandemic disease may adversely affect Smaaash’s business, financial condition or results of operations. For instance, India has experienced several natural calamities such as earthquakes, tsunamis, floods and drought in recent years, including Cyclone Phailin, which affected the coastal areas of the States of Odisha and Andhra Pradesh, the earthquake in the state of Uttarakhand in 2013, floods in the Kashmir valley in 2014 and the floods in Chennai in the state of Tamil Nadu in 2015. The extent and severity of such natural disasters determines their effect on the regional and national economy.

 

Any downgrade of credit ratings of India or Indian companies may adversely affect Smaaash’s ability to raise debt financing.

 

India’s sovereign foreign currency long-term debt is currently rated (i) “BBB-” (negative) by Standard & Poor’s Rating Group, a division of McGraw-Hill Companies, Inc., or Standard & Poor’s, (ii) “BBB-” (negative) by Fitch Ratings Ltd, or Fitch, and (iii) “Baa3” (stable) by Moody’s Investors Services Limited, or Moody’s. These ratings reflect an assessment of the GoI’s overall financial capacity to pay its obligations and its ability or willingness to meet its financial commitments as they become due. Further, rating agencies may change their methodology for rating, which may impact the rating. No assurance can be given that Standard & Poor’s, Fitch, Moody’s or any other statistical rating organization will not downgrade the credit ratings of India. Any adverse revisions to India’s credit ratings for domestic and international debt by international rating agencies may negatively impact both the perception of credit risk associated with Smaaash’s current variable rate debt and its ability to access the debt markets on favorable terms in the future.

 

A decline in India’s foreign exchange reserves may affect liquidity and interest rates in the Indian economy.

 

According to a report released by Reserve Bank of India (RBI), India’s foreign exchange reserves totaled approximately $320 billion as of December 19, 2014. India’s foreign exchange reserves have declined recently and may have negatively affected the valuation of the Rupee. Further declines in foreign exchange reserves could adversely affect the valuation of the Rupee and could result in reduced liquidity and higher interest rates that could adversely affect Smaaash’s future financial condition.

 

Smaaash is exposed to foreign currency fluctuation risks, particularly in relation to import of equipment for Smaaash’s games, to the extent such exposures are not set off by Smaaash’s product sales to overseas customers. A depreciation of the Indian Rupee against the U.S. Dollar or other major foreign currencies may adversely impact Smaaash’s results of operations by increasing Smaaash’s import costs and capital expenditures.

 

Smaaash’s financial statements are presented in Indian Rupees. However, Smaaash incurs expenses in foreign currencies to the extent that Smaaash imports game equipment or components from overseas vendors and thus has foreign currency denominated trade payables. Smaaash also earns income in foreign currencies to the extent that Smaaash conducts product sales overseas. Smaaash may also have foreign currency borrowings from time to time, and thus incur foreign currency denominated finance charges. The exchange rates between the Indian Rupee and the U.S. Dollar or other relevant foreign currencies have fluctuated significantly in the past. Smaaash is exposed to foreign currency fluctuation risks particularly to the extent that such exposures are not set off by Smaaash’s product sales to overseas customers. A depreciation of the Indian Rupee against the U.S. Dollar or other major foreign currencies may adversely impact Smaaash’s results of operations by increasing Smaaash’s import costs and capital expenditure. A sustained appreciation of the Indian Rupee may negatively impact Smaaash’s revenue and results of operations.

 

Since a majority of Smaaash’s directors, officers and assets reside or are located outside of the United States, I-AM Capital may have difficulty enforcing judgments against Smaaash, its directors and officers.

 

Smaaash is incorporated under the laws of India. Further, Smaaash conducts substantially all of its operations in India. The majority of its directors and officers, reside outside the United States, and a majority of Smaaash’s assets and some or all of the assets of such persons are located outside the United States. As a result, it may be difficult or impossible to effect service of process within the United States upon Smaaash or those persons, or to recover against Smaaash or those persons on judgments of United States courts, including judgments predicated upon the civil liability provisions of the United States federal securities laws. An award of punitive damages by a United States courts based upon United States federal securities laws is likely to be construed by Indian courts to be penal in nature and therefore unenforceable in India. Further, no claim may be brought in India against Smaaash or its directors and officers in the first instance for a violation of United States federal securities laws because these laws have no extraterritorial application under Indian law and are not enforceable in India. However, an Indian courts may impose civil liability, including the possibility of monetary damages, on Smaaash or its directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Indian law. Moreover, it is unlikely that a courts in India would award damages on the same basis as a foreign courts if an action were brought in India or that the Indian courts would enforce foreign judgments if it viewed the amount of damages as excessive or inconsistent with Indian practice or public policy.

 

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The courts of India will not automatically enforce judgments of United States courts obtained in actions against Smaaash or its directors and officers, predicated upon the civil liability provisions of the United States federal securities laws, or entertain actions brought in India against Smaaash or such persons predicated solely upon United States federal securities laws. Further, the United States has not been declared by the Government of India to be a reciprocating territory for the purposes of enforcement of foreign judgments, and there are grounds upon which Indian courts may decline to enforce the judgments of United States courts. Some remedies available under the laws of United States jurisdictions, including remedies available under the United States federal securities laws, may not be allowed in Indian courts if contrary to public policy in India. Because judgments of United States courts are not automatically enforceable in India, it may be difficult for you to recover against Smaaash or its directors and officers or some experts named in this proxy statement based upon such judgments. In India, prior approval of the RBI is required in order to repatriate any amount recovered pursuant to such judgments. See “Enforceability of Civil Liabilities."

 

Risks Related to Smaaash’s Share Equity

 

Smaaash has not paid dividends in the past. Smaaash’s ability to pay dividends in the future will depend on, among other things, Smaaash’s future earnings, cash flows, financial condition, working capital requirements and capital expenditures.

 

Smaaash has no formal dividend policy and has not paid any dividends in the past. Smaaash cannot assure you that Smaaash will pay any dividends in the future, or provide any assurance as to the amounts of such future dividend payments. The declaration and payment of dividends, if any, will be recommended by Smaaash’s board of directors and approved by Smaaash’s shareholders at their discretion, subject to the provision of its Articles of Association and the Companies Act. The payment of dividends, if any, will depend upon Smaaash’s future earnings, financial condition, cash flows, working capital requirements, capital expenditures and other factors. Additionally, Smaaash may be prohibited by the terms of Smaaash’s future debt financing agreements to make any dividend payments until a certain time period as may be agreed with lenders.

 

There is currently no trading market for Smaaash’s equity shares and liquidity of the equity shares is limited.

 

Smaaash’s equity shares of are not registered under the securities laws of India, the United States or any state or other jurisdiction, and accordingly there is no public trading market for the equity shares that I-AM Capital will receive in the Transaction and no public trading market is expected to develop in the foreseeable future. Therefore, I-AM Capital may not be able to readily sell or transfer the Smaaash equity shares that it receives in the transaction.

 

Smaaash’s principal stockholders and management own a significant percentage of its share equity stock and will be able to exert significant control over matters subject to shareholder approval.

 

Assuming no redemptions and the investment of the full $49.0 million, Shripal Morakhia and AHA Holdings Private Limited, his affiliated entity, and FW Metis, Smaaash’s principal shareholders, beneficially owned approximately 24.34% and 21.23%, respectively, of Smaaash’s share equity after to the Transaction. Accordingly, these shareholders have significant influence over the outcome of corporate actions requiring shareholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of its assets or any other significant corporate transaction. The interests of these shareholders may not be the same as or may even conflict with I-AM Capital’s interests. The concentration in ownership may have the effect of delaying, preventing or deterring a change in control of Smaaash and deprive Smaaash’s shareholders of an opportunity to receive a premium for their equity shares as part of a sale of Smaaash.

 

Risks Related to I-AM Capital and the Transaction

 

I-AM Capital may become subject to the requirements of the Investment Company Act, which would limit I-AM Capital’s business operations and require it to spend significant resources to comply with such act.

 

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The Investment Company Act defines an “investment company” as an issuer that is engaged in the business of investing, reinvesting, owning, holding or trading in securities and owns investment securities having a value exceeding 40 percent of the issuer’s unconsolidated assets, excluding cash items and securities issued by the federal government. While we believe that a reasonable investor would not conclude that we are engaged primarily in investing in securities based on our business plan focused on serving as the sole distributor for Smaaash games and as the master franchisee for Smaaash centers in North and South America and making acquisitions in the active entertainment industry in the United States, the composition of our assets after the Transaction, including our ownership of Smaaash equity shares, could contribute to a conclusion that we meet the threshold definition of an investment company. While the Investment Company Act also has several exclusions and exceptions that we would seek to rely upon to avoid being deemed an investment company, our reliance on any such exclusions or exceptions may be misplaced resulting in violation of the Investment Company Act, the consequences of which can be significant. For example, investment companies that fail to register under the Investment Company Act are prohibited from conducting business in interstate commerce, which includes selling securities or entering into other contracts in interstate commerce. Section 47(b) of the Investment Company Act provides that a contract made, or whose performance involves, a violation of the Investment Company Act is unenforceable by either party unless a court finds that enforcement would produce a more equitable result than non-enforcement. Similarly, a court may not deny rescission to any party seeking to rescind a contract that violates the Investment Company Act, unless the court finds that denial of rescission would produce more equitable result than granting rescission.

 

If we are deemed to be an investment company under the Investment Company Act, Rule 3a-2 of the Investment Company Act provides that inadvertent or transient investment companies will not be treated as investment companies subject to the provisions of the Investment Company Act, provided the issuer has the requisite intent to be engaged in a non-investment business, evidenced by the issuer’s business activities and an appropriate resolution of the issuer’s board of directors, within one year from the commencement of the earlier of (1) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the value of such issuer’s total assets on either a consolidated or unconsolidated basis, or (2) the date on which an issuer owns or proposes to acquire investment securities (as defined in section 3(a) of the Investment Company Act) having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis. If the Company becomes an inadvertent investment company, and fails to meet the requirements of the transient investment company exemption under Rule 3a-2 of the Investment Company Act, then we will be required to register as an investment company with the SEC.

 

I-AM Capital’s Sponsor and certain of its officers and directors either directly or indirectly beneficially own shares of I-AM Capital common stock and have obligations and interests in the Transaction that are different from, or in addition to, I-AM Capital stockholders. If the Transaction is not approved, the securities held by the Sponsor will likely become worthless.

 

The Sponsor has agreed to vote its founder shares, and each of its executive officers and directors have also agreed to vote any shares purchased by them during or after I-AM Capital’s initial public offering, in favor of the Transaction. Accordingly, it is more likely that the requisite stockholder approval will be received than would be the case if the Sponsor had agreed to vote its founder shares in accordance with the majority of votes cast by I-AM Capital’s public stockholders. As of the record date, the Sponsor directly and certain of the officers and directors of I-AM Capital beneficially own, in the aggregate, approximately 22.92% of the issued and outstanding shares of I-AM Capital common stock.

 

In light of the amount of consideration paid, the Sponsor will likely significantly benefit from the consummation of the Transaction, even if the Transaction causes the market price of I-AM Capital’s securities to significantly decline. Furthermore, the $2,545,000 purchase price of the 254,500 private placement units acquired by the Sponsor will be included in the working capital that is distributed to I-AM Capital’s public stockholders in the event of I-AM Capital’s dissolution and liquidation if I-AM Capital fails to consummate an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (unless further extended). These factors may influence the Sponsor in promoting the Transaction and/or soliciting proxies for the approval and adoption of the Business Combination Proposal. I-AM Capital’s common stock and warrants held by the Sponsor had an aggregate market value (without taking into account any discount that may be attributed to such securities due to their restricted nature or any exercise limitations of the private placement warrants) of $15,894,055 based on the closing sale prices of $10.10 and $0.47, respectively, on NASDAQ on May 9, 2018. The founder shares are subject to lock-up agreements, and the Sponsor has waived any rights to receive any liquidation proceeds that may be distributed upon I-AM Capital’s liquidation in respect of the founder shares. Therefore, if the Business Combination Proposal is not approved by I-AM Capital’s stockholders, and I-AM Capital is subsequently required to commence proceedings to dissolve and liquidate, the founder shares and private placement warrants held directly or beneficially by the Sponsor will be worthless.

 

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In addition, in considering the recommendation of I-AM Capital’s board of directors elsewhere in this proxy statement to vote “FOR” the Business Combination Proposal, you should also be aware that (i) it is currently anticipated that F. Jacob Cherian and Suhel Kanuga, each of whom is a current member of I-AM Capital’s board of directors, will each be appointed as a director of Smaaash following the Transaction and will be compensated for such service in the same manner as the other directors of Smaaash, and (ii) if the Business Combination Proposal is not approved and I-AM Capital has not completed an alternative business combination by August 21, 2018, which has been extended to November 21, 2018 (unless further extended), the founder shares and private placement warrants held by the Sponsor will be worthless because they are not entitled to receive any of the funds held in the trust account that of may be distributed upon liquidation of I-AM Capital. 

 

In addition, if I-AM Capital dissolves and liquidates prior to the consummation of an initial business combination, the Sponsor, pursuant to certain written agreements executed in connection with I-AM Capital’s initial public offering, will be liable for any successful claims made by third parties for services rendered or products sold to I-AM Capital and by potential target businesses who entered into written agreements, such as a letter of intent or confidentiality agreement, with I-AM Capital and who did not waive all of their rights to make claims against the proceeds in the trust account, to the extent such claims reduce the amounts in the trust account to below the lesser of (i) $10.15 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account, in each case less taxes payable and up to $600,000 of working capital expenses.

 

I-AM Capital’s directors will not receive reimbursement for any out-of-pocket expenses incurred by them on I-AM Capital’s behalf incident to identifying, investigating and consummating a business combination to the extent such expenses exceed the amount not required to be retained in the trust account, unless a business combination is consummated.

 

The personal and financial interests of I-AM Capital’s directors may have influenced their decision as members of I-AM Capital’s board of directors to approve and adopt the Subscription Agreement and the adoption of the Business Combination Proposal, you should consider these interests. Additionally, the exercise of the directors’ discretion in agreeing to changes or waivers in the terms of the Subscription Agreement prior to the vote by the stockholders, may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the stockholders’, best interest.

 

In connection with the stockholder vote to approve the Business Combination Proposal, the Sponsor, I-AM Capital’s directors, executive officers, advisors or their affiliates may elect to purchase public shares from I-AM Capital’s public stockholders, which may influence the vote on the Business Combination Proposal.

 

In connection with the stockholder vote to approve the Business Combination Proposal, the Sponsor, I-AM Capital’s directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination Proposal 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 the Transaction, where it appears that such requirement would otherwise not be met. This may result in the completion of our business combination that may not otherwise have been possible.

 

If a stockholder fails to receive notice of I-AM Capital’s offer of redemption in connection with the vote to approve the Business Combination Proposal, such shares may not be redeemed.

 

I-AM Capital will comply with the proxy rules when conducting redemptions in connection with the stockholder vote to approve the Business Combination Proposal. Despite compliance with these rules, if a stockholder fails to receive the proxy materials, such stockholder may not become aware of the opportunity to redeem his, her or its public shares. In addition, the proxy materials that I-AM Capital is furnishing to holders of its shares in connection with the Transaction describe the various procedures that must be complied with in order to validly redeem the shares. In the event that a stockholder fails to comply with these procedures, such stockholder’s shares may not be redeemed.

 

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I-AM Capital’s security holders will not have any rights or interests in funds from the trust account, except under certain limited circumstances, to liquidate their investment, therefore, I-AM Capital’s security holders may be forced to sell their shares or warrants, potentially at a loss if they do not elect to redeem.

 

I-AM Capital’s public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of: (i) I-AM Capital’s completion of an initial business combination, and then only in connection with those shares of I-AM Capital’s common stock that such stockholder properly elected to redeem, subject to the limitations described herein, and (ii) the redemption of I-AM Capital’s public shares if it is unable to complete an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period of time to consummate a business combination), subject to applicable law and as further described herein. In no other circumstances will an I-AM Capital public stockholder have any right or interest of any kind in the trust account. Accordingly, to liquidate their investment, I-AM Capital’s security holders may be forced to sell their I-AM Capital shares, rights or warrants, potentially at a loss. 

 

The ability of I-AM Capital’s stockholders to exercise redemption rights with respect to a large number of I-AM Capital’s shares could increase the probability that the Transaction would be unsuccessful and that I-AM Capital’s stockholders would have to wait for liquidation in order to redeem their stock.

 

The probability that the Transaction with Smaaash will be unsuccessful is increased if a large number of I-AM Capital’s public shares are tendered for redemption. If the Transaction is unsuccessful, I-AM Capital’s public stockholders will not receive their pro rata portion of the trust account until the trust account is liquidated. If I-AM Capital’s public stockholders are in need of immediate liquidity, they could attempt to sell their stock in the open market; however, at such time, I-AM Capital’s stock may trade at a discount to the pro rata per share amount in the trust account. In either situation, I-AM Capital’s stockholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with the redemption until I-AM Capital is liquidated or I-AM Capital’s stockholders are able to sell their stock in the open market.

 

If an I-AM Capital stockholder chooses to redeem his, her or its shares, he, she or it may not exercise his, her or its redemption rights to cause the redemption of his, her or its shares of I-AM Capital’s common stock for a pro rata portion of the trust account, including any interest earned thereon, less taxes payable and up to $600,000 of working capital expenses, until the date that is two business days prior to the date of the special meeting of I-AM Capital’s stockholders.

 

Stockholders holding shares of I-AM Capital’s common stock issued in I-AM Capital’s initial public offering, whether or not they vote against the Business Combination Proposal, may elect to redeem all or a portion of their shares of common stock upon the completion of the Transaction for cash equal to their pro rata share of the aggregate amount on deposit in the trust account which holds the proceeds of I-AM Capital’s initial public offering as of two business days prior to the consummation of the transactions contemplated by the Subscription Agreement, including interest, less taxes payable and up to $600,000 of working capital expenses, upon the closing of the Transaction. Any stockholder who seeks to exercise this redemption right must, with respect to the portion of shares he, she or it wishes to redeem, prior to 4:30 p.m. Eastern time on October 2, 2018 (two business days before the special meeting), (i) submit a written request to I-AM Capital’s transfer agent that I-AM Capital redeem such public shares for cash, and (ii) deliver their stock to I-AM Capital’s transfer agent physically or electronically through the DTC.

 

If an individual stockholder or a “group” of stockholders are deemed to hold in excess of 15% of I-AM Capital’s common stock, that individual or group will lose the ability to redeem all such shares in excess of 15% of I-AM Capital’s common stock.

 

I-AM Capital’s Restated Certificate 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 public shares (the “Excess Shares”). However, stockholders are not restricted from voting all of their shares (including Excess Shares) for or against the Transaction. The inability to redeem the Excess Shares will reduce the influence of I-AM Capital’s stockholders over I-AM Capital’s ability to complete the Transaction, and such stockholders could suffer a material loss on their investment in I-AM Capital if they sell their Excess Shares in open market transactions. Additionally, such stockholders will not receive redemption distributions with respect to the Excess Shares if I-AM Capital completes the Transaction. As a result, such stockholders would continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell their stock in open market transactions, potentially at a loss.

 

I-AM Capital expects to incur significant costs associated with the Transaction, whether or not the Transaction is completed.

 

Whether or not the Transaction is completed, I-AM Capital expects to incur significant costs associated with the Transaction, including due diligence, legal, accounting and other expenses associated with structuring, negotiating and documenting the Transaction. If the parties do not consummate the Transaction, and if time permits I-AM Capital to seek an alternative business combination, then the costs I-AM Capital will have incurred with respect to the Transaction will reduce the amount of cash otherwise available to complete an alternative business combination. I-AM Capital estimates that it will incur significant transaction costs associated with the Transaction of at least approximately $1.2 million.

 

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When the Smaaash Founders acquire additional shares of I-AM Capital pursuant to the Subscription Agreement they may be able to influence major corporate decisions of I-AM Capital or their interests may conflict with the interests of other holders of our common stock.

 

Under the Subscription Agreement, the Smaaash Founders have agreed that within six months of the Closing they shall transfer all of their ownership interest in Smaaash (which represented 33.6% of the share capital of Smaaash on a fully diluted basis as of June 22, 2018 and shall represent 24.34% immediately after the Investment) to I-AM Capital in exchange for newly issued shares of common stock of I-AM Capital in an amount that would enable the Smaaash Founders to retain a 24.34% ownership interest in Smaaash indirectly through their interest in I-AM Capital. Consequently, the Smaaash Founders shall be issued and shall beneficially own 6,473,573 shares of common stock of I-AM Capital representing approximately 46.97% of the voting power of our outstanding common stock (including shares issued upon conversion of private placement rights and public rights). As a result of such stock ownership, the Smaaash Founders will have the ability to significantly influence the outcome of most corporate actions requiring stockholder approval, including a merger by I-AM Capital with or into another company, the sale of all or substantially all of I-AM Capital’s assets and amendments to its certificate of incorporation. The Smaaash Founders may also have interests that differ from other stockholders and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may also have the effect of delaying, deferring or preventing a change of control of I-AM Capital, which may be disadvantageous to other stockholders.

 

Smaaash may fail to realize all of the anticipated benefits of the Transaction.

 

The success of the Transaction will depend, in part, on Smaaash’s ability to realize the anticipated benefits from the availability of the cash currently in I-AM Capital’s trust account to Smaaash following the completion of the Transaction. To realize these anticipated benefits, Smaaash must successfully manage and apply I-AM Capital’s cash and use the available shares of I-AM Capital as currency to fund potential future acquisitions of target companies.

 

Following the consummation of the Transaction, we might require additional equity or debt financing to fund operations and/ or future acquisitions.

 

Although I-AM Capital intends to enter into a backstop agreement(s) for up to $7 million (or 14% of the maximum Investment Amount) in funds as a backstop to cover redemptions by public stockholders, to help fund the Transaction and related expenses, as well as for working capital, I-AM Capital may still need access to additional debt or equity capital to fund operations or to fund potential acquisitions. If additional capital is required, I-AM Capital may not be able to obtain debt and/or equity financing on terms favorable to it, or at all. The failure to obtain additional funding could result in a curtailment of I-AM Capital’s operations and future development, which in turn could adversely affect I-AM Capital’s business, results of operations, and financial condition.

 

I-AM Capital may not be able to obtain backstop financing on commercially reasonable terms.

 

I-AM Capital intends to seek to obtain up to $7 million (or 14% of the maximum Investment Amount) in funds as a backstop to cover redemptions by public stockholders, to help fund the Transaction and related expenses, as well as for working capital. If I-AM Capital is unable to obtain such financing on commercially reasonable terms, it may not be able to complete the Transaction.

 

Subsequent to the completion of the Transaction, Smaaash may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.

 

Even if I-AM Capital conducts extensive due diligence on Smaaash, this diligence may not expose all material issues that may be present inside Smaaash, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of Smaaash’s and I-AM Capital’s control will not later arise. As a result of these factors, Smaaash may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in reporting losses. Even if due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on Smaaash’s liquidity, the fact that charges of this nature are reported could contribute to negative market perceptions about Smaaash or its securities. In addition, charges of this nature may cause Smaaash to violate net worth or other covenants to which it may be subject as a result of assuming pre-existing debt held by a target business or by virtue of its obtaining post-combination debt financing. Accordingly, any stockholders who choose to remain stockholders following the Transaction could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by Smaaash’s officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the tender offer materials or proxy statement relating to the Transaction contained an actionable material misstatement or material omission.

 

If Smaaash or third parties bring claims against I-AM Capital, the proceeds held in the trust account could be reduced and the per-share redemption amount received by stockholders may be less than $10.15 per share.

 

I-AM Capital’s placing of funds in the trust account may not protect those funds from third party claims against it. Although I-AM Capital will seek to have all vendors, service providers, prospective target businesses or other entities with which it does business agree to waive any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of I-AM Capital’s public stockholders, such parties may not execute such agreements, or, even if they execute such agreements, may not 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 advantage with respect to a claim against I-AM Capital’s 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 account, I-AM Capital’s 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 I-AM Capital’s management believes that such third party’s engagement would be significantly more beneficial to I-AM Capital than any other alternative.

 

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Examples of possible instances where I-AM Capital 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 I-AM Capital’s management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where I-AM Capital’s management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims that they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with I-AM Capital and will not seek recourse against the trust account for any reason. Upon redemption of its shares, if I-AM Capital is unable to complete the Transaction with Smaaash within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Transaction, I-AM Capital will be required to provide for payment of claims of creditors that were not waived that may be brought against I-AM Capital within the 10 years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.15 per share currently held in the trust account, due to claims of such creditors. The Sponsor has agreed that it will be liable to us if and to the extent any claims by a vendor for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (i) $10.15 per public share (or such higher amount then held in trust) 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 the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes or up to a maximum of $600,000 of working capital expenses, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwriters of this offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third party claims. I-AM Capital has not independently verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations and believes that the Sponsor’s only assets are securities of I-AM Capital. I-AM Capital has not asked the Sponsor to reserve for such indemnification obligations. Therefore, the Sponsor may not be able to satisfy those obligations. I-AM Capital believes that the likelihood of the Sponsor having to indemnify the trust account is limited because it will endeavor to have all vendors and prospective target businesses, including Smaaash, as well as other entities execute agreements with it waiving any right, title, interest or claim of any kind in or to monies held in the trust account.

 

I-AM Capital’s directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.

 

In the event that the proceeds in the trust account are reduced below the lesser of (i) $10.15 per share (or such higher amount then held in trust) or (ii) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets other than due to the failure to obtain such waiver, in each case net of the interest which may be withdrawn to pay taxes or up to a maximum of $600,000 of working capital expenses, and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, I-AM Capital’s independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While I-AM Capital currently expects that its independent directors would take legal action on its behalf against the sponsor to enforce its indemnification obligations to it, it is possible that such independent directors in exercising their business judgment may choose not to do so in any particular instance. If the independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to I-AM Capital’s public stockholders may be reduced below $10.15 per share (or such higher amount then held in trust).

 

If, after I-AM Capital distributes the proceeds in the trust account to its public stockholders, it files a bankruptcy petition or an involuntary bankruptcy petition is filed against it that is not dismissed, a bankruptcy courts may seek to recover such proceeds, and the members of I-AM Capital’s board of directors may be viewed as having breached their fiduciary duties to I-AM Capital’s creditors, thereby exposing the members of the board of directors and I-AM Capital to claims of punitive damages.

 

If, after the proceeds in the trust account are distributed to I-AM Capital’s public stockholders, it files a bankruptcy petition or an involuntary bankruptcy petition is filed against it that is not dismissed, any distributions received by I-AM Capital’s 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 courts could seek to recover all amounts received by I-AM Capital’s stockholders. In addition, I-AM Capital’s board of directors may be viewed as having breached its fiduciary duty to I-AM Capital’s creditors and/or having acted in bad faith, thereby exposing itself and I-AM Capital to claims of punitive damages, by paying public stockholders from the trust account prior to addressing the claims of creditors.

 

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If, before distributing the proceeds in the trust account to its public stockholders, I-AM Capital files a bankruptcy petition or an involuntary bankruptcy petition is filed against I-AM Capital that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of I-AM Capital’s stockholders and the per-share amount that would otherwise be received by I-AM Capital’s stockholders in connection with its liquidation may be reduced.

 

If, before distributing the proceeds in the trust account to its public stockholders, I-AM Capital files a bankruptcy petition or an involuntary bankruptcy petition is filed against it that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in I-AM Capital’s bankruptcy estate and subject to the claims of third parties with priority over the claims of I-AM Capital’s stockholders. To the extent any bankruptcy claims deplete the trust account, the per-share amount that would otherwise be received by I-AM Capital’s stockholders in connection with its liquidation may be reduced.

 

I-AM Capital is not required to obtain an opinion from an independent investment banking or accounting firm, and consequently, you may have no assurance from an independent source that the price of the investment in Smaaash is fair to our company from a financial point of view.

 

Unless I-AM Capital completes a business combination with an affiliated entity, it is not required to obtain an opinion from an independent investment banking or accounting firm that the price it is paying is fair from a financial point of view. An opinion is not required for the minority equity investment in Smaaash. If no opinion is obtained, the I-AM Capital stockholders will be relying on the judgment of its board of directors, who will determine fair market value based on standards generally accepted by the financial community.

 

Since I-AM Capital’s initial stockholder, executive officers and directors will lose their entire investment in us if our business combination is not completed, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.

 

I-AM Capital’s Initial stockholder currently owns 1,561,500 shares of common stock (which includes 261,500 private placement shares). I-AM Capital’s initial stockholder also owns 261,500 private placement warrants and 261,500 private placement rights that will be cancelled and become worthless if we do not complete a business combination. The holder has agreed (A) to vote any shares owned by it in favor of any proposed business combination and (B) not to redeem any shares in connection with a stockholder vote to approve the Transaction. The personal and financial interests of I-AM Capital’s executive officers and directors may influence their motivation in completing the Transaction and influencing the operation of the business following the initial business combination. 

 

I-AM Capital has no prior history as an operating company and may be subject to the risks encountered by early-stage companies.

 

I-AM Capital was founded as a blank check company on April 17, 2017. Because I-AM Capital has no history as an operating company, you should consider and evaluate its operating prospects in light of the risks and uncertainties frequently encountered by early- stage operating companies in rapidly evolving markets. For I-AM Capital, these risks include:

 

  that it may not have sufficient capital to achieve its growth strategy;
     
  that it may not develop its product and service offerings in a manner that enables us to be profitable and meet its customers’ requirements;
     
  that its growth strategy may not be successful; and
     
  that fluctuations in its operating results will be significant relative to our revenues.

 

I-AM Capital’s future growth will depend substantially on its ability to address these and the other risks described in this section. If we do not successfully address these risks, our business could be significantly harmed.

 

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After the consummation of the Transaction, I-AM Capital may not have sufficient capital to fund its ongoing operations, effectively pursue its strategy or sustain its growth initiatives.

 

After the consummation of the Transaction, I-AM Capital’s remaining liquidity and capital resources may not be sufficient to allow it to fund its ongoing operations, effectively pursue its strategy or sustain its growth initiatives. As of May 31, 2018, excluding accrued interest set aside for working capital, I-AM Capital had $52.78 million of cash in its trust account. Assuming, the minimum number of shares are tendered for redemption by I-AM Capital’s stockholders, after transaction costs, expenses and taxes payable we estimate that approximately $49.0 million will be invested in Smaaash, leaving minimal cash to fund I-AM Capital’s ongoing operations, pursue its strategy and sustain its growth initiatives. Furthermore, under the amendment to the Subscription Agreement, I-AM Capital has agreed to invest any and all monies it receives, (i) pursuant to the exercise of outstanding warrants for its capital stock and (ii) from capital raises of additional funds outside of India, whether from the public or in private transactions, into Smaaash as consideration for the subscription of additional shares of Smaaash, which obligation further limits I-AM Capital’s liquidity and capital resources. A portion of the $250,000 that Smaaash intends to initially contribute to I-AM Capital to set up the initial Centers in the United States may however be used for working capital.

 

In order to augment I-AM Capital’s working capital, I-AM Capital and Smaaash have entered into an agreement, pursuant to which Smaaash will arrange for a line of credit to I-AM Capital in accordance with Indian law, the proceeds of which will be used to fund the operating expenses of I-AM Capital after the Transaction until such time as the revenue that I-AM Capital generates is sufficient to meet its ongoing expenses. While the line of credit will increase I-AM Capital’s working capital, funds drawn on the line of credit will also increase I-AM Capital’s debt. I-AM Capital’s ability to repay the principal and accrued interest on the debt under the line of credit at maturity will depend upon its future revenues. I-AM Capital future revenues and financial performance are, to a certain extent, subject to general economic, financial, competitive, legislative, regulatory and other factors beyond its control. There can be no assurance that I-AM Capital will generate sufficient revenue to repay the amounts borrowed under the line of credit when due and as a result if its anticipated revenues are inadequate to repay the debt, it could default on the loan, which could cause material adverse consequences for I-AM Capital.

 

In addition, there can be no assurance that Smaaash will be in a financial position to extend the full amount of funds required by I-AM Capital at the time such funds are needed by I-AM Capital or that disbursement of the loans will not be restricted due to currency or other regulatory restrictions in India. If the transfers of funds under the line of credit are delayed or the amounts are reduced below the amounts requested, I-AM Capital’s financial position could be materially and adversely affected.

 

If I-AM Capital requires additional capital resources and is unable to obtain such funds under the Smaaash line of credit, it may seek such funds directly from third party sources; however, it may not be able to obtain sufficient equity capital and/or debt financing from third parties to allow it to fund its expected ongoing operations or it may not be able to obtain such equity capital or debt financing on acceptable terms or conditions. Factors affecting the availability of equity capital or debt financing to I-AM Capital on acceptable terms and conditions include:

 

  I-AM Capital’s current and future financial results and position;
     
  the collateral availability of I-AM Capital’s otherwise unsecured assets;
     
  the market’s, investors and lenders’ view of I-AM Capital’s industry and products;
     
  the perception in the equity and debt markets of I-AM Capital’s ability to execute its business plan or achieve its operating results expectations; and 
     
  the price, volatility and trading volume and history of I-AM Capital’s common stock.

 

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If I-AM Capital is unable to obtain the equity capital or debt financing necessary to fund its ongoing operations, pursue its strategy and sustain its growth initiatives it may be forced to scale back its operations or its expansion initiatives, and its business and operating results will be materially adversely affected.

 

I-AM Capital’s growth strategy depends on the availability of suitable locations for its Centers and its ability to open new Centers and operate them profitably.

 

A key element of I-AM Capital’s growth strategy is to extend the Smaaash brand by opening additional Centers in locations in North and South America that it believes will provide attractive returns on investment. I-AM Capital has initially identified six sites in the United States for potential Centers, however, desirable locations for additional Center openings may not be available at an acceptable cost when I-AM Capital identifies a particular opportunity for a new Center.

 

In addition, I-AM Capital’s ability to open new Centers on a timely and cost-effective basis, or at all, is dependent on a number of factors, many of which are beyond its control, including its ability or the ability of the selected franchisee to:

 

  reach acceptable agreements regarding the lease of the locations;

 

  comply with applicable zoning, licensing, land use and environmental regulations;

 

  raise or have available an adequate amount of cash or currently available financing for construction and opening costs;

 

  timely hire, train and retain the skilled management and other employees necessary to meet staffing needs;

 

  obtain, for acceptable cost, required permits and approvals, including liquor licenses; and

 

  efficiently manage the amount of time and money used to build and open each new Center.

 

If I-AM Capital succeeds in opening new Centers on a timely and cost-effective basis, it may nonetheless be unable to attract enough customers to the new Centers because potential customers may be unfamiliar with its Centers or concept, or its entertainment and menu options might not appeal to them. I-AM Capital’s new Centers may not meet or exceed I-AM Capital’s performance targets, including target cash-on-cash returns. New Centers may even operate at a loss, which could have a significant adverse effect on I-AM Capital’s overall operating results.

 

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I-AM Capital may not be able to compete favorably in the highly competitive out-of-home and home-based entertainment and restaurant market in North and South America, which could have a material adverse effect on its business, results of operations or financial condition.

 

The out-of-home entertainment market in North American and South America is highly competitive. I-AM Capital’s Centers in North and South America will compete for customers’ discretionary entertainment dollars with providers of out-of-home entertainment, including localized attraction facilities such as movie theatres, sporting events, bowling alleys, sports activity centers, arcades and entertainment centers, nightclubs and restaurants as well as theme parks. Many of the entities operating these businesses are larger and have significantly greater financial resources, a greater number of locations, have been in business longer, have greater name and brand recognition and are better established in the local markets where I-AM Capital’s Centers are planned to be located. As a result, they may be able to invest greater resources than I-AM Capital can in attracting customers and succeed in attracting customers who would otherwise come to I-AM Capital’s Centers. In North America, the legalization of casino gambling in geographic areas near any future Center would create the possibility for adult entertainment alternatives, which could have a material adverse effect on I-AM Capital’s business and financial condition. I-AM Capital will also face competition from local, regional and national establishments that offer entertainment experiences similar to it and restaurants that are highly competitive with respect to price, quality of service, location, ambience and type and quality of food and beverages. I-AM Capital’s Centers will also face competition from increasingly sophisticated home-based forms of entertainment, such as internet and video gaming and home movie streaming and delivery. If I-AM Capital’s fails to compete favorably in the competitive out-of-home and home-based entertainment and restaurant markets it could have a material adverse effect on its business, results of operations and financial condition.

 

I-AM Capital may not be able to operate its Centers in North America and South America, or obtain and maintain licenses and permits necessary for such operation, in compliance with laws, regulations and other requirements, which could adversely affect I-AM Capital’s business, results of operations or financial condition.

 

Each Center in North America and South America will be subject to licensing and regulation by alcoholic beverage control, amusement, health, sanitation, safety, building code and fire agencies in the country, state, county and/or municipality in which the Center is located. In North America, each Center with a restaurant or bar will be required to obtain a license to sell alcoholic beverages on the premises from a state authority and, in certain locations, county and municipal authorities. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. In some states, the loss of a license for cause with respect to one Center may lead to the loss of licenses at all Centers in that state and could make it more difficult to obtain additional licenses in that state. Alcoholic beverage control regulations relate to numerous aspects of the daily operations of each Center, including minimum age of patrons and employees, hours of operation, advertising, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. The failure of I-AM Capital or a franchisee in obtaining and maintaining the required licenses, permits and approvals at any one Center could impact the continuing operations of existing Centers, or delay or prevent the opening of new Centers. Although I-AM Capital does not anticipate any material difficulties occurring in the future, the failure to receive or retain a liquor license, or any other required permit or license, in a particular location, or to continue to qualify for, or renew licenses, could have a material adverse effect on operations and its ability to obtain such a license or permit in other locations.

 

As a result of operating certain entertainment games and attractions, including skill-based games that offer redemption prizes, I-AM Capital’s Centers in North and South America are subject to amusement licensing and regulation by the countries, states, provinces, counties and municipalities in which its Centers are located. These laws and regulations can vary significantly by country, state, province, county, and municipality and, in some jurisdictions, may require I-AM Capital to modify its business operations or alter the mix of redemption games and simulators it offers. Moreover, as more states and provinces in the United States and Canada and local communities implement legalized gambling, the laws and corresponding enabling regulations may also be applicable to I-AM Capital’s redemption games and regulators may create new licensing requirements, taxes or fees, or restrictions on the various types of redemption games it offers. Furthermore, other states, provinces, counties and municipalities may make changes to existing laws to further regulate legalized gaming and illegal gambling. Adoption of these laws, or adverse interpretation of existing laws, after I-AM Capital has established a Center in the jurisdiction could require the existing center in these jurisdictions to alter the mix of games, modify certain games, limit the number of tickets that may be won by a customer from a redemption game, change the mix of prizes that it may offer or terminate the use of specific games, any of which could adversely affect its operations.

 

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I-AM Capital is also subject to laws and regulations governing its relationship with its employees, including those related to minimum wage requirements, exempt status, overtime, health insurance mandates, working and safety conditions, immigration status requirements, child labor, and non- discrimination. Additionally, changes in federal labor laws, including card verification regulations, could result in portions of I-AM Capital workforce being subjected to greater organized labor influence, which could result in an increase to its labor costs. A significant portion of Center personnel will be paid at minimum wage rates established by federal, state and municipal law. Increases in the minimum wage result in higher labor costs, which may be only partially offset by price increases and operational efficiencies.

 

I-AM Capital is also subject to the rules and regulations of the Federal Trade Commission and various state laws regulating the offer and sale of franchises. The Federal Trade Commission and various state laws require that I-AM Capital furnish a franchise disclosure document containing certain information to prospective franchisees, and a number of states require registration of the franchise disclosure document with state authorities. State laws that regulate the franchisor-franchisee relationship presently exist in a substantial number of states, and bills have been introduced in Congress from time to time that would provide for federal regulation of the franchisor-franchisee relationship. The state laws often limit, among other things, the duration and scope of non-competition provisions, the ability of a franchisor to terminate or refuse to renew a franchise and the ability of a franchisor to designate sources of supply. I-AM Capital shall endeavor to make sure that any franchise disclosure document it provides, together with any applicable state versions or supplements, and franchising procedures, comply in all material respects with both the Federal Trade Commission guidelines and all applicable state laws regulating franchising in those states in which we have offered franchises.

 

If I-AM Capital and its franchisees fail to comply with such laws and regulations, it may be subject to various sanctions and/or penalties and fines or may be required to cease operations until it achieves compliance, which could have an adverse effect on its business and its financial results.

 

I-AM Capital’s success depends upon its ability to recruit and retain qualified management, culinary professionals and operating personnel at its Smaassh Centers in North and South America.

 

I-AM Capital and its franchisees must attract, retain and motivate a sufficient number of qualified management, culinary professionals and operating personnel in order to maintain consistency in it service, hospitality, quality and atmosphere of its Centers in the North America and South America. In particular, I-AM capital and its franchisees will need to hire and retain an experiences team of culinary professionals to create appealing food and beverage menus, tailored to the tastes and preferences of the locations in which it will operate. Qualified management, culinary professionals and operating personnel are typically in high demand. If I-AM Capital and its franchisees are unable to attract and retain a satisfactory number of qualified management, culinary professionals and operating personnel, labor shortages could delay the planned openings of new Centers which could have a material adverse effect on I-AM Capital’s business and results of operations.

 

I-AM Capital’s senior management team has limited experience in establishing, operating, licensing rights to and franchising entertainment centers and related products.

 

The members of I-AM Capital’s senior management team have extensive backgrounds in finance and the management and operation of special purpose acquisition companies, however, they have limited prior experience in establishing, operating, licensing rights to and franchising entertainment centers and restaurants and operating businesses in South America. I-AM Capital will need to expand its management team, to include individuals with expertise in establishing and operating entertainment centers and restaurants as well as individuals with expertise in product licensing and franchise operations in North and South America. If I-AM Capital is unable to recruit professionals with acceptable backgrounds in establishing and operating entertainment centers and restaurants and with backgrounds in product licensing and financing, it may not be able to pursuit its growth strategy which could have a material adverse effect on its business and results of operations.

 

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I-AM Capital could face liability from or as a result of its franchisees.

 

Various state and federal laws will govern the relationship between I-AM Capital and franchisees and the potential sale of a franchise. If I-AM Capital fails to comply with these laws, it could be liable for damages to franchisees and fines or other penalties. A franchisee or government agency may bring legal action against I-AM Capital based on the franchisee/franchisor relationship. Also, under the franchise business model, I-AM Capital may face claims and liabilities based on vicarious liability, joint-employer liability, or other theories or liabilities. Such legal actions could result in expensive litigation with its franchisees or government agencies that could adversely affect both I-AM Capital’s profits and its important relations with its franchisees. In addition, regulatory or legal developments could result in changes to laws or the franchisor/franchisee relationship that could negatively impact the franchise business model and, accordingly, I-AM Capital’s profits.

 

A failure or unanticipated delay in securing any necessary or desired certification for Smaaash products from government or regulatory organizations could impair distribution of Smaaash products and materially and adversely affect I-AM Capital’s results of operations and financial condition.

 

In order for certain Smaaash products to be commercially distributed for use in certain target markets, they must first be certified by certain government or regulatory organizations, such as the Underwriters Laboratory (UL) in the U.S. and the Technischer Überwachungs-Verein (TÜV) and Conforme Européene (CE) in Europe. A failure or unanticipated delay in securing any necessary or desired certification for the Smaaash products could impair sales of Smaaash products and materially and adversely affect I-AM Capital’s business, results of operations and financial condition.

 

If Smaaash fails to keep pace with changing industry technology and consumer preferences, I-AM Capital will be at a competitive disadvantage.

 

The Smaaash VR and AR products that I_AM Capital will distribute also compete within industries that are characterized by swiftly changing technology, evolving industry standards, frequent new and enhanced product introductions, rapidly changing consumer preferences and product obsolescence. In order to continue to compete effectively, Smaaash needs to respond quickly to technological changes and to understand their impact on customers’ preferences. It may take significant time and resources to respond to these technological changes and changes in consumer preferences. I-AM Capital’s business and results of operations may be negatively impacted if the products it distributes fail to keep pace with these changes.

 

Various product safety laws and governmental regulations applicable to the distributor of Smaaash products may adversely affect I-AM Capital’s business, results of operations and financial condition.

 

I-AM Capital’s distribution of Smaaash products will be subject to numerous federal, state, provincial, local and foreign laws and regulations, including laws and regulations with respect to product safety, including regulations enforced by the United States Consumer Products Safety Commission. I-AM Capital and its franchisees could incur costs in complying with these regulations and, if they fail to comply, could incur significant penalties.

 

A failure to comply with applicable laws and regulations, or concerns about product safety, may also lead to a recall or post-manufacture repair of selected Smaaash products, resulting in the rejection of the products by I-AM Capital’s franchisees, lost sales, increased customer service and support costs, and costly litigation.

 

Risks Associated with Doing Business in South America

 

To the extent I-AM Capital starts the Smaaash Center operations in South America, it will be subject to the following risks associated with doing business in South America.

 

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Political or economic instability in South America could have an adverse impact on I-AM Capital’s results of operations due to diminished revenues.

 

I-AM Capital plans to set up and operate Smaaash Centers in South America. To the extent it starts operations in South America, it may derive a portion of its future revenues from countries within South America. Political or economic instability in countries within South America could have an adverse impact on I-AM Capital’s results of operations due to diminished revenues. I-AM Capital’s future revenues, costs of operations and profits could also be affected by a number of other factors related to its anticipated South American operations, including changes in economic conditions in such countries, changes in a country’s political condition, trade protection measures, licensing and other legal requirements, and local tax issues.

 

Fluctuations in local currency exchange rates could negatively affect I-AM Capital’s performance.

 

Unanticipated exchange rate fluctuations in the local currencies could lead to lower reported consolidated results of operations due to the translation of these currencies into U.S. dollars when I-AM Capital consolidates its financial results for any subsidiaries that it established in South America.  A decrease in the value of the U.S. dollar in relation to the applicable local currency could increase I-AM Capital’s cost of doing business in the relevant jurisdiction.

 

Governmental policies in the South American countries where Smaaash Centers are located could impact I-AM Capital’s business.

 

Changes in local governmental policies in the South American countries where Smaaash Centers are expected to be located, and which could be expected to have a substantial impact on I-AM Capital’s business, include:

 

  new laws and regulations or new interpretations of those laws and regulations;

 

  the introduction of measures to control inflation or stimulate growth;

 

  changes in the rate or method of taxation;

 

  the imposition of additional restrictions on currency conversion and remittances abroad; and

 

  any actions which limit I-AM Capital’s ability to finance and operate its business in such jurisdictions.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF SMAAASH

 

The following table sets forth selected historical financial information derived from Smaaash’s audited financial statements included elsewhere in this proxy statement as of March 31, 2018, 2017 and 2016 and for the years ended March 31, 2018, 2017 and 2016. Historical results are not necessarily indicative of results to be expected in any future period. You should read the following selected financial information in conjunction with the section entitled ” Smaaash Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Smaaash’s financial statements and the related notes appearing elsewhere in this proxy statement.

 

   Year Ended March 31, 
(Rs. in thousands)  2016   2017   2018 
Income Statement Information:               
Total Revenue   573,669    1,169,786    2,143,884 
Total Expenses   818,509    1,522,685    2,709,668 
Profit/(Loss) before tax   (244,840)   (352,899)   (565,784)
Profit/(Loss) from continuing operations   (174,549)   (247,550)   (329,783)
Profit/(Loss) for the period   (189,823)   (263,016)   (329,749)
                
Statement of Financial Position information (at period end):               
                
Total non-current assets   1,715,897    2,770,269    4,863,147 
Total current assets   326,440    431,206    965,428 
Total Assets   2,042,337    3,201,475    5,828,575 
Total Equity   875,153    824,304    2,435,593 
Total non-current liabilities   857,980    1,775,194    1,565,601 
Total current liabilities   309,204    601,977    1,827,381 
Total Liabilities   1,167,184    2,377,171    3,392,982 
Total equity and liabilities   2,042,337    3,201,475    5,828,575 

 

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EXCHANGE RATES

 

The following tables show, for the periods indicated, information concerning the exchange rate between the U.S. dollar and the rupee. This information is provided solely for your convenience, and Smaaash and I-AM Capital do not represent that rupees have been converted into U.S. dollars at these rates or at any other rate. These rates may differ from the rates used by Smaaash in the preparation of its consolidated financial statements or other financial information appearing in this proxy statement.

 

The data provided in the following tables are expressed in Indian Rupees per US Dollar and are based on the noon buying rate in The City of New York for cable transfers of Indian Rupees as certified for customs purposes by the Federal Reserve Bank of New York.

 

On May 7, 2018, the last trading day before Smaaash and I-AM Capital announced the execution of the Subscription Agreement, the exchange rate between the U.S. dollar and the rupee expressed in Indian Rupees per U.S. dollar was $1 = Rs. 67.13. On May 8, 2018, the day of the public disclosure of the Transaction, the exchange rate between the U.S. dollar and the rupee expressed in Indian Rupees per U.S dollar was $1 = Rs.67.12. On September 7, 2018, the most recent practicable day prior to the date of this proxy statement, the exchange rate was $1 = Rs. 71.78. (Source: Federal Reserve of New York).

 

   High   Low   Average (1)   Period
End
 
   (Indian Rupees per US Dollar) 
Annual Data (Year Ended March 31)                    
2018   65.71    63.38    64.46    65.11 
2017   68.86    64.85    67.01    64.85 
2016   68.84    61.99    65.39    66.25 

 

  (1) The average rates for annual periods were calculated by taking the simple average of the exchange rates on the last business day of each month during the relevant period.

 

   High   Low 
   (Indian Rupees per
US Dollar)
 
Recent Monthly Data          
March 2018   65.24    64.83 
April 2018   66.92    64.92 
May 2018   68.38    66.52 
June 2018   68.81    66.87 
July 2018   69.01    68.42 
August 2018   71.00    68.37 

 

COMPARATIVE SHARE INFORMATION

 

The following table sets forth historical comparative share information for Smaaash and unaudited pro forma share information after giving effect to the Transaction, assuming (i) under the minimum scenario that no holders of public shares exercise their redemption rights and (ii) under the maximum scenario that holders of 90% of the public shares exercise their redemption rights. The historical information should be read in conjunction with “Selected Historical Financial Information of Smaaash” included elsewhere in this proxy statement and the historical financial statements of Smaaash included elsewhere in this proxy statement.

 

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The unaudited pro forma combined share information does not purport to represent what the actual results of operations of Smaaash would have been had the Transaction been completed or to project Smaaash’s results of operations that may be achieved after the Transaction. The unaudited pro forma book value per share information below does not purport to represent what the value of Smaaash would have been had the Transaction been completed nor the book value per share for any future date or period.

 

   Historical   Pro forma
(minimum)
   Pro forma
(maximum)
 
As of and for the year ended March 31, 2018               
Book value (deficit) per share (Rs.) (a)   11.0    19.0    12.1 
Shares outstanding   185,734,979    275,318,194    194,876,123 
Basic earnings (loss attributable to common stock) per share (Rs.) for the year ended March 31, 2018   (2.0)   (1.3)   (1.9)
Diluted earnings (loss attributable to common stock) per share (Rs.) for the year ended March 31, 2018   (1.8)   (1.2)   (1.7)

 

  (a) Book value per share is calculated using the following formula: Book value per share = (Total Shareholders’ Equity excluding Preferred Equity)/Total Outstanding Shares).

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Smaaash and I-AM Capital make forward-looking statements in this proxy statement. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for their respective businesses, and the timing and ability to complete the Transaction. Specifically, forward-looking statements may include statements relating to:

 

  the benefits of the Transaction;

 

  the future financial performance of Smaaash following the Transaction;

 

  changes in the market for Smaaash products;

 

  expansion plans and opportunities; and

 

  other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions.

 

These forward-looking statements are based on information available to Smaaash or I-AM Capital, as applicable, as of the date of this proxy statement, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing the views of Smaaash or I-AM Capital as of any subsequent date, and neither Smaaash nor I-AM Capital undertakes any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

 

You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this proxy statement. As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

  the occurrence of any event, change or other circumstances that could give rise to the termination of the Subscription Agreement;

 

  the outcome of any legal proceedings that may be instituted against Smaaash or I-AM Capital following announcement of the proposed Transaction and related transactions contemplated thereby;

 

  the inability to complete the Transaction due to the failure to obtain approval of the stockholders of I-AM Capital, or any conditions to closing in the Subscription Agreement;

 

  the risk that the proposed Transaction disrupts current plans and operations of Smaaash as a result of the announcement and consummation of the Transaction;

 

  the ability to recognize the anticipated benefits of the Transaction, which may be affected by, among other things, competition and the ability of Smaaash to grow and manage growth profitably;

 

  costs related to the Transaction;

 

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  changes in applicable laws or regulations;

 

  the possibility that Smaaash or I-AM Capital may be adversely affected by other economic, business, and/or competitive factors; and

 

  other risks and uncertainties indicated in this proxy statement, including those under “Risk Factors.”

 

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SPECIAL MEETING OF I-AM CAPITAL STOCKHOLDERS

 

General

 

I-AM Capital is furnishing this proxy statement to its stockholders as part of the solicitation of proxies by its board of directors for use at the special meeting to be held on October 4, 2018, and at any adjournment or postponement thereof. This proxy statement is first being furnished to I-AM Capital stockholders on or about September 24, 2018. This proxy statement provides you with information you need to know to be able to vote or instruct your vote to be cast at the special meeting. In connection with the special meeting, we are also providing you with our Annual Report on Form 10-K for the fiscal year ended May 31, 2018, which includes I-AM Capital financial statements for the year ended May 31, 2018 and I-AM Capital Management’s Discussion and Analysis of Financial Condition and Results of Operation.

 

Date, Time and Place of Special Meeting

 

The special meeting will be held at 10:00 a.m. Eastern time, on October 4, 2018, at the offices of Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, 11th Floor, New York, New York, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

 

Voting Power; Record Date

 

You will be entitled to vote or direct votes to be cast at the special meeting if you owned shares of I-AM Capital common stock at the close of business on September 10, 2018, which is the record date for the special meeting. You are entitled to one vote for each share of I-AM Capital common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were 6,813,500 shares of I-AM Capital common stock outstanding, consisting of 5,200,000 public shares, 1,561,500 founder shares, and 52,000 shares held by the underwriters of I-AM Capital’s initial public offering.

 

Vote of I-AM Capital Sponsor

 

In connection with I-AM Capital’s initial public offering, I-AM Capital and the underwriters of the initial public offering entered into agreements with each of the Sponsor and I-AM Capital’s executive officers and directors pursuant to which the Sponsor and the officers and directors agreed to vote the founder shares and any other shares acquired during and after I-AM Capital’s initial public offering in favor of the initial business combination.

 

The Sponsor, executive officers and directors have waived any redemption rights, including with respect to shares of common stock purchased in I-AM Capital’s initial public offering or in the aftermarket, in connection with Transaction. The founder shares held by the Sponsor have no redemption rights upon I-AM Capital’s liquidation and will be worthless if no business combination is effected by I-AM Capital prior to by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period to consummate a business combination).

 

Quorum and Required Vote for Proposals for the Special Meeting

 

A quorum of I-AM Capital stockholders is necessary to hold a valid meeting. A quorum will be present at the special meeting if a majority of the I-AM Capital common stock outstanding and entitled to vote at the special meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

 

The approval of the Business Combination Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal require the affirmative vote of the holders of a majority of the votes cast thereon at the special meeting. Accordingly, abstentions, a broker non-vote and shares not in attendance at the special meeting will have no effect on the outcome of any vote on the Business Combination, the Incentive Plan Proposal, the Auditor Ratification Proposal, and the Adjournment Proposal, respectively.

 

The approval of the Certificate Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of I-AM Capital common stock. Accordingly, a stockholder’s failure to vote by proxy or to vote in person at the special meeting, an abstention from voting or a broker non-vote will have the same effect as a vote “AGAINST” the Certificate Amendment Proposal.

 

The affirmative vote of a plurality of the votes cast by the stockholders present in person or represented by proxy at the special meeting and entitled to vote thereon is required for the election of directors. Accordingly, abstentions, a broker non-vote and shares not in attendance at the special meeting will have no effect on the outcome of any vote on the Director Election Proposal.

 

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The Certificate Amendment Proposal and the election of Shripal Morakhia, the director nominee, as a director are conditioned on the approval of the Business Combination Proposal. If the Business Combination Proposal is not approved, the Certificate Amendment Proposal and the election of Mr. Morakhia will have no effect, even if such proposals are approved by the requisite vote.

 

Recommendation to I-AM Capital Stockholders

 

I-AM Capital’s board of directors believes that each of the Business Combination Proposal, the Certificate Amendment Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal and the Adjournment Proposal to be presented at the special meeting is in the best interests of I-AM Capital and its stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals and for the re-election of the four current directors standing for re-election and the election of the director nominee named in the Director Election Proposal.

 

When you consider the recommendation of I-AM Capital’s board of directors in favor of approval of the Business Combination Proposal, you should keep in mind that its directors and officers have interests in the Transaction that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

 

  the appointment of two of I-AM Capital’s executive officers and directors, as directors (but not officers) of Smaaash even though Mr. Cherian and Mr. Kanuga will not receive any compensation for their services as directors of Smaaash;

 

  the continued indemnification of current directors and officers of I-AM Capital and the continuation of directors’ and officers’ liability insurance after the Transaction;

 

  unless I-AM Capital consummates an initial business combination, its officers, directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account;

 

  the Sponsor has agreed that the private placement units, and all of their underlying securities, will not be sold or transferred by it until I-AM Capital has completed a business combination;

 

  the Sponsor paid an aggregate of $25,000 for the founder shares and such securities will have a significantly higher value at the time of the Transaction;

 

  the Sponsor has agreed not to redeem any of the founder shares in connection with a stockholder vote to approve a proposed initial business combination;

 

  if I-AM Capital does not complete an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (or May 21, 2019, if we further extend the period of time to consummate a business combination), the proceeds from the sale of the private placement units will be included in the liquidating distribution to I-AM’s public stockholders and the private placement units, including the private placement shares, private placement rights and private placement warrants, purchased by the Sponsor will be worthless; and

 

  if the trust account is liquidated, including in the event I-AM Capital is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify I-AM Capital to ensure that the proceeds in the trust account are not reduced below (i) $10.15 per public share (or such higher amount then held in trust) or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account by the claims of prospective target businesses with which I-AM has entered into an acquisition agreement or claims of any third party for services rendered or products sold to I-AM Capital, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the trust account.

 

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Broker Non-Votes and Abstentions

 

Under the rules of various national and regional securities exchanges your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. I-AM Capital believes the proposals presented to its stockholders (other than the Auditor Ratification Proposal) will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your bank, broker or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank, broker or nominee is not voting your shares is referred to as a “broker non-vote.”

 

Abstentions are considered present for the purposes of establishing a quorum but will have the same effect as a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal, or the Adjournment Proposal. Broker non-votes will have the effect of a vote “AGAINST” the Certificate Amendment Proposal, but will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, Auditor Ratification Proposal or the Adjournment Proposal.

 

Voting Your Shares

 

Each share of I-AM Capital common stock that you own in your name entitles you to one vote on each of the proposals for the special meeting. Your one or more proxy cards show the number of shares of I-AM Capital common stock that you own. There are several ways to have your shares voted:

 

  You can submit your vote by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the special meeting. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of I-AM Capital common stock will be voted, as recommended by I-AM Capital’s board of directors. Our board of directors recommends voting “FOR” the Business Combination Proposal, “FOR” the Certificate Amendment Proposal, “FOR” the re-election of the current directors standing for re-election and the election of the director nominee named in the Director Election Proposal, “FOR” the Incentive Plan Proposal, “FOR” the Auditor Ratification Proposal, and “FOR” the Adjournment Proposal.

 

  You can attend the special meeting and vote in person even if you have previously voted by submitting a proxy. You will be given a ballot when you arrive. However, if your shares of common stock are held in the name of your broker, bank or other nominee, you must get a proxy from the broker, bank or other nominee. That is the only way we can be sure that the broker, bank or nominee has not already voted your shares of common stock.

 

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Revoking Your Proxy

 

If you give a proxy, you may revoke it at any time before the special meeting, or at such meeting by doing any one of the following:

 

  you may send another proxy card with a later date;

 

  you may notify Suhel Kanuga, I-AM Capital’s Secretary, in writing before the special meeting that you have revoked your proxy; or

 

  you may attend the special meeting, revoke your proxy, and vote in person, as indicated above.

 

Additional Matters May Be Presented at the Special Meeting

 

The special meeting has been called to consider the approval of the Business Combination Proposal, the Certificate Amendment Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Auditor Ratification Proposal and the Adjournment Proposal. The stockholder may also consider and transact such other procedural matters as may properly come before the special meeting.

 

Who Can Answer Your Questions About Voting

 

If you have any questions about how to vote or direct a vote in respect of your shares of I-AM Capital common stock, you may call Morrow, I-AM Capital’s proxy solicitor, at (800) 662-5200 or banks and brokers can call (203) 658-9400.

 

Redemption Rights

 

Pursuant to I-AM Capital’s Restated Certificate, any holders of public shares may demand that such shares be redeemed in exchange for 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 Transaction, including interest, less taxes payable and up to $600,000 of working capital expenses, divided by the number of then outstanding public shares, subject to the limitations described herein. If demand is properly made and the Transaction is consummated, these shares, immediately prior to the Transaction, will cease to be outstanding and will represent only the right to receive 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 Transaction, including interest, divided by the number of then outstanding public shares, subject to the limitations described herein. For illustrative purposes, based on funds in the trust account of approximately $52,780,000 on May 31, 2018 (excluding accrued interest set aside for working capital purposes), the estimated per share redemption price would have been approximately $10.15.

 

In order to exercise your redemption rights, you must, prior to 4:30 p.m. Eastern time on October 2, 2018 (two business days before the special meeting), both:

 

Submit a request in writing that I-AM Capital redeem your public shares for cash to Continental Stock Transfer & Trust Company, I-AM Capital’s transfer agent, at the following address:

 

Continental Stock Transfer & Trust Company
One State Street Plaza, 30th Floor
New York, New York 10004
Attn: Mark Zimkind
E-mail: mZimkind@continentalstock.com

 

and

 

Deliver your public shares either physically or electronically through DTC to the transfer agent. Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent. It is I-AM Capital’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, I-AM Capital does not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically. If you do not submit a written request and deliver your public shares as described above, your shares will not be redeemed.

 

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with I-AM Capital’s consent, until the vote is taken with respect to the Transaction. If you delivered your shares for redemption to I-AM Capital’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that the transfer agent return the shares (physically or electronically). You may make such request by contacting the transfer agent at the email or physical address listed above.

 

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Each redemption of I-AM Capital common stock by our public stockholders will decrease the amount in our trust account, which held $52,780,000 as of May 31, 2018 (excluding accrued interest set aside for working capital purposes), and thereby reduces the equity interests in Smaaash that I-AM Capital receives in the Investment. In no event, however, will I-AM Capital redeem public shares in an amount that would cause its net tangible assets to be less than $5,000,001 immediately prior to the Investment. If I-AM Capital receives redemption requests in an amount that would cause our net tangible assets to be less than $5,000,001, the Transaction will not be consummated.

 

Prior to exercising redemption rights, stockholders should verify the market price of I-AM Capital common stock as they may receive higher proceeds from the sale of their common stock in the public market than from exercising their redemption rights if the market price per share is higher than the redemption price. No assurance can be made that you will be able to sell your shares of I-AM Capital common stock in the open market, even if the market price per share is higher than the redemption price stated above, as there may not be sufficient liquidity in I-AM Capital common stock when you wish to sell your shares.

 

If you exercise your redemption rights, your shares of I-AM Capital common stock will cease to be outstanding immediately prior to the Transaction and will only represent the right to receive the per-share redemption price. You will no longer own those shares and will not be entitled to the Special Dividend. You will be entitled to receive cash for these shares only if you properly demand redemption.

 

If the Transaction is not approved and I-AM Capital does not consummate an initial business combination by August 21, 2018, which has been extended to November 21, 2018 (unless such date is further extended), I-AM Capital will be required to dissolve and liquidate and its warrants will expire worthless.

 

Appraisal Rights

 

Appraisal rights are not available to holders of shares of I-AM Capital common stock in connection with the Transaction.

 

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PROPOSAL NO. 1 —THE BUSINESS COMBINATION PROPOSAL

 

I-AM Capital is asking its stockholders to approve the subscription for equity shares of Smaaash pursuant to the terms of the Subscription Agreement and the other transactions contemplated thereby. I-AM Capital stockholders should read carefully this proxy statement in its entirety for more detailed information concerning the Transaction and the Subscription Agreement, which is attached as Annex A to this proxy statement and is incorporated by reference herein. Please see the subsection entitled “The Subscription Agreement” below for additional information and a summary of certain terms of the Subscription Agreement. You are urged to read carefully the Subscription Agreement in its entirety before voting on this proposal.

 

Because I-AM Capital is holding a stockholder vote on the Transaction, its Restated Certificate provides that it may consummate the Transaction only if it is approved by the affirmative vote of the holders of a majority of the shares of I-AM Capital common stock that are voted at the special meeting.

 

The Transaction

 

Pursuant to the Subscription Agreement, I-AM Capital will invest into Smaaash the funds held in the trust account, less transaction expenses, amounts used to pay I-AM Capital stockholders who properly exercise their redemption rights in connection with the vote to approve the Business Combination Proposal, and reserves for liquidation and liquidation expenses, in exchange for equity shares of Smaaash. I-AM Capital estimates that if $49.0 million is invested in Smaaash, the equity shares issued by Smaaash will constitute up to approximately 27.53% of the issued share capital of Smaaash, provided that such percentage shall decrease proportionately depending on the number of shares redeemed by I-AM Capital’s public stockholders. See “Unaudited Pro Forma Condensed Financial Information" for further information. A copy of the Subscription Agreement is attached to this proxy statement as Annex A.

 

In connection with the Investment, I-AM Capital shall change its name to “Smaaash Entertainment Inc.” and it shall receive the right under the Master Distribution Agreement and the Master Franchise Agreement to become (i) the sole distributor of Smaaash games in North America and South America and (ii) the master franchisee for Smaaash centers in North America and South America. After the Transaction, I-AM Capital shall also pursue acquisitions within the active entertainment industry in the United States with the objective of facilitating the transformation of Smaaash from an India focused company to a globally recognized brand within the active entertainment industry.

 

In connection with, and as a condition to, the Investment, the Shareholders’ Agreement that I-AM Capital previously entered into, pursuant to which it will have the right to, among other things, appoint two directors and jointly consent to the appointment of three additional directors to the board of directors of Smaaash (which board may have up to 10 directors), will become effective. Copies of the Master Distribution Agreement, the Master Franchise Agreement and the Shareholders’ Agreement are attached to this proxy statement as Annex B, Annex C, and Annex D, respectively.

 

The Subscription Agreement

 

The following is a summary of the material provisions of the Subscription Agreement between Smaaash and I-AM Capital and the other parties thereto (which we refer to as the Subscription Agreement). This summary is qualified in its entirety by reference to the Subscription Agreement, a copy of which is included as Annex A to this proxy statement and is incorporated into this proxy statement by reference. References to the Subscription Agreement include its exhibits and schedules unless the context otherwise requires. You should read the Subscription Agreement in its entirety, as it is the legal document governing this transaction. The Subscription Agreement and this summary of its terms have been included with this proxy statement to provide you with information regarding the terms of the Subscription Agreement.

 

In reviewing the representations and warranties contained in the Subscription Agreement and described in this summary it must be recognized that the parties negotiated the representations and warranties with the principal purpose of establishing the circumstances in which a party to the Subscription Agreement may have liability in the event that a representation or warranty is untrue due to a change in circumstance or otherwise, and allocating risk between the parties, rather than establishing matters as facts.

 

The Subscription Agreement has been entered into by and between I-AM Capital, Smaaash and the Smaaash Founders.

 

Capitalized terms used but not defined herein shall have the meanings ascribed to them under the Subscription Agreement.

 

Pursuant to the Subscription Agreement and subject to the satisfaction or waiver of certain conditions set forth therein, I-AM Capital has agreed to subscribe to 89,583,215 shares for a consideration of up to $49,000,000. This amount will be paid through normal banking channels in accordance with Applicable Laws. The amount shall then be utilized to fuel the growth of Smaaash in accordance with the Business Plan, principally to fund acquisitions and for the repayment of existing debt up to an amount of $22,500,000.

 

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Conditions to Closing

 

The parties have agreed to fulfilment of certain conditions to Closing. I-AM Capital shall make its investment in Smaaash subject to fulfilment of such conditions. Some of these include: finalization and execution of the Shareholders’ Agreement and any other Transaction Documents; there being no legal or other issue that may interfere with the consummation of any of the transactions contemplated under the Subscription Agreement; no Material Adverse Effect having occurred; all authorizations, approvals, permits, consents and waivers, having been obtained to enter into the transaction; corporate actions such as holding board and shareholder meetings, filings with the registrar of companies having been undertaken; and accounts, financials and projections of Smaaash being provided to I-AM Capital. I-AM Capital may also exercise discretion and choose to waive certain conditions.

 

Conduct Prior to Closing

 

The Subscription Agreement provides that during the period between the Effective Date and the Closing Date, Smaaash shall continue to conduct its business in its ordinary course consistent with past practices, and shall not (other than to the extent required to fulfil Conditions Precedent to Closing), without the prior written consent of I-AM Capital (which consent shall not be unreasonably withheld) undertake actions such as alter its share capital; take any action that has the effect of re-organization, consolidation, merger, demerger or sale of all or substantially all of its Assets; enter into any transactions over a value of INR 5,000,000; dissolve, wind-up or liquidate Smaaash, whether or not voluntary, or permit any restructuring of itself; incur any indebtedness over INR 500,000,000; create any security, indemnity or guarantee of value over INR 1,000,000; alter the terms of or employment of or appoint any key managerial personnel; amend the tax policies; amend the constitutional documents of Smaaash; or do or permit anything which would constitute a breach of any of the Representations and Warranties or any covenant under the Subscription Agreement.

 

Closing of the Transaction

 

Once the Conditions Precedent have been fulfilled, Smaaash shall issue a notice to I-AM Capital informing it of the completion of the Conditions Precedent. The Closing under the Subscription Agreement is expected to take place within seven (7) days of completion of the Conditions Precedent or its waiver, or such other date as may be agreed between Smaaash and I-AM Capital. The date on which the actual Closing occurs is the “Closing Date". At Closing, I-AM Capital shall remit the Investment Amount and Smaaash shall hold a meeting of its Board and its shareholders in order to ensure all corporate actions are given effect to, such as issue and allotment of the shares to I-AM Capital, entering the name of I-AM Capital as the registered holder of the Subscription Shares in the statutory records of Smaaash; approving amendment to the Articles of Smaaash and appointment of Directors nominated by I-AM Capital, to the Board. All the Closing actions shall occur simultaneously on the Closing Date itself.

 

Stockholders should note that depending on the level of redemptions by the I-AM Capital stockholders, I-AM Capital may own less than 50% of the share capital of Smaaash on a fully diluted basis even after the transfer by the Smaaash Founders of all of their equity ownership to I-AM Capital.

 

The following tables illustrate varying ownership levels assuming varying levels of investments and redemptions by I-AM Capital stockholders on the Closing Date and upon the transfer by the Smaaash Founders of their ownership in smaaash six (6) months after the Closing Date:

 

On the Closing Date:                
Investment Amount (US Dollars in Millions)  $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders   96.27%   83.76%   78.66%   72.47%
I-AM Capital   3.73%   16.24%   21.34%   27.53%

 

After the Transfer by the Smaaash Founders

Six Months After the Closing Date:

                
Investment Amount (US Dollars in Millions) $5   $25   $35   $49 
% of I-AM Capital Public Shares Redeemed   90%   49%   29%   0.00%
Current Smaaash Shareholders (Less Founders)   71.93%   59.42%   54.32%   48.13%
I-AM Capital   28.07%   40.58%   45.68%   51.87%

 

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Upon Closing having occurred, the following items shall be completed: filings with the relevant Registrar of Companies, India with respect to the appointment of Directors by I-AM Capital; filing of Advance Reporting Form along with the supporting documents to the Reserve Bank of India on the e-Biz platform with regard to the Investment Amount; filing of Form FC-GPR along with the supporting documents to the Reserve Bank of India on the e-Biz platform with regard to the Subscription Shares. If any of the provisions relating to Closing are not complied with, then, unless otherwise agreed by I-AM Capital, Smaaash shall, immediately repay the Investment Amount to I-AM Capital in accordance with Applicable Laws, and thereafter the Subscription Agreement shall terminate and cease to have effect.

 

Covenants and Agreements

 

Parties have made certain covenants under the Subscription Agreement such as: Parties agree that no publicity or dissemination of information in any manner with regard to the transactions contemplated in the Subscription Agreement shall be made without the prior written consent of I-AM Capital; Parties shall keep confidential any non-public information; Parties shall use their best efforts to cause the transactions contemplated by the Subscription Agreement including obtaining all Approvals of Governmental Authorities and other Persons as may be necessary or required by I-AM Capital and its nominees in order to achieve the objectives of the Subscription Agreement.

 

In addition, the Parties agreed that I-AM Capital shall invest any and all monies it receives, (i) pursuant to the exercise of outstanding warrants for its capital stock and (ii) from capital raises of additional funds outside of India whether from the public or in private transactions, into Smaaash as consideration for the subscription of additional shares of Smaaash, and any such investment in Smaaash will be at the same valuation as the valuation used when the warrants were issued or the funds were raised, as the case may be. There is no investment limit or ceiling on the investment of proceeds from exercise of outstanding warrants and capital raised outside of India.

 

The Smaaash Founders also agreed that if Smaaash does not meet its projected EBITDA target of $45 million for the fiscal year ending March 31, 2020, they would, at the sole discretion of I-AM Capital, either (i) transfer such number of equity shares of Smaaash constituting 5% (five percent) of the share capital of Smaaash, as of June 22, 2018, as held by the Smaaash Founders in Smaaash, to I-AM Capital, or (ii) dilute their shareholding in I-AM Capital (if any, as on that date) by 5% (five percent) or more (as may be agreed between the Smaaash Founders and I-AM Capital) at no cost or the lowest permissible price under applicable laws.

 

The Smaaash Founders further agreed that within six (6) months following the Closing Date, they shall transfer all of their ownership interest in Smaaash (representing 33.6% of the share capital of Smaaash on a fully diluted basis as of June 22, 2018 and which will represent 24.34% of the share capital of Smaaash on a fully diluted basis immediately after the Investment) to I-AM Capital in exchange for newly issued shares of common stock of I-AM Capital in an amount which would enable the Smaaash Founders to retain their 24.34% post-Investment ownership interest in Smaaash through their interest in I-AM Capital. 

 

Smaaash agreed that on the Closing Date it shall make a lump sum payment of $250,000 to I-AM Capital to be used as working capital and to set up the entertainment centers in North America. Smaaash further agreed that it shall arrange for a line of credit for I-AM Capital under applicable Indian law in an amount of up to $2,000,000, which amount is subject to review from time to time by the board of directors of Smaaash and I-AM Capital, until such time as the revenue that I-AM Capital generates is sufficient to meet its ongoing expenses.

 

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Representations and Warranties

 

Under the Subscription Agreement, Smaaash and Smaaash Founders jointly and severally make representations and warranties relating to the organization, authorization to execute the Subscription Agreement, corporate matters, compliance with applicable laws, authorization and ownership of the shares of Smaaash. In addition, Smaaash and the Smaaash Founders jointly and severally also make representations and warranties relating to financial statements and financial matters, business and its operations, taxation, assets and properties, commercial matters, employees, litigation, insolvency, completeness of statements and environment related matters. Smaaash and the Smaaash Founders have, wherever applicable, made few disclosures against the representations and warranties, as an exception to such representation and warranty. No disclosures are, however, made against Fundamental Warranties. I-AM Capital makes certain representations and warranties under the Subscription Agreement, as well. These include representations relating to its organization, its power and authority to execute the Subscription Agreement, non-violation of any other agreements in its entering into the Subscription Agreement and non-contravention of applicable laws.

 

Indemnification

 

The Subscription Agreement contains certain indemnification obligations of the Smaaash Founders. The Smaaash Founders agree to indemnify I-AM Capital, its Affiliates and its directors, employees, agents, representatives, successors and assigns from and against any and all direct (and not remote) losses, costs, claims, damages and expenses (including reasonable attorney fees) and interest incurred or suffered by the foregoing Persons in relation to any and all claims, demands, notices of claims issued by any Person, Actions, causes of actions, suits, litigation or any proceeding by virtue of: (a) any inaccuracy in or misrepresentation or breach of any of the Representations and Warranties (except as disclosed in the Disclosure Schedule or the Updated Disclosure Schedule, as the case may be, except for Fundamental Warranties), (b) notwithstanding anything contained in the Subscription Agreement or the Disclosure Schedule and/or the Updated Disclosure Schedule, failure on behalf of the Smaaash Founders or Smaaash to obtain (i) necessary registrations for the purpose of the conduct of the business; or (ii) such other registrations mandated under Applicable Law, with respect to Smaaash and each of its Subsidiaries; (c) any fraudulent conduct, gross negligence, willful misconduct or intentional concealment of information, of or by the Smaaash Founders or Smaaash; (d) any breach of or default by any of the Smaaash Founders and/or Smaaash of any covenants or undertakings of the Smaaash Founders and/or Smaaash or any other provision contained in the Transaction Documents; or (e) any and all Actions, causes of Action and suits arising out of, relating to or in connection with the operation of Smaaash, pursuant to which I-AM Capital is named a party.

 

The indemnity is meant to operate in a manner so as to place I-AM Capital or, at its election, Smaaash, in the same position as it would have been in, had there not been any breach or inaccuracy, and as if the indemnity, had not been triggered.

 

The total aggregate liability of the Smaaash Founders in respect of all Claims made pursuant to the indemnity provisions of the Subscription Agreement shall not exceed the Investment Amount. This, however, shall not be applicable to indemnity Claims made in relation to (i) breach of Fundamental Warranties; (ii) any Claims pursuant to fraud, willful misconduct and (iii) claims pursuant to sub-clause (b) above. The claim for indemnity by I-AM Capital is not subject to the requirement of a de minimis or per deductible cap.

 

Limitations on Warranties and Survival of Indemnity

 

I-AM Capital shall not be entitled to make a Claim for a breach of Representations and Warranties, unless such Claim has been made on or before the expiry of the relevant Claim Period.

 

Termination

 

The Subscription Agreement may be terminated by the mutual agreement in writing of the parties. In addition, I-AM Capital has the right to terminate the Subscription Agreement immediately if (i) the conditions precedent to the Closing have not been fulfilled to I-AM Capital’s satisfaction within 30 days of the Effective Date; (ii) there is a breach by Smaaash or the Smaaash Founders of their representations and warranties; (iii) updated disclosure schedules provided by Smaaash and the Smaaash Founders are not acceptable to I-AM Capital; or (iv) an event occurs that has a material adverse effect, as defined in the Subscription Agreement. If the Subscription Agreement is terminated, all of the rights and obligations of the parties under the Subscription Agreement will terminate, except for rights that have already accrued and the rights and obligations under the provisions relating to indemnification, Effective Date and termination, confidentiality, notices, and governing law.

 

Governing Law

 

The governing law shall be the laws of India.

 

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Agreements Related to the Subscription Agreement

 

Shareholders Agreement

 

The Shareholders Agreement which has been negotiated and finalized by I-AM Capital sets out the rights of I-AM Capital vis-à-vis the other shareholders of Smaaash and Smaaash. The Shareholders Agreement further, inter alia, sets out the management and governance rights, nomination rights to the board of directors, information and inspection rights and the reserved matter rights of I-AM Capital, which has been detailed below. The Shareholders Agreement shall be adopted by all the shareholders of Smaaash in a meeting of the members convened by Smaaash and shall be entrenched into the articles of association of Smaaash, which shall make it binding on all shareholders of Smaaash. Capitalized terms used but not defined herein shall have the meanings ascribed to them under the Shareholders Agreement. The Shareholders Agreement has been entered into by and between I-AM Capital, FW Metis Limited, Mitesh R Gowani, Smaaash Founders (being Mr. Shripal Morakhia and AHA Holdings Private Limited) and Smaaash.

 

Further Issue of Securities

 

If the board of Smaaash decides to raise fresh capital contributions, I-AM Capital shall have the right to subscribe to such number of securities of Smaaash so as to maintain its shareholding in Smaaash on a Fully Diluted Basis, simultaneous with the investment by the proposed subscriber. Further, if any other existing shareholder of Smaaash who has a similar right to subscribe to additional shares fails to exercise his right, the entitlement of such existing shareholder shall automatically devolve upon I-AM Capital who will have to accept and exercise the devolved entitlement.

 

Valuation Protection

 

If Smaaash issues any New Securities at a price per Security that is lower than the I-AM Capital Issue Price, then I-AM Capital shall be entitled to broad based weighted average anti-dilution protection. Smaaash and the Smaaash Founders shall take necessary steps to issue additional equity shares to I-AM Capital, at no additional amounts or at the lowest price required to be paid under applicable law, in accordance with the broad based weighted average anti -dilution formula.

 

Transfer Restrictions

 

Transfer by I-AM Capital

 

I-AM Capital shall not have any restrictions on transfer of shares to its Affiliates. I-AM Capital may transfer shares to any person who is not a Restricted Person until the Metis Fall Away Date. After the Metis Fall Away Date or upon the occurrence of an Event of Default, I-AM Capital shall have the right to transfer its shares to any Person including a Restricted Person but other than a Person who has been convicted of a criminal or an economic offence where the punishment is not less than imprisonment of six (6) months, without any restriction whatsoever or any obligation to make an offer to the Smaaash Founders, together with any or all of the rights of I-AM Capital.

 

Smaaash Founder Shares Lock-in

 

The Smaaash Founders shall not transfer any shares without the consent of I-AM Capital except to Permitted Smaaash Founder Transferees. Any transfer of shares by the Smaaash Founders with the consent of I-AM Capital shall be subject to, inter alia, the right of first offer and tag along right of I-AM Capital.

 

Right of First Offer

 

If any Smaaash Founder Shares are sought to be Transferred, or if I-AM Capital seeks to Transfer any Securities held by it, then the Transferring Shareholder shall provide to the Non-Transferring Shareholder(s) the right of first offer with respect to the Securities that are proposed to be Transferred by the Transferring Shareholder. However, there shall be no right of first offer between the Shareholders of Smaaash other than the Smaaash Founders, in the event of Transfer of Shares by them.

 

Tag Along Right

 

In case any or all Smaaash Founders, individually or collectively, propose to Transfer any Shares held by them in Smaaash, then I-AM Capital shall, in addition to its right of first offer, be entitled to exercise its Tag Right, along with Metis and the other Shareholders of Smaaash. If the Smaaash Founders Transfer equal to more than 10% of the Smaaash Founder Shares in aggregate either in a single or series of transactions, then I-AM Capital shall have the right to Transfer all the Securities held by I-AM Capital in Smaaash.

 

Board, Management and Other Related Matters

 

The board of Smaaash shall be comprised of up to a maximum of ten (10) Directors. I-AM Capital shall have the right to nominate two (2) directors and the right to jointly nominate an additional three (3) directors. I-AM Capital may also nominate one (1) Observer on the Board. Mr. Shripal Morakhia shall not resign from full time employment of Smaaash until such time as I-AM Capital no longer holds any Securities in Smaaash. The mandatory quorum for all board meetings shall inter alia include presence of 1 (one) I-AM Capital director throughout the meeting. The mandatory quorum for all meetings of the members shall also require one representative of I-AM Capital.

 

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Reserved Matters

 

No action shall be taken by Smaaash or a resolution passed by the Board, or committees of the Board or by the Shareholders, except with the affirmative vote (in person or in writing) of I-AM Capital, or the prior written consent of I-AM Capital or such Person(s) as may be nominated by I-AM Capital in this regard, in respect of the matters listed in the Shareholders Agreement. The Reserved Matters include all the significant strategic, commercial and management decisions which may be taken by Smaaash, including, (i) any alteration to the rights, preferences, or privileges of any Securities to the extent it affects the rights of I-AM Capital, (ii) divestment of or sale of assets or business of Smaaash, (iii) any modification to the business plan, (iv) merger, demerger, restructuring, acquisition, change of voting control, (v) change to the Board composition, and (vi) authorizing any indebtedness exceeding five (5) times the debt to EBITDA ratio of Smaaash for each financial year.

 

Exit

 

Smaaash and the Smaaash Founders agree and covenant to endeavour to provide an exit to I-AM Capital (at the option and with the approval of I-AM Capital by way of a QIPO or secondary sale), at any time after the Investor Exit Date, but prior to the Final Deadline Date. For clarity, the Investor Exit Date is March 31, 2022 and the Final Deadline Date is six (6) months from the Investor Exit Date. In a secondary sale, the consideration to be received by I-AM Capital shall not be less than the sum of the Investment Amount and an IRR of 20% (twenty percent). In the event Smaaash fails to provide a complete exit to I-AM Capital on or prior to the Final Deadline Date, then I-AM Capital may require Smaaash by delivering a Buy-back Notice, to buyback all or any of the Subscription Shares in one or more tranches; and/or require the Smaaash Founders by way of a Notice, to purchase all or any of the Subscription Shares, in each case, at a price not less than the sum of the Investment Amount and an IRR of 20% (twenty percent). In case (i) Smaaash and the Smaaash Founders fail to provide a complete exit to I-AM Capital on or prior to the Final Deadline Date or (ii) in case the Smaaash Founders have committed fraud or embezzlement in relation to the affairs of Smaaash, then I-AM Capital (along with other shareholders, as applicable) shall have the right but not the obligation to require the Smaaash Founders (including Group Companies or the Immediate Family Members) to and cause the Smaaash Founders to require BCCL, SRT and Mr. Samir Patel, by way of a written notice in this regard to undertake a sale of all or a part of their shareholding of Smaaash.

 

Liquidation Preference

 

Upon the occurrence of a Liquidation Event, I-AM Capital shall be entitled to be paid an amount equal to the Investor Exit Price pari passu and simultaneously with the payment of liquidation preference amounts to Metis, Qualified Investors, BCCL and SRT, as set out in the Articles.

 

Governing Law and Jurisdiction

 

The governing law shall be the laws of India. Any disputes arising out of the Shareholders Agreement shall be resolved by arbitration, by a single arbitrator, which shall be governed by the rules of Singapore International Arbitration Centre.

 

Master Franchise Agreement

 

Franchise and license right. Under the Master Franchise Agreement, Smaaash has granted to I-AM Capital an exclusive right to establish and operate Smaaash Centers (as defined under the Master Franchise Agreement) and to sublicense the right to establish and operate Smaaash Centers to third party franchisees, and a license to use the products and other services developed by Smaaash with respect to the Smaaash Centers, in the territories of North America and South America (“Territory”). Further, Smaaash has granted to I-AM Capital the limited license to use the Trademarks of Smaaash (as set out in the Master Franchise Agreement) for the purposes of establishing and operating the Smaaash Centers in the Territory. The Master Franchise Agreement has been executed on an arms’ length basis between Smaaash and I-AM Capital.

 

Obligations of I-AM Capital. All future rights, goodwill and reputation of the Smaaash Marks shall inure to the benefit of Smaaash. I-AM Capital shall not directly or indirectly engage or be concerned with any business which competes with Smaaash’s business in the Territory during the term of the Master Franchise Agreement. I-AM Capital shall market, promote and publicize the Smaaash Centers in the Territory. I-AM or third party sub-franchisees shall be under an obligation to set up at least six Smaaash Centers during the first calendar year.

 

Obligations of Smaaash. Smaaash shall assist in training and installing the equipment and bear all the costs associated therewith. The franchisee or sub-franchisee will bear the cost to set up the Smaaash Center.

 

License fees and other payments. Franchisee or the third party franchisee shall be entitled to receive the revenue generated from each of the Smaaash Centers. In connection with the operations of the Smaaash Centers by sub-franchisees, I-AM Capital shall be entitled to receive (i) a signup fee equal to 5% of the capital expenditure of the sub-franchisee, (ii) 5% of the revenue of the sub-franchisee on an annual basis; and (iii) a 15% markup of the products sold to the sub-franchisee. Smaaash will not receive any portion of the revenue or other fees in connection with the Master Franchise Agreement.

 

Ownership of Smaaash Marks. Smaaash shall be the sole owner of all intellectual property related to the Smaaash Centers.

 

Term of the Agreement. The Master Franchise Agreement shall commence from its execution date and continue until the agreement is terminated in accordance with the Master Franchise Agreement.

 

Termination. The Master Franchise Agreement may be terminated (i) by the mutual written agreement of parties or (ii) by Smaaash if I-AM Capital fails to make a payment, ceases to operate or abandon’s the Smaaash Centers or fails to use best efforts to market the Smaaash Centers and such failure is not cured within 30 days’ of notice of the failure.

 

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Governing laws and jurisdiction of courts. The governing law of the Master Franchise Agreement shall be laws of the State of New York and New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York shall have exclusive jurisdiction with respect to matters arising out of the Master Franchise Agreement.

 

Master Distribution Agreement

 

Grant of license and distribution rights. Under the Master Distribution Agreement, Smaaash has granted to I-AM Capital an exclusive right to purchase from Smaaash specialized equipment and products related to sports and recreational activities (“Products”) in the territory under the brand name of Smaaash and sell them with a 15% markup to the customers which shall be the sub-franchisees of I-AM Capital who shall operate the Smaaash Centers, as specified in the Master Franchise Agreement.

 

Pricing. The pricing of the sale of the Products to the customers by I-AM Capital shall be as mutually discussed and agreed among the parties. Further, I-AM Capital shall receive a markup of 15% for the distribution of the Products.

 

Grant of license in Smaaash Marks. Smaaash has also granted a license I-AM Capital to use the Trademarks (as set out in the Agreement) on a royalty free basis for the purpose of promoting the sale of the Products in the Territory.

 

Ownership of the Smaaash Games. Smaaash shall be the sole owner of any intellectual property rights relating to the Products and all the goodwill relating thereto.

 

Term. The Master Distribution Agreement shall commence from its execution date and continue until the agreement is terminated in accordance with the Master Distribution Agreement.

 

Termination. The Master Distribution Agreement may be terminated (i) by the mutual written agreement of parties, (ii) by Smaaash if I-AM Capital fails to make a payment or use best efforts to market the Products and such failure is not cured within 30 days’ of notice of the failure, and (iii) by I-AM Capital for any reason upon 120 days’ notice.

 

Governing laws and jurisdiction of courts. The governing law of the Master Distribution Agreement shall be laws of the State of New York and New York State Supreme Court, County of New York or in the United States District Court for the Southern District of New York shall have exclusive jurisdiction with respect to matters arising out of the Master Distribution Agreement.

 

Plan of Operations

 

Under the Master Franchise Agreement and the Master Distribution Agreement, I-AM Capital will become the master franchisee for the Smaaash Centers in North and South America as well as the sole distributor of Smaaash games and equipment in North America and South America. In addition, I-AM Capital will pursue acquisitions within the U.S. entertainment industry to facilitate the transformation of Smaaash from an India focused company to a globally recognized brand in the entertainment industry. Set forth below is the plan of operations of I-AM Capital following the consummation of the Transaction.

 

Smaaash Centers

 

I-AM Capital will work with Smaaash to identify franchisees for Smaaash centers in North and South America. Initially, the focus will be on expansion in North America while working in parallel to identify growth markets in South America. I-AM Capital plans to identify franchisees to set up a minimum of 6 new centers in New Jersey, Pennsylvania, Delaware, California, Florida and Illinois in the United States within the first year, with an estimated capital expenditure of around $900,000 to $1,500,000 per center, depending on the size of the center. Smaaash has already entered into an agreement with Simon Properties, one of the largest mall operators in the United States, which allows Smaaash Centers to be opened at specific Simon-operated malls throughout the United States. The first such Simon-property selected is in Menlo Park, New Jersey, where a Smaaash Center owned by Smaaash is expected to be operational in the second half of 2018. The arrangement with Simon Properties provides the Company with access to potential locations where Centers can be opened by third party franchisees through the Company’s master franchise agreement. I-AM Capital is currently in discussion with various potential franchisees.

 

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I-AM Capital will help market, promote and publicize these centers to strengthen the Smaaash brand and products across the United States. I-AM Capital will appoint a Chief Operating Officer for the Smaaash Center operations within two months following the closing of the Transaction and Smaaash will designate personnel from their team in India to assist and train the franchisees in setting up the centers.

 

The formats available for franchising in the United States includes Smaaash Zone, Smaaash and Smaaash Mega. The table below shows the size, costs, time and number of employees required to set up different type of Smaaash centers in the United States and the services available at each type of center.

 

   Smaaash Zone   Smaaash   Smaaash Mega 
Size (sq. ft.)   6,000    12,000    18,000 
Capital expenditure (USD)   900,000    1,200,000    1,500,000 
Time required to set up a center (days)   90    120    120 
No. of employees required to run center (#)   10    16    22 
Attractions and facilities   Sports, VR and Arcade games    Sports, VR and Arcade games and F&B and Banquets     Sports, VR and Arcade games and F&B and Banquets 

 

Smaaash will make a one-time payment of $250,000 to I-AM Capital as working capital and to help it identify franchisees and set up on its own Smaaash Centers. Smaaash also agreed to arrange for a line of credit in accordance with Indian law to fund I-AM Capital’s operations after the closing of the Transaction until such time as I-AM Capital generates sufficient revenue to support its operations. The operations of Smaaash Centers will be funded by franchisees. I-AM Capital will receive (i) a signup fee equal to 5% of the capital expenditure of the franchisee; (ii) 5% of the revenues of the franchisee on an annual basis and (iii) a 15% markup of the products sold to the franchisee.

  

The investment in Smaaash will help expand the Smaaash brand franchise in North and South America as well as help it capitalize on the potential of entertainment centers in the United States, specifically VR/AR gaming. The investment in Smaaash will help Smaaash in achieving its growth plans in India and international markets.

 

I-AM Capital will benefit from the investment in Smaaash. In connection with the investment, I-AM Capital will become the master franchisee for the Smaaash Centers as well as the sole distributor of Smaaash games and equipment in North and South America. I-AM Capital will begin its franchise operations and product distribution and generate revenue from such operations. The investment will better align I-AM Capital’s interest with Smaaash’s and promote the growth of Smaaash. The success of Smaaash and its ability to continually invest and develop products in the gaming space will directly affect I-AM Capital’s franchisee business in North and South America and financial results.

 

In the future, I-AM Capital may open and operate the Smaaash centers on its own with capital from its operations or proceeds from financing.

 

The operations of Smaaash Centers in North and South America involve various risks. See “Risk Factors.”

 

Product Distribution

 

I-AM Capital will focus largely on theme parks having an annual attendance of 500,000 or more to sell Smaaash’s gaming products relating to sports and virtual reality. I-AM Capital is in the process of hiring a sales manager dedicated for this purpose.

 

Distribution of Smaaash products in North and South America involve various risks. See “Risk Factors.”

 

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Government Regulations

 

The development and operation of Centers in the United States is subject to numerous federal, state and local governmental regulations, including those relating to the operation of redemption, video, and arcade games and rides, the preparation and sale of food and alcoholic beverages, sanitation, public health, fire codes, zoning, and building requirements. Each Center with a restaurant requires appropriate licenses from regulatory authorities allowing it to sell liquor, beer and wine, and each restaurant requires food service licenses from local health authorities. Smaaash Centers licenses to sell alcoholic beverages must be renewed annually and may be suspended or revoked at any time for cause, including violation by us or our employees of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum age of employees or patrons who may serve or be served alcoholic beverages, the serving of alcoholic beverages to visibly intoxicated patrons, advertising, wholesale purchasing and inventory control. In order to reduce this risk, restaurant employees shall be trained in standardized operating procedures designed to assure compliance with all applicable codes and regulations. The Centers shall also be subject to governmental regulations, such as the Foreign Corrupt Practices Act, that impact the way I-AM Capital does business with its international franchisees and vendors, and, as it expands into international markets, it may be subject to various foreign regulations. I-AM Capital intends to implemented policies, procedures and training to ensure compliance with these regulations.

 

I-AM Capital and its franchisees will also be subject to laws governing their relationship with employees including those related to minimum wage requirements, exempt status, overtime, health insurance mandates, working and safety conditions, immigration status requirements, child labor, and non- discrimination. I-AM Capital’s failure or the failure of its franchisees to comply with international, federal, state and local employment laws and regulations may subject it to losses and harm its brands. The laws and regulations govern such matters as wage and hour requirements; workers’ compensation insurance; unemployment and other taxes; working and safety conditions; and citizenship and immigration status. Significant additional government-imposed regulations under the Fair Labor Standards Act and similar laws related to increases in minimum wages, overtime pay, paid leaves of absence, scheduling, and mandated health benefits, may also impact the performance of franchised operations. In addition, employee claims based on, among other things, discrimination, harassment, wrongful termination, wage and hour requirements and payments to employees who receive gratuities, may divert financial and management resources and adversely affect operations. The losses that may be incurred as a result of any violation of such governmental regulations by I-AM Capital or its franchisees are difficult to quantify.

 

In addition, I-AM Capital will be subject to various state and federal laws relating to the offer and sale of franchises and the franchisor-franchisee relationship. In general, these laws and regulations impose specific disclosure and registration requirements prior to the sale and marketing of franchises and regulate certain aspects of the relationship between franchisor and franchisee.

 

Background of the Transaction

 

The terms of the Transaction are the result of negotiations between the representatives of I-AM Capital and Smaaash. The following is a brief description of the background of these negotiations and the resulting Transaction.

 

I-AM Capital is a blank check company organized under the laws of the State of Delaware on April 17, 2017. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Although I-AM Capital is not limited to a particular industry or geographic region for purposes of consummating a business combination, I-AM Capital focuses on businesses with a connection to India.

 

On May 31, 2017, I-AM Capital issued 1,437,500 shares of I-AM Capital’s common stock to the Sponsor in exchange for a capital contribution of $25,000. Upon the partial exercise of the underwriters’ over-allotment option on September 13, 2017, 137,500 founder shares were forfeited by the Sponsor.

 

The founder shares are identical to the shares of common stock included in the units and holders of founder shares have the same stockholder rights as public stockholders, except that (i) the founder shares and the shares of common stock underlying the private units are subject to certain transfer restrictions, and (ii) the Sponsor has entered into a letter agreement, pursuant to which it has agreed (A) to waive its redemption rights with respect to the founder shares, and the shares of common stock underlying the private units and the public units in connection with the completion of a business combination and (B) to waive its rights to liquidating distributions from the trust account with respect to the founder shares and the shares of common stock underlying the private units if I-AM Capital fails to complete a business combination within 12 months from the closing of the initial public Offering (or up to 21 months from the closing of the initial public offering if I-AM Capital extends the period of time to consummate a business combination).

 

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On August 22, 2017, I-AM Capital sold 5,000,000 public units at a purchase price of $10.00 per public unit in its initial public offering, generating gross proceeds of $50.0 million. I-AM Capital incurred offering costs of approximately $3.7 million, inclusive of approximately $3.2 million of underwriting fees. I-AM Capital paid $1 million of underwriting fees upon the closing of the initial public offering, issued 50,000 shares of common stock for underwriting fees, and deferred $1.75 million of underwriting fees until the consummation of the initial business combination. Each unit consists of one share of I-AM Capital’s common stock, one right to receive one-tenth of one share of I-AM Capital’s common stock upon consummation of I-AM Capital’s initial business combination, and one redeemable warrant. No fractional shares will be issued as a result of the issuance of shares for rights, and any right to a fractional share (after aggregating all rights held by such holder) will be rounded up to the nearest whole share. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share, subject to adjustment. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on the later of (i) 30 days after the completion of the initial business combination and (ii) 12 months from the closing of the initial public offering, and will expire five years after the completion of the initial business combination or earlier upon redemption or liquidation. There will be no redemption rights or liquidating distributions with respect to the warrants and rights, which will expire worthless if I-AM Capital fails to complete it business combination within the above specified period. The Company granted the underwriters a 45-day option to purchase up to 750,000 additional public units to cover any over-allotment, at the initial public offering price less any underwriting discounts and commissions. On September 13, 2017, the underwriters purchased 200,000 additional public units for gross proceeds of $2,000,000 less commissions of $110,000, of which $70,000 are deferred. The Company issued Maxim Group LLC, as compensation for the initial public offering, 50,000 shares at the closing of the initial public offering, plus an additional 2,000 shares upon partial exercise of the over-allotment.

 

Concurrently with the closing of the initial public offering, the Sponsor purchased an aggregate of 254,500 private placement units at $10.00 per private placement unit, generated gross proceeds of $2,545,000 in a private placement. The private placement units (including their component securities) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination and the warrants included in the private units will be non-redeemable so long as they are held by the Sponsor or its permitted transferees. After deducting underwriting discounts and commissions and offering expenses, $50,750,000 of the proceeds of I-AM Capital’s initial public offering and the private units was placed in a trust account with Continental Stock Transfer & Trust Company as trustee. Currently $52,780,000 is in trust following the underwriter partially exercising its overallotment option and the sale of additional private placement units to the Sponsor. The trust proceeds are invested in U.S. government treasury bills with a maturity of 180 days or less or money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations.

 

Upon completion of the IPO of I-AM Capital in August 22, 2017, Mr. Cherian and Mr. Kanuga prepared an extensive list of their relationships and contacts, which would be helpful in identifying a suitable business combination opportunity. They determined investment banks, private equity firms, deal advisers, law firms, and accounting firms would provide good deal flow.

 

Mr. Kanuga travelled to Mumbai, India on August 23, 2017 and began tapping the networks and relationships, introducing I-AM Capital Acquisition Company, and the type of companies/sectors I-AM Capital was looking to invest in.

 

From mainly September to December 2017, Mr. Kanuga met with over 15 private equity firms, investment banks, deal advisers, accounting firms and law firms. Mr. Cherian assisted in these meetings during his visits to India in September and October.

 

Mr. Cherian met also representatives of Nomura and UBS in New York, with the objective of tapping their networks for deals connected to India. Nomura presented Mr. Cherian with a pitchbook on suitable opportunities for I-AM Capital, particularly in the technology and services sectors. UBS introduced Mr. Cherian to the UBS India team, who were closer to deals on the ground in India.

 

From September to December 2017, Mr. Cherian and Mr. Kanuga met with a number of potential attractive companies to consider a transaction with. Of the companies that Messrs. Cherian and Kanuga met with, four were in the technology sector, three companies operate in the infrastructure sector, including toll road operation and road building, two companies were in the financial services sector, two companies operate in the energy sector, one company was in the specialized plastics sector and one company was in the manufacturing sector. Mr. Cherian and Mr. Kanuga deliberated extensively on the merits of each deal, looking closely at the sector, the growth opportunity, scalability of the business model, impact of technology, operating and financial metrics, government regulation, and strength of management team. Based on these factors, an IT infrastructure and services company (“Target 1") ranked ahead of the others given the scalable opportunity in areas such as Smart Cities, Public Wifi, and Intelligent Transit Systems. Mr. Cherian and Mr. Kanuga commenced detailed discussions with Target 1 on a transaction.

 

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Over the next few months, mainly from October 2017 to February 2018, Mr. Cherian and Mr. Kanuga pursued Target 1. Target 1 was going through a Strategic Debt Restructuring, which would have provided attractive investment terms for I-AM Capital, once Target 1’s long term debt and working capital limits were restructured. Accordingly, Mr. Kanuga spent considerable time on-the-ground in India meeting with and working with Target 1’s lenders, along with the management team of Target 1, in order to arrive at a suitable plan under the Strategic Debt Restructuring, which would then have to be approved by the Joint Lenders Forum. The State Bank of India, India’s largest public sector bank, was the lead lender to Target 1, and as such, Mr. Kanuga collaborated closely with senior officials of SBI to draft acceptable terms for restructuring Target 1’s debt. Once draft terms were negotiated, Mr. Kanuga also travelled to New York in November with the Founder of Target 1. Along with the Founder of Target 1, Mr. Cherian and Mr. Kanuga met with Maxim, Nomura, and SunTrust, presenting the draft restructuring plan they had arrived at with Target 1’s lenders, and soliciting input. Meetings were also held with I-AM Capital Chairman Mr. Caldwell, and Board member Mr. Franklin. Meetings were also held with key officials at NASDAQ. Overall feedback was positive, and Mr. Kanuga travelled to India to continue to pursue the transaction, while continuing to meet other potential opportunities.

 

In November and December 2017, Mr. Kanuga received proposals from Aarayaa Advisory Services, a key adviser to investment funds in India. After a number of meetings to vet potential deals, Mr. Kanuga spoke with and met with an aircraft maintenance company, one of their key investors GTE Capital, a US investment fund with offices in India. Mr. Kanuga also deliberated with, a unicorn technology firm (ecommerce firm). After completing its analysis, I-AM Capital determined that this company did not represent the best opportunity for a successful business combination based on its large writedowns, conflicted investor base and declining market share.

 

Mr. Kanuga received a proposal from Grant Thornton, recommending a flooring company (“Target 2"). Mr. Kanuga subsequently met with the management team at Target 2. I-AM Capital decided not to pursue a business combination with Target 2 because of its small revenues, lack of clear business strategy and trading company status.

 

Mr. Kanuga spoke with YES Securities (India) Limited, a leading mid-market Investment Bank in India (“Yes Securities”), who presented proposals for Smaaash Entertainment (entertainment and virtual reality gaming company) and a media technology company. YES Securities spoke with both companies and Smaaash was interested in exploring a transaction. Mr. Kanuga met with the founder and management team of Smaaash, and meetings were positive.

 

Mr. Cherian travelled to India in December 2017. Mr. Cherian and Mr. Kanuga continued to work on Target 1, met with SBI and other Lenders, and continued discussions on the debt restructuring arriving at better deal terms. Sensing that negotiations with Lenders were proceeding slowing, given that there were around 16 different lenders and private equity investors, Mr. Cherian and Mr. Kanuga delivered a firm message to the lenders that if the restructuring discussions were not concluded in a timely way with mutually agreeable terms, I-AM Capital would have to focus on other opportunities. Mr. Cherian and Mr. Kanuga also met with a digital media company and Smaaash.

 

Over the next month and a half, Mr. Kanuga pursued Target 1, aiming to secure an agreement with the entire group of lenders and private equity investors in Target 1. The lenders agreed to improved terms over the course of many negotiations. Mr. Kanuga travelled to New York in January along with the founder of Target 1. Meetings were held with Maxim, Nomura, and SunTrust to discuss improved deal terms. The Founder of Smaaaash also visited New York, and various meetings were held with Maxim, SunTrust, and Nomura. I-AM Capital board member Roman Franklin also participated in various meetings with Smaaash. Positive feedback was received on Smaaash and Target 1.

 

The Reserve Bank of India (RBI) made a surprise announcement in India on February 12, 2018 essentially eliminating all existing debt structuring rules (including the strategic debt restructuring and the joint lenders forum, which was the regulatory framework I-AM Capital was utilizing to negotiate terms with Target 1’s lenders). RBI announced implementation of the new framework for stressed assets, effective immediately, and scrapped all negotiations that had not been concluded under the older frameworks.

 

Mr. Caldwell travelled to India that very same day (in February 2018), and had meetings with founder and management team of Target 1, Target 1’s lenders, and Smaaash. Mr. Kanuga and Mr. Cherian and Mr. Caldwell discussed the change in the regulations, and determined that I-AM Capital should consult major law firms to understand the impact of these changes, and determine whether I-AM Capital could move forward with Target 1 in a timely way. Mr. Kanuga spent time with various law firms including Nishith Desai Associates, AZB Partners, Luthra & Luthra, to understand the full impact of the new regulations, including the ability of I-AM Capital to move forward in a timely way. In the following week, Mr. Cherian travelled to India, and along with Mr. Kanuga, continued to solicit views of various law firms, who indicated that substantial delays could be expected in such a situation, as new regulatory prescriptions could take much more time to be announced and streamlined. RBI in its own circular, indicated it may take up to two years further to finalize regulatory rules for companies with debt below a certain threshold ($300 mn), as in the case of Target 1. Given the overall uncertainly, Mr. Cherian, Mr. Kanuga, and Mr. Caldwell conferred, and decided to focus on exploring a transaction with Smaaash.

 

Representatives of Nomura contacted Mr. Cherian, and introduced him to the management of a technology services company based out of Philadelphia. Because this company had low growth rate with low profit margins, was highly leveraged with high-cost debt and did not have a clear India- focused growth strategy, I-AM Capital did not pursue a business combination with it.

 

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Mr. Kanuga and Mr. Cherian met with representatives of Yes Securities to discuss the key terms for a potential transaction between I-AM Capital and Smaaash. The discussion covered the business of Smaaash, the Media and Entertainment sector in India and overseas, and valuation of Smaaash. To arrive at a potential valuation range, they discussed a number of factors, including: recent transaction multiples and listed company multiples in the Media and Entertainment sector in India; the strengths of Smaaash, including its market leader position in India, strong growth in sales, rapid expansion of centers, attractive operating margins, vertically integrated nature of the business including development of games in-house, and the track record of success of the founder of Smaaash; valuation of last round of capital raise; the positive global brand; the technology sales to marquis customers in 30 countries worldwide; the successful setup of the first center in the US in the Mall of America; the scalable nature of the business model, and the global expansion underway, the attractiveness of virtual reality and interactive sports entertainment businesses; growth rates of comparable firms in the United States as well as lack of profitability which could hinder growth without sufficient capital. Yes Securities indicated that the founder of Smaaash would not be open to a low evaluation, as there were credible investors who participated in the last round of financing in Smaaash and who would not support a lower valuation, given the positive growth prospects of the business. Mr. Cherian and Mr. Kanuga indicated that they were not open to a premium valuation, as U.S. investors expected an upside. Accordingly, Yes Securities recommended keeping the valuation in line with the last round of financing of Smaaash. The parties then discussed the enterprise value of Smaaash of approximately $155 million in its recent financing where Smaaash raised $30 million. Based on these factors, Yes Securities recommended a range of $175- $200 million, factoring in the capital raised in the last round and Smaaash’s projected EBITDA of approximately $25 million for its fiscal year 2019.

 

The next day, Mr. Cherian and Mr. Kanuga, along with representatives from Yes Securities, met with the founder of Smaaash, and engaged in a discussion around the key terms of a potential transaction with Smaaash. The founder of Smaaash indicated Smaaash had raised a substantial amount of capital from credible institutional and high net worth investors in the most recent round of financing, and he would not be able to offer a valuation lower than that as the deal would not meet with a favorable response as the business had grown substantially. The founder of Smaaash stated that he would want a premium, given the growth prospects of Smaaash. Yes Securities then recommended keeping the valuation at the same level as the last round, to satisfy existing investors in Smaaash and also offering the U.S. investors an equity upside. After some back and forth, Yes Securities recommended that Smaaash offer a valuation of approximately $180 million at a price per share of $0.50- $0.60 for Smaaash, in line with its last round of financing. Based on the valuation recommended by Yes Securities, the Smaaash founder and Messrs. Cherian and Kanuga reached a consensus and arrived at a per share price of approximately $0.50 per share.

 

Mr. Cherian and Mr. Kanuga articulated that corporate governance was of paramount importance to U.S. investors, and asked for at least two Board seats for I-AM Capital. They also discussed the global aspirations of Smaaash, international expansion currently underway, and furthering international growth through master franchise agreements, global technology sales agreements, and acquisitions outside of India, particularly in the United States and Europe. After discussion, the founder of Smaaash agreed with Mr. Cherian and Mr. Kanuga on the key terms of a potential transaction between I-AM Capital and Smaaash including the valuation of Smaaash, and the two Board seats for I-AM Capital.

 

Mr. Cherian and Mr. Kanuga discussed with the founder of Smaaash the potential terms for franchise and distribution agreements. They covered various industry models including fixed fee or revenue sharing models, commission levels prevalent in the industry, sign-up fees, as well as revenue sharing arrangements. They agreed that a model linking the success of the franchise operator with Smaaash was a sound way to grow the business. In the case of product sales, they agreed on a commission model prevalent in the industry.

 

Representatives of YES Securities, Nishith Desai and Associates, lawyers representing I-AM Capital, IndusLaw, lawyers representing Smaaash, and Shardul Amarchand Mangaldas, lawyers representing Fidelis World, an existing investor of Smaaash, met with the founder of Smaaash and Messrs. Cherian and Kanuga to discuss in detail the rights, representations, warranties and covenants under the Subscription Agreement and Shareholders’ Agreement. IndusLaw and Nishith Desai and Associates discussed and mutually decided the roles and representations each party would require in Smaaash post the Transaction including board representation, future financing by Smaaash, hiring of key management, valuation protection mechanisms for the investors, exit rights, and fall-away of rights. Messrs. Cherian and Kanuga also discussed corporate governance, including for Nasdaq companies, and the necessity to have an independent Board of experienced executives with public company, industry and financial expertise. Fidelis World is an existing investor of Smaaash and participated in the negotiations to align the interest of I-AM Capital and Fidelis World in Smaaash.

 

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The parties specifically discussed the following key covenants and agreements in the Subscription Agreement: (i) restrictions on Smaaash to raise additional capital, to make or declare any dividend or redeem directly or indirectly any share capital dividend and (ii) indemnity provided by Smaaash to I-AM Capital. The covenants and agreements under the Shareholders’ Agreement that were discussed among the parties include: (i) exit options to be provided by Smaaash, (ii) restriction on Mr. Morakhia to transfer his interest in AHA Holdings, (iii) right to nominate directors, (iv) liquidation preference and (v) other covenants such as non-compete and non-solicit.

 

After multiple rounds of discussions with counsel, a near-final draft of the Shareholders’ Agreement was circulated and an all-party meeting was held at Smaaash’s office where all open issues were negotiated and finalized. Parties agreed to move forward with the due diligence and definitive agreements and other aspects of a proxy filing.

 

Mr. Kanuga travelled to New York in March with the founder of Smaaash. Various meetings were held with Maxim to discuss the key terms of a potential transaction. The I-AM Capital Board met in New York, and the founder of Smaaash presented his vision to the Board; the Board deliberated and agreed it made sense to pursue a transaction.

 

Mr. Kanuga travelled to India and proceeded to work on the definitive agreements, due diligence and IFRS audits, assisted by professional teams from Nishith Desai Associates, YES Securities, IndusLaw, Grant Thornton and Shardul Amarchand Mangaldas, Deloitte and Prager Metis.

 

Mr. Cherian travelled to India in April 2018. Meetings were held with the Principals of Fidelis, the Private Equity Investor in Smaaash. Various meetings were held with the full team of lawyers and the parties arrived at the key terms for the transaction.

 

Mr. Kanuga travelled to New York in April with the Founder of Smaaash. All terms were finalized. Mr. Cherian and Mr. Kanuga regularly consulted with the Board of I-AM Capital along the way. The Board was supportive, and upon deliberating the key terms, agreed to move forward with Smaaash. Definitive Agreements were executed by all the Principals. Meetings were held with EGS to prepare proxy filing.

 

I-AM Capital’s Board of Directors’ Reasons for the Approval of the Business Combination

 

On May 1, 2018, I-AM Capital board of directors unanimously (i) approved the Subscription Agreement and the transactions contemplated thereby, and (ii) directed that the Subscription Agreement be submitted to I-AM Capital’s stockholders, for approval and adoption, and recommended that Smaaash’s stockholders approve the Transaction and approve and adopt the Subscription Agreement.

 

I-AM Capital’s board of directors considered a wide variety of factors in connection with its evaluation of the Transaction, including the following, although not weighted in any order of significance:

 

Positve Factors:

 

High growth company operating in highly scalable markets. Smaaash has a proven business model not only in India, but also globally. Smaaash can also grow quickly by making acquisitions globally, in addition to organic growth.

 

Business with multiple and diverse s potential drivers of revenue and with earnings growth potential. Smaaash’s family entertainment centers draw customers from various backgrounds and age groups, as the interactive sports and virtual reality entertainment experience, combined with food and beverage options, creates an attractive place for customers. Smaaash games are also being sold to third-party customers, creating further growth opportunities.

 

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Experienced and motivated management team. Smaaash’s founder is a visionary entrepreneur with a proven ability to build value for investors, and a track record of success.

 

Negative Factors:

 

Less than majority equity position in Smaaash. I-AM will initially not acquire a majority interest in Smaaash and, as a result, may not have effective control over the operations of Smaaash.

 

Possibility of becoming an investment company pursuant to the Investment Company Act. Following the Transaction, I-AM Capital may become subject to the requirements of the Investment Company Act, which would limit I-AM Capital’s business operations and require it to spend significant resources to comply with such act.

 

Increase in Losses. The increase in Smaaash’s losses from the year ended March 31, 2017 to the nine month period ended December 31, 2017 was primarily due to Smaaash incurring significant high-cost debt to fund its acquisitions. Without further injection of capital, Smaaash may not be able to effectively reduce its costs and expenses, and thereby continue to suffer losses.

 

In light of the complexity of those factors, I-AM Capital’s board of directors, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weight to the specific factors it took into account in reaching its decision. Individual members of I-AM Capital’s board of directors may have given different weight to different factors. This explanation of the reasons for the board of director’s approval of the Transaction, and all other information presented in this section is forward-looking and should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.”

 

Before reaching its decision, I-AM Capital’s board of directors reviewed the results of management’s due diligence, which included:

 

  research on industry trends, content and other operating cost projections, and other industry factors;

 

  extensive meetings and calls with Smaaash’s management team and representatives regarding operations, company services, major vendors and financial prospects, among other customary due diligence matters;

 

  personal visits to Smaaash’s headquarters in Mumbai, India;

 

  review of Smaaash’s material business contracts and certain other legal diligence;

 

  financial and accounting diligence; and

 

  creation of an independent financial model in conjunction with management of Smaaash.

 

In the prospectus for I-AM Capital’s IPO, I-AM Capital identified the following general criteria and guidelines that its management believed would be important in evaluating prospective target businesses, including the following:

 

  Opportunities in the faster-growing segments of the economy, including consumer, technology and services driven companies;
  Businesses with multiple, diverse potential drivers of revenue and earnings growth;
  Companies with potential for strong free cash flow generation;
  Under-valued companies impacted by rapidly shifting market dynamics, market dislocations, gaps in understanding of a company’s future prospects, or liquidity-driven valuation discounts; and
  Obtain a platform for continued growth through serial acquisitions, organic growth in existing business or new business initiatives.

 

In considering the Transaction, I-AM Capital’s board of directors concluded that Smaaash substantially satisfied the above criteria.

 

Certain Benefits of I-AM Capital’s Directors and Officers and Others in the Business Combination

 

In considering the recommendation of I-AM Capital’s board of directors in favor of approval of the Transaction, it should be noted that I-AM Capital’s directors and officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder. These interests include, among other things:

 

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  the appointment of F. Jacob Cherian and Suhel Kanuga, executive officers and directors of I-AM Capital, as directors, but not as officers, of Smaaash even though Mr. Cherian and Mr. Kanuga will not receive any compensation for their services as directors of Smaaash;

 

  the continued indemnification of current directors and officers of I-AM Capital and the continuation of directors’ and officers’ liability insurance after the Business Combination.

 

Neither Mr. Cherian nor Mr. Kanuga is now, or has ever been, an officer or director of Smaaash.

 

Potential Purchases of Public Shares

 

In connection with the stockholder vote to approve the Transaction, the Sponsor, I-AM Capital’s directors, officers, or advisors or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per-share pro rata portion of the trust account. None of I-AM Capital’s directors, officers or advisors or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase of shares may include a contractual acknowledgement that such stockholder, although still the record holder of I-AM Capital’s public shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that the Sponsor, I-AM Capital’s directors, officers or advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are in excess of the per-share pro rata portion of the trust account. The purpose of such purchases would be to increase the likelihood of obtaining stockholder approval of the Transaction or, where the purchases are made by our Sponsor, directors, officers or advisors or their respective affiliates, to satisfy a closing condition in an agreement related to the Business Combination.

 

As of the date of this proxy statement, no agreements with respect to the private purchase of public shares by I-AM Capital or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K or other required forms with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals.

 

Redemption Rights

 

Pursuant to I-AM Capital’s Restated Certificate, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with its Restated Certificate. As of May 31, 2018, this would have amounted to approximately $10.15 per share and assuming that accrued interest and other funds set aside in a separate account are sufficient to pay estimated taxes payable of $10,000 in taxes payable and working capital expenses. If a holder exercises its redemption rights, then such holder will be exchanging its shares of common stock for cash and will no longer own shares of I-AM Capital. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to I-AM Capital’s transfer agent in accordance with the procedures described herein. See the section entitled “Special Meeting of I-AM Capital Stockholders — Redemption Rights “for the procedures to be followed if you wish to redeem your shares for cash. A holder who chooses to redeem its shares will not receive the Special Dividend.

 

Appraisal Rights

 

Appraisal rights are not available to holders of shares of I-AM Capital common stock in connection with the Transaction.

 

Vote Required for Approval

 

Approval of this proposal is a condition to the completion of the Transaction. If this proposal is not approved, the Transaction will not occur. The affirmative vote of a majority of the votes cast by the holders of common stock of I-AM Capital in person or represented by proxy at the special meeting and entitled to vote thereon is required to approve the Business Combination Proposal. Abstentions and broker non-votes will have no effect on this proposal.

 

As of the record date, our Sponsor has agreed to vote its founder shares and any public shares purchased during or after the initial public offering in favor of the Business Combination Proposal and our executive officers and directors have also agreed to vote any public shares purchased during or after the initial public offering in favor of the Business Combination Proposal.

 

Recommendation of the Board

 

I-AM CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR
STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE BUSINESS COMBINATION PROPOSAL.

 

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PROPOSAL NO. 2 —THE CERTIFICATE AMENDMENT PROPOSAL

 

I-AM Capital stockholders are being asked to vote upon and approve the third amended and restated certificate of incorporation of I-AM Capital attached hereto as Annex E, which amends the Restated Certificate to:

 

i.          change I-AM Capital’s name to “Smaaash Entertainment Inc.”; and

 

ii.         make certain changes related to I-AM Capital’s transition from a blank check company to an operating company.

 

I-AM Capital is required to change its name in connection with the Transaction. I-AM Capital has agreed to change its name to reflect I-AM Capital’s new business and operations following completion of the Transaction and use a similar name as the one with which its business is known to customers, suppliers and the industry.

 

In addition, upon consummation of the Transaction, I-AM Capital will cease to be a blank check company. As such, I-AM Capital is proposing to change the provisions in its Restated Certificate related to its corporate purpose in connection with its transition to an operating company. I-AM Capital is also proposing the removal of the provisions related to the waiver of the corporate opportunity doctrine and the redemption rights.

 

The following table sets forth a summary of the material differences between the Restated Certificate the proposed third amended and restated certificate of incorporation:

 

Proposed Changes to Amended and Restated Certificate of Incorporation Pursuant to Proposal 2

 

    Current Certificate   Proposed Certificate
Purpose   The Restated Certificate provides that I-AM Capital’s purpose is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law, as amended, and that, in addition to the powers and privileges conferred upon I-AM Capital by law and those incidental thereto, I-AM Capital possesses and may exercise all the powers and privileges that are necessary or convenient to the conduct, promotion or attainment of the business or purposes of I-AM Capital including, but not limited to, effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination, involving I-AM Capital and one or more businesses.   The proposed certificate provides that I-AM Capital’s purpose is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
         
Corporate Opportunity   The Restated Certificate provides that the doctrine of corporate opportunity, or any other analogous doctrine, shall not apply with respect to I-AM Capital or any of its officers or directors in circumstances where the application of any such doctrine would conflict with any fiduciary duties or contractual obligations they may have.   The proposed certificate does not include this corporate opportunity provision because such provision is not typical for an operating public company.
         
Redemption Rights   The Restated Certificate provides for the redemption of the public shares upon the consummation of a business combination.   The proposed certificate does not include redemption provisions as it will no longer be applicable if the Transaction has been consummated.

 

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Vote Required for Approval

 

The affirmative vote of holders of a majority of the outstanding shares of I-AM Capital’s common stock is required to approve the Certificate Amendment Proposal. Broker non-votes, abstentions or the failure to vote on this proposal will have the same effect as a vote “AGAINST” this proposal.

 

This proposal is conditioned upon the approval of the Business Combination Proposal. If the Business Combination Proposal is not approved, this proposal will have no effect. By approving this Certificate Amendment Proposal, the I-AM Capital’s stockholders are approving the proposed third amended and restated certificate of incorporation of I-AM Capital’s which is attached hereto to as Annex E and which reflects the amendments contemplated by this Certificate Amendment Proposal.

 

Recommendation of the Board

 

I-AM CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CERTIFICATE AMENDMENT PROPOSAL.

 

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PROPOSAL NO. 3— THE DIRECTOR ELECTION PROPOSAL

 

Overview

 

There are currently eight members of I-AM Capital’s board of directors. I-AM Capital’s board of directors is divided into two classes, Class I and Class II with only one class of directors being elected in each year and each class (except for those directors appointed prior to I-AM Capital’s first annual meeting of stockholders) serving a two-year term. The term of office of the Class I directors, consisting of Messrs. Caldwell, Leavy, Franklin and Jaroski will expire at the special meeting at which time each of these four incumbents will stand for re-election. In addition, in connection with the Transaction, Shripal Morakhia has been nominated to serve on the board of directors. The four Class I directors standing for re-election, if elected, will serve a two-year term until the 2020 annual meeting of stockholders and until their successors are duly elected and qualified. The Class II director nominee standing for election, if elected, will serve a one-year term until the 2019 annual meeting of stockholders and until his successor is duly elected and qualified.

 

Nominees

 

The board of directors has nominated the following individuals to serve on the board of directors in the classes set forth below:

 

●          Donald R. Caldwell Class I
   
●          Roman Franklin Class I
   
●          Frank Leavy Class I
   
●          Edward Leonard Jaroski Class I
   
●          Shripal Morakhia Class II

 

Business background and biographical information on Donald R. Caldwell, Roman Franklin, Frank Leavy, Edward Leonard Jaroski and Shripal Morakhia is set forth below under “Information about I-AM Capital–Management–Directors and Executive Officers” and “Smaaash Management"

 

Vote Required

 

A plurality of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors will be required to re-elct the current directors and to elect nominees. The five individuals receiving the highest number of affirmative votes cast at the special meeting will be elected as our directors. Proxies cannot be voted for a greater number of persons than the number of nominees named.

 

The approval of Shripal Morakhia, the director nominee, is conditioned upon the approval of the Business Combination Proposal. If the Business Combination Proposal is not approved the election of Shripal Morakhia will have no effect.

 

Recommendation of the Board

 

I-AM CAPITAL’S BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE ABOVE-LISTED DIRECTORS AND NOMINEES.

 

Unless marked otherwise, proxies received will be voted “FOR” the election of each of the current directors and the director nominee listed above.

 

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PROPOSAL NO. 4 —THE INCENTIVE PLAN PROPOSAL

 

I-AM Capital board of directors has unanimously approved and adopted the I-AM Capital 2018 Equity Incentive Plan (the “Equity Incentive Plan”), and I-AM Capital’s board has unanimously approved and recommended that I-AM Capital’s stockholders approve and adopt the Equity Incentive Plan.

 

Stockholders are being asked to approve the Equity Incentive Plan. Stockholder approval of the Equity Incentive Plan is necessary for certain purposes. If I-AM Capital’s stockholders do not approve the Equity Incentive Plan, the Equity Incentive Plan will not go into effect.

 

The principal features of the Equity Incentive Plan are summarized below, but the summary is qualified in its entirety by reference to the complete text of the I-AM Capital 2018 Equity Incentive Plan document, which is attached as Annex E to this proxy statement.

 

Highlights of the Equity Incentive Plan

 

Following the consummation of the Transaction, I-AM Capital will be an operating company and will be (i) the sole distributor of Smaaash games in North and South America and (ii) the master franchisee for Smaaash centers in North and South America. I-AM Capital adopted the Equity Incentive Plan to enable us and I-AM Capital’s affiliated companies to: (a) recruit and retain highly qualified employees, directors and consultants; (b) offer them a greater stake in I-AM Capital’s success and a closer identity with our company; and (c) encourage ownership of I-AM Capital’s stock by such individuals.

 

The Equity Incentive Plan permits the grant of (i) nonqualified stock options (“NQSOs”) and incentive stock options (“ISOs”) (collectively, “Options”); (ii) restricted stock awards; (iii) restricted stock units (“RSUs”), (iv) stock appreciation rights (“SARs”), (v) other stock bonus awards, and (vi) performance compensation awards, which I-AM Capital refer to collectively as “Awards,” as more fully described below.

 

Some of the key features of the Equity Incentive Plan that reflect I-AM Capital’s commitment to effective management of incentive compensation are as follows:

 

No In-the-Money Options. The Equity Incentive Plan prohibits the grant of Options with an exercise or base price less than the fair market value of I-AM Capital’s common stock as of the date of grant.

 

Independent Administration. The compensation committee, which consists of only independent directors, will be responsible for the general administration of the Equity Incentive Plan with respect to Awards, provided however, that the compensation committee may delegate to one or more officers or Board members the authority to grant Awards to eligible individuals, who are neither subject to the requirements of Rule 16b-3 of the Exchange Act nor “covered employees” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

 

All Awards granted under the Equity Incentive Plan are governed by separate Award Agreements between us and the participants. No Awards may be granted after the 10th anniversary of the date on which the Equity Incentive Plan was approved by the stockholders, although Awards granted before that time will remain valid in accordance with their terms.

 

Eligibility. Any of I-AM Capital’s employees, officers, directors, consultants (who are natural persons) are eligible to participate in the Equity Incentive Plan if selected by the compensation committee (the “Participants”). The basis of participation of an individual under the Equity Incentive Plan, and the type and amount of any Award that an individual will be entitled to receive under the Equity Incentive Plan, will be determined by the compensation committee based on its judgment as to the best interests of I-AM Capital and I-AM Capital’s stockholders, and therefore cannot be determined in advance.

 

Subject to certain adjustments, the maximum number of shares of common stock that may be issued under the Equity Incentive Plan in connection with Awards is 500,000. Any shares tendered by a Participant in payment of an exercise price for an Award or the tax liability with respect to an Award, including shares withheld from any such Award, that are used or withheld to satisfy tax withholding obligations of a Participant, or which are subject to a SAR that are not issued in connection with the stock settlement of the SAR upon exercise, shall not be available for future Awards hereunder. Additionally, any shares subject to an Award under the Plan that are forfeited, cancelled, expire unexercised, or are settled in cash shall again be available for Awards under the Equity Incentive Plan.

 

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In the event of any dividend, recapitalization, forward or reverse stock split, reorganization, merger, amalgamation, consolidation, split-up, split-off, combination, repurchase or exchange of common stock or other securities of I-AM Capital, issuance of warrants or other rights to acquire common stock or other securities of I-AM Capital, or other similar corporate transaction or event, which affects the common stock, or unusual or nonrecurring events affecting I-AM Capital, or the financial statements of I-AM Capital, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange or inter-dealer quotation system, accounting principles or law, the compensation committee may make such adjustment, which is appropriate in order to prevent dilution or enlargement of the rights of Participants under the Equity Incentive Plan, to (i) the number and kind of shares of common stock which may thereafter be issued in connection with Awards, (ii) the number and kind of shares of common stock issuable in respect of outstanding Awards, (iii) the aggregate number and kind of shares of common stock available under the Equity Incentive Plan, (iv) the exercise price or grant price relating to any Award or, if deemed appropriate, make provision for a cash payment with respect to any outstanding Award, and (vi) if applicable to the performance goals applicable to any such Award.

 

Options. The compensation committee is authorized to grant Options to purchase shares of common stock that are either ISOs meaning they are intended to satisfy the requirements of Section 422 of the Code, or NQSOs, meaning they are not intended to satisfy the requirements of Section 422 of the Code. Options granted under the Equity Incentive Plan will be subject to the terms and conditions established by the compensation committee. Under the terms of the Equity Incentive Plan, unless the compensation committee determines otherwise in the case of an Option substituted for another Option in connection with a corporate transaction, the exercise price of the Options will not be less than the fair market value (as determined under the Equity Incentive Plan) of the shares at the time of grant. Options granted under the Equity Incentive Plan will be subject to such terms, including the exercise price and the conditions and timing of exercise, as may be determined by the compensation committee and specified in the applicable award agreement. The maximum term of an option granted under the Equity Incentive Plan will be ten years from the date of grant (or five years in the case of an ISO granted to a 10% stockholder). Payment in respect of the exercise of an Option may be made in cash or by check, by surrender of unrestricted shares (at their fair market value on the date of exercise) that have been held by the participant for any period deemed necessary by I-AM Capital’s accountants to avoid an additional compensation charge or have been purchased on the open market, or the compensation committee may, in its discretion and to the extent permitted by law, allow such payment to be made through a broker-assisted cashless exercise mechanism, a net exercise method, or by such other method as the compensation committee may determine to be appropriate.

 

Unless otherwise provided in an Award Agreement or as may be determined by the compensation committee, upon a Participant’s termination of service with I-AM Capital or its affiliates, the unvested portion of such Participant’s Options shall cease to vest and shall be forfeited with no further compensation due to the Participant and the vested portion of such Participant’s Options shall remain exercisable by the Participant or the Participant’s beneficiary or legal representative, as the case may be, for a period of (i) 90 days in the event of a Participant’s termination of service by I-AM Capital or a Subsidiary without Cause (as such term is defined in the Equity Incentive Plan), and (ii) one year in the event of a Participant’s termination of service due to death or disability; provided, however, that in no event shall any Option be exercisable after its stated term has expired. All of a Participant’s Options shall be forfeited immediately upon such Participant’s termination by I-AM Capital for Cause.

 

Restricted Stock. A restricted stock award is a grant of shares of common stock, which are subject to forfeiture restrictions during a restriction period. The compensation committee will determine the price, if any, to be paid by the Participant for each share of common stock subject to a restricted stock award. The compensation committee may condition the expiration of the restriction period, if any, upon: (i) the Participant’s continued service over a period of time with I-AM Capital or its affiliates; (ii) the achievement by the Participant, us or our affiliates of any other performance goals set by the compensation committee; or (iii) any combination of the above conditions as specified in the Award Agreement. If the specified conditions are not attained, the Participant will forfeit the portion of the restricted stock award with respect to which those conditions are not attained, and the underlying common stock will be forfeited to us. At the end of the restriction period, if the conditions, if any, have been satisfied, the restrictions imposed will lapse with respect to the applicable number of shares. During the restriction period, unless otherwise provided in an Award Agreement, a Participant will have the right to vote the shares underlying the restricted stock; however, all dividends will remain subject to restriction until the stock with respect to which the dividend was issued lapses. The compensation committee may, in its discretion, accelerate the vesting and delivery of shares of restricted stock. Unless otherwise provided in an Award Agreement or as may be determined by the compensation committee, upon a Participant’s termination of service with I-AM Capital, the unvested portion of a restricted stock award will be forfeited.

 

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RSUs. RSUs are granted in reference to a specified number of shares of common stock and entitle the holder to receive, on achievement of specific performance goals established by the compensation committee, after a period of continued service with us or our affiliates or any combination of the above as set forth in the applicable Award Agreement, one share of common stock for each such share of common stock covered by the RSU; provided, that the compensation committee may elect to pay cash, or part cash and part common stock in lieu of delivering only common stock. The compensation committee may, in its discretion, accelerate the vesting of RSUs. Unless otherwise provided in an Award Agreement or as may be determined by the compensation committee, upon a Participant’s termination of service with I-AM Capital, the unvested portion of the RSUs will be forfeited.

 

Stock Appreciation Rights. An SAR entitles the recipient to receive, upon exercise of the SAR, the increase in the fair market value of a specified number of shares of common stock from the date of the grant of the SAR and the date of exercise payable in shares of common stock. Any grant may specify a vesting period or periods before the SAR may become exercisable and permissible dates or periods on or during which the SAR shall be exercisable. No SAR may be exercised more than ten years from the grant date. Upon a Participant’s termination of service, the same general conditions applicable to Options as described above would be applicable to the SAR.

 

Other Stock-Based Awards. Other stock-based Awards may be granted by the compensation committee in the form and on such terms and conditions as the compensation committee shall determine.

 

Performance Goals. Performance goals may be linked to a variety of factors including the Participant’s completion of a specified period of employment or service with us or an affiliated company. Additionally, performance goals can include objectives stated with respect to an individual Participant, I-AM Capital or the subsidiary, division, department or function in which the Participant is employed. Performance goals may be measured on an absolute or relative basis. Relative performance may be measured by a group of peer companies or by a financial market index. The performance goals are limited to one or more of the following:

 

●          revenue;

 

●          sales;

 

●          Profit (net profit, gross profit, operating profit, economic profit, profit margins or other corporate profit measures);

 

●          earnings (EBIT, EBITDA, earnings per share, or other corporate earnings measures);

 

●          net income (before or after taxes, operating income or other income measures);

 

●          cash (cash flow, cash generation or other cash measures);

 

●          stock price or performance;

 

●          total stockholder return (stock price appreciation plus reinvested dividends divided by beginning share price);

 

●          economic value added;

 

●          return measures (including, but not limited to, return on assets, capital, equity, investments or sales, and cash flow return on assets, capital, equity, or sales);

 

●          market share;

 

●          improvements in capital structure;

 

●          expenses (expense management, expense ratio, expense efficiency ratios or other expense measures);

 

●          business expansion or consolidation (acquisitions and divestitures);

 

●          internal rate of return or increase in net present value;

 

●          working capital targets relating to inventory and/or accounts receivable;

 

●          inventory management;

 

●          service or product delivery or quality;

 

●          customer satisfaction;

 

●          employee retention;

 

●          safety standards;

 

●          productivity measures;

 

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●          cost reduction measures; and/or

 

●          strategic plan development and implementation.

 

The compensation committee may impose restrictions on the grant, exercise or payment of an Award as it determines appropriate. Generally, Awards granted under the Equity Incentive Plan shall be nontransferable except by will or by the laws of descent and distribution. No Participant shall have any rights as a stockholder with respect to shares covered by Options, SARs, restricted stock awards, or RSUs, unless and until such Awards are settled in shares of common stock.

 

No Option (or, if applicable, SARs) shall be exercisable, no shares of common stock shall be issued, no certificates for shares of common stock shall be delivered and no payment shall be made under the Equity Incentive Plan except in compliance with all applicable laws.

 

I-AM Capital’s board of directors may amend, alter, suspend, discontinue or terminate the Equity Incentive Plan and the compensation committee may amend any outstanding Award at any time; provided that (a) such amendment, alteration, suspension, discontinuation, or termination shall be subject to the approval of I-AM Capital’s stockholders if such approval is necessary to comply with any tax or regulatory requirement applicable to the Equity Incentive Plan (including, without limitation, as necessary to comply with any rules or requirements of any national securities exchange or inter-dealer quotation system on which the shares of common stock may be listed or quoted or to prevent us from being denied a tax deduction under Section 162(m) of the Code) and (b) no such amendment or termination may adversely affect Awards then outstanding without the Award holder’s permission.

 

In the event of a change of control (as defined in the Equity Incentive Plan) and except to the extent otherwise provided in an Award Agreement, (i) all of the then outstanding Options and SARs shall immediately vest and become immediately exercisable as of a time prior to the change in control, (ii) the restricted period with respect to any restricted awards and RSUs shall expire as of a time prior to the change in control (including without limitation a waiver of any applicable performance goals) and (iii) performance periods in effect on the date the change in control occurs shall end on such date, and the compensation committee shall (A) determine the extent to which performance goals with respect to each such performance period have been met based upon such audited or unaudited financial information or other information then available as it deems relevant and (B) cause the Participant to receive partial or full payment of Awards for each such performance period based upon the compensation committee’s determination of the degree of attainment of the performance goals, or assuming that the applicable “target” levels of performance have been attained or on such other basis determined by the compensation committee. To the extent practicable, any actions taken by the compensation committee under the immediately preceding clauses (i) through (iii) shall occur in a manner and at a time which allows affected Participants the ability to participate in the change in control transactions with respect to the shares of common stock subject to their Awards. The judgment of the compensation committee with respect to a change of control shall be conclusive and binding upon each Participant without the need for any amendment to the Equity Incentive Plan.

 

New Plan Benefits

 

Because I-AM Capital’s compensation committee has discretion to grant future Awards of a design and amount determined in its discretion, (i) it is not possible at present to specify the persons to whom Awards will be granted under the Equity Incentive Plan in the future or the amounts and types of individual grants and (ii) it would not be possible to predict what Awards would have been granted had the Equity Incentive Plan been in existence in the prior fiscal year. However, it is anticipated that, among others, all of I-AM Capital’s current executive officers, including I-AM Capital’s named executive officers, will receive Awards under the Equity Incentive Plan.

 

Section 162(m) of the Internal Revenue Code

 

Section 162(m) of the Code limits the federal income tax deductions a publicly held company can claim for compensation in excess of $1,000,000 paid to certain executive officers (generally, the officers who are “named executive officers” in the summary compensation table in the issuer’s proxy statement). Accordingly, there can be no assurance that awards under the Equity Incentive Plan will be fully deductible under all circumstances.

 

Federal Income Tax Consequences Relating to Awards Under the Equity Incentive Plan

 

The material United States federal income tax treatment of Awards under the Equity Incentive Plan is generally described below. This description of tax consequences is not a complete description. There may be different income tax consequences under certain circumstances, and there may be gift and estate tax consequences. Local, state and other taxing authorities may also tax Awards under the Equity Incentive Plan. Tax laws are subject to change.

 

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Nonqualified Stock Options

 

There are generally no federal income tax consequences to a Participant or to I-AM Capital upon the grant of an NQSO. Upon the exercise of an NQSO, a Participant will recognize ordinary income in an amount equal to the excess of the fair market value of the shares at the time of exercise over the aggregate exercise price paid. The Company generally will be entitled to a corresponding federal income tax deduction. The Participant will have a tax basis in the shares equal to the exercise price plus the amount of income recognized at the time of exercise.

 

When a Participant sells shares of stock acquired through the exercise of an NQSO, the Participant will have a capital gain or loss in an amount equal to the difference between the amount realized on the sale and the tax basis in the shares. The capital gain tax rate will depend on a number of factors, including the length of time the Participant held the shares prior to selling them.

 

Incentive Stock Options

 

There are a number of requirements that must be met for an Option to be treated as an ISO. One such requirement is that common stock acquired through the exercise of an ISO cannot be disposed of before the later of (i) two years from the date of grant of the Option, or (ii) one year from the date of exercise. Participants who receive ISOs will generally incur no federal income tax liability at the time of grant or upon exercise of those Options. However, the spread at exercise will be an “item of tax preference,” which may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs.

 

If the Participant does not dispose of the shares before the later of two years following the date of grant and one year following the date of exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long- or short-term capital gain or loss, as the case may be. Assuming both holding periods are satisfied, no deduction will be allowed to us for federal income tax purposes in connection with the grant or exercise of the ISO. If, within two years following the date of grant or within one year following the date of exercise, the Participant disposes of the shares acquired through the exercise of an ISO, the Participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the fair market value of the common stock on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by us for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to executives designated in those Sections. Finally, if an otherwise ISO becomes first exercisable in any one year for shares having an aggregate value in excess of $100,000 (based on the grant date value), the portion of the ISO in excess of that limit will be treated as a NQSO for federal income tax purposes.

 

Restricted Stock

 

Unless a Participant makes a valid Section 83(b) election as described below, such Participant will generally not recognize federal taxable income when he or she receives a grant of restricted stock, and I-AM Capital will not be entitled to a deduction until the stock is transferable by the Participant or is otherwise no longer subject to a substantial risk of forfeiture. When the stock is either transferable or is no longer subject to a substantial risk of forfeiture, the Participant will recognize ordinary income in an amount equal to the fair market value of the shares at that time (less any amounts paid for the shares), and generally, I-AM Capital will be entitled to a deduction in the same amount. Any gain or loss recognized by the Participant upon a later disposition of the common stock will be capital gain or loss. A Participant’s holding period for purposes of determining whether that capital gain or loss is long-term or short-term will be counted from the date the stock became transferable or ceased to be subject to a substantial risk of forfeiture.

 

A Participant may elect to recognize ordinary income at the time that a restricted stock award is granted in an amount equal to the fair market value of the shares subject to the Award (less any amounts paid for such shares) at the time of grant, determined without regard to certain restrictions. This election is referred to as a Section 83(b) election. In that event, I-AM Capital will be entitled to a corresponding deduction in the same year. Any gain or loss recognized by the Participant upon a later disposition of the shares will be capital gain or loss. A Participant’s holding period for purposes of determining whether that capital gain or loss is long-term or short-term will be counted from the date of the original transfer to the Participant. The Participant may not claim a credit for any tax previously paid on stock that is later forfeited.

 

Restricted Stock Units

 

If a Participant is granted an RSU, he or she will not be required to recognize any taxable income at the time of grant or at the time that the RSU vests. Upon distribution of shares or cash in respect of an RSU, the fair market value of those shares or the amount of that cash will be taxable to the Participant as ordinary income and I-AM Capital will receive a deduction equal to the income recognized by the Participant. The subsequent disposition of shares acquired pursuant to an RSU will result in capital gain or loss (based on the difference between the price received on disposition and the market value of the shares at the time of their distribution). The capital gain tax rate will depend on a number of factors, including the length of time the Participant held the shares prior to selling them.

 

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Stock Appreciation Rights

 

A Participant realizes no taxable income and I-AM Capital is not entitled to a deduction when a SAR is granted. Upon exercising a SAR, a Participant will realize ordinary income in an amount equal to the fair market value of the shares received minus any amount paid for the shares, and I-AM Capital will be entitled to a corresponding deduction. A Participant’s tax basis in the shares of common stock received upon exercise of a SAR will be equal to the fair market value of such shares on the exercise date, and the Participant’s holding period for such shares will begin at that time. Upon sale of the shares of common stock received upon exercise of a SAR, the Participant will realize short-term or long-term capital gain or loss, depending upon the applicable holding period. The amount of such gain or loss will be equal to the difference between the amount realized in connection with the sale of the shares and the Participant’s tax basis in such shares.

 

Stock Bonus Awards

 

The tax consequences of receiving stock bonus awards will generally be governed by the principles set forth in the Code. These tax consequences may vary depending upon the terms and conditions of such Awards.

 

Interest of Certain Persons in the Equity Incentive Plan

 

Stockholders should understand that I-AM Capital’s executive officers and non-employee directors may be considered to have an interest in the approval of the Equity Incentive Plan because they may in the future receive Awards under it. Nevertheless, I-AM Capital’s board of directors believes that it is important to provide incentives and rewards for superior performance and the retention of experienced directors by implementing the Equity Incentive Plan.

 

Equity Awards

 

The grant of Options and other equity or cash awards under the Equity Incentive Plan is discretionary and I-AM Capital cannot determine now the specific number or type of equity or cash awards to be granted in the future to any particular person or group. Any such grants of Awards will be made in the sole discretion of I-AM Capital’s compensation committee, in such amounts and to such persons, as I-AM Capital’s compensation committee deems appropriate.

 

Vote Required for Approval

 

The affirmative vote of a majority of the votes cast by the holders of common stock of I-AM Capital present in person or represented by proxy at the special meeting and entitled to vote thereon is required to approve the Equity Incentive Plan. Abstentions and broker-non votes will have no effect on the outcome of the vote on this proposal. 

  

Recommendation of the Board

 

I-AM CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE INCENTIVE PLAN PROPOSAL.

 

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PROPOSAL NO. 5 — THE AUDITOR RATIFICATION PROPOSAL

 

On  July 23, 2018, the audit committee of the board of directors appointed the firm of Prager Metis CPAs, LLC (“Prager Metis”) to serve as our independent auditors for our fiscal year ending May 31, 2019. Stockholders will be asked to ratify the appointment of the Auditor to serve as I-AM Capital’s independent auditors. The audit committee is directly responsible for appointing I-AM Capital’s independent registered public accounting firm. The audit Committee is not bound by the outcome of this vote but will consider these voting results when selecting I-AM Capital’s independent auditor for fiscal year 2019. The Auditor was engaged as our independent registered public accounting firm in connection with our initial public offering. The Auditor has audited all of our annual financial statements since our inception in April 2017 and the financial statements of our combined entity following the Transaction. A representative of the Auditor is not expected to be present at the special meeting.

 

The audit committee reviews and approves the audit and non-audit services to be provided by our independent registered public accounting firm during the year, considers the effect that performing those services might have on audit independence and approves management’s engagement of our independent registered public accounting firm to perform those services. The audit committee reserves the right to appoint a different independent registered public accounting firm at any time during the year if the board of directors of I-AM Capital and the audit committee believe that a change is in the best interest of I-AM Capital and our stockholders.

 

The aggregate fees billed for the fiscal years ended May 31, 2018 and May 31, 2017 for (i) professional services rendered by the principal accountant for the audit of its annual financial and review of financial statements included in Form 10-Q (“Audit Fees”), (ii) assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the financial statements and not reportable under Audit Fees (the “Audit Related Fees”), (iii) tax compliance, advice, and planning (“Tax Fees”), and (iv) other products or services provided (“Other Fees”) were:

 

   Year Ended
May 31,
2018
   Year Ended
May 31,
2017
 
Audit Fees  $15,000   $0 
Audit Related Fees  $23,500   $0 
Tax Fees  $0   $0 
All Other Fees  $0   $0 
Total  $38,500   $0 

 

Our audit committee has determined that the services provided by Prager Metis are compatible with maintaining the independence of the Auditor as our independent registered public accounting firm. 

 

Required Vote 

 

The affirmative vote of a majority of the votes cast by the holders of common stock of I-AM Capital present in person or represented by proxy at the special meeting and entitled to vote thereon is required to approve the Auditor Ratification Proposal.

 

Recommendation of the Board 

 

I-AM CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AUDITOR RATIFICATION PROPOSAL.

 

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PROPOSAL NO. 6 — THE ADJOURNMENT PROPOSAL

 

The Adjournment Proposal, if adopted, will allow I-AM Capital’s board of directors to adjourn the special meeting to a later date or dates. The Adjournment Proposal will only be presented to stockholders if I-AM Capital determines that there are not sufficient votes to approve one or more proposals presented at the special meeting or that one or more closing conditions under the Subscription Agreement will not be satisfied. In no event will I-AM Capital’s board of directors adjourn the special meeting or consummate the Transaction beyond the date by which it may properly do so under its Restated Certificate and Delaware law.

 

Consequences if the Adjournment Proposal is Not Approved

 

If the Adjournment Proposal is not approved by I-AM Capital stockholders, I-AM Capital’s board of directors may not be able to adjourn the special meeting to a later date, if I-AM Capital determines that there are not sufficient votes to approve one or more proposals presented at the special meeting or that one or more closing conditions under the Subscription Agreement will not be satisfied.

 

Required Vote

 

The affirmative vote of a majority of the votes cast by the holders of common stock of I-AM Capital present in person or represented by proxy at the special meeting and entitled to vote thereon is required for the adoption of the Adjournment Proposal. Adoption of the Adjournment Proposal is not conditioned upon the adoption of any of the other proposals.

 

Recommendation of the Board

 

I-AM CAPITAL’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE ADJOURNMENT PROPOSAL.

 

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I-AM CAPITAL UNAUDITED PRO FORMA FINANCIAL INFORMATION

 

The following unaudited I-AM Capital pro forma financial information, which is referred to as the pro forma financial information, shows the pro forma effect of the consummation of the Transaction between I-AM Capital and Smaaash, for balance sheet purposes, as if it had occurred on May 31, 2018. The pro forma financial information should be read in conjunction with the historical financial statements of I-AM Capital in its Annual Report on Form 10-K provided with this proxy statement.

 

The pro forma financial information is presented for illustrative purposes only and, therefore, does not purport to represent what the actual financial condition of I-AM Capital would have been if the Transaction had occurred on the date assumed, and it is not necessarily indicative of the company’s future financial position. In this regard, the pro forma financial information does not give effect to any benefits that may be derived from the company’s growth projects or expansions resulting from the cash proceeds received.

 

  Assuming Minimum Redemption:  This presentation assumes that no I-AM Capital stockholders exercise their redemption rights. This assumption presumes transaction expenses of $1.2 million. 

 

The $49.0 million estimate represents the proposed maximum aggregate Investment Amount which assumes the minimum redemptions by I-AM Capital stockholders. This pro forma information is subject to risks and uncertainties, including those discussed in the section of this proxy statement titled “Risk Factors.”

 

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The following table sets forth the unaudited pro forma balance sheet of I-AM Capital as of May 31, 2018, giving effect to the proposed Transaction as if it had occurred on May 31, 2018.

 

I-AM CAPITAL ACQUSITION COMPANY
PRO FORMA BALANCE SHEET 
(Unaudited)

  

       Pro Forma     
   May 31, 2018   Adjustments   Pro Forma 
             
ASSETS               
Current Assets               
Cash and cash equivalents  $458,063         458,063 
Prepaid expenses   3,168         3,168 
Total Current Assets   461,231        461,231 
                
Cash held in Trust Account   52,895,652    (52,120,000)   775,652 
                
Investment in non-consolidated subsidiary        50,200,000    50,200,000 
                
Total Assets  $53,356,883   $(1,920,000)  $51,436,883 
                
LIABILITIES AND STOCKHOLDERS’ EQUITY               
Current Liabilities               
Loan payable - Related party  $81,618         81,618 
Accrued expenses   63,579        63,579 
Deferred legal fees   100,000    (100,000)    
Total current liabilities   245,197    (100,000)   145,197 
Deferred underwriting fees   1,820,000    (1,820,000)    
Total Liabilities   2,065,197    (1,920,000)   145,197 
                
Commitments               
Common stock subject to possible redemption, $.0001 par value; 4,560,757 shares   46,291,685        46,291,685 
                
Stockholders’ equity               
Preferred Stock - $0.0001 par value, 1,000,000 shares authorized; no shares issued and outstanding            
Common Stock - $0.0001 par value; 20,000,000 shares authorized; 2,252,743 shares issued and outstanding (excluding 4,560,757  shares subject to possible redemption)   225         225 
Additional paid-in capital   5,009,310         5,009,310 
Accumulated deficit   (9,534)        (9,534)
Total stockholders’ equity   5,000,001        5,000,001 
Total Liabilities and stockholders’ equity  $53,356,883   $(1,920,000)  $51,436,883 

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS REDEMPTION OF I-AM CAPITAL COMMON STOCK

 

The following is a discussion of the material U.S. federal income tax considerations for holders of I-AM Capital common stock that elect to have their I-AM Capital common stock redeemed for cash if the acquisition is completed. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the regulations promulgated by the U.S. Treasury Department, current administrative interpretations and practices of the Internal Revenue Services (the “IRS”) and judicial decisions, all as currently in effect and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described below. No advance ruling has been or will be sought from the IRS regarding any matter discussed in this summary. This summary does not discuss the impact that U.S. state and local taxes and taxes imposed by non-U.S. jurisdictions could have on the matters discussed in this summary. This summary does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular stockholder in light of its investment or tax circumstances or to stockholders subject to special tax rules, such as:

 

  certain U.S. expatriates;

 

  traders in securities that elect mark-to-market treatment;

 

  S corporations;

 

  U.S. stockholders (as defined below) whose functional currency is not the U.S. dollar;

 

  financial institutions;

 

  mutual funds;

 

  qualified plans, such as 401(k) plans, individual retirement accounts, etc.;

 

  insurance companies;

 

  broker-dealers;

 

  regulated investment companies (or RICs);

 

  real estate investment trusts (or REITs);

 

  persons holding I-AM Capital common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;

 

  persons subject to the alternative minimum tax provisions of the Code;

 

  tax-exempt organizations;

 

  persons that actually or constructively own 5 percent or more of I-AM Capital common stock; and

 

  non-U.S. stockholders (as defined below, and except as otherwise discussed below).

 

If any partnership (including for this purpose any entity treated as a partnership for U.S. federal income tax purposes) holds I-AM Capital common stock, the tax treatment of a partner will depend on the status of the partner and the activities of the partner and the partnership. If you are a partner of a partnership holding I-AM Capital common stock, you should consult your tax advisor. This summary assumes that stockholders hold I-AM Capital common stock as capital assets within the meaning of Section 1221 of the Code, which means as property held for investment and not as a dealer or for sale to customers in the ordinary course of the stockholder’s trade or business.

 

WE URGE HOLDERS OF I-AM CAPITAL COMMON STOCK CONTEMPLATING EXERCISE OF THEIR REDEMPTION RIGHTS TO CONSULT THEIR TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES THEREOF.

 

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U.S. Federal Income Tax Considerations to U.S. I-AM Capital Stockholders

 

This section is addressed to U.S. holders of I-AM Capital common stock that elect to have their I-AM Capital common stock redeemed for cash as described in the section entitled “Special Meeting in Lieu of an Annual Meeting of I-AM Capital Stockholders — Redemption Rights.” For purposes of this discussion, a “Redeeming U.S. Holder” is a beneficial owner that so redeems its I-AM Capital common stock and is:

 

  a citizen or resident of the United States;

 

  a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof;

 

  an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

 

  any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) it has a valid election in place to be treated as a U.S. person.

 

A Redeeming U.S. Holder will recognize capital gain or loss equal to the difference between the amount realized on the redemption and such stockholder’s adjusted basis in the I-AM Capital common stock exchanged therefor if the Redeeming U.S. Holder’s ownership of stock in I-AM Capital is completely terminated or if the redemption meets certain other tests described below. Special constructive ownership rules apply in determining whether a Redeeming U.S. Holder’s ownership of stock in I-AM Capital is treated as completely terminated. Pursuant to these constructive ownership rules, a Redeeming U.S. Holder will be deemed to own stock that is actually or constructively owned by certain members of his or her family (spouse, children, grandchildren and parents) and other related parties including, for example, certain entities in which such Redeeming U.S. Holder has a direct or indirect interest (including partnerships, estates, trusts and corporations), as well as shares of stock that such Redeeming U.S. Holder (or a related person) has the right to acquire upon exercise of an option or conversion right. In addition, if a shareholder lives in a community property state, the community property laws of that state may have an effect on the constructive ownership rules. Certain exceptions to the family attribution rules for the purpose of determining a complete termination. If a Redeeming U.S. Holder intends to rely upon these exceptions, the Redeeming U.S. Holder must file a “waiver of family attribution” statement with the shareholder’s tax return and must comply with certain other requirements set forth in the Code and the income tax regulations promulgated thereunder. If gain or loss treatment applies, such gain or loss will be long-term capital gain or loss if the holding period of such stock is more than one year at the time of the exchange. Stockholders who hold different blocks of I-AM Capital common stock (generally, shares of I-AM Capital common stock purchased or acquired on different dates or at different prices) should consult their tax advisors to determine how the above rules apply to them.

 

Cash received upon redemption that does not completely terminate the Redeemed U.S. Holder’s interest will still give rise to capital gain or loss, if the redemption is either (i) “substantially disproportionate” or (ii) “not essentially equivalent to a dividend.” In determining whether the redemption is substantially disproportionate or not essentially equivalent to a dividend with respect to a Redeeming U.S. Holder, that Redeeming U.S. Holder is deemed to own not just stock he, she or it actually owned but also, in some cases, stock owned by certain family members, certain estates and trusts of which the Redeeming U.S. Holder is a beneficiary, and certain other affiliated entities.

 

For purposes of these tests, the redemption will be “substantially disproportionate” with respect to the Redeeming U.S. Holder if (i) the Redeeming U.S. Holder’s percentage ownership of the outstanding voting stock (including all classes which carry voting rights) of I-AM Capital is reduced immediately after the redemption to less than 80% of the Redeeming U.S. Holder’s percentage interest in such stock immediately before the redemption; (ii) the Redeeming U.S. Holder’s percentage ownership of the outstanding common stock (both voting and nonvoting) immediately after the redemption is reduced to less than 80% of such percentage ownership immediately before the redemption; and (iii) the Redeeming U.S. Holder owns, immediately after the redemption, less than 50% of the total combined voting power of all classes of stock of I-AM Capital entitled to vote. Whether the redemption will be considered “not essentially equivalent to a dividend” with respect to a Redeeming U.S. Holder will depend upon the particular circumstances of that U.S. holder. At a minimum, however, the redemption must result in a meaningful reduction in the Redeeming U.S. Holder’s actual or constructive percentage ownership of I-AM Capital. The IRS has ruled that any reduction in a stockholder’s proportionate interest generally is a “meaningful reduction” if the stockholder’s relative interest in the corporation is minimal and the stockholder does not have meaningful control over the corporation.

 

If none of the redemption tests described above give rise to capital gain or loss, the consideration paid to the Redeeming U.S. Holder will be treated as a distribution by us to such Redeeming U.S. Holder, which will be treated as dividend income for U.S. federal income tax purposes to the extent of our current or accumulated earnings and profits. However, for the purposes of the dividends-received deduction and of “qualified dividend” treatment, due to the redemption right, a Redeeming U.S. Holder may be unable to include the time period prior to the redemption in the stockholder’s “holding period” as part of the Redeeming U.S. Holder’s determination as to whether such gain or loss would be treated as short term or long term for U.S. federal income tax purposes. Any distribution in excess of our earnings and profits will reduce the Redeeming U.S. Holder’s basis in the I-AM Capital common stock (but not below zero), and any remaining excess will be treated as gain realized on the sale or other disposition of the I-AM Capital common stock.

 

These rules are complex and U.S. holders of I-AM Capital common stock considering exercising their redemption rights should consult their own tax advisors as to whether the redemption will be treated as a sale or as a distribution under the Code.

 

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Certain Redeeming U.S. Holders who are individuals, estates or trusts pay a 3.8% tax on all or a portion of their “net investment income” or “undistributed net investment income” (as applicable), which may include all or a portion of their capital gain or dividend income from their redemption of I-AM Capital common stock. Redeeming U.S. Holders should consult their tax advisors regarding the effect, if any, of the net investment income tax.

 

U.S. Federal Income Tax Considerations to Non-U.S. I-AM Capital Stockholders

 

This section is addressed to non-U.S. holders of I-AM Capital common stock that elect to have their I-AM Capital common stock redeemed for cash as described in the section entitled “Special Meeting in Lieu of an Annual Meeting of I-AM Capital Stockholders — Redemption Rights.” For purposes of this discussion, a “Redeeming Non-U.S. Holder” is a beneficial owner (other than a partnership) that so redeems its I-AM Capital common stock and is not a Redeeming U.S. Holder.

 

Except as discussed in the following paragraph, a Redeeming Non-U.S. Holder who elects to have its I-AM Capital common stock redeemed will be treated in the same manner as a U.S. Holder for U.S. federal income tax purposes. See the discussion above under “U.S. Federal Income Tax Considerations to U.S. I-AM Capital Stockholders.”

 

Any Redeeming Non-U.S. Holder will not be subject to U.S. federal income tax on any capital gain recognized as a result of the exchange unless:

 

  such stockholder is an individual who is present in the United States for 183 days or more during the taxable year in which the redemption takes place and certain other conditions are met, in which case the Redeeming Non-U.S. Holder will be subject to a 30% tax on the individual’s net capital gain for the year; or

 

  such stockholder is engaged in a trade or business within the United States and any gain recognized in the exchange is treated as effectively connected with such trade or business (and, if an income tax treaty applies, the gain is attributable to a permanent establishment maintained by such holder in the United States), in which case the Redeeming Non-U.S. Holder will be subject to the same treatment as a Redeeming U.S. Holder with respect to the exchange, and a corporate Redeeming Non-U.S. Holder may be subject to the branch profits tax at a 30% rate (or lower rate as may be specified by an applicable income tax treaty).

 

With respect to any redemption treated as a distribution rather than a sale, any amount treated as dividend income to a Redeeming Non-U.S. Holder will generally be subject to U.S. withholding tax at a rate of 30%, unless the Redeeming Non-U.S. Holder is entitled to a reduced rate of withholding under an applicable income tax treaty. Dividends received by a Redeeming Non-U.S. Holder that are effectively connected with such holder’s conduct of a U.S. trade or business (and, if an income tax treaty applies, such dividends are attributable to a permanent establishment maintained by the Redeeming Non-U.S. Holder in the United States), are includible in the Redeeming Non-U.S. Holder’s gross income in the taxable year received. Although not subject to withholding tax (except as may be required by the “backup withholding” or “FATCA” rules, in each case as described below), such dividends are taxed at the same graduated rates applicable to Redeeming U.S. Holders, net of certain deductions and credits, subject to an applicable income tax treaty providing otherwise. In addition, dividends received by a corporate Redeeming Non-U.S. Holder that are effectively connected with the holder’s conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty.

 

Non-U.S. holders of I-AM Capital common stock considering exercising their redemption rights should consult their own tax advisors as to whether the redemption of their I-AM Capital common stock will be treated as a sale or as a distribution under the Code.

 

Under the Foreign Account Tax Compliance Act (“FATCA”) and U.S. Treasury regulations and administrative guidance thereunder, a 30% United States federal withholding tax may apply to any dividends paid to (i) a “foreign financial institution” (as specifically defined in FATCA), whether such foreign financial institution is the beneficial owner or an intermediary, unless such foreign financial institution agrees to verify, report and disclose its United States “account” holders (as specifically defined in FATCA) and meets certain other specified requirements or (ii) a non-financial foreign entity, whether such non-financial foreign entity is the beneficial owner or an intermediary, unless such entity provides a certification that the beneficial owner of the payment does not have any substantial United States owners or provides the name, address and taxpayer identification number of each such substantial United States owner and certain other specified requirements are met. In certain cases, the relevant foreign financial institution or non-financial foreign entity may qualify for an exemption from, or be deemed to be in compliance with, these rules. Redeeming Non-U.S. Holders should consult their own tax advisors regarding this legislation and whether it may be relevant to their disposition of I-AM Capital common stock.

 

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Backup Withholding

 

Proceeds received from the exercise of redemption rights will be subject to backup withholding for a non-corporate U.S. stockholder that:

 

  fails to provide an accurate taxpayer identification number;

 

  is notified by the IRS regarding a failure to report all interest or dividends required to be shown on his or her federal income tax returns; or

 

  in certain circumstances, fails to comply with applicable certification requirements.

 

A non-U.S. stockholder may eliminate the requirement for information reporting and backup withholding by providing certification of its foreign status, under penalties of perjury, on a duly executed applicable IRS Form W-8 or by otherwise establishing an exemption.

 

Any amount withheld under these rules will be creditable against the U.S. stockholder’s or non-U.S. stockholder’s U.S. federal income tax liability or refundable to the extent that it exceeds this liability, provided that the required information is timely furnished to the IRS and other applicable requirements are met.

 

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MATERIAL INDIAN TAX CONSIDERATIONS

 

Introduction

 

The following is a summary of the material Indian income tax consequences of the acquisition, ownership and disposal of the equity shares (“Target equity shares”) of Smaaash (“Target”) for I-AM Capital (“Acquirer”). For the purpose of this summary, it is assumed that the Acquirer is a non-resident in India for the purposes of the (Indian) Income Tax Act, 1961, as amended (“IT Act”) and is a tax resident in the United States of America. The summary only addresses the tax consequences for the Acquirer on equity shares of the Target as capital assets and does not address the tax consequences in other cases. The summary proceeds on the basis that the Acquirer continues to remain a non-resident when the income by way of dividends and capital gains are earned. The summary is based on Indian tax laws and relevant interpretations thereof as are in force as on May 3, 2018, and are subject to change. This summary is not intended to constitute a complete analysis of all the tax consequences for the Acquirer under Indian law in relation to the acquisition, ownership and disposal of the Target equity shares and does not deal with all possible tax consequences relating to an investment in the Target equity shares, such as the tax consequences under state, local and other (for example, non-Indian) tax laws. The Acquirer should therefore consult their own tax advisers on the tax consequences of such acquisition, ownership and disposal of the Target equity shares under Indian law including specifically, the tax treaty between India and USA and the law of the jurisdiction in USA.

 

Taxation of Income arising from sale of Target equity shares

 

Section 112 of the IT Act provides that Capital gains accruing to a non-resident from the sale of unlisted equity shares, in this case- Target equity shares, on the sale of the equity shares will be subject to capital gains tax in India. Such capital gains are computed as the difference between the sales consideration received for such shares less their cost of acquisition. In the event the sales consideration is less than the Fair market value, the fair value as determined in accordance with the Income-tax Rules, 1962 (“IT Rules”) will be deemed to be the sales consideration.

 

Capital gains realized in respect of unlisted equity shares of Indian public companies held by a non-resident investor for more than 24 months will be treated as long-term capital gains and will be subject to tax at a maximum effective rate of 10.92% (including surcharge @ 5% and cess at 4%), provided the non-resident forgoes the benefit of neutralization of foreign exchange fluctuations. Capital gains realized in respect of equity shares held by the non-resident investor for 24 months or less will be treated as short-term capital gains and will be subject to tax at ordinary tax rates applicable to non-residents (Maximum effective rate of 43.68% including surcharge @ 5% and cess at 4%). Taxes, if any, payable on the sale of equity shares by the seller, are required to be withheld by the purchaser from the purchase consideration at the applicable rate. Further, the tax treatment discussed above is subject to Double Taxation Avoidance Agreements between India and USA.

 

This summary only addresses the tax consequences for non-resident investors who hold the Target equity shares as capital assets and does not address the tax consequences where such shares are held as “stock in trade”. If such shares are held as stock in trade, the income arising from the transfer of these shares would be treated as business income, which would be taxable in India if it arises through or from the non-resident seller’s business connection in India, if any. However, if the Acquirer is registered as a ‘Foreign Institutional Investor (FII)’ under the regulations prescribed by Securities and Exchange Board of India (SEBI), any investment by such FII shall be deemed to be a capital asset. The Acquirer should consult their own tax advisers on the tax consequences in India of holding the Target equity shares as a capital asset or as stock in trade, including in relation to the applicable DTAA.

 

Capital Losses

 

The losses arising from a transfer of a capital asset in India can only be set off against capital gains and not against any other income in accordance with the IT Act. A long-term capital loss may be set off only against a long-term capital gain. To the extent that the losses are not absorbed in the year of transfer, they may be carried forward for a period of eight years immediately succeeding the year for which the loss was first computed and may be set off against the capital gains assessable for such subsequent years. In order to get the benefit of set-off of the capital losses in this manner, the non-resident investor must file appropriate and timely tax returns in India and undergo the usual assessment procedures.

 

Corporate Tax

 

The Target will be liable to a headline corporate tax in India @ 34.94% (including surcharge and cess).

 

Taxation of Dividends

 

Dividends paid the Acquirer would not be subject to tax in the hands of such holder. However, the Target will be liable to pay a “dividend distribution tax” currently at an effective rate of 21.17% (inclusive of surcharge @ 12% and cess @ 4% as computed on grossed up basis).

 

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Tax Treaties

 

The above mentioned tax rates and the consequent taxation are subject to any benefits available to the Acquirer under the provisions of the DTAA entered into between the Government of USA and the Government of India.

 

Gift Tax

 

S. 56(2)(x) of the IT Act provides that in the event the transfer of any unlisted shares is undertaken at less than fair value (as determined by the IT Rules) or for NIL consideration, the whole of the difference between the fair value and actual consideration payable (if such difference exceeds INR 50,000) shall be deemed to be a gift in the hands of the recipient and the same would be taxable at applicable tax rates.

 

Tax Credit

 

The Acquirer may be entitled to a tax credit with respect to any withholding tax paid by us or any other person for their account in accordance with the laws of USA and the provisions of the tax treaty between India and USA.

 

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INFORMATION ABOUT I-AM CAPITAL

 

General

 

I-AM Capital is a blank check company organized under the laws of the State of Delaware on April 17, 2017. The Company was formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Although I-AM Capital is not limited to a particular industry or geographic region for purposes of consummating a business combination, I-AM Capital focuses on businesses with a connection to India.

 

On May 31, 2017, I-AM Capital issued 1,437,500 founder shares to the Sponsor in exchange for a capital contribution of $25,000. Upon the partial exercise of the underwriters’ over-allotment option on September 13, 2017, 137,500 founder shares were forfeited by the Sponsor.

 

The founder shares are identical to the shares of common stock included in the public units sold in I-AM Capital’s initial public offering and holders of founder shares have the same stockholder rights as public stockholders, except that (i) the founder shares and the shares of common stock underlying the private units are subject to certain transfer restrictions, and (ii) the Sponsor has entered into a letter agreement, pursuant to which it has agreed (A) to waive its redemption rights with respect to the founder shares, and the shares of common stock underlying the private units and the public units in connection with the completion of a business combination and (B) to waive its rights to liquidating distributions from the trust account with respect to the founder shares and the shares of common stock underlying the private units if I-AM Capital fails to complete a business combination within 12 months from the closing of the initial public offering (or up to 21 months from the closing of the initial public offering if I-AM Capital extends the period of time to consummate a business combination).

 

On August 22, 2017, I-AM Capital sold 5,000,000 public units at a purchase price of $10.00 per public unit in its initial public offering, generating gross proceeds of $50.0 million. The Company incurred offering costs of approximately $3.7 million, inclusive of approximately $3.2 million of underwriting fees. The Company paid $1 million of underwriting fees upon the closing of the initial public offering, issued 50,000 shares of common stock for underwriting fees, and deferred $1.75 million of underwriting fees until the consummation of the initial business combination. Each public unit consists of one share of I-AM Capital’s common stock, one right to receive one-tenth of one share of I-AM Capital’s common stock upon consummation of I-AM Capital’s initial business combination, and one redeemable warrant. No fractional shares will be issued as a result of the issuance of shares for rights, and any right to a fractional share (after aggregating all rights held by such holder) will be rounded up to the nearest whole share. Each warrant entitles the holder to purchase one share of common stock at an exercise price of $11.50 per share, subject to adjustment. No fractional shares will be issued upon exercise of the warrants. The warrants will become exercisable on the later of (i) 30 days after the completion of the initial business combination and (ii) 12 months from the closing of the initial public offering, and will expire five years after the completion of the initial business combination or earlier upon redemption or liquidation. There will be no redemption rights or liquidating distributions with respect to the warrants and rights, which will expire worthless if I-AM Capital fails to complete it business combination within the period specified above. The Company granted the underwriters a 45-day option to purchase up to 750,000 additional public units to cover any over-allotment, at the initial public offering price less any underwriting discounts and commissions. On September 13, 2017, the underwriters purchased 200,000 additional public units for gross proceeds of $2,000,000 less commissions of $110,000, of which $70,000 are deferred. The Company issued Maxim Group LLC, as compensation for the initial public offering, 50,000 shares at the closing of the initial public offering, plus an additional 2,000 shares upon partial exercise of the over-allotment.

 

Concurrently with the closing of the initial public offering, the Sponsor purchased an aggregate of 254,500 private placement units at $10.00 per private unit, generating gross proceeds of $2,545,000 in a private placement. The private placement units (including their component securities) will not be transferable, assignable or salable until 30 days after the completion of the initial business combination and the warrants included in the private placement units will be non-redeemable so long as they are held by the Sponsor or their permitted transferees. After deducting underwriting discounts and commissions and offering expenses, $50,750,000 of the proceeds of I-AM Capital’s initial public offering and the private units was placed in a trust account with Continental Stock Transfer & Trust Company as trustee. On September 13, 2017, upon the partial exercise of the underwriter’s over-allotment option for 200,000 public units and the purchase by the Sponsor of an additional 7,000 private placement units, after deducting underwriting commissions, an additional $2,030,000 of net proceeds was deposited into the trust account, for a balance of $52,780,000. The trust proceeds are invested in U.S. government treasury bills with a maturity of 180 days or less or money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations.

 

I-AM Capital’s Restated Certificate provides that, other than the withdrawal of interest to pay taxes or up to a maximum of $600,000 of working capital expenses, if any, none of the funds held in trust will be released until the earlier of: (i) the completion of the initial business combination; or (ii) the redemption of 100% of the shares of common stock sold in the initial public offering if I-AM Capital is unable to complete its initial business combination within 12 months (or 21 months if extended) from the closing of the initial public offering (subject to the requirements of law).

 

On August 21, 2018, I-AM Capital deposited an aggregate of $303,610, representing $0.058 per public share, into its trust account, in order to extend the period of time I-AM Capital has to complete its initial business combination for an additional three month period from August 21, 2018 to November 21, 2018.

 

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Fair Market Value of Target Business

 

I-AM Capital’s initial business combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the trust account (excluding the deferred underwriting commissions and taxes payable on the income earned on the trust account) at the time of the agreement to enter into the initial business combination. I-AM Capital’s board of directors determined that the fair market value of Smaaash satisfies the 80% of net assets test based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses.

 

Submission of the Transaction to a Stockholder Vote

 

Since I-AM Capital is seeking stockholder approval of the Transaction, I-AM Capital is distributing proxy materials and, in connection therewith, providing its public stockholders with the redemption rights described above upon completion of the Transaction. Public stockholders electing to exercise their redemption rights will be entitled to receive cash equal to their pro rata share of the aggregate amount then on deposit in the trust account as of two business days prior to the consummation of the Transaction, including any amounts representing interest earned on the trust account (less taxes payable and up to $600,000 of working capital expenses), provided that such stockholders follow the specific procedures for redemption set forth in this proxy statement relating to the stockholder vote on the Transaction. I-AM Capital’s public stockholders are not required to vote against the Transaction in order to exercise their redemption rights. If the Transaction is not completed, then public stockholders electing to exercise their redemption rights will not be entitled to receive such payments.

 

I-AM Capital will complete the Transaction if the votes cast by the holders of common stock of I-AM Capital present in person or represented by proxy at the special meeting and entitled to vote thereon vote in favor of the Business Combination Proposal. The initial stockholder have agreed to vote their founder shares and any public shares purchased during or after the initial public offering in favor of the Transaction. In addition, the initial stockholder have agreed to waive their redemption rights with respect to their founder shares and public shares in connection with the consummation of the Transaction.

 

The Sponsor, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the Transaction. They will not make any such purchases when they are in possession of any material non-public information not disclosed to the seller or if such purchases are prohibited by Regulation M under the Exchange Act. Such a share purchase may include a contractual acknowledgement that such stockholder, although still the record holder of I-AM Capital shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that the Sponsor, directors, officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. It is not anticipated 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.

 

The purpose of such purchases would be to vote such shares in favor of the Transaction and thereby increase the likelihood of obtaining stockholder approval of the Transaction. This may result in the completion of the Transaction that may not otherwise have been possible.

 

Redemption Rights for Holders of Public Shares Upon Consummation of the Transaction

 

I-AM Capital is providing its public stockholders with the opportunity to redeem all or a portion of their shares of common stock upon the completion of the Transaction at a per-share price, payable in cash, equal to the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the Transaction, including interest, divided by the number of then outstanding public shares, subject to the limitations described herein. The amount in the trust account is anticipated to be approximately $10.15 per public share. The Sponsor and the Company’s executive officers and directors have entered into letter agreements with I-AM Capital, pursuant to which they have agreed to waive their redemption rights with respect to their founder shares and any public shares they may hold in connection with the completion of the Transaction.

 

In addition, I-AM Capital has agreed to issue a Special Dividend of common stock on all shares of I-AM Capital common stock that are outstanding at the end of the day immediately prior to the date of the closing of the Transaction, to each stockholder who beneficially owns such shares as of such time (other than the Sponsor, Maxim and its affiliates, who have agreed to waive their rights to such dividend) on the condition that the stockholder of any such shares remains a stockholder immediately after the closing. The number of shares to be issued in the Special Dividend for each outstanding share shall be equal to 600,000 divided by the number of shares of common stock eligible to receive such dividend, which shall not include the shares of common stock held by the Sponsor, Maxim and its affiliates. In connection with the Special Dividend, the Sponsor has agreed to cancel a number of founder shares equal to the aggregate number of shares issued in the Special Dividend. The Special Dividend will only be paid if and when the Transaction closes. To the extent you transfer or redeem your shares of I-AM Capital common stock prior to the date of the closing of the Transaction, you will not receive the Special Dividend.

 

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Limitation on Redemption Rights Upon Completion of the Transaction

 

Notwithstanding the foregoing, I-AM Capital’s Restated Certificate 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 I-AM Capital’s initial public offering. This restriction may 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 business combination as a means to force I-AM Capital or its management to purchase their shares at a significant premium to the then-current market price or on other undesirable terms. Absent this provision, a public stockholder holding more than an aggregate of 15% of the shares sold in I-AM Capital’s initial public offering could threaten to exercise its redemption rights if such holder’s shares are not purchased by I-AM Capital or I-AM Capital’s management at a premium to the then-current market price or on other undesirable terms. By limiting stockholders’ ability to redeem to no more than 15% of the shares sold in I-AM Capital’s initial public offering, the ability of a small group of stockholders to unreasonably attempt to block the completion of the Transaction is limited. However, stockholders’ ability to vote all of their shares (including all shares held by those stockholders that hold more than 15% of the shares sold in the initial public offering) for or against the Transaction is not restricted.

 

Redemption of Public Shares and Liquidation if No Initial Business Combination

 

The Sponsor, executive officers and directors have agreed that I-AM Capital must complete its initial business combination by November 21, 2018 (or May 21, 2019, if we further extend the period to consummate a business combination). If I-AM Capital is unable to complete its business combination within such time frame, it will: 

 

  cease all operations except for the purpose of winding up;

 

  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 (less up to $50,000 of interest to pay liquidation expenses), less taxes payable and up to $600,000 of working capital 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 liquidation distributions, if any), subject to applicable law; and

 

  as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and I-AM Capital’s board of directors, dissolve and liquidate;

 

subject in each case to obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

 

Pursuant to its Restated Certificate, I-AM Capital’s powers following the expiration of the permitted time period for consummating a business combination will automatically thereafter be limited to acts and activities relating to dissolving and winding up its affairs.

 

Management

 

Directors and Executive Officers

 

I-AM Capital’s directors and executive officers are as follows:

 

Name   Age   Position
F. Jacob Cherian   53   Chief Executive Officer and Class II Director
Suhel Kanuga   43   Chief Financial Officer, Secretary and Class II Director
Donald R. Caldwell   71   Chairman and Class I Director
Roman Franklin   34   Class I Director
Max Hooper   71   Class II Director
Frank Leavy   65   Class I Director
Edward Leonard Jaroski   71   Class I Director
William H. Herrmann, Jr.   72   Class II Director

 

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F. Jacob Cherian, has served as our Chief Executive Officer and has been a member of our board of directors since inception. Mr. Cherian is also one of the managing members of our Sponsor Mr. Cherian co-founded and served as Chairman, Chief Executive Officer and director of Millennium India from July 2006 to October 2013, completing a $58 million initial public offering in July 2006. Millennium India completed a business combination with SMC, an India-headquartered diversified financial services company with over 2,500 locations in over 500 cities in India serving approximately 1.7 million investors by acquiring a 14.9% interest in SMC. Mr. Cherian served on the Board of Directors of SMC from 2008 to December 2017, and also served on the Board of Directors of Moneywise Financial Services, a non-bank finance company in India, from 2008 to December 2017. From April 2004 to July 2006, Mr. Cherian served as Partner in the financial services division of Computer Sciences Corporation (“CSC”), a Fortune 500 firm with approximately $15.0 billion in annual revenues. Mr. Cherian’s prior work experience includes positions as a director in New York with KPMG LLP / KPMG Consulting from October 1998 to March 2004, and JP Morgan & Co from September 1995 to September 1998 in its Fixed Income Credit Portfolio & Derivatives Division.  Mr. Cherian has extensive international experience and has relocated to, and had multi-year residences in, both Europe and India. He is frequently featured in leading publications and industry conferences for his insights on emerging trends and growth markets, and is a respected authority on South Asian and India-related affairs.  Mr. Cherian holds a Bachelor of Arts degree in Accounting & Information Systems from Queens College of CUNY and an MBA in International Finance from St. John’s University. He has also served as Adjunct Professor of Finance at the Tobin College of Business at St. John’s University’s MBA Program for ten years.

 

We believe Mr. Cherian’s extensive executive experience and leadership in global including India related business transactions qualifies him to serve on our board of directors.

 

Suhel Kanuga, has served as our Chief Financial Officer and Secretary and has been a member of our board of directors since inception. Mr. Kanuga is also one of the managing members of our Sponsor. Mr. Kanuga co-founded Millennium India, completing a $58 million initial public offering in July 2006 and consummated a business combination with SMC and served at various positions including President, Chief Financial Officer, Treasurer, Secretary, Chief Compliance Officer and Director from March 2006 through May 2015. Mr. Kanuga also served on the Board of Directors of SAM Global Securities, prior to its amalgamation with SMC from January 2008 to February 2009. From April 2004 to July 2006, Mr. Kanuga served as Principal in the financial services division of CSC. He also held management positions at KPMG Consulting in New York from January 1999 to August 2004 and prior to that, U.S. West, Inc. Mr. Kanuga has significant international management experience, having worked with businesses across the United States, Europe and Asia. Mr. Kanuga is experienced in identifying business value, and structuring investments and acquisitions to scale up businesses. Mr. Kanuga has been interviewed in the media for his views and expertise on emerging markets/India investments and governance, and has also presented at industry conferences. He holds Bachelor’s degrees in Mathematics and Economics from Lawrence University. 

 

We believe Mr. Kanuga’s deep understanding of finance and international business management and transactions qualifies him to serve on our board of directors.

 

Donald R. Caldwell, who has been an independent director and the Chairman of our board of directors since August 16, 2017, is an experienced investor, co-founded Cross Atlantic Capital Partners, Inc., a venture capital management company, where he has served as its Chairman and Chief Executive Officer since 1999. At Cross Atlantic Capital Partners, Inc., Mr. Caldwell has raised four investment funds totaling over $500 million of committed capital and is responsible for the firm’s operations, building the investment team, and growing the Cross Atlantic franchise through fundraising, network development, and deal flow generation. Prior to founding Cross Atlantic Capital Partners, Inc. in March 1999, Mr. Caldwell was President and Chief Operating Officer of Safeguard Scientifics, Inc. (NYSE: SFE) (“Safeguard”) from 1996 to 1999, where he also previously served as Executive Vice President from 1993 to 1996.  In addition to his service on our board, Mr. Caldwell currently serves on the board of directors of three public companies: InsPro Technologies Corporation (OTC: ITCC) since 2008, where he serves as chairman of the board and member of the audit committee; Lightning Gaming, Inc., since June 2015, where he serves as a director and chairman of the audit committee; and Quaker Chemical Corporation (NYSE: KWR) since 1997, where he serves as lead director, as chairman of the executive committee and member of the compensation and audit committees; Mr. Caldwell was previously a member of the board of directors of Diamond Cluster International, Inc. from 1994 to 2010 and has served as a director for several private companies and non-profit organizations, including software and money management firms as well as the Pennsylvania Academy of the Fine Arts and the Committee for Economic Development. Mr. Caldwell is a Certified Public Accountant (Retired) and holds a Bachelor of Science degree from Babson College and a Master of Business Administration from the Graduate School of Business at Harvard University. 

 

We believe Mr. Caldwell’s deep financial, entrepreneurial and business expertise and extensive experience as a member of the boards and board committees of other public companies qualifies him to serve on our board of directors.

 

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Roman Franklin, has been an independent director since August 16, 2017. Mr. Franklin has been Chief Investment Officer of SMC Global USA since March 2016, and prior, President of Franklin Financial Planning from 2005 to 2016. Roman Franklin is a 14-year veteran of the financial services industry. By the age of 22 he held FINRA Series 7, Series 66, and Life, Health, and Variable Insurance Licenses. In 2005, he founded a fee-only registered investment advisory firm. In 2008, he was one of the youngest recipients of the National Association of Financial Advisors (“NAPFA”) Registered Financial Advisor (RFA) designation. In 2015, he was elected as a Board Member of the NAPFA, South Region Board of Directors, overseeing more than a dozen states from Texas, to Florida, to North Carolina. Mr. Franklin has experience in domestic and international investment, and has been involved in multiple business transactions tied to India, including the sale of a 50% equity stake in his wealth management business to Indian financial services firm SMC. Mr. Franklin holds a Bachelor’s Science degree in Management from Barry University and an M.B.A. in Finance from the Graduate School of Business at Stetson University.  His civic organization roles include School Advisory Council for Volusia County Schools, City of DeLand Economic Development Committee, and the Boys’ and Girls’ Clubs of Central Florida. 

 

We believe Mr. Franklin’s strong expertise in finance and international and domestic business transactions, in particular those with Indian exposure, qualifies him to serve on our board of directors.

 

Max Hooper, who has been an independent director since August 16, 2017, serves as Managing Director of Merging Traffic, a web-based crowdsourcing portal, since September 2015 and Head of Investment Banking and Senior Vice President of Triloma Securities, a subsidiary of Triloma Financial Group LLC, since January 2016. Dr. Hooper is also the founder and owner of Partners Advisory Group and Partners Capital Group, two financial advisory firms since January 2014. Since February 2018, Dr. Hooper’s primary focus has been as Managing Director/CEO of Managing Traffic and co-owner of Triloma Financial Group. Prior to that, Dr. Hooper was co-founder of Equity Broadcasting Corporation, a media company that owned and operated more than one hundred television stations across the United States. Dr. Hooper is an accomplished entrepreneur and has started multiple businesses in technology/internet, lodging, and services industries. Dr. Hooper has served on the investment committee of several venture capital and angel funds, and has completed “work out” transactions as a Certified Debt Arbitrator representing banks and private transactions. Dr. Hooper also has prior experience with SPACs such as transaction structuring, administration, research, and execution. Dr. Hooper has earned five doctorate degrees from a variety of institutions.

 

We believe Dr. Hooper’s expertise in investment, management and mergers and acquisitions over various industries qualify him to serve on our board of directors.

 

Frank Leavy, has been an independent director since August 16, 2017. Since 2007, Mr. Leavy has been the Senior Vice President and Director of Finance and Administration for Blake’s All Natural Foods, a manufacturer of “better for you” frozen entrees. Prior to that, he held various financial officer positions at member companies of Group Rossignol, a world leading company in the winter sports industry. Specifically, he was Controller of Rossignol Ski Company from 1982 to 2006 and Vice President of Finance of Skis Dynastar, Inc. and Skis Dynastar Canada from 2000 to 2006. He also served as Chief Operating Officer at Roger Cleveland Golf Company, a subsidiary of Group Rossignol from 1999 to 2000 and was elected a director of the company from 2003 to 2005. Mr. Leavy holds a Bachelor of Arts degree from the College of the Holy Cross and a Master of Science degree in accounting from the Graduate School of Professional Accounting at Northeastern University. 

 

We believe Mr. Leavy’s extensive experience in corporate finance qualify him to serve on our board of directors.

 

Edward Leonard Jaroski, has been an independent director since October 2017. Mr. Jaroski was the founder of Fixed Income Portfolio Manager at Capstone Asset Management Company and has served as its President and Chief Executive Officer since from Mr. Jaroski has been Chairman, Chief Executive Officer and President of various Capstone/Steward Funds in the fund complex from 1987 through 2016. Mr. Jaroski was at Tenneco Financial Services from 1981 to 1987, where he was the Executive Vice President. He started his career at Philadelphia Life Insurance Company as Manager of Investments in 1969, where he served until 1981 and also served as its Vice President of Finance. He also served as a Director of Philadelphia Life Asset Management Company. Mr. Jaroski holds the insurance industry professional designations of Chartered Life Underwriter, Charter Financial Consultant and Fellow Life Management Institute. He holds a B.B.A. degree in Accounting from Temple University.

 

We believe Mr. Jaroski’s experience in investments and asset management qualify him to serve on our board of directors.

 

William H. Herrmann, Jr., has been an independent director since October 2017. Mr. Herrmann has over 40 years of experience in financial services, and insurance and investment planning industries. Presently, Mr. Herrmann is the Owner of Herrmann & Associates, a financial services firm affiliated with Hudson Heritage Capital Management Inc., a Registered Investment Advisor since February 15, 2006. Mr. Herrmann has also served as Director of Steward Funds, since 2011, and presently serves as it lead independent director. Mr. Herrmann serves as the Chairman of the Nominating and Corporate Governance Committee of Steward Funds. He previously served as the Chairman of the Contracts Committee of Steward Funds. Mr. Herrmann is also a Director of Church Capital Fund, where he serves as the Chairman of the Nominating and Corporate Governance Committees. Mr. Herrmann is also a Trustee of LuLu Shriners Investment Advisory Committee and the Chairman of Beta Rho Property Company. Mr. Herrmann holds a B.A. from the University of Pennsylvania, and an MBA from Temple University, and holds the Chartered Life Underwriter (CLU) designation from American College. Mr. Herrmann holds Series 7, 63, and 65 securities licenses as well as insurance licenses in multiple states. 

 

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We believe Mr. Herrmann’s experience in financial services and the investment planning industry qualify him to serve on our board of directors.

 

Our officers and board of directors are well qualified as leaders. In their prior positions they have gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Our officers and directors also have experience serving on boards of directors and board committees of other public companies and private companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies.  

 

Number and Terms of Office of Officers and Directors

 

Our board of directors is divided into two classes, Class I and Class II, with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a two-year term. The term of office of the Class I director, consisting of Messrs. Caldwell, Leavy, Franklin and Jaroski, will expire at the special meeting of stockholders. The term of office of the Class II directors, consisting of Messrs. Cherian, Kanuga and Herrmann and Dr. Hooper, will expire at the second annual meeting of stockholders. 

 

Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chief Executive Officer, President, Chief Financial Officer, Vice Presidents, Secretary, Assistant Secretaries, Treasurer and such other offices as may be determined by the board of directors.

 

Director Independence 

 

NASDAQ listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board of directors has determined that Messrs. Caldwell, Leavy, Franklin, Jaroski and Herrmann and Dr. Hooper 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. 

 

Executive Officer and Director Compensation 

 

Prior to the Transaction, none of our executive officers, directors or director nominees received any cash (or non-cash) compensation for services rendered to us. We pay an affiliate of our executive officers a total of $10,000 per month for office space, utilities and secretarial support. Prior to the Transaction our Sponsor, executive officers and directors, or any of their respective affiliates, were entitled to 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 independent directors will review on a quarterly basis all payments that were made to our Sponsor, officers, directors or their affiliates.

 

After the completion of the Transaction, directors or members of our management team who remain with us may be paid consulting, management or other fees. All of these fees will be fully disclosed to stockholders. Any compensation to be paid to our officers will be determined by out compensation committee. 

 

Committees of the Board of Directors 

 

Our board of directors has two standing committees: an audit committee and a compensation committee. Both our audit committee and our compensation committee are composed solely of independent directors. 

 

Audit Committee 

 

Messrs. Caldwell and Franklin and Dr. Hooper serve as members of our audit committee. Mr. Caldwell serves as chairman of the audit committee. Under NASDAQ listing standards and applicable SEC rules, I-AM Capital is required to have three members of the audit committee, all of whom must be independent. Messrs. Caldwell and Roman and Dr. Hooper are independent. 

 

Each member of the audit committee is financially literate and our board of directors has determined that Mr. Caldwell qualifies as an “audit committee financial expert” as defined in applicable SEC rules. 

 

Responsibilities of the audit committee include:

 

  the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
  pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

 

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  reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
  setting clear hiring policies for employees or former employees of the independent auditors;
  setting clear policies for audit partner rotation in compliance with applicable laws and regulations;
  obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within, the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;
  reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and
  reviewing with management, the independent auditors, 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 Financial Accounting Standards Board, the SEC or other regulatory authorities.

 

Compensation Committee

 

The members of our compensation committee are Messrs. Caldwell and Franklin and Dr. Hooper. Mr. Caldwell serves as chairman of the compensation committee. I-AM Capital has adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

 

  reviewing and approving the compensation of all of our other executive officers;
  reviewing our executive compensation policies and plans;
  implementing and administering our incentive compensation equity-based remuneration plans;
  assisting management in complying with our proxy statement and annual report disclosure requirements;
  approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our executive officers and employees;
  producing a report on executive compensation to be included in our annual proxy statement; and
  reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

 

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. In accordance with Rule 5605(e)(2) of the NASDAQ rules, a majority of the independent directors may recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who shall participate in the consideration and recommendation of director nominees are Messrs. Caldwell and Franklin and Dr. Hooper. In accordance with Rule 5605(e)(1)(A) of the NASDAQ rule, 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. Our stockholders that wish to nominate a director for election to the board of directors should follow the procedures set forth in our bylaws. 

 

I-AM Capital has not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders. 

 

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Code of Ethics

 

I-AM Capital has adopted a Code of Ethics applicable to our directors, officers and employees. I-AM Capital has previously filed a copy of our form of Code of Ethics as an exhibit to our registration statement on Form S-1 (File 333-219251). You will be able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our Code of Ethics in a Current Report on Form 8-K. See “Where You Can Find Additional Information.”

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

 Section 16(a) of the Exchange Act, requires our officers, directors and persons who beneficially own more than ten percent of our common stock to file reports of ownership and changes in ownership with the SEC. These reporting persons are also required to furnish us with copies of all Section 16(a) forms they file. Messrs. Jaroski and Herrmann did not file Form 3s upon their appointment to the board of directors. Based solely upon a review of such forms, we believe that except as provided above during the year fiscal ending May 31, 2018 there were no delinquent filers.

 

Board Meetings and Attendance at Annual Meetings

 

In the fiscal year ending May 31, 2018, I-AM Capital’s board of directors held four meetings, and its audit committee and compensation committee did not meet.

 

Limitation on Liability and Indemnification of Officers and Directors

 

Our Restated Certificate provides that our officers and directors will be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended. In addition, our Restated Certificate provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, except to the extent such exemption from liability or limitation thereof is not permitted by the DGCL.

 

I-AM Capital has entered into agreements with our officers and directors to provide contractual indemnification in addition to the indemnification provided for in our Restated Certificate. Our bylaws also permit us to maintain insurance on behalf of any officer, director or employee for any liability arising out of his or her actions, regardless of whether Delaware law would permit such indemnification. I-AM Capital has purchased a policy of directors’ and officers’ liability insurance that insures our officers and directors against the cost of defense, settlement or payment of a judgment in some circumstances and insures us against our obligations to indemnify our officers and directors.

 

Our officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the trust account, and have agreed to waive any right, title, interest or claim of any kind they may have in the future as a result of, or arising out of, any services provided to us and will not seek recourse against the trust account for any reason whatsoever. Accordingly, any indemnification we provide to our officers and directors will only be able to be satisfied by us if (i) I-AM Capital has sufficient funds outside of the trust account or (ii) we consummate an initial business combination.

 

These provisions may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit us and our stockholders. Furthermore, a stockholder’s investment may be adversely affected to the extent we pay the costs of settlement and damage awards against officers and directors pursuant to these indemnification provisions.

 

We believe that these provisions, the insurance and the indemnity agreements are necessary to attract and retain talented and experienced officers and directors.

 

The Board’s Role in Risk Oversight

 

Although our management is primarily responsible for managing our risk exposure on a daily basis, our board of directors oversees the risk management processes. Our board, as a whole, determines the appropriate level of risk for our Company, assesses the specific risks that we face, and reviews management’s strategies for adequately mitigating and managing the identified risks. Although our board administers this risk management oversight function, our audit committee supports our board in discharging its oversight duties and addresses risks inherent in its area.

 

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Employees

 

Prior to the Transaction, I-AM Capital has two executive officers. Members of the management team are not and will not be obligated to devote any specific number of hours to I-AM Capital’s matters, but they intend to devote as much of their time as they deem necessary to its affairs until the initial business combination is complete. The amount of time that members of management will devote in any time period will vary based on whether a target business has been selected for the initial business combination and the current stage, if any, of any business combination. I-AM Capital has one full time administrative employee and does not intend to have any other employees prior to the completion of the initial business combination.

 

Legal Proceedings

 

There are no legal proceedings pending against I-AM Capital.

 

Properties

 

I-AM Capital currently leases executive offices at 1345 Avenue of the Americas, 11th Floor, New York, New York. I-AM Capital considers the current office space adequate for its current operations.

 

Available Information

 

I-AM Capital is required to file Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q with the SEC on a regular basis, and is required to disclose certain material events (e.g., changes in corporate control, acquisitions or dispositions of a significant amount of assets other than in the ordinary course of business and bankruptcy) in a Current Report on Form 8-K. The public may read and copy any materials filed with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The SEC’s Internet website is located at http://www.sec.gov.

 

Beneficial Ownership

 

The following table sets forth information regarding the beneficial ownership of I-AM Capital’s common stock as of September 10, 2018 by:

 

  each person known by I-AM Capital to be a beneficial owner of more than 5% of its outstanding 6,813,500 shares of common stock;
  each of I-AM Capital’s officers and directors; and
  all of I-AM Capital’s officers and directors as a group.

 

Unless otherwise indicated, it is believed that all persons named in the table below have sole voting and investment power with respect to all shares of common stock beneficially owned by them. The following table does not reflect record or beneficial ownership of the public rights or public warrants or the private placement rights or private placement warrants. 

 

Name and Address of Beneficial Owners (2)  Amount and
nature of
beneficial
ownership (1)
   Percentage of
outstanding
common stock
 
Five Percent Owners:          
           
I-AM Capital Partners LLC (3)   1,561,500    22.9%
Boothbay Absolute Return Strategies LP (4)   568,400    8.3%
Polar Asset Management Partners Inc. (5)   458,000    6.7%
Karpus Management, Inc.(6)   457,125    6.7%
AQR Capital Management, LL (7)   450,000    6.6%
Hudson Bay Capital Management LP (8)   425,000    6.2%
HGC Investment Management Inc. (9)   408,750    6.0%
The K2 Principal Fund, L.P.(10)   400,000    5.9%
           
Directors and Officers:          
           
F. Jacob Cherian (3)   1,561,500    22.9%
Suhel Kanuga (3)   1,561,500    22.9 
Donald R. Caldwell(11)        
Roman Franklin(11)        
Max Hooper(11)        
Frank Leavy(11)        
Edward Leonard Jaroski(11)        
William H. Herrmann, Jr.,(11)        
All Directors and Officers as a group (eight persons)   1,561,500    22.9%

 

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  (1) Does not include the exercise of the 5,200,000 warrants or rights included in the public units sold at the initial public offering and upon the exercise of the underwriter’s over-allotment option or the 261,500 warrants or rights that are included in the private placement units purchased by our Sponsor at the initial public offering and upon the exercise of the underwriter’s over-allotment option. Includes 52,000 shares issued to Maxim at closing of the initial public offering and the exercise of the underwriter’s over-allotment option, which do not have redemption rights to the trust.

 

  (2) Unless otherwise indicated, the business address of each of the stockholders is 1345 Avenue of the Americas, 11th Floor, New York, NY 10105. 
     
  (3) Represents shares of common stock held directly by I-AM Capital Partners LLC, our sponsor. F. Jacob Cherian and Suhel Kanuga are managers and members of our sponsor and share voting and dispositive control over the securities held by our sponsor, and thus share beneficial ownership of such securities. Each of Messrs. Cherian and Kanuga disclaims beneficial ownership over any securities owned by our Sponsor in which he does not have any pecuniary interest. 
     
  (4) According to a Schedule 13G filed with the SEC on October 20, 2017 on behalf of Boothbay Absolute Return Strategies LP, a Delaware limited partnership, Boothbay Fund Management, LLC, a Delaware limited liability company and Ari Glass. Mr. Glass is the Managing Member of Boothbay Fund Management, LLC. The principal office of the stockholder is 810 7th Avenue, Suite 615, New York, NY 10019-5818. 
     
  (5) According to a Schedule 13G filed with the SEC on February 14, 2018, on behalf of Polar Asset Management Partners Inc., a company incorporated under the laws on Ontario, Canada. The principal office of the stockholder is 401 Bay Street, Suite 1900, PO Box 19, Toronto, Ontario M5H 2Y4, Canada. 
     
  (6) According to a Schedule 13G filed with the SEC on February 14, 2018, on behalf of Karpus Management, Inc., d/b/a Karpus Investment Management, a New York corporation. The principal office of the stockholder is 183 Sully’s Trail, Pittsford, New York 14534. 
     
  (7) According to a Schedule 13G filed with the SEC on February 14, 2018, on behalf of AQR Capital Management, LLC, AQR Capital Management Holdings, LLC and CNH Partners, LLC.  AQR Capital Management, LLC is a wholly owned subsidiary of AQR Capital Management Holdings, LLC. CNH Partners, LLC is deemed to be controlled by AQR Capital Management, LLC.  The principal office of the stockholder is Two Greenwich Plaza, Greenwich, CT 0683.
     
  (8) According to a Schedule 13G filed with the SEC on February 2, 2018, on behalf of Hudson Bay Capital Management LP and Sander Gerber. Mr. Gerber serves as the managing member of Hudson Bay Capital GP LLC, which is the general partner of Hudson Bay Capital Management LP. Mr. Gerber disclaims beneficial ownership of these securities. The principal office of the stockholder is 777 Third Avenue, 30th Floor, New York, NY 10017.
     
  (9) According to a Schedule 13G filed with the SEC on February 1, 2018, on behalf of HGC Investment Management Inc. a company incorporated under the laws of Canada.  The principal office of the stockholder is 366 Adelaide, Suite 601, and Toronto, Ontario M5V 1R9, Canada.
     
  (10) According to a Schedule 13G filed with the SEC on August 30, 2017 on behalf of Shawn Kimel (“Kimel”), Shawn Kimel Investments, Inc., an Ontario corporation (“SKI”), The K2 Principal Fund, L.P., an Ontario limited partnership (the “Fund”), K2 GenPar L.P., an Ontario limited partnership (the “GP”), K2 GenPar 2009 Inc., an Ontario corporation (“GenPar 2009"), and K2 & Associates Investment Management Inc., an Ontario corporation.  Mr. Kimel is president of each of SKI, the GP, GenPar 2009 and K2 & Associates. The GP is the general partner of the Fund, and GenPar 2009 is the general partner of the GP. GenPar 2009 is a direct wholly-owned subsidiary of SKI. K2 & Associates is a direct 66.5% owned subsidiary of SKI, and is the investment manager of the Fund.  The principal office of the stockholder is 2 Bloor St West, Suite 801, Toronto, Ontario, M4W 3E2.

 

  (11) Indirectly have an interest in the founder shares of common stock held directly by the Sponsor due to their partial ownership of the Sponsor.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF I-AM CAPITAL

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this proxy statement. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Unless otherwise indicated, references in this section to “we,” “our,” “us” and other similar terms refer to I-AM Capital before the Transaction.

 

Overview

 

We are a blank check company incorporated on April 17, 2017 in Delaware and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our business combination using cash from the proceeds of our IPO and the private placement, our securities, debt or a combination of cash, securities and debt.

 

The issuance of additional shares of common stock or preferred stock:

 

  may significantly dilute the equity interest of our investors;
  may subordinate the rights of holders of common stock if we issue preferred shares with rights senior to those afforded to our common stock;
  could cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
  may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
  may adversely affect prevailing market prices for our securities.

 

Similarly, if we issue debt securities, it could result in:

 

  default and foreclosure on our assets if our operating revenues after our business combination are insufficient to pay our debt obligations;
  acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
  our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
  our inability to obtain additional financing if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding;
  our inability to pay dividends on our common stock;
  using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;
  limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
  increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and
  limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

 

We expect to continue to incur significant costs in the pursuit of our acquisition plans. Our plans to raise capital or to complete a business combination may not be successful.

 

Recent Events

 

On May 3, 2018, we entered into a definitive agreement to invest up to $49 million in Smaaash. Following the closing, our primary business will be to act as the sole master distributor of Smaaash’s active entertainment games in North and South America and as the master franchisee for Smaaash’s active entertainment centers in North and South America. The transaction is subject to customary closing conditions. See our Current Reports on Form 8-K filed with the SEC on May 9, 2018 and June 28, 2018 for further information.

 

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Results of Operations

 

We have neither engaged in any operations nor generated any revenues to date. Our only activities from April 17, 2017 (date of inception) through May 31, 2018 were organizational activities, those necessary to prepare for our IPO, which was consummated on August 22, 2017, and identifying a target company for a business combination including the Transaction. Following our IPO, we have not generated any operating revenues and will not until after the completion of our initial business combination. We have generated $521,702 through May 31, 2018 of non-operating income in the form of interest income. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

 

For the year ended May 31, 2018, we had net loss of $8,862, which consists of operating costs of $530,564 offset by interest income of $521,702 on cash and marketable securities held in the trust account.

 

Liquidity and Capital Resources

 

The completion of our IPO and simultaneous private placement, inclusive of the underwriters’ partial exercise of their over-allotment option, generated gross proceeds to us of $54,615,000. Related transaction costs amounted to approximately $3,838,000, consisting of $3,360,000 of underwriting fees, including $1,820,000 of deferred underwriting commissions payable (which are held in the trust account) and $478,000 of IPO costs.

 

Following our IPO and the partial exercise of the over-allotment option, a total of $55,740,000 was placed in the trust account and we had $552,190 of cash held outside of the trust account, after payment of all costs related to the IPO.

 

As of May 31, 2018, we had cash and marketable securities held in the trust account of $53,353,715, substantially all of which is invested in U.S. treasury bills with a maturity of 180 days or less. Interest income earned on the balance in the trust account may be available to us to pay taxes. Since inception, we have withdrawn $406,050 of interest income from the trust account.

 

As of May 31, 2018, we had cash of $458,063 held outside the trust account, which is available for use by us to cover the costs associated with identifying a target business including Smaaash, negotiating a business combination, due diligence procedures and other general corporate uses. In addition, as of May 31, 2018, we had accrued expenses of $63,579.

 

For the year ended May 31, 2018, cash used in operating activities amounted to $470,153, mainly resulting from net loss of $8,862, offset by interest earned on marketable securities held in the trust account of $521,702. Changes in our operating assets and liabilities generated cash of $60,411.

 

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable and up to a maximum of $600,000 of working capital released to us and excluding deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay taxes and up to $600,000 for working capital expenses, if any. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

 

We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses (as well as pay personnel and advisors to do the forgoing), structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the trust account is not sufficient to pay our taxes.

 

In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor or an affiliate of our sponsor or certain of our 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.

 

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our business combination. Moreover, we may need to obtain additional financing either to complete our business combination or because we become obligated to redeem a significant number of our public shares upon completion of our business combination, in which case we may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. In the current economic environment, it has become especially difficult to obtain acquisition financing. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

 

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Off-balance sheet financing arrangements

 

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

 

Contractual obligations

 

We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the sponsor a monthly fee of $10,000 for office space, utilities and administrative support provided to us. We began incurring these fees on August 16, 2017 and will continue to incur these fees monthly until the earlier of the completion of our initial business combination or our liquidation.

 

Critical Accounting Policies

 

The preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. The Company has not identified any critical accounting policies.

 

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INDUSTRY OVERVIEW

 

The information contained in this section is derived from various third party data sources including data from Government of India publications and industry sources. Industry sources and publications generally state that the information contained therein has been obtained from sources generally believed to be reliable, but that their accuracy, completeness and underlying assumptions are not guaranteed and their reliability cannot be assured. Industry and Government of India’s publications are also prepared based on information as of specific dates and may no longer be current or reflect current trends. However, we believe the information under this section to be accurate and complete.

 

Overview of the Indian Economy

 

India has emerged as the fastest growing major economy in the world as per the Central Statistics Organisation (CSO) and International Monetary Fund (IMF) and it is expected to be one of the top three economic powers of the world over the next 10-15 years, backed by its strong democracy and partnerships. India’s gross domestic product (GDP) is estimated to have increased 6.6% in 2017-18 and is expected to grow 7.3% in 2018-19.

 

Market size

 

India’s GDP at constant prices grew by 7.2% in September-December 2017 quarter as per the Central Statistics Organisation (CSO). Corporate earnings in India are expected to grow by 15 to 20% in fiscal year 2018-19 supported by recovery in capital expenditure, according to JM Financial. The tax collection figures between April 2017- February 2018 show an increase in net direct taxes by 19.5% year-on-year and an increase in net direct taxes by 22.2% year-on-year.

 

India has retained its position as the third largest startup base in the world with over 4,750 technology startups, with about 1,400 new start-ups being founded in 2016, according to a report by NASSCOM.

 

India’s labor force is expected to reach 160-170 million by 2020, based on rate of population growth, increased labor force participation, and higher education enrolment, among other factors, according to a study by ASSOCHAM and Thought Arbitrage Research Institute.

 

India’s foreign exchange reserves were $422.53 billion in the week up to March 23, 2018, according to data from the RBI.

 

Recent Developments

 

With the improvement in the economic scenario, there have been various investments in various sectors of the economy. The M&A activity in India increased 53.3% to $77.6 billion in 2017 while private equity (PE) deals reached $24.4 billion. Some of the important recent developments in Indian economy are as follows:

 

  Indian companies raised Rs 1.6 trillion ($24.96 billion) through primary market in 2017.

 

  Moody’s upgraded India’s sovereign rating after 14 years to Baa2 with a stable economic outlook.

 

  India has improved its ranking in the World Bank’s Doing Business Report by 30 spots over its 2017 ranking and is ranked 100 among 190 countries in 2018 edition of the report.

 

  India’s ranking in the world has improved to 126 in terms of its per capita GDP, based on purchasing power parity (PPP) as it increased to $7,170 in 2017, as per data from the International Monetary Fund (IMF).

 

  India is expected to have 100,000 startups by 2025, which will create employment for 3.25 million people and $500 billion in value, as per Mr. T V Mohan Das Pai, Chairman, Manipal Global Education.

 

  The total projected expenditure of Union Budget 2018-19 is Rs 23.4 lakh crore ($371.81 billion), 9% higher than previous year’s budget, as laid out in the Medium Term Expenditure Framework (MTEF).

 

  India’s revenue receipts are estimated to touch Rs 28-30 trillion ($436- 467 billion) by 2019, owing to Government of India’s reforms like demonetisation and Goods and Services Tax (GST).

 

  India received the highest ever inflow of equity in the form of foreign direct investments (FDI) worth $43.4 billion in 2016-17 and has become one of the most open global economies by ushering in liberalization measures, as per the mid-year economic survey of India. Total FDI investments in India during April-December 2017 stood at $35.94 billion.

 

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  The World Bank has stated that private investments in India is expected to grow by 8.8% in Fiscal Year 2018-19 to overtake private consumption growth of 7.4%, and thereby drive the growth in India’s gross domestic product (GDP) in Fiscal Year 2018-19.

 

  The Indian Government has also introduced the Digital India initiative, which focuses on three core components: creation of digital infrastructure, delivering services digitally and to increase the digital literacy.

  

Road Ahead

 

India’s gross domestic product (GDP) is expected to reach $6 trillion by 2027 and achieve upper-middle income status on the back of digitization, globalization, favorable demographics, and reforms.

 

India is expected to be the third largest consumer economy as its consumption may triple to $4 trillion by 2025, owing to shift in consumer behavior and expenditure pattern, according to a Boston Consulting Group (BCG) report; and is estimated to surpass USA to become the second largest economy in terms of purchasing power parity (PPP) by the year 2040, according to a report by Pricewaterhouse Coopers.

 

Overview of the Indian Media & Entertainment Sector (Source: FICCI – EY M&E Report 2018)

 

The Media & Entertainment (“M&E”) sector in India is also experiencing good growth. Favorable demographics, rising consumer incomes, and demand for knowledge, entertainment, experiences, news, and sports aided the growth of the Indian M&E sector, which reached $23 billion in 2017, a growth of almost 13% from 2016. This growth was led by digital, film, gaming and events.

 

While the M&E sector was traditionally characterized by television, print and the new-age M&E sectors which are now growing include digital, family entertainment centers, virtual reality and augmented reality experiences, and online gaming.

 

Family Entertainment Center (“FEC”) Market Overview (Source: Global Family/Indoor Entertainment Centers report by Future Market Insights

 

Family entertainment centers (FECs) are small amusement parks or entertainment zones that typically serve local communities in big and small cities. These centers are designed to keep the entire family engaged, generally at a significantly less per-person cost than a traditional amusement park. They offer varied amusement options such as gaming consoles, arcades, video games, indoor playground systems, soft play areas, redemption machines, children’s rides, skill-based machine games and games based on virtual and augmented reality. FECs also host private celebrations such as birthday parties and corporate events. FECs are attractively located in areas such as malls, where customers often visit.

 

Globally, the FEC market is expected to increase from $17 billion in 2017 to $61 billion in 2027, especially given the launch of new and differentiated FECs that provide technology-rich and interactive experiences.

 

Global Family/Indoor Entertainment Centers Industry Analysis and Opportunity Assessment

 

In terms of value, the arcade studios segment is projected to be the most attractive segment in the global family/indoor entertainment centers market during the assessment period. Virtual reality (VR) gaming zones are expected to register a moderate year over year growth rate throughout the forecast period. In terms of value, the VR gaming zones segment is expected to register a compound annual growth rate (“CAGR”) of 15.9% during the assessment period. In 2017, the arcade studios segment is estimated to be valued at $6.0819 billion and is expected to register steady growth in terms of revenue throughout the period of forecast. With an increasing number of malls in various cities globally, consumers visit these malls on weekends, usually for shopping and dining at restaurants. The presence of entertainment centers at these malls allows customers to spend quality time with their family and friends, while playing games and other indoor sports. Hence, entertainment centers are becoming attractive places for families to spend time since they provide a combination of dining, and play areas. Family entertainment centers are attracting families in large numbers, which is expected to positively impact revenue growth of the market.

 

US and India markets are specifically fast-growing due to emergence of new gaming technologies and increasing trend of indoor gaming centers.

 

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Diversified gaming and entertainment options available in FECs supporting global market growth:

 

With continuous innovations in technology, family entertainment centers are offering a diversified range of entertainment options for their customers. New technologies such as virtual reality gaming, 3D technology, and interactive sports entertainment are attracting consumers who prefer this form of entertainment over traditional entertainment options.

 

Rising preference for indoor entertainment is fueling the market growth of FECs:

 

Indoor entertainment centers, typically climate-controlled, are increasingly preferred as entertainment and leisure options by families over outdoor entertainment centers, in order to ensure that environmental factors and weather changes do not negatively affect the leisure time or experience of customers. Along with this, companies are offering food and other services at indoor entertainment centers under a single roof, which is another factor prompting customers to visit FECs and this factor is expected to drive growth of the FEC market.

 

Increasing disposable income and changing lifestyles:

 

Rising income among families has led to increased spending on entertainment and leisure activities. Families with children are spending more on entertainment activities such as bowling, and arcade games due to the interest of children in these kinds of games. Also, due to rapid industrialization and crowded cities, the lifestyle of people across the world has been hampered. With these changes in lifestyles, preference for quality time spending along with entertainment, food and beverages and other leisure activities is increased. This aids in attracting customers to the family entertainment centers for spending their leisure time also for celebrations, relaxation, and adventure experiences.

 

Geographical Expansion providing access to new consumer groups:

 

With the rising popularity of family entertainment centers as a leisure time spending option, the owners of the FEC’s have started to partner with the international brands specifically known for their entertainment. This partnership helps in value addition to the FEC’s as well as contributes significantly in the promotions of the FEC. It also helps in generating new international customer groups present in the other countries.

 

India FEC Market: (Source: Persistence Market Research):

 

The Indian family entertainment centers market is estimated to grow at a CAGR of 17.2% between 2018 and 2022. The market is expected to be valued at $1.598 billion by the end of 2018, and is expected to reach $3.014 billion by 2022. Increasing disposable incomes of Indian customers is expected to boost the family entertainment centers market in the coming years. In terms of market value share by end-2018, the arcade studios segment is estimated to hold nearly 41.9% of the Indian FEC market, and reach $670.0 million by end-2018.

 

Due to the advances in entertainment technology such as virtual reality, augmented reality and interactive sports experiences, family entertainment center owners are focused on offering advanced entertainment experiences to increase the revenue generation of the FECs. Hence, the VR gaming zones segment in the Indian FEC market are expected to grow at the highest CAGR over the forecast period. India, with solid GDP growth and a young and growing population, is expected to be attractive market for the family entertainment centers model.

 

The entry fees and ticket sales segment is estimated to gain significant market share, owing to the increasing retail traffic of teenage (12-18) customers in India.

 

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India Family Entertainment Centers Market Value (US$ Mn) Forecast by FEC Type, 2018-2022

 

FEC Type  2018E   2019F   2020F   2021F   2022F   CAGR (2018-
2022)
 
Arcade   670    754    864    1,010    1,208    15.9%
VR Gaming   319    376    451    551    690    21.2%
Sports Arcades   442    506    588    697    847    17.6%
Others   166    183    204    232    268    12.8%
Total   1598    1820    2108    2491    3014    17.2%

 

U.S. FEC Market: (Source: Persistence Market Research):

 

Revenue from the U.S. family entertainment centers market is expected to increase from $6.711 billion in 2018 to $10.981 billion by the end of 2022, representing a CAGR of 13.1% from 2018 to 2022. The growth of the FEC market in the U.S. is attributed to the increased gaming and entertainment options for young adults (18-24) in the U.S. FECs in the U.S. are focusing on introducing new VR games and interactive experiences to provide a better entertainment experience to consumers.

 

Revenue generation from the entry fees and ticket sales segment is estimated to dominate the market by 2018 end, by holding a market share of 32.5% in the overall U.S. family entertainment centers market, and this trend is expected to continue to the end of 2022.

 

Revenue generation from the food & beverages source in FECs is expected to grow at the highest CAGR, due to the increasing availability of different food options for kids as well as adults. In addition to this, people are also preferring FECs as a ‘location of choice’ for corporate parties and birthday parties for children as well as adults, and this trend is increasing revenue generation from the food and beverages section from the FECs.

 

The entry fees and tickets segment is projected to grow higher year over year as compared to other revenue sources in the U.S. Family entertainment centers market.

 

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U.S. Family Entertainment Centers Market Value (US$ Mn) Forecast by FEC Type, 2018-2022

 

FEC Type  2018E   2019F   2020F   2021F   2022F   CAGR (2018-
2022)
 
Arcade   2407    2653    2933    3252    3609    10.7%
VR Gaming   1724    2003    2333    2726    3187    16.6%
Sports Arcades   2127    2404    2726    3101    3530    13.5%
Others   453    501    550    602    655    9.6%
Total   6711    7562    8543    9682    10981    13.1%

 

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SMAAASH’S BUSINESS

 

Overview

 

Smaaash operates state-of-the-art games and entertainment centers (the “Centers” and each a “Center”) across 31 locations in India and one location in the U.S., in addition to carrying out product sales of Smaaash’s games and equipment that Smaaash has developed in-house, supported by Smaaash’s sponsorship and other revenues.

 

Smaaash’s core concept is to offer an interactive, immersive and fun experience to customers at Smaaash’s Centers, blending Augemented Reality (AR) and Virtual Reality (VR) and other games, interactive sports experiences, indoor entertainment, and attractive food and beverage options, customized to the tastes and preferences of a diverse set of customers across age groups, genders and backgrounds, including corporate customers, families, friends and children. Smaaash’s game concepts are supported by Smaaash’s in-house technology, value engineering and systems integration capabilities.

 

Smaaash’s game attractions are classified as follows:

 

  Active games and interactive sports simulators (“Active Games”), including active game options such as single and multi-level go-karting lanes and bowling alleys, as well as interactive simulator-based game options such as Super Keeper, Hoop Shot, Extreme Drone Racing and more;

 

  In-house developed AR and VR games, including Finger Coaster, Jurassic Escape, Vertigo Walk The Plank, Fly Max and Haunted Hospital; and

 

  Arcade games and others, including Camel Racing, Hoop Shot and Human Claw; soft play zones (indoor play areas for young children, including a ball pool, designed to encourage longer and repeat visits to Smaaash’s Centers, doing away with the requirement for families to make alternative childcare arrangements for the duration of their visits to Smaaash’s Centers); and indoor game viewing areas, complemented by its in-house food and beverage services.

 

Smaaash launched its flagship Center in November 2012, at Kamala Mills in Lower Parel, Mumbai, with a proprietary cricket game (obtained via a perpetual license from its Promoter and the patent-holder, Shripal Morakhia, for a one-time fee) as its anchor attraction. Over the last five years, Smaaash has transformed into a multi-center integrated games and entertainment company, with a wide suite of in-house developed AR and VR and other games, as well as food and beverage options at each of its Centers. Among other marketing initiatives, from time to time, Smaaash’s sponsorships with local athletes, sports icons and celebrities, including cricket, football, basketball and ice hockey players, to customize its games and increase their appeal to its customers, including via brand ambassadorships and game options designed around specific sports personalities.

 

Smaaash launched its first international Center in December 2016, at the Mall of America in Minnesota, USA. Smaaash’s star attraction in its U.S. Center is a multi-level go-karting track and games developed and launched by Smaash specifically for this Center, keeping in mind local preferences, such as its ice hockey-themed game called “What the Puck", and Active Games such as Super Keeper, Hoop Shot and Extreme Drone Racing, among others.

 

In fiscal year-ended March 2018, Smaaash bought PVR bluO and SVM bowling and gaming assets to expand its footprint across India. The acquisitions added 20 centers to Smaaash’s already existing portfolio. Smaaash is in the final stages of launching its Center in Dubai, in this quarter.

 

History & Key Milestones

 

 

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Since the commencement of its business, Smaaash has developed and launched 55 games, in terms of either rolling out these games at its Centers, or conducting product sales to third parties. SMAAASH Labs, the research and development hub of Smaaash, includes a group of over 50 engineering professionals that has designed and built reality and interactive games, including interactive sports experiences such as the world’s first 360 degrees cricket simulator. Sporting experiences include soccer, ice hockey and basketball. Smaaash is also endorsed by Virat Kohli, Captain of India’s cricket team. Smaaash currently has over 25 new games under development, intended for launch during calendar 2018. Based on Smaaash’s in-house product development capability, Smaaash has also recently diversified its revenue mix by entering into product sales, including domestic and export sales, where Smaaash retains the intellectual property rights. Despite its limited operating history in this business, which Smaaash commenced during fiscal 2016, Smaaash has already established a global footprint with sales of its in-house developed games and equipment in global markets, including USA, Germany, Mexico, China, Turkey and Israel. Smaaash has received several awards and accolades, including, recently, the Asia Retail Congress (Entertainment and Fun) Award and Times Food and Nightlife Awards for Verbena, India Mice Awards for 18.99 Latitude Banquets, Best Indoor Kids Play Area for Mumbai and Runnerup Best Indoor Kids Play Area for Delhi in the year 2017.

 

Strengths

 

Smaaash considers the following to be its core competitive strengths:

 

Strategically located interactive and immersive entertainment centers.

 

Smaaash’s operate state-of-the-art games and entertainment Centers, offering an interactive, immersive and fun experience to customers at its Centers, blending AR and VR and other games, indoor entertainment and attractive food and beverage options, customized to the tastes and preferences of a diverse set of customers across age groups, genders and backgrounds, including families, friends and children, as well as corporate customers.

 

Smaaash has over 802 games in total across its Centers in India and 29 games in total at its Center in the U.S., at a range of attractive price points. Smaaash also has several other games in varying stages of conception and development, including over 25 games proposed to be launched during calendar year 2018. To complement Smaaash’s games and recreation options, Smaaash offers in-house food and beverage services at each of its Centers. Each of Smaaash’s Centers in India (except its Center at Cyberhub, in the National Capital Region of Delhi, or “Delhi NCR”) includes a circus and carnival-themed multi-cuisine café, under the brand “Mighty Small". At Smaaash’s Center at Cyberhub, Delhi NCR, Smaaash has a restaurant and bar named “Uncorked". Smaaash also runs a micro-brewery and go-karting center called “Pitstop Brewpub and Smaaash Skykarting” at Smaaash’s Center in HUDA Center, Delhi NCR.

 

As Smaaash’s Centers are primarily designed as indoor complexes, the games and entertainment options at its Centers are not designed around or dependent on any seasons, in order to attract customers, and are not unduly affected by adverse weather conditions. Smaaash believes it has the “first mover advantage”, as its unique and differentiated blend of games, indoor entertainment and food and beverage attractions at Smaaash’s Centers cannot be easily replicated. Moreover, Smaaash’s Centers are strategically located in easily accessible locations in densely populated urban centers, with wide catchment areas, in terms of being located near commercial hubs or relatively upmarket areas. For instance, Smaaash’s flagship Center in India is at Kamala Mills in Lower Parel, while its Center in the Mall of America, with its several stores and dining options, is located in Bloomington, Minnesota, close to downtown Minneapolis.

 

Culture of innovation and value engineering.

 

Smaaash, through Smaaash Labs, has robust in-house research and development (“R&D”), value engineering and systems integration capabilities, across multiple technology and product platforms. Smaaash commenced its operations by launching a proprietary cricket game as its anchor attraction at Smaaash’s first and flagship Center in Mumbai. Since then, Smaaash has developed 55 games in-house and have a pipeline of over 25 such games intended for launch during 2018. Smaaash continue to place emphasis on enhancing its R&D, value engineering and systems integration capabilities. Headed by Smaaash’s CTO, Kaizad Bajina, its in-house R&D team consists of 50 employees. Smaaash has also set up a dedicated product development laboratory in Worli, Mumbai. Smaaash has 99 registered trademarks owned or perpetually licensed and 219 trademark registrations applied for.

 

Among other things, Smaaash’s ability to develop its own games in-house allows it to operate such games at its Centers without high-cost licensing, royalty and maintenance expenses, and to explore monetization opportunities through product sales.

 

Smaaash’s value engineering capability also allows it to keep pace with evolving technology and customer preferences and provides us with operational flexibility, in terms of Smaaash’s ability to enhance and reconfigure games and components at a fast pace and controlled cost, for instance, by reducing power consumption or floor space usage, increasing load capacity or durability, and reducing reliance on staff to operate the games and maintain the equipment at its Centers.

 

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Strong, unique and differentiated brand with broad customer appeal.

 

At its Centers, Smaaash blends games and recreation with attractive food and beverage and dining concepts into uniquely immersive, involved and fun indoor social entertainment experiences. Despite its relatively short operating history, Smaaash has established strong brand recall and a proposition that appeals to a wide range of customers of all ages, genders and backgrounds, across geographies and seasons. Smaaash’s in-house R&D and innovation enable it to differentiate its brand and value proposition, compared to other companies that are traditionally focused on arcade games, or that focus solely on certain customer segments such as children and families (family entertainment centers, or “FECs”) or adults, or food and beverage operators, including sports bars; innovating, customizing and upgrading Smaaash’s games by leveraging on the “novelty factor”, local customer preferences, psychographic or demographic fit, game or footprint size, competitive element, and other social and aspirational elements affecting its customers.

 

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In addition, Smaaash place emphasis on its marketing and sales initiatives. At its Centers, Smaaash offers aspirational redemptions, including in the form of opportunities for customers to play simulated games with and against global sporting idols, and rewards in terms of prizes for winning games at its Centers. From time to time, Smaaash also ties up with local athletes and sports icons, such as cricket, football, basketball and ice hockey players, to customize its games and increase their appeal to Smaaash’s customers, including via brand ambassadorships. Smaaash also continually refines its pricing and promotions strategy to coincide with various sports and other events, festivals, seasons and holidays through the year, targeted promotions such as to corporate customers for hosting corporate events and off-sites, or college and school students, or “ladies nights” and “happy hours”, birthday and other parties and celebrations, and other social events, as well as utilizing Smaaash’s loyalty program, “Smaaash Insiders", and feedback tools to obtain customer insights, as part of its overall commitment to customer satisfaction. In addition, Smaaash advertises on and sell tickets to customers through third party mobile application (“app”)-based or online aggregators, allowing it to introduce its offerings to, and draw in customers from, beyond the immediate physical vicinity and catchment areas of its Centers.

 

Scalable business model, uniquely positioned for growth.

 

Smaaash’s diversified revenue base extends beyond game revenues from its Centers, to include product sales and sponsorship and other income sources. Smaaash’s games are designed to have a relatively long “shelf life”, based on the enduring popularity of sports such as cricket in the Indian market and ice hockey in the U.S. market. Smaaash continues to evolve and optimize its operations at its Centers to support Smaaash’s future growth. For instance, supported by Smaaash’s in-house R&D, discussed in more detail above, each of its Centers includes modular components that can be arranged in various combinations to fit into differently shaped sites and to facilitate future expansion and redesign, also allowing attractions or components to be moved from one Center to another for re-deployment, depending on customer preferences and geographies.

 

Smaaash’s in-house R&D and value engineering capability also serves to accelerate product sales. Despite a relatively short operating history in this vertical, which Smaaash commenced only in fiscal 2016, Smaaash has developed some marquee customer relationships. Smaaash’s popular product sales include some of Smaaash’s in-house developed games, the “Finger Coaster", "Walk the Plank” and “Cricket Lanes". The success of its Centers, based on Smaaash’s scalable business model, also enables Smaaash to earn sponsorship revenues. In addition to such internal factors, Smaaash is uniquely positioned to leverage favorable macroeconomic and demographic factors and other external contributors for growth.

 

Experienced founder, supported by professional key management and staff.

 

Smaaash was founded by its Chief Executive Officer (“CEO”) Emeritus, Shripal Morakhia, an entrepreneur associated in the past with Sharekhan, SSKI and YoBoHo. Among other things, Smaaash benefits from Mr. Morakhia’s vision, strategic guidance, years of entrepreneurial and managerial experience, and his relationships in the industry. Smaaash has a young and dynamic management team, of which various members have contributed to its track record of growth, including: Vishwanath Kotian, Chief Financial Officer (“CFO”), with extensive experience in the M&E sector, having been CFO of ACK Media and in the M&E team at Ernst & Young; Kaizad Bajina, Smaaash’s Chief Technology Officer (“CTO”), with over 15 years of experience at systems integration companies, previously as chief of operations and technology at Strix System Inc and Lifestyle Networks Limited;

 

Smaaash also actively recruits professionally qualified individuals with a professional and educational background that Smaaash considers appropriate to a business of its size and nature.

 

Strategies

 

Smaaash considers the following to be its core growth strategies:

 

Expand Smaaash’s network of Centers across India and overseas.

 

Smaaash continues to explore opportunities to set up and expand operations primarily in mall and shopping center locations in India and overseas, typically with revenue share arrangements with the respective property developers, based on Smaaash’s potential to attract and increase high quality consumer traffic. In India, Smaaash intends to expand its network of Centers with a focus on urban locations across India, particularly towns with increasing urban populations in North and Western India, expecting to grow to approximately 60 centers within the next two years. In India, while Smaaash has historically focused on organic growth, Smaaash intends to also explore commercially viable franchisee arrangements or opportunities for future inorganic growth, including in tier-II and tier-III cities and towns in India. Smaaash is also exploring opportunities for strategic overseas expansion, particularly in developed and emerging markets such as North America and the Middle East, including through joint ventures. At each of Smaaash’s new Centers, Smaaash intends to offer targeted attractions, for instance, including cricket-themed attractions for its customers in India; ice hockey and American football themed attractions for its customers in the North American market; and football and cricket themed attractions for Smaaash’s customers in the Middle East market, including the Indian diaspora in the Middle East market. Moreover, Smaaash intends to continue targeted promotions to increase bulk bookings at its Centers, particularly for corporate events. As Smaaash increases its network of Centers in the future, Smaaash will seek to leverage economies of scale, including by reducing its overhead and optimizing its procurement strategy and channels, as and when suitable opportunities arise.

 

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Grow Smaaash’s range of games and entertainment attractions, across its Centers.

 

Smaaash’s strategic objective of growing its range of games and entertainment options at its Centers is intended to increase Smaaash’s popularity with customers, encourage repeat visits from customers. This strategy is based on Smaaash’s pipeline of new games in various stages of in-house ideation and development, to create targeted attractions based around sports and celebrities that are popular in local markets. Smaaash is also constantly evolving its marketing and promotional activities to increase its popularity with customers and improve the customer experience at its Centers. For example, in the past, Smaaash has developed cricket-themed games for Smaaash’s Centers in India, ice hockey and basketball themed games for its Center in the Mall of America in Minnesota, U.S., and football themed games for Smaaash’s planned centers in the Middle East, where these sports are very popular locally. Smaaash also expects that customer demand for indoor game viewing areas, complemented by Smaaash’s in-house food and beverage services, will be one of the key drivers of Smaaash’s growth in the future. Smaaash has used its flagship center in Mumbai as a testing ground for games that Smaaash has launched across its other Centers in India, and Smaaash intends to continue doing so in the future. Going forward, Smaaash’s objective will be to also use its Center in the U.S. as a testing ground to innovate and develop customized attractions for future international expansions in Canada and the U.S. and other developed game markets. Smaaash may also explore similar opportunities to incubate and develop new game ideas at any existing, planned or future centers.

 

Increase Smaaash’s product sales, worldwide.

 

Smaaash intends to continue increasing its product sales, with a focus on exports, including through Smaaash’s expansion into different global markets, particularly large and attractive markets in Asia, such as China, Korea and Japan, and in the U.S. and Canada. Smaaash intends to continue to develop a pipeline of new games, to support the growth of its product sales business worldwide, supported by its in-house R&D and value engineering capability. In addition, Smaaash expects to continue its participation in industry fairs and exhibitions, particularly with a view to increasing Smaaash’s product sales business. Smaaash’s planned increase in its product sales would balance Smaaash’s revenue mix between games, product sales, and sponsorship and other income. Moreover, as Smaaash increase its product sales in the future, including through possible growth and diversification in Smaaash’s distributor network, Smaaash would seek to leverage economies of scale, including in terms of obtaining insights and strategic access to high-value customers and markets.

 

Enhance Smaaash’s marketing and advertising initiatives to retain and increase Smaaash’s customer appeal and strengthen its brand value.

 

One aspect of Smaaash’s planned digital customer outreach will be digital sales, including through its own website and the launch of its own app for mobile phones and smart devices, allowing customers planning to visit Smaaash’s Centers to pre-purchase games and packages digitally prior to their visits to its Centers, and to leave their valuable feedback digitally, in a manner that may be more convenient for them, while also being easier for Smaaash to track and utilize. Another aspect of Smaaash’s planned digital outreach will be Smaaash’s continuing initiative to reach out to a wider customer base through app-based or online aggregators.

 

Smaaash’s digital customer outreach initiatives are intended to reduce Smaaash’s promotional expenses, increase its brand management flexibility, and expand recognition of its brand and value proposition beyond the immediate physical vicinity and catchment areas of its Centers. Through Smaaash’s digital customer outreach, Smaaash would, among other things, seek to draw increasing numbers of new customers to its Centers, increase the number of return customers at its Centers, and increase per capita and overall customer spend at its Centers. In addition to the above, Smaaash also intends to continue to refine Smaaash’s pricing and promotions strategy to coincide with various sports and other events, festivals, seasons and holidays through the year, targeted promotions such as to corporate customers for hosting corporate events and off-sites, or college and school students, or “ladies nights” and “happy hours”, birthday and other parties and celebrations, and other social events, as well as utilizing Smaaash’s loyalty program, “Smaaash Insiders", and feedback tools (in the future, in particular, including through Smaaash’s digital outreach, as indicated above) to obtain customer insights, as part of its overall commitment to customer satisfaction. Smaaash would also seek to continue tying up with sports icons and other celebrities to act as Smaaash’s brand ambassadors, and offering aspirational rewards by way of prizes for winning games at its Centers.

 

Increase and diversify Smaaash’s sponsorship revenue.

 

Historically, while its sponsorship revenues have primarily been pursuant to long-term arrangements with a satellite television channel broadcaster, Smaaash is currently evaluating, and shall continue to explore, arrangements of varying terms with various third parties for on-ground brand activation and outreach, including co-branding, at a game or zone level.

 

In this regard Smaaash’s twofold objective would be to increase its sponsorship revenues over time, and reduce and mitigate its exposure to possible risks arising in the future from concentration with a single or relatively small set of sponsorship arrangements.

 

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Centers and Games

 

As of this date, Smaaash has 32 operational centers out of which 28 are company operated and four centers are franchised and operated by third parties. The detail of the centers are set forth below under Properties.

 

Revenue Sharing Agreements

 

Smaaash has entered into revenue sharing arrangements with the property developers for 22 Centers in India. Under such revenue sharing arrangements with property developers, Smaaash is typically liable to pay monthly rent by way of a fixed percentage of the monthly net retail sales amount (which is generally reset to a higher percentage after the completion of a specified initial duration within the rental period) or, in certain cases, either a monthly minimum guaranteed amount, or a fixed percentage of the monthly net retail sales amount (which is reset to a higher percentage after the completion of a specified initial duration within the rental period), whichever is higher.

 

Certain of these rental and revenue sharing arrangements are subject to a lock-in period, during which time, Smaaash may prematurely terminate these arrangements only subject to payment of the agreed rent for the entire lock-in period. After the lapse of the lock-in period, Smaaash may terminate the arrangements with prior notice.

 

The licensors can typically terminate the arrangements at any time, with prior notice, with or without cause, including in the event of a default or material default by us, in making due monthly payments or in complying with applicable law and regulations applicable to such premises.

 

Principles of Game Selection:

 

Commercial Criteria   Other Criteria
     

¨ Minimize operator requirement.

¨ Revenue per square foot / meter of space.

¨ Single user vs. multi user.

¨ Cycle time.

¨ Repeat value.

¨ Development and production cost.

¨ Operating cost.

¨ Ability to create additional games on the same platform.

 

¨ Early adoption of newly evolving technology.

¨ Safety.

¨ Novelty factor.

¨ Target group fit.

¨ Psychographic fit.

¨ Game footprint size.

¨ Competitive element.

¨ Social element.

 

Sponsorship

 

Historically, while Smaaash’s sponsorship revenues have primarily been pursuant to long-term arrangements with a satellite television channel broadcaster, Smaaash is currently evaluating, and shall continue to explore, arrangements of varying terms with various third parties for on-ground brand activation and outreach, at a game or zone level.

 

In relation to Smaaash’s flagship Center in Mumbai, which commenced commercial operations in November 2012, Smaaash has entered into a sponsorship agreement dated July 6, 2012, with a satellite television channel broadcaster, in terms of which, the broadcaster had agreed to exclusively sponsor Smaaash’s Mumbai Center and, at its option, subject to a right of first refusal (although not obligation) held by this broadcaster, other Centers. This agreement lapsed on July 6, 2017 and has not been renewed.

 

In addition, Smaaash entered into a sponsorship agreement dated November 30, 2013, with the same broadcaster, for Smaaash’s Center at Cyberhub, in Delhi NCR, for a period of five years, i.e., until November 30, 2018, as well as a sponsorship agreement dated February 17, 2014, with the same broadcaster, for Smaaash’s Center in Delhi NCR (Noida), for a period of five years, i.e., until February 17, 2019. Smaaash does not currently have similar sponsorship agreements with this broadcaster for Smaaash’s other Centers. Under these agreements, Smaaash is entitled to a sponsorship fee, including a non-refundable upfront onetime fee and quarterly advance payments commencing from the date of commercial operations at the respective Centers specified in these agreements and for the term of such agreements, and also acquired rights to use certain specified trademarks, without the right to sub-license such marks. Other than the requirement to make payments of the sponsorship fees due to us from the broadcaster and to provide the broadcaster’s approval or input on the promotional materials used by us in respect of the trademarks licensed by us from the broadcaster, the arrangements described above do not require or entitle the broadcaster to operate, manage or control Smaaash’s Centers, or to be responsible or liable for its employees, agents or subcontractors, among other things.

 

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These agreements are terminable with advance notice by us, or terminable by the broadcaster on account of any default by us, and contain standard indemnity, confidentiality and other similar provisions.

 

Going forward, Smaaash’s twofold objective would be to increase its sponsorship revenues over time, and to reduce and mitigate Smaaash’s potential exposure to possible risks arising in the future from concentration with a single or relatively small set of sponsorship arrangements.

 

Others

 

In addition to Smaaash’s core business, described above, Smaaash currently has the following other business initiatives:

 

Specialty Restaurants and Convention Center

 

Adjacent to Smaaash’s Center at Kamala Mills in Mumbai, Smaaash operates one specialty restaurant, with several signature dishes across a range of attractive price points. These include a rooftop brewpub and primarily continental restaurant called "Verbena", which Smaaash launched in January, 2017. In addition, also adjacent to the Center at Kamala Mills in Mumbai, Smaaash operates a 1,000 seat convention center, spread over approximately 13,500 square feet carpet area, called “18.99 Latitude", which Smaaash launched in October 2016. This convention center features a large banquet and convention facility, smaller partitioned units for breakaway meetings and events, gourmet catering with a separate Jain vegetarian kitchen, power backup, Wi-Fi connectivity, parking, and other facilities. These premises are leased and operated by Smaaash and Smaaash does not outsource any functions at these premises to any third party, other than non-core functions, such as security or housekeeping functions, which may be outsourced by Smaaash to various third party contractors from time to time.