PRER14A 1 d707388dprer14a.htm PRER14A PRER14A
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No. 3)

 

 

Filed by the Registrant  ☒                             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))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

GIGCAPITAL, INC.

(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):

  No fee required.
  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:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (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:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


Table of Contents

Preliminary Proxy Materials

Dated October 28, 2019

Subject to Completion

GIGCAPITAL, INC.

2479 E. Bayshore Rd., Suite 200

Palo Alto, CA 94303

Dear GigCapital, Inc. Stockholder:

We cordially invite you to attend a special meeting of the stockholders of GigCapital, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), which will be held on [●], 2019 at 10:00 a.m., local time, at the offices of the Company, located at 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303 (the “Special Meeting”).

On February 22, 2019, the Company, Kaleyra S.p.A., an Italian corporation (“Kaleyra”), Shareholder Representative Services LLC, as representative for the sellers (“Sellers’ Representative”), and each of the following holders of the ordinary shares (the “Ordinary Shares”) of Kaleyra (collectively the “Sellers”), Esse Effe S.p.A, a company with shares formed under the laws of Italy (“Esse Effe”), Maya Investments Limited, a company formed under the laws of England (“Maya”), Hong Kong Permanent Shine Limited, a company formed under the laws of Hong Kong, Ipai Terry Hsiao, Giacomo Dall’Aglio, Alex Milani, Luca Giardina Papa, Filippo Monastra, Matteo Castelucci, Kirk Tsai, Justyna Miziolek, Erjon Metko, Claudio Ippolito, Andrea Riccardi, and Francesco Vizzone, entered into a stock purchase agreement, as amended (and as it may be further amended from time to time, the “Stock Purchase Agreement”), pursuant to which the Company agreed to acquire (the “Acquisition” and, together with the Issuances (as defined below), and the other transactions contemplated by the Stock Purchase Agreement, the “Business Combination”) all of the outstanding Ordinary Shares of Kaleyra and its subsidiaries. You are being asked to vote on the Business Combination between the Company and Kaleyra.

At the Special Meeting, we are asking you to consider and vote upon a proposal (the “Business Combination Proposal” or “Proposal No. 1”) to adopt the Stock Purchase Agreement and approve the Business Combination, including the issuances (the “Closing Stock Issuances”) in connection therewith of shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), and the contingent issuance of any additional shares (the “Earn-Out Shares”) of Common Stock pursuant to the earn-out provisions of the Stock Purchase Agreement (such issuances of shares of Common Stock to the Sellers pursuant to the terms of the Stock Purchase Agreement, collectively, the “Stock Issuances”) and to Esse Effe and Maya the payment of cash and issuance of unsecured convertible promissory notes (such issuances of unsecured promissory convertible notes, together with the Stock Issuances, the “Issuances”). Copies of the Stock Purchase Agreement and Amendment No. 1 to the Stock Purchase Agreement are attached to the accompanying proxy statement as Annex A and Annex B, respectively. The consideration to be paid to thirteen of the Sellers will be the Stock Issuances and is subject to certain adjustments described in the Stock Purchase Agreement, and the consideration to be paid to the remaining two Sellers (Esse Effe and Maya) will be in the form of a combination of cash, Stock Issuances and unsecured convertible promissory notes, which will all be subject to certain adjustments described in the Stock Purchase Agreement. The cash consideration payable to Esse Effe and Maya at the closing (“Closing”) of the Business Combination (assuming redemptions, as described below, of less than 50% of the public shares (as defined below) and no adjustments) is $15,000,000, but could, depending upon the amount of redemptions of the public shares, be as low as no cash consideration. The maximum value of the unsecured convertible promissory notes to be issued to Esse Effe and Maya at the Closing (assuming redemptions, as described below, of less than 50% of the public shares (as defined below) and no adjustments) will total in the aggregate $15,000,000, but could, depending upon the amount of redemptions of the public shares, be as low as no unsecured convertible promissory notes being issued. Collectively, the aggregate of the cash consideration and the unsecured convertible promissory notes, paid or issued to Esse Effe and Maya will be $15,000,000. The number of shares of Common Stock issued as Closing Stock Issuances shall be determined by the amount of redemptions of public shares and may be as much as 10,181,819 shares of Common Stock, but will be at least 8,616,819 shares of Common Stock (assuming no adjustments). The relative allocation of the consideration to be received by the


Table of Contents

Sellers at Closing as among cash, the Stock Issuances and unsecured convertible promissory notes will be adjusted as more fully described in the accompanying proxy statement.

The number of Earn-Out Shares that may be issued to the Sellers are up to 4,292,272 shares of Common Stock. The Earn-Out Shares may be issuable pursuant to an earn-out based upon the post-combination company and its subsidiaries achieving certain pro forma revenue and pro forma adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) targets in 2019 and/or 2020, as more fully described in the accompanying proxy statement and subject to the amount of redemptions of public shares (as defined below).

At the Special Meeting, we are asking you to adopt the Stock Purchase Agreement and approve the Business Combination, including the Issuances. In addition, we are asking you to consider and vote upon (i) two separate proposals to approve and adopt amendments to the Company’s current amended and restated certificate of incorporation, as amended (the “Charter” or “Current Charter”), to: (A) provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes (“Proposal No. 2”); and (B) provide for certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital, Inc.” to “Kaleyra, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (“Proposal No. 3”, which together with Proposal No. 2 are collectively referred to as the “Charter Amendment Proposals”), (ii) a proposal to elect, effective at the Closing, six directors to serve staggered terms on our Board until the 2020, 2021 and 2022 annual meeting of stockholders, respectively, and until their respective successors are duly elected and qualified or until they resign or are otherwise removed (the “Director Election Proposal” or “Proposal No. 4”), (iii) a proposal to approve the Kaleyra, Inc. 2019 Equity Incentive Plan, a copy of which is attached to this proxy statement as Annex D (the “Kaleyra, Inc. 2019 Incentive Plan”), including the authorization of the initial share reserve under the Kaleyra, Inc. 2019 Incentive Plan (the “Incentive Plan Proposal” or “Proposal No. 5”) and (iv) a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Charter Amendment Proposals (the “Adjournment Proposal” or “Proposal No. 6”). A copy of our proposed second amended and restated certificate of incorporation reflecting the Charter Amendment Proposals, assuming the consummation of the Business Combination, is attached as Annex C to the accompanying proxy statement.

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

Our common stock, units, warrants and rights are currently listed on New York Stock Exchange (“NYSE”) under the symbols “GIG”, “GIG.U” “GIG.WS” and “GIG.RT,” respectively. Upon Closing, we intend to apply to list the shares issued to the Sellers on the NYSE under the symbol “KLR”. Thereafter, our units (each comprised of one share of Common Stock, one right to receive one-tenth of one share of Common Stock and three-fourths of one warrant to purchase one share of Common Stock), will cease to trade as an individual security and, instead, will be separated into their constituent securities, and the Common Stock and warrants will trade under the symbols “KLR” and “KLR WS,” respectively.

Pursuant to our Charter, we are providing our stockholders that hold shares of Common Stock that were included in the units issued in our initial public offering (“IPO”) (“public stockholders” and such shares, “public shares”), with the opportunity to redeem, upon the Closing, public shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in our trust account (the “Trust Account”) that holds the proceeds (including interest, which shall be net of taxes paid and taxes payable and amounts previously redeemed) of our IPO and such additional amounts as we have deposited into such trust account in connection with extensions of time for us to consummate the Business Combination. The per-share amount we will distribute to public stockholders that properly redeem their shares will not be reduced by transaction expenses incurred by the Company and Kaleyra in connection with the Business Combination. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account


Table of Contents

of approximately $[●] as of [●], 2019, the estimated per share redemption price would have been approximately $[●] on such date. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. 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 13d-3 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the public shares. We have no specified maximum redemption threshold under our Charter, other than the aforementioned 15% threshold. Each redemption of shares of Common Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $[●] as of [●], 2019. We have announced that we have entered into non-binding letters of intent with each of Yakira Capital Management (“Yakira”), Glazer Capital, LLC (“Glazer”) and an affiliate of Nomura Securities International, Inc. (“Nomura”), which would provide that each of Yakira, Glazer and Nomura would not redeem shares that they each hold in connection with the Business Combination, and would instead either hold such shares for a period of time following the consummation of the Business Combination, at which time they will each have the right to sell them to the Company, or will sell them during such time period at a price of at least $10.50 per share. The non-binding letters of intent provide that the aggregate number of our shares of Common Stock which would be subject to agreements that we may enter into with each of Yakira, Glazer and Nomura to implement the terms of the non-binding letters of intent are 3,908,750 shares. Upon entry into the agreements with Yakira, Glazer and Nomura with respect to such shares, there will be no restrictions on the number of additional shares that can be redeemed in compliance with the requirements of our Current Charter that we have net tangible assets of at least $5,000,001. Unless otherwise specified, the information in the accompanying proxy statement assumes that less than fifty percent of our public stockholders at the time that we entered into the Stock Purchase Agreement exercise their Redemption Rights with respect to their public shares.

Holders of our outstanding warrants and rights do not have Redemption Rights (as defined in our Charter) in connection with the Business Combination. We have commenced a tender offer to purchase up to 14,873,256 of our rights at a purchase price of $0.99 per right, subject to certain conditions as further described in the accompanying proxy statement. However, we have also entered into Forward Share Purchase Agreements with each of Greenhaven Road Capital Fund 1, LP and Greenhaven Road Capital Fund 2, LP (together, “Greenhaven”) and Kepos Alpha Fund L.P. (“KAF”) with respect to the rights currently held by each of them and any additional rights (the “Additional Rights”) they may acquire prior to the closing of the Business Combination. Each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the rights tender offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us. We may enter into similar agreements with other right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in response to the rights tender offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the rights tender offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the rights tender offer.


Table of Contents

Our initial stockholders prior to the IPO, including the Sponsor, Cowen Investments II LLC, a Delaware limited liability company as successor to Cowen Investments LLC (“Cowen Investments”), Irwin Silverberg and Jeffrey Bernstein (the “Founders”) and those of our directors who hold shares of Common Stock (such directors and the Founders, our “Initial Stockholders”) have agreed to waive their Redemption Rights with respect to any shares of Common Stock they may hold (other than any public shares, in the case of Cowen Investments) in connection with the consummation of the Business Combination. Currently, our Initial Stockholders, officers and directors own 35.12% of our issued and outstanding shares of Common Stock, including all of the Founder Shares (as defined below). The Founder Shares are subject to transfer restrictions. The 4,087,006 shares of Common Stock that are currently owned by our Initial Stockholders, of which 60,000 shares are held by our directors (the “Founder Shares”), will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor of the Business Combination.

We are providing you with the accompanying proxy statement and accompanying proxy card in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting. Information about the Special Meeting, the Business Combination and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement. Whether or not you plan to attend the Special Meeting, we urge you to read this proxy statement, including the Annexes and the accompanying financials statements of the Company and of Kaleyra, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 48 of the accompanying proxy statement.

After careful consideration, our board of directors (the “Board”) has unanimously (i) determined that the transactions contemplated by the Stock Purchase Agreement are fair to, and in the best interests of, the Company and its stockholders, (ii) approved and declared advisable the execution, delivery and performance by the Company of the Stock Purchase Agreement and the consummation of the Business Combination, including the Issuances, and (iii) resolved to recommend that the holders of shares of Common Stock vote in favor of the adoption and approval of the Stock Purchase Agreement and the consummation of the Business Combination, including the Issuances. The Board has also approved (i) the Charter Amendment Proposals, and (ii) the adoption of the Kaleyra, Inc. 2019 Incentive Plan. The Board unanimously recommends that you vote “FOR” adoption of the Stock Purchase Agreement and approval of the Business Combination, including the Issuances, and “FOR” all other proposals presented to you in the accompanying proxy statement. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Interests of Certain Persons in the Business Combination” for additional information.

Approval of the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Approval of each of the Charter Amendment Proposals requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Approval of the Director Election Proposal requires the affirmative vote of the holders of a plurality of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the special meeting.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in the accompanying proxy statement to make sure that your shares are represented at the Special Meeting. 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. The transactions contemplated by the Stock Purchase Agreement will be consummated only if the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal are approved at the Special Meeting. Unless waived by the parties to the Stock Purchase Agreement, the Closing is conditioned upon the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal.


Table of Contents

The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the accompanying proxy statement.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card 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. 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.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

On behalf of our Board, I would like to thank you for your support of GigCapital, Inc. and look forward to a successful completion of the Business Combination.

Sincerely,

 

LOGO

Dr. Avi S. Katz

Chairman, Secretary, President and Chief Executive Officer

[●], 2019

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement is dated [●], 2019, and is expected to be first mailed to Company stockholders on or about [●], 2019.


Table of Contents

NOTICE OF SPECIAL MEETING OF

STOCKHOLDERS OF GIGCAPITAL, INC.

TO BE HELD [], 2019

To the Stockholders of GigCapital, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of the stockholders of GigCapital, Inc., a Delaware corporation (“we,” “us,” “our” or the “Company”), will be held on [●], 2019 at 10:00 a.m., local time, at the offices of the Company located at 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303 (the “Special Meeting”). You are cordially invited to attend the Special Meeting to conduct the following items of business:

 

1.

Business Combination Proposal—To consider and vote upon a proposal to adopt the Stock Purchase Agreement, dated as of February 22, 2019, as amended (and as it may be further amended from time to time, the “Stock Purchase Agreement”), by and among the Company, Kaleyra S.p.A., an Italian corporation (“Kaleyra”), Shareholder Representative Services LLC as representative for the sellers (the “Sellers’ Representative”), and each of the following holders of the ordinary shares (the “Ordinary Shares”) of Kaleyra (collectively, the “Sellers”), Esse Effe S.p.A, a company with shares formed under the laws of Italy (“Esse Effe”), Maya Investments Limited, a company formed under the laws of England (“Maya”), Hong Kong Permanent Shine Limited, a company formed under the laws of Hong Kong, Ipai Terry Hsiao, Giacomo Dall’Aglio, Alex Milani, Luca Giardina Papa, Filippo Monastra, Matteo Castelucci, Kirk Tsai, Justyna Miziolek, Erjon Metko, Claudio Ippolito, Andrea Riccardi, and Francesco Vizzone, and approve the transactions contemplated thereby, including the issuances (the “Closing Stock Issuances”) in connection therewith of shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”) the contingent issuance of any additional shares (the “Earn-Out Shares”) of Common Stock pursuant to the earn-out provisions of the Stock Purchase Agreement (such issuances of shares of Common Stock, collectively, the “Stock Issuances”), the issuance of unsecured promissory convertible notes (the “Notes”), and the payment of cash (such issuances of unsecured promissory convertible notes, together with the Stock Issuances, the “Issuances” and together with the other transactions contemplated by the Stock Purchase Agreement, the “Business Combination”) (Proposal No. 1).

 

2.

Charter Amendment Proposals—To consider and vote upon two separate proposals to amend the Company’s current amended and restated certificate of incorporation, as amended (the “Charter”), to:

 

   

provide for the classification of our board of directors (our “Board”) into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 2); and

 

   

provide for certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital, Inc.” to “Kaleyra, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (Proposal No. 3);

 

3.

Director Election Proposal—To elect, effective at the Closing, six directors to serve staggered terms on our Board until the 2020, 2021 and 2022 annual meeting of stockholders, respectively, and until their respective successors are duly elected and qualified or until they resign or are otherwise removed (Proposal No. 4);

 

4.

Incentive Plan Proposal—To consider and vote upon a proposal to approve the Kaleyra, Inc. 2019 Equity Incentive Plan (the “Kaleyra, Inc. 2019 Incentive Plan”) (Proposal No. 5); and

 

5.

Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Charter Amendment Proposals. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal and the Charter Amendment Proposals (Proposal No. 6).

The above matters are more fully described in the accompanying proxy statement, which also includes, as Annex A and Annex B, copies of the Stock Purchase Agreement and Amendment No. 1 to the Stock Purchase Agreement, respectively. We urge you to read carefully the accompanying proxy statement in its entirety, including the Annexes and accompanying financial statements of the Company and Kaleyra.


Table of Contents

The record date for the Special Meeting is [●], 2019. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available at least ten days before and continuing through the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting.

Pursuant to our Charter, we are providing our stockholders that hold shares of Common Stock that were included in the units issued in our initial public offering (“IPO”) (“public stockholders” and such shares, “public shares”), with the opportunity to redeem, upon the Closing, public shares then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the Closing) in our trust account (the “Trust Account”) that holds the proceeds (including interest, which shall be net of taxes paid and taxes payable) of our IPO. The per-share amount we will distribute to public stockholders that properly redeem their shares will not be reduced by transaction expenses (the “Transaction Expenses”) incurred by the Company and Kaleyra in connection with the Business Combination. For illustrative purposes, based on the fair value of marketable securities held in our Trust Account of approximately $[●] as of [●], 2019, the estimated per share redemption price would have been approximately $[●] on such date. Public stockholders may elect to redeem their shares even if they vote for the Business Combination. 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 13d-3 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the public shares. We have no specified maximum redemption threshold under our Charter, other than the aforementioned 15% threshold. Each redemption of shares of Common Stock by our public stockholders will reduce the amount in our Trust Account, which held marketable securities with a fair value of approximately $[●] as of [●], 2019. We have announced that we have entered into non-binding letters of intent with each of Yakira Capital Management (“Yakira”), Glazer Capital, LLC (“Glazer”) and an affiliate of Nomura Securities International, Inc. (“Nomura”), which would provide that each of Yakira, Glazer and Nomura would not redeem shares that they each hold in connection with the Business Combination, and would instead either hold such shares for a period of time following the consummation of the Business Combination, at which time they will each have the right to sell them to the Company, or will sell them during such time period at a price of at least $10.50 per share. The non-binding letters of intent provide that the aggregate number of our shares of Common Stock which would be subject to agreements that we may enter into with each of Yakira, Glazer and Nomura to implement the terms of the non-binding letters of intent are 3,908,750 shares. Upon entry into the agreements with Yakira, Glazer and Nomura with respect to such shares, there will be no restrictions on the number of additional shares that can be redeemed in compliance with the requirements of our Current Charter that we have net tangible assets of at least $5,000,001. Unless otherwise specified, the information in the accompanying proxy statement assumes that less than fifty percent of our public stockholders at the time that we entered into the Stock Purchase Agreement exercise their Redemption Rights with respect to their public shares.

Holders of our outstanding warrants and rights do not have Redemption Rights (as defined in our Charter) in connection with the Business Combination. We have commenced a tender offer to purchase up to 14,873,256 of our rights at a purchase price of $0.99 per right, subject to certain conditions as further described in the accompanying proxy statement. However, we have also entered into Forward Share Purchase Agreements with each of Greenhaven Road Capital Fund 1, LP and Greenhaven Road Capital Fund 2, LP (together, “Greenhaven”) and Kepos Alpha Fund L.P. (“KAF”) with respect to the rights currently held by each of them and any additional rights (the “Additional Rights”) they may acquire prior to the closing of the Business Combination. Each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the rights tender offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us. We may enter into similar agreements with other


Table of Contents

right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in response to the rights tender offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the rights tender offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the rights tender offer.

Our initial stockholders prior to the IPO, including our Sponsor, Cowen Investments II LLC, a Delaware limited liability company as successor to Cowen Investments LLC (“Cowen Investments”), Irwin Silverberg and Jeffrey Bernstein (the “Founders”) and those of our directors who hold shares of Common Stock (such directors and the Founders, our “Initial Stockholders”) have agreed to waive their Redemption Rights with respect to any shares of Common Stock they may hold (other than any public shares, in the case of Cowen Investments) in connection with the consummation of the Business Combination. Currently, our Initial Stockholders, officers and directors own 35.12% of our issued and outstanding shares of Common Stock, including all of the Founder Shares. The Founder Shares (as defined below) are subject to transfer restrictions. The 4,087,006 shares of Common Stock that are currently owned by our Initial Stockholders, of which 60,000 shares are held by our directors (the “Founder Shares”), will be excluded from the pro rata calculation used to determine the per-share redemption price. Our Initial Stockholders have agreed to vote any shares of Common Stock owned by them in favor of the Business Combination.

The Business Combination is conditioned on the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal at the Special Meeting. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in the accompanying proxy statement.

Approval of the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Approval of each of the Charter Amendment Proposals requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Approval of the Director Election Proposal requires the affirmative vote of the holders of a plurality of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the Special Meeting.

After careful consideration, our Board has unanimously (i) determined that the transactions contemplated by the Stock Purchase Agreement are fair to and in the best interests of the Company and its stockholders, (ii) approved and declared advisable the execution, delivery and performance by the Company of the Stock Purchase Agreement and the consummation of the Business Combination, including the Issuances, and (iii) resolved to recommend that the holders of shares of Common Stock vote in favor of the adoption of the Stock Purchase Agreement and approve the Business Combination, including the Issuances. The Board unanimously recommends that you vote “FOR” adoption of the Stock Purchase Agreement and approval of the Business Combination, including the Issuances, and “FOR” all other proposals presented to you in the accompanying proxy statement.

By Order of the Board of Directors

 

LOGO

Dr. Avi S. Katz

Chairman, Secretary, President and Chief Executive Officer

Palo Alto, California

[●], 2019


Table of Contents

TABLE OF CONTENTS

 

SUMMARY TERM SHEET

    1  

FREQUENTLY USED TERMS

    5  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

    10  

SUMMARY OF THE PROXY STATEMENT

    26  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

    40  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF KALEYRA

    41  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

    43  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    46  

RISK FACTORS

    48  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

    91  

COMPARATIVE SHARE INFORMATION

    104  

SPECIAL MEETING OF COMPANY STOCKHOLDERS

    107  

PROPOSAL NO. 1—APPROVAL OF THE BUSINESS COMBINATION

    115  

PROPOSAL NO. 2—CLASSIFICATION OF THE BOARD OF DIRECTORS

    154  

PROPOSAL NO. 3—APPROVAL OF ADDITIONAL AMENDMENTS TO CURRENT CERTIFICATE OF INCORPORATION IN CONNECTION WITH THE BUSINESS COMBINATION

    157  

PROPOSAL NO. 4—ELECTION OF DIRECTORS

    172  

PROPOSAL NO. 5—APPROVAL OF THE KALEYRA, INC. 2019 INCENTIVE PLAN, INCLUDING THE AUTHORIZATION OF THE INITIAL SHARE RESERVE UNDER THE INCENTIVE PLAN

    174  

PROPOSAL NO. 6—THE ADJOURNMENT PROPOSAL

    183  

INFORMATION ABOUT THE COMPANY PRIOR TO THE BUSINESS COMBINATION

    184  

THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    198  

EXECUTIVE COMPENSATION

    203  

INFORMATION ABOUT KALEYRA

    206  

KALEYRA’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    216  

MANAGEMENT AFTER THE BUSINESS COMBINATION

    241  

DESCRIPTION OF SECURITIES

    250  

BENEFICIAL OWNERSHIP OF SECURITIES

    260  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    263  

PRICE RANGE OF SECURITIES AND DIVIDENDS

    269  

APPRAISAL RIGHTS

    270  

HOUSEHOLDING INFORMATION

    270  

TRANSFER AGENT AND REGISTRAR

    270  

SUBMISSION OF STOCKHOLDER PROPOSALS

    270  

WHERE YOU CAN FIND MORE INFORMATION

    271  

INDEX TO CONSOLIDATED FINANCIAL INFORMATION

    F-1  

ANNEX A—STOCK PURCHASE AGREEMENT

    A-1  

ANNEX B—AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT

    B-1  

ANNEX C—SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

    C-1  

ANNEX D—KALEYRA, INC. 2019 EQUITY INCENTIVE PLAN

    D-1  

 

i


Table of Contents

SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

The Company is a Private-to-Public Equity (PPE) company, also known as a blank check company or special purpose acquisition company, formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

In connection with the Company’s IPO, we issued 14,375,000 units at a price of $10.00 per unit resulting in total gross proceeds of $143,750,000. Each unit consisted of one share of Common Stock, three-quarters of one warrant to purchase one share of Common Stock and one right to receive one-tenth of one share of Common Stock.

 

   

There are currently 11,636,542 shares of Common Stock, par value $0.0001 per share, issued and outstanding, including 7,549,536 shares of Common Stock originally sold as units as part of the IPO, 4,027,006 Founder Shares of Common Stock that were either initially issued or purchased as part of units prior to our IPO by our Founders (of which 498,256 shares are private placement shares (as defined below)), and 60,000 shares of Common Stock issued to directors (the “Insider Shares”). There are currently no shares of preferred stock issued and outstanding.

 

   

We have announced that we have entered into non-binding letters of intent with each of Yakira, Glazer and Nomura, which would provide that each of Yakira, Glazer and Nomura would not redeem shares that they each hold in connection with the Business Combination, and would instead either hold such shares for a period of time following the consummation of the Business Combination, at which time they will each have the right to sell them to the Company, or will sell them during such time period at a price of at least $10.50 per share. The non-binding letters of intent provide that the aggregate number of our shares of Common Stock which would be subject to agreements that we may enter into with each of Yakira, Glazer and Nomura to implement the terms of the non-binding letters of intent are 3,908,750 shares. Unless otherwise specified, the information in this proxy statement assumes that we will enter into agreements with each of Yakira, Glazer and Nomura on the terms set forth in each of the non-binding letters of intent, and that an aggregate of 3,908,750 shares of Common Stock will not be redeemed by them.

 

   

In addition, we issued 10,781,250 redeemable common stock purchase warrants (originally sold as part of the units issued in our IPO) as part of our IPO, along with 373,692 common stock purchase warrants issued as part of the units purchased in the private placement prior to our IPO. Each warrant entitles its holder to purchase one share of our Common Stock at an exercise price of $11.50 per share. The warrants will become exercisable 30 days after the completion of the Business Combination and they expire on December 12, 2024 or earlier upon redemption or liquidation. Once the warrants become exercisable, the Company may redeem the outstanding warrants at a price of $0.01 per warrant, if the last sale price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading day period ending on the third trading day before the Company sends the notice of redemption to the warrant holders. The private placement warrants, however, are non-redeemable so long as they are held by our Founders or their permitted transferees.

 

   

In addition to the shares of Common Stock and warrants, and without any relationship to the warrants other than that they were also a component of the units, we also issued 14,375,000 rights that were originally sold as part of the units issued in our IPO, and an additional 498,256 rights as

 

1


Table of Contents
 

part of the units purchased in the private placement prior to our IPO. Each holder of a right will receive one-tenth of one share of Common Stock upon consummation of the Business Combination, even if the holder of such right redeems all shares of Common Stock held by it in connection with the initial business combination. We have commenced the Rights Tender Offer (as defined below) to purchase up to 14,873,256 of our rights (constituting all of our public rights and rights included in the units purchase in the private placement prior to our IPO) at a purchase price of $0.99 per right, subject to certain conditions as further described in this proxy statement. The Rights Tender Offer will expire one minute after 11:59 p.m., New York City time, on the day of the Special Meeting. However, we have also entered into Forward Share Purchase Agreements with each of Greenhaven and KAF with respect to the rights currently held by each of them and any Additional Rights they may acquire prior to the closing of the Business Combination. Each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the Rights Tender Offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us. We may enter into similar agreements with other right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in response to the Rights Tender Offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the Rights Tender Offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the Rights Tender Offer.

No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of the Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in our IPO. The shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of ours). We will not issue fractional shares upon conversion of the rights.

 

   

On June 5, 2019, in connection with the amendment of our Current Charter, to extend the date by which the Company must consummate its initial business combination from June 12, 2019 to December 12, 2019, stockholders holding shares originally sold as part of the units issued in our IPO elected to redeem 6,825,464 of such shares, which represent approximately 47.5% of the shares of Common Stock that were part of the units sold in our IPO. Following such redemptions, approximately $77.6 million remains in the Trust Account and 11,636,542 shares of Common Stock remain issued and outstanding.

 

   

For more information regarding our Common Stock, warrants and rights, please see the section entitled “Description of Securities.”

 

   

In accordance with, and subject to the Stock Purchase Agreement, each Seller will be entitled to receive his, her or its share, as specified in the Stock Purchase Agreement, of the aggregate closing consideration to be paid to the Sellers at the Closing (the “Aggregate Closing Consideration”), in

 

2


Table of Contents
 

addition to a contingent right to receive the Earn-Out Shares (as defined below). The Aggregate Closing Consideration shall consist of a combination of Cash Consideration (as defined below), Common Stock Consideration (as defined below) and unsecured convertible promissory notes (the “Notes”) for a specified principal amount (the “Note Principal Amount”). Each of Esse Effe and Maya will receive its portion of the Aggregate Closing Consideration in the form of a combination of Common Stock Consideration, Cash Consideration and Notes. Each of the other Sellers will receive his, her or its portion of the Aggregate Closing Consideration solely in the form of Common Stock Consideration. The aggregate total of the Cash Consideration and the Note Principal Amount payable at Closing in respect of the Business Combination is $15,000,000, assuming no adjustments. The aggregate value of each component of the Aggregate Closing Consideration will be calculated based on the percentage of the Offering Shares (as defined in our Charter) outstanding as of February 22, 2019 that are redeemed prior to the Closing (the “Redemption Percentage”) pursuant to the Redemption Rights (as defined in our Charter) and Article IX of our Charter, as amended. The Stock Purchase Agreement apportions each component of the Aggregate Closing Consideration according to five fixed ranges of possible Redemption Percentages (the “Redemption Ranges”). The Common Stock Consideration shall be determined by the Redemption Percentage, and may be as much as 10,181,819 shares of Common Stock, but will be at least 8,616,819 shares of Common Stock (assuming no adjustments). Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Consideration to Sellers in the Business Combination for information regarding each such Redemption Range and the section entitled Proposal No. 1—Approval of the Business Combination—Convertible Notes for more details on the terms of the Notes.

 

   

The aggregate amount of Common Stock Consideration, and the Aggregate Closing Consideration amounts listed above, are subject to certain adjustments at Closing. The adjustments are based on the amount of Debt (as defined below) of Kaleyra that is outstanding immediately prior to the Closing. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Consideration to Sellers in the Business Combination for details on the adjustments.

 

   

The Sellers may also be entitled to receive up to an additional 4,292,272 Earn-Out Shares. The number of Earn-Out Shares to be issued to the Sellers (if any) by the Company will depend on the pro forma revenue and Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula (as defined below) of the post-combination company as calculated pursuant to the terms of the Stock Purchase Agreement for the 2019 and/or 2020 fiscal years, as more fully described in the section entitled “Proposal No. 1—Approval of the Business Combination—Earn-Out Shares.”

 

   

In order to facilitate the Business Combination, each of the Founders (as described below) entered into a Founder Shares Agreement on February 22, 2019 pursuant to which each Founder agreed that a portion of the Founder Shares will be forfeited in the event that either the 2019 Earn-Out Shares or the 2020 Earn-Out Shares (each as defined below) are not issued in full (such Founder Shares subject to risk of forfeiture, the “Founder Earn-Out Shares”). The aggregate number of Founder Earn-Out Shares will be determined based on the Redemption Percentage, as more fully described in the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Consideration to Sellers in the Business Combination.” For more information about the Stock Purchase Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement.”

 

   

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders will own approximately 40.46% of the post-combination company’s outstanding Common Stock; (ii) our Initial Stockholders will own approximately 19.31% of the post-combination company’s outstanding Common Stock and (iii) the Sellers will own approximately 40.23% of the post-combination company’s outstanding Common Stock. These ownership percentages assume that (a) there are no additional redemptions of the Offering Shares by the Company’s public stockholders other than those that have already occurred on June 5, 2019, (b) 8,616,819 shares of Common Stock are issued to the Sellers at Closing, and (c) the Company does not issue any additional shares of Common

 

3


Table of Contents
 

Stock between the date of the Stock Purchase Agreement and the Closing. The above-stated ownership percentages with respect to the post-combination company do not take into account: (a) warrants that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares under the Kaleyra, Inc. 2019 Incentive Plan, a copy of which is attached to this proxy statement as Annex D, including up to 1,290,909 restricted stock units to be awarded to service providers of Kaleyra following the Business Combination pursuant to the terms of the Stock Purchase Agreement or (c) the conversion of 3,199,109 public rights into 319,911 shares of Common Stock which are subject to the Rights Tender Offer, but do take into account the conversion of 498,256 private placement rights into 49,826 shares of Common Stock upon the completion of the Business Combination, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer. If the actual facts are different than these assumptions (which they are likely to be), the ownership percentage retained by the Company’s public stockholders in the post-combination company will be different from the above-stated ownership percentage. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information.”

 

   

Our management and Board considered a variety of factors in determining whether to approve the Stock Purchase Agreement, including that Kaleyra is a Cloud Communications Platform as a Service (“CPaaS”) company with an established customer base of banks and other financial institutions, enterprises and mobile network operators, and our management and Board believe Kaleyra is well positioned to take advantage of long-term growth in the CPaaS sector. As a result, our management and Board believe that Kaleyra is well-positioned for growth and that the valuation of Kaleyra implied by the purchase price provides significant opportunity for capital appreciation. For more information about our decision-making process, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Company’s Board of Directors’ Reasons for Approving the Business Combination.”

 

   

Pursuant to our Charter, as amended, in connection with the Business Combination, holders of public shares may elect to have their public shares redeemed for cash at the applicable redemption price per share calculated in accordance with our Charter. As of [●], 2019, this would have amounted to approximately $[●] per share. If a holder exercises its Redemption Rights, then such holder will be exchanging its shares of our Common Stock for cash and will no longer own shares of the post-combination company and will not participate in the future growth of the post-combination company, if any. 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 our transfer agent at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights.

 

   

Unless waived by the parties to the Stock Purchase Agreement, and subject to applicable law, the Closing is subject to a number of conditions set forth in the Stock Purchase Agreement, including, among others, receipt of certain stockholder approvals contemplated by this proxy statement. For more information about the closing conditions to the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Conditions to Closing of the Business Combination.”

 

   

The Stock Purchase Agreement may be terminated at any time prior to the consummation of the Business Combination upon agreement of the parties thereto, or by the Company or the Sellers holding a majority of Ordinary Shares, upon notice to the other, in specified circumstances. For more information about the termination rights under the Stock Purchase Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Termination.”

 

   

The proposed Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

4


Table of Contents

FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “GigCapital” refer to GigCapital, Inc., and the term “post-combination company” refers to the Company following the consummation of the Business Combination.

In this proxy statement:

Acquisition” mean acquisition by the Company of all of the outstanding Ordinary Shares from the Sellers.

Adjustment Time” means as of 11:59 p.m. (EST) on the date immediately preceding the Closing Date.

Amendment No. 1 to Stock Purchase Agreement” means that certain Amendment No. 1 to Stock Purchase Agreement, dated as of September 24, 2019, by and among the Company, Kaleyra S.p.A., the Sellers and the Seller Representative, a copy of which is attached to this proxy as Annex B.

Board” means the board of directors of the Company.

Buc Mobile” means Buc Mobile Inc. (doing business as Hook Mobile).

Business Combination” means the transactions contemplated by the Stock Purchase Agreement, including the Acquisition and the Issuances.

Bylaws” means our Bylaws, dated as of October 9, 2017.

Cash Consideration” means the cash consideration to be paid to Esse Effe and Maya.

Closing” means the closing of the transactions contemplated by the Stock Purchase Agreement.

Closing Date” means the date on which the Closing occurs.

Code” means the Internal Revenue Code of 1986, as amended.

Cooley” means Cooley LLP, counsel to Kaleyra.

Common Stock” means the shares of common stock, par value $0.0001 per share, of the Company.

Common Stock Consideration” means the Common Stock to be issued to the Sellers at the Closing pursuant to the terms of the Stock Purchase Agreement.

Company” means GigCapital, Inc., a Delaware corporation.

Cowen” means Cowen Inc., the representative of the underwriters in our IPO.

Crowell” means Crowell & Moring LLP, counsel to the Company.

Charter” or “Current Charter” means our amended and restated certificate of incorporation, dated December 7, 2017, as amended on June 5, 2019.

Debt” means (a) all indebtedness for borrowed money or in respect of loans or advances of any kind or for the deferred purchase price related to the acquisitions of Buc Mobile and Solutions Infini; (b) the amount of all liabilities pursuant to all financial leases; (c) all liabilities evidenced by bonds, debentures, notes or similar

 

5


Table of Contents

instruments or debt securities; (d) all guarantees of the debt of other persons (except for those provided in the ordinary course of business); (e) all liabilities of a person in respect of bankers’ acceptances; and (f) all fees, accrued and unpaid interest, premiums or penalties (including prepayment penalties) or other obligations related to any of the foregoing. For clarity, Debt shall not include any (i) taxes, (ii) transaction expenses (other than Transaction Compensation Payments (as such term is defined in the Stock Purchase Agreement)) or (iii) trade payables, accounts payable and other current liabilities not in the nature of items that are the subject of clauses (a), (c), (d) or (e) of this definition.

DGCL” means the General Corporation Law of the State of Delaware.

Earn-Out Shares” means up to 4,292,272 shares of Common Stock issuable to the Sellers in the event the post-combination company and its subsidiaries achieve certain pro forma revenue and Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula milestones for the 2019 and/or 2020 fiscal year, as set forth in the Stock Purchase Agreement.

EBITDA” means earnings before interest, tax, depreciation and amortization.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Founders” mean the Sponsor, Cowen Investments II LLC, a Delaware limited liability company as successor to Cowen Investments LLC (“Cowen Investments”), Irwin Silverberg (“Silverberg”) and Jeffrey Bernstein (“Bernstein”).

Founder Shares” means the shares of Common Stock held of record by the Founders.

Founder Shares Agreement” means that certain agreement Entered into on February 22, 2019 with each of our Founders in the form attached as Exhibit A to the Stock Purchase Agreement.

GAAP” means Generally Accepted Accounting Principles.

Initial Stockholders” means the Founders and those of our directors who hold shares of Common Stock.

Insider Shares” means the shares of Common Stock issued to certain of our directors.

Investment Company Act” means the Investment Company Act of 1940, as amended.

IPO” means the Company’s initial public offering, consummated on December 12, 2017, through the sale of 14,375,000 units at $10.00 per unit.

Kaleyra” means Kaleyra S.p.A., an Italian corporation, and its subsidiaries.

Kaleyra, Inc. 2019 Incentive Plan” means the Kaleyra, Inc. 2019 Equity Incentive Plan.

KPMG” means KPMG S.p.A., an independent registered public accounting firm.

KPMG LLP” means KPMG LLP, an independent registered public accounting firm and the auditor of Buc Mobile, Inc.

MacKenzie” means MacKenzie Partners, Inc., proxy solicitor to the Company.

Non-GAAP Pro Forma Adjusted EBITDA Earn-Out Formula” means the sum of the consolidated earnings of a party and its subsidiaries, before finance income and finance cost (including bank charges), tax, depreciation

 

6


Table of Contents

and amortization calculated from the audited consolidated financial statements of such party and its subsidiaries (prepared in accordance with GAAP as applicable to such party), for each of Kaleyra, Solutions Infini and Buc Mobile for the period of January 1, 2018 to December 31, 2018, plus (i) Kaleyra’s loss on equity investments prior to the acquisition of Solutions Infini, (ii) Kaleyra’s non-cash compensation and stock option expenses, and (iii) the acquisition transaction costs for the acquisitions of Solutions Infini and Buc Mobile.

NYSE” means the New York Stock Exchange.

Offering Shares” mean shares of Common Stock included as part of the units sold in the IPO.

Ordinary Shares” means the ordinary shares of Kaleyra.

“Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula” means for the post-combination company and its subsidiaries, including any subsidiaries acquired by such party during such fiscal year, and as of any date of calculation, the consolidated earnings of such party and its subsidiaries, before finance income and finance cost (including bank charges), tax, depreciation and amortization calculated from the audited consolidated financial statements of such party and its subsidiaries (prepared in accordance with U.S. GAAP), plus (i) Transaction Expenses, (ii) without duplication of clause (i), severance or change of control payments, (iii) any expenses related to company restructuring, (iv) any compensation expenses relating to stock options, restricted stock units, restricted stock or similar equity interests as may be issued by such party or any of its subsidiaries to employees of such party or any of its subsidiaries and (v) any provision for the write down of assets.

private placement rights” mean the rights included in the private placement units issued to our Founders in a private placement that closed prior to the IPO.

private placement shares” mean the shares of our Common Stock included in the private placement units issued to our Founders in a private placement that closed prior to the IPO.

private placement units” mean the units, consisting of one share of Company Common Stock, three-quarters of one warrant to purchase one share of Company Common Stock, and one right to receive one-tenth of one share of Company Common Stock, issued to our Founders in a private placement that closed prior to the IPO.

private placement warrants” means the warrants included in the private placement units issued to our Founders in a private placement that closed prior to the IPO, each of which is exercisable for one share of Common Stock, in accordance with its terms.

proposed second amended and restated certificate of incorporation” or “proposed certificate” means the proposed second amended and restated certificate of incorporation of the Company, a form of which is attached hereto as Annex C, which will become the post-combination company’s certificate of incorporation upon the approval of the Charter Amendment Proposals, assuming the consummation of the Business Combination.

public rights” means the rights included in the public units issued in our IPO.

public shares” means shares of Common Stock included in the public units issued in our IPO.

public stockholders” means holders of public shares, including our Initial Stockholders to the extent our Initial Stockholders hold public shares, provided, that our Initial Stockholders will be considered “public stockholders” only with respect to any public shares held by them.

public units” means one unit, consisting of one public share of Company Common Stock, three-quarters of one warrant to purchase one share of Company Common Stock, and one right to receive one-tenth of one share of Company Common Stock, issued in our IPO.

 

7


Table of Contents

public warrants” means the warrants included in the public units issued in the IPO, each of which is exercisable for one share of Common Stock, in accordance with its terms.

Registration Rights Agreement” means that certain Amended and Restated Registration Rights Agreement to be entered into at Closing by the Sellers and which amends and restates the registration rights agreement currently in effect between the Company and certain holders of Company Common Stock.

Related Agreements” means the Founder Shares Agreement and the Registration Rights Agreement.

rights” means the right to receive one-tenth of one share of Common Stock.

Rights Tender Offer” means the offer by the Company to purchase up to 14,893,256 of its rights at a purchase price of $0.99 per right, subject to certain conditions, including that the Stock Purchase Agreement is not terminated for any reason. The Rights Tender Offer will expire one minute after 11:59 p.m., New York City time, on the day of the Special Meeting.

SEC” means the United States Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

Sellers” means Esse Effe S.p.A, a company with shares formed under the laws of Italy (“Esse Effe”), Maya Investments Limited, a company formed under the laws of England (“Maya”), Hong Kong Permanent Shine Limited, a company formed under the laws of Hong Kong, Ipai Terry Hsiao, Giacomo Dall’Aglio, Alex Milani, Luca Giardina Papa, Filippo Monastra, Matteo Castelucci, Kirk Tsai, Justyna Miziolek, Erjon Metko, Claudio Ippolito, Andrea Riccardi, and Francesco Vizzone.

Seller Representative” means Shareholder Representative Services LLC, a Colorado limited liability company.

Solutions Infini” means Solutions Infini Technologies (India) Private Limited along with its subsidiaries.

Special Meeting” means the special meeting of the stockholders of the Company that is the subject of this proxy statement.

Sponsor” means GigAcquisitions, LLC, a Delaware limited liability company.

Stock Issuances” means the issuances of the Common Stock Consideration to Sellers, and the contingent issuance of any Earn-Out Shares.

Stock Purchase Agreement” means that certain Stock Purchase Agreement, dated as of February 22, 2019, as amended by that certain Amendment No. 1 to Stock Purchase Agreement, dated as of September 24, 2019, by and among the Company, Kaleyra S.p.A., the Sellers and the Seller Representative, copies of which are attached to this proxy statement as Annex A and Annex B, respectively.

Transaction Expenses” means the transaction expenses incurred by the Company and Kaleyra, its subsidiaries and the Sellers’ Representative, subject to certain limitations described in the Stock Purchase Agreement.

Transfer Agent” means Continental Stock Transfer & Trust Company.

Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO.

Trustee” means Continental Stock Transfer & Trust Company.

 

8


Table of Contents

2019 Earn-Out Shares” means the number of Earn-Out Shares which the Sellers will be entitled to receive if the pro forma revenue of the post-combination company and Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2019 fiscal year achieve targets specified in the Stock Purchase Agreement, as determined based on the applicable Redemption Range.

2020 Earn-Out Shares” means the number of Earn-Out Shares which the Sellers will be entitled to receive if the pro forma revenue of the post-combination company and Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2020 fiscal year achieve targets specified in the Stock Purchase Agreement, as determined based on the applicable Redemption Range.

U.S. GAAP” means accounting principles generally accepted in the United States of America.

warrants means the private placement warrants and the public warrants.

 

9


Table of Contents

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Special Meeting, which will be held on [], 2019 at 10:00 a.m., local time, at the offices of GigCapital, Inc., located at 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303.

Q: Why am I receiving this proxy statement?

A: You are being asked to consider and vote upon a proposal to adopt the Stock Purchase Agreement and approve the Business Combination and transactions contemplated thereby, among other proposals. In accordance with, and subject to the Stock Purchase Agreement, each Seller will be entitled to receive his, her or its share of the Aggregate Closing Consideration, in addition to a contingent right to receive the Earn-Out Shares. The Aggregate Closing Consideration shall consist of Cash Consideration, Common Stock Consideration and Notes for the Note Principal Amount. Each of Esse Effe and Maya will receive its portion of the Aggregate Closing Consideration in the form of a combination of Common Stock Consideration, Cash Consideration and Notes. Each of the other Sellers will receive his, her or its portion of the Aggregate Closing Consideration solely in the form of Common Stock Consideration. All such issuance and payments are subject to adjustment as more fully described in this proxy statement. You are being asked to vote on the Business Combination between us and Kaleyra. A copy of the Stock Purchase Agreement is attached to this proxy statement as Annex A.

In addition to the Business Combination, there are related matters that we are asking you to approve. This proxy statement and its Annexes contain important information about the proposed Business Combination 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.

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: When and where is the Special Meeting?

A: The Special Meeting will be held on [●], 2019 at 10:00 a.m., local time, at our offices, located at 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303.

Q: What are the specific proposals on which I am being asked to vote at the Special Meeting?

A: You are being asked to approve the following proposals:

 

1.

Business Combination Proposal—To adopt the Stock Purchase Agreement and approve the Business Combination, including the Issuances (Proposal No. 1);

 

2.

Charter Amendment Proposals—To amend our Charter to:

 

   

provide for the classification of our Board into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 2); and

 

   

provide for certain additional changes, including, but not limited to, changing the post-combination company’s corporate name from “GigCapital, Inc.” to “Kaleyra, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (Proposal No. 3);

 

10


Table of Contents
3.

Director Election Proposal—To elect, effective at the Closing, six directors to serve staggered terms on our Board until the 2020, 2021 and 2022 annual meeting of stockholders, respectively, and until their respective successors are duly elected and qualified or until they resign or are otherwise removed (Proposal No. 4);

 

4.

Incentive Plan Proposal—To approve the Kaleyra, Inc. 2019 Incentive Plan, including the authorization of the initial share reserve under the Kaleyra, Inc. 2019 Incentive Plan (Proposal No. 5); and

 

5.

Adjournment Proposal—To approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Charter Amendment Proposals. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal and the Charter Amendment Proposals. (Proposal No. 6).

Q: Are the proposals conditioned on one another?

A: Yes. The Business Combination is conditioned on the approval of the Business Combination Proposal and the Charter Amendment Proposals at the Special Meeting. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal and the Charter Amendment Proposals. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement. It is important for you to note that in the event that the Business Combination Proposal and the Charter Amendment Proposals do not receive the requisite vote for approval, then we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by December 12, 2019, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.

Q: Why are we providing stockholders with the opportunity to vote on the Business Combination?

A: We are seeking approval of the Stock Purchase Agreement, including the Issuances, for purposes of complying with applicable NYSE listing rules requiring that our initial business combination occurs with one or more target businesses that together have a fair market value of at least 80% of our assets held in the Trust Account (excluding taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial business combination. Under our Charter, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. We have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than a tender offer.

Q: How will Kaleyra be acquired in the Business Combination?

A: Pursuant to the Stock Purchase Agreement, and upon the terms and subject to the conditions set forth therein, the Company will acquire all issued and outstanding Ordinary Shares of Kaleyra from the Sellers.

Q: Following the Business Combination, will our securities continue to trade on a stock exchange?

A: Yes. We intend to apply to continue the listing of our Common Stock and warrants on the NYSE under the symbols “KLR” and “KLR WS”, respectively, upon the Closing.

Q: Will the rights convert upon the Closing of the Business Combination?

A: Yes. Each holder of a right will receive one-tenth of one share of Company Common Stock upon consummation of the Business Combination, even if the holder of such right redeems all shares of Company Common Stock held by it in connection with the initial business combination. No additional consideration will be required to be paid by a holder of rights in order to receive its additional shares upon consummation of the Business Combination, as the consideration related thereto has been included in the unit purchase price paid for by investors in the Company’s IPO.

 

11


Table of Contents

Q: What is the Rights Tender Offer?

A: We have commenced the Rights Tender Offer to purchase up to 14,873,256 of our rights (constituting all of our public rights and rights included in the units purchase in the private placement prior to our IPO) at a purchase price of $0.99 per right, subject to certain conditions as further described in this proxy statement. The Rights Tender Offer will provide holders of public rights who may not wish to retain shares of Common Stock into which the public rights convert following the Business Combination the possibility of receiving cash for their public rights in connection with the closing of the Business Combination. The Rights Tender Offer will expire one minute after 11:59 p.m., New York City time, on the day of the Special Meeting. We have also separately entered into Forward Share Purchase Agreements with each of Greenhaven and KAF with respect to the rights currently held by each of them and any Additional Rights they may acquire prior to the closing of the Business Combination. After we announced our intent to commence the Rights Tender Offer, Greenhaven and KAF informed us that neither desired to receive cash for their public rights in connection with the closing of the Business Combination, and that they were each willing to let the shares of Common Stock into which their public rights convert become a part of the public float of the post-combination company provided that they received an option to be able in the future to sell such shares to us. Because we believe that a larger public float at the time of the closing of the Business Combination is of benefit, including because it assists the Company satisfy the listing requirements of the NYSE, we agreed to engage in transactions with each of Greenhaven and KAF. Pursuant to the Forward Share Purchase Agreements, each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the Rights Tender Offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us at prices that reflect the risk that they are each bearing by not participating in the Rights Tender Offer and instead allowing the shares that they each hold to become a part of the public float of the post-combination company at the time of the closing of the Business Combination. We may enter into similar agreements with other right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in response to the Rights Tender Offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the Rights Tender Offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the Rights Tender Offer.

Q: How has the announcement of the Business Combination affected the trading price of our Common Stock?

A: On February 25, 2019, the trading date immediately prior to the public announcement of the Business Combination, our Common Stock, public warrants, public units and public rights closed at $10.15, $10.56, $0.2299 and $0.20, respectively. On [●], 2019, our Common Stock, public warrants, public units and public rights closed at $[●], $[●], $[●] and $[●], respectively.

 

12


Table of Contents

Q: Is the Business Combination the first step in a “going private” transaction?

A: No. We do not intend for the Business Combination to be the first step in a “going private” transaction. One of the primary purposes of the Business Combination is to provide a platform for Kaleyra to access the U.S. public markets.

Q: Will the management and board of directors of Kaleyra change in the Business Combination?

A: We anticipate that all of the executive officers of Kaleyra will remain with the post-combination company. Upon completion of the Business Combination, Dr. Katz will continue as the chairman of the board of the directors of the post-combination company; our current directors will resign from our Board (other than Dr. Katz, and Messrs. Miotto and Mikulsky) and Messrs. Dario Calogero, Simone Fubini, Matteo Lodrini and an additional director unanimously approved by each of the foregoing, who is qualified as an independent director under NYSE rules, will comprise the board of directors for the post-combination company.

Q: What percentage of the outstanding Common Stock will our current stockholders and the Sellers hold in the post-combination company immediately after the Closing?

A: It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders will own approximately 40.46% of the post-combination company’s outstanding Common Stock; (ii) our Initial Stockholders will own approximately 19.31% of the post-combination company’s outstanding Common Stock and (iii) the Sellers will own approximately 40.23% of the post-combination company’s outstanding Common Stock. These ownership percentages assume that (a) there are no additional redemptions of the Offering Shares by the Company’s public stockholders other than those that have already occurred on June 5, 2019, (b) no further 8,616,819 shares of Common Stock are issued to the Sellers at Closing and (c) the Company does not issue any additional shares of Common Stock between the date of the Stock Purchase Agreement and the Closing Date. The above-stated ownership percentages with respect to the post-combination company do not take into account: (a) warrants that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares under the Kaleyra, Inc. 2019 Incentive Plan, a copy of which is attached to this proxy statement as Annex D, including up to 1,290,909 restricted stock units to be awarded to service providers of Kaleyra following the Business Combination pursuant to the terms of the Stock Purchase Agreement or (c) the conversion of 3,199,109 public rights into 319,911 shares of Common Stock which are subject to the Rights Tender Offer, but do take into account the conversion of 498,256 private placement rights into 49,826 shares of Common Stock upon the completion of the Business Combination, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer. If the actual facts are different than these assumptions (which they are likely to be), the ownership percentage retained by the public stockholders in the post-combination company will be different from the above-stated ownership percentage.

The following table illustrates varying ownership levels in the post-combination company’s outstanding Common Stock, assuming varying levels of redemptions by the public stockholders:(1)

 

     No Additional
Redemptions
    Maximum
Redemptions
 

The public stockholders

     40.46     27.10

Initial Stockholders

     19.31     22.31

The Sellers

     40.23     50.59

Total

     100.00     100.00

 

(1)

This table, other than the maximum redemption scenario wherein all of our currently outstanding public shares other than the 3,908,705 public shares that are the subject of the non-binding letters of intent with Yakira, Giazer and Nomura are redeemed, reflects the assumptions as set forth in the preceding paragraph.

 

13


Table of Contents

For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float” and “Unaudited Pro Forma Condensed Combined Financial Information.

Q: Will we obtain new financing in connection with the Business Combination?

A: Although there is not a need to raise capital in order to consummate the Business Combination, the Company may choose to either raise equity in conjunction with the consummation of the Business Combination or have the post-combination company increase its borrowing capacity to provide it with additional liquidity in order to help it drive growth.

Q: What conditions must be satisfied to complete the Business Combination?

A: There are a number of closing conditions in the Stock Purchase Agreement, including the approval by our stockholders of the Business Combination Proposal and the Charter Amendment Proposals. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement.”

Q: Are there any arrangements to help ensure that we will have sufficient funds to fund the cash portion of the purchase price?

A: In the event that the Redemption Percentage equals or exceeds 87.5% of the Offering Shares, there will be no Cash Consideration paid to Esse Effe and Maya, and these two Sellers will instead be issued Notes with an aggregate Note Principal Amount of $15,000,000.

Q: Why are we proposing the Director Election Proposal?

A: Upon the Closing, all of our incumbent directors will resign. Our Board has nominated Simone Fubini and John Mikulsky to serve as Class I directors for a term expiring at the Company’s annual meeting in 2020, Neil Miotto and Matteo Lodrini to serve as Class II directors for a term expiring at the Company’s annual meeting in 2021 and Avi Katz and Dario Calogero to serve as Class III directors for a term expiring at the Company’s annual meeting in 2022. See the section entitled “Proposal 4—Election of Directors” for additional information. Unless waived by Kaleyra, the Sellers and the Company, approval of the Director Election Proposal is a condition to the consummation of the Business Combination pursuant to the Stock Purchase Agreement.

Q: Why are we proposing the Charter Amendment Proposals?

A: The proposed second amended and restated certificate of incorporation that we are asking our stockholders to approve in connection with the Business Combination provides for: (i) the classification of our Board into three separate classes; and (ii) certain additional changes, including changing the post-combination company’s corporate name from “GigCapital, Inc.” to “Kaleyra, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company. Pursuant to Delaware law and the Stock Purchase Agreement, we are required to submit the Charter Amendment Proposals to the Company’s stockholders for approval. For additional information please see the sections entitled “Proposal No. 2—Classification of the Board of Directors” and “Proposal No. 3—Approval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combination” for more information.

Q: Why are we proposing the Incentive Plan Proposal?

A: The purpose of the Kaleyra, Inc. 2019 Incentive Plan is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the post-combination company. Please see the section entitled “Proposal No. 5—Approval of the Kaleyra, Inc. 2019 Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan” for additional information.

 

14


Table of Contents

Q: Why are we proposing the Adjournment Proposal?

A: We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Charter Amendment Proposals, but no other proposal if the Business Combination Proposal and the Charter Amendment Proposals are approved. Please see the section entitled “Proposal No. 6—The Adjournment Proposal” for additional information.

Q: What happens if you sell your shares of Common Stock before the Special Meeting?

A: The record date for the Special Meeting is earlier than the date of the Special Meeting. If you transfer your shares of 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 able to seek redemption of your shares of Common Stock because you will no longer be able to deliver them two business days prior to the Special Meeting. If you transfer your shares of Common Stock prior to the record date, you will have no right to vote those shares at the Special Meeting. Regardless of whether you transfer your shares of Common Stock before or after the Record Date, your transferee will be entitled to exercise Redemption Rights with respect to the shares purchased by following the procedures set forth in this proxy statement.

Q: What vote is required to approve the proposals presented at the Special Meeting?

A: The approval of the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. In order to establish a quorum for purposes of the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal, holders of at least a majority of the outstanding shares of Common Stock entitled to vote as of the record date must be present at the Special Meeting in person or by proxy. Accordingly, your failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Approval of the Director Election Proposal requires the affirmative vote of the holders of a plurality of the shares of our common stock represented in person or by proxy and entitled to vote thereon at the special meeting. The approval of the Charter Amendment Proposals requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, your failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to any of the Charter Amendment Proposals will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

Q: What happens if the Business Combination Proposal is not approved?

A: If the Business Combination Proposal is not approved and we do not consummate a business combination by December 12, 2019, we will be required to dissolve and liquidate our Trust Account.

Q: May the Company, the Founders or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?

A: In connection with the stockholder vote to approve the proposed Business Combination, our Founders, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares of Common Stock from public stockholders who would have otherwise elected to have such 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 our directors or officers 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

 

15


Table of Contents

under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling 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, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Founders, directors or officers 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 below or in excess of the per-share pro rata portion of the Trust Account. Other than units acquired in the private placement, a portion of which were acquired after the IPO, none of our Founders, directors or officers has purchased any shares of our Common Stock after our IPO and, as of the date of this proxy statement, neither we nor our Founders, directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination.

Q: How many votes do you have at the Special Meeting?

A: Each stockholder is entitled to one vote on each proposal presented at the Special Meeting for each share of Common Stock held of record by such stockholder as of [●], 2019, the record date for the Special Meeting. As of the close of business on the record date, there were [●] outstanding shares of our Common Stock.

Q: What constitutes a quorum at the Special Meeting?

A: A majority of the issued and outstanding shares of Common Stock entitled to vote as of the record date, present in person or represented by proxy, constitutes a quorum for purposes of conducting business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting, 5,818,272 shares of our Common Stock would be required to achieve a quorum, and as of such date, our Initial Stockholders, owned 4,087,006 shares of Common Stock, which will count towards this quorum.

Q: How will our Initial Stockholders, directors and officers vote?

A: Prior to our IPO, we entered into agreements with our Initial Stockholders, pursuant to which each Initial Stockholder agreed to vote any shares of Common Stock owned by them in favor of the Business Combination Proposal. Currently, our Initial Stockholders own 35.12% of our issued and outstanding shares of Common Stock, and will be able to vote all such shares at the Special Meeting.

Q: What interests do our Founders and our current officers and directors have in the Business Combination?

A: Our Founders and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include but are not limited to:

 

   

the fact that our Initial Stockholders cannot redeem any of the shares of Common Stock that they hold in connection with a stockholder vote to approve a proposed initial business combination and such Initial Stockholders will lose their entire investment in us if an initial business combination is not consummated by December 12, 2019;

 

   

the fact that our Founders paid an aggregate of $5,007,560 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at $40,270,060 (based upon a $10.00 per share price for our Common Stock);

 

   

the fact that our Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their shares of Common Stock that they hold (other than any public

 

16


Table of Contents
 

shares, in the case of Cowen Investments) if we fail to complete an initial business combination by December 12, 2019;

 

   

the fact that our Founders paid an aggregate of $4,982,560 for their 498,256 private placement units, including the rights and warrants that are a constituent part of the private placement units, and that such private placement units will be worthless if a business combination is not consummated by December 12, 2019;

 

   

the continued right of our Founders to hold our Common Stock and the shares of Common Stock to be issued to our Founders upon conversion of the rights and exercise of their private placement warrants following the Business Combination, subject to certain vesting restrictions and lock-up periods;

 

   

that fact that our 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) $10.00 per public share; or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, 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 the IPO against certain liabilities, including liabilities under the Securities Act;

 

   

the anticipated continuation of certain members of our Board as directors of the post-combination company; and

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination.

These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination. See the sections entitled “Proposal No. 1—Approval of the Business Combination—Interests of Certain Persons in the Business Combination” and “Information about the Company Prior to the Business Combination—Conflicts of Interest” for a complete description of such interests.

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

A: If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the affirmative vote of holders of a majority of the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting, then the Business Combination Proposal will be approved and, assuming the approval of the Charter Amendment Proposals and the satisfaction or waiver of the other conditions to Closing, the Business Combination will be consummated in accordance with the terms of the Stock Purchase Agreement.

If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting, then unless the Adjournment Proposal is approved, the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination, we may try to complete a business combination with a different target business until December 12, 2019. If we fail to complete an initial business combination by December 12, 2019, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.

Q: Do you have Redemption Rights?

A: If you are a holder of public shares, you may redeem your public shares for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust

 

17


Table of Contents

Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes paid and payable and amounts previously redeemed), by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any shares of Common Stock issued in the IPO to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. 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 13d-3 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the public shares. Holders of our outstanding public warrants or rights do not have Redemption Rights in connection with the Business Combination. We have commenced the Rights Tender Offer to purchase up to 14,873,256 of our rights (constituting all of our public rights and rights included in the units purchase in the private placement prior to our IPO) at a purchase price of $0.99 per right, subject to certain conditions as further described in this proxy statement. The Rights Tender Offer will expire one minute after 11:59 p.m., New York City time, on the day of the Special Meeting. However, we have also entered into Forward Share Purchase Agreements with each of Greenhaven and KAF with respect to the rights currently held by each of them and any Additional Rights they may acquire prior to the closing of the Business Combination. Each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the Rights Tender Offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us. We may enter into similar agreements with other right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in response to the Rights Tender Offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the Rights Tender Offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the Rights Tender Offer. Our Initial Stockholders have agreed to waive their Redemption Rights with respect to any shares of our Common Stock they may hold (other than any public shares, in the case of Cowen Investments) in connection with the consummation of the Business Combination, and the Founder Shares and Insider Shares will be excluded from the pro rata calculation used to determine the per-share redemption price. For illustrative purposes, based on the fair value of marketable securities held in the Trust Account of approximately $[●] as of [●], 2019, the estimated per share redemption price would have been approximately $[●] on such date. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination 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 paid payable and amounts previously redeemed) in connection with the liquidation of the Trust Account, unless we complete an alternative business combination prior to December 12, 2019. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

 

18


Table of Contents

Q: If you are a Company public warrant holder, can you exercise Redemption Rights with respect to your public warrants?

A: No. The holders of our public warrants have no Redemption Rights with respect to such public warrants.

Q: If you are a Company rights holder, can you exercise Redemption Rights with respect to your rights?

A: No. The holders of our rights have no Redemption Rights with respect to such rights. However, holders of our public rights may participate in the Rights Tender Offer.

Q: Can the Initial Stockholders redeem their Founder Shares or Insider Shares in connection with consummation of the Business Combination?

A: No. Our Initial Stockholders have agreed to waive their Redemption Rights with respect to any shares of Common Stock (that they may hold other than any public shares, in the case of Cowen Investments) in connection with the consummation of our Business Combination, which shares represent, in the aggregate, approximately 35.12% of our outstanding shares of Common Stock.

Q: Why is the Company giving certain stockholders the ability to sell their shares to the Company in the future at a price per share that is higher than the redemption price paid upon the exercise of Redemption Rights?

A: To assist the Company satisfy the listing requirements of the NYSE that the Company maintain a sufficient public float, and to preserve the possibility that cash currently held in the Trust Account for certain of the public shares could in the future become available to the post-combination company, we entered into non-binding letters of intent with Yakira, Glazer and Nomura that provide that they each would not redeem public shares that they each hold in connection with the Business Combination, and would instead either hold such public shares for a period of time following the consummation of the Business Combination, and at the end of such time period they will each have the right at their option to sell such public shares to the post-combination company, or during such time period each of them will sell such public shares in the market at a price of at least $10.50 per share. Following the closing of the Business Combination, we will either deposit into escrow accounts, in the case of Yakira or Glazer, the aggregate cash amount necessary to purchase the shares, or, in the case of Nomura, we will transfer from the Trust Account an amount of cash equal to (a) the aggregate number of shares held by Nomura multiplied by (b) the per share redemption amount for our shares of Common Stock. As a result, these amounts will not be available to the post-combination company unless and until any of Yakira, Glazer or Nomura sell such shares in the market. In addition, if Yakira or Glazer sell shares to the post-combination company, the per share price shall be equal to (a) the per share redemption amount for our shares of Common Stock, plus (b) $0.03 per share for each month following the Business Combination that Yakira or Glazer has held the shares. Furthermore, if Nomura sells shares to the post-combination company, Nomura will keep that portion of the cash transferred to it following the closing of the Business Combination attributable to such shares sold to the post-combination company, plus an accrual amount equal to the per share redemption amount multiplied by 2.75% per annum if the shares are sold to the post-combination company at the end of one year following the Business Combination, or 3.50% per annum if the shares are sold to the post-combination company at the end of two years following the Business Combination. Although the amounts that would be paid to each of Yakira, Glazer or Nomura, if any of them exercise their option to in the future sell the shares to the post-combination company are higher than the redemption price paid upon the exercise of the Redemption Rights, the amounts being paid to each of Yakira, Glazer and Nomura each reflect the risk that they are each bearing by agreeing not to redeem their shares in conjunction with the Business Combination and to instead hold such shares for a longer period of time. The Company is in the process of negotiating binding forward share purchase agreements with each of Yakira, Glazer and Nomura to reflect the terms described above and expects that those will be finalized prior to the Special Meeting.

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

A: Yes. 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 13d-3 of the Exchange Act), is

 

19


Table of Contents

restricted from seeking Redemption Rights with respect to more than an aggregate of 15% of the outstanding public shares. Accordingly, all shares in excess of the foregoing 15% threshold owned by such stockholder or group will not be redeemed for cash. On the other hand, a public stockholder or group that holds less than the foregoing 15% threshold may redeem all of the public shares held by such stockholder for cash.

In no event is your ability to vote all of your shares (including those shares held by you in excess of the foregoing 15% threshold) for or against the Business Combination Proposal or any other proposal described in this proxy statement restricted.

Q: Is there a limit on the total number of shares that may be redeemed?

A: Yes. Our Charter provides that we may not redeem our public shares in an amount that would cause our net tangible assets to be less than $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Stock Purchase Agreement. Other than this limitation and the 15% threshold mentioned in the preceding question and answer, our Charter does not provide a specified maximum redemption threshold.

Q: Will how you vote affect your ability to exercise Redemption Rights?

A: No. You may exercise your Redemption Rights regardless of whether, or how, you vote on the Business Combination. As a result, the Stock Purchase Agreement 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 in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of NYSE.

Q: How do you exercise your Redemption Rights?

A: In order to exercise your Redemption Rights you must (i) if you hold public units, separate the underlying public shares and public warrants, and (ii) prior to 5:00 p.m., Eastern time, on [●], 2019 (two business days before the Special Meeting), tender your public shares physically or electronically and submit a request in writing that we redeem your public shares for cash to Continental Stock Transfer & Trust Company, our Transfer Agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street - 30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

You must also affirmatively certify in your request to Continental Stock Transfer & Trust Company for redemption if you “ARE” or “ARE NOT’ acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of Common Stock. Notwithstanding the foregoing, a holder of public shares, 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 13d-3 of the Exchange Act) will be restricted from seeking Redemption Rights with respect to more than 15% of the public shares, which we refer to as the “15% threshold.” Accordingly, all public shares in excess of the 15% threshold beneficially owned by a public stockholder or “group” (as defined in Section 13d-3 of the Exchange Act) will not be redeemed for cash.

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 and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the Transfer Agent. However, we do 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.

 

20


Table of Contents

Stockholders seeking to exercise their Redemption Rights, whether they are record holders or hold their shares in “street name”, are required to either tender their certificates to our Transfer Agent prior to the date that is two business days prior to the Special Meeting, or to deliver their shares to the Transfer Agent electronically using Depository Trust Company’s (“DTC”) Deposit/Withdrawal At Custodian (“DWAC”) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise Redemption Rights to tender their shares, as the need to deliver shares is a requirement to exercising Redemption Rights, regardless of the timing of when such delivery must be effectuated.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests (and submitting shares to the Transfer Agent) and thereafter, with our consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to our Transfer Agent and decide within the required timeframe not to exercise your Redemption Rights, you may request that our Transfer Agent return the shares (physically or electronically). You may make such request by contacting our Transfer Agent at the address listed under the question “Who can help answer my questions?” below.

Q: What are the U.S. federal income tax consequences of exercising your Redemption Rights?

A: Whether the redemption is subject to U.S. federal income tax depends on the particular facts and circumstances. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—United States Federal Income Tax Considerations for Stockholders Exercising Redemption Rights.” We urge you to consult your tax advisors regarding the tax consequences of exercising your Redemption Rights.

Q: Do you have appraisal rights if you object to the Business Combination?

A: No. Appraisal rights are not available to holders of our Common Stock in connection with the Business Combination.

Q: What happens to the funds held in the Trust Account upon consummation of the Business Combination?

A: If the Business Combination is consummated, the funds held in the Trust Account will be used to: (i) pay Company stockholders who properly exercise their Redemption Rights; (ii) pay the Cash Consideration payable to Seller pursuant to the Stock Purchase Agreement; (iii) pay the Company’s public rights holders who properly tender their rights pursuant to the Rights Tender Offer; (iv) pay Transaction Expenses; (v) repay certain outstanding indebtedness of Kaleyra, if any; and (vi) pay for the operating and other expenses of the post-combination company.

Q: What happens if the Business Combination is not consummated?

A: There are certain circumstances under which the Stock Purchase Agreement may be terminated. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Termination” for information regarding the parties’ specific termination rights.

If we do not consummate the Business Combination, we may try to complete a business combination with a different target business until December 12, 2019. If we fail to complete an initial business combination by December 12, 2019, then we will: (i) cease all operations, except for the purpose of winding up; (ii) as promptly as reasonably possible, but not more than ten business days thereafter, redeem our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest

 

21


Table of Contents

(which interest shall be net of taxes paid and payable and amounts previously redeemed, and less up to $100,000 of interest to pay dissolution expenses) divided by the number of then outstanding public shares, which redemption will completely extinguish our public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk Factors—Risks Related to the Company and the Business Combination.”

Holders of our Founder Shares and Insider Shares have waived any right to any liquidation distribution with respect to such Founder Shares and Insider Shares. In addition, if we fail to complete a business combination by December 12, 2019, there will be no Redemption Rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.

Q: When is the Business Combination expected to be completed?

A: The Closing is expected to take place on or prior to the second business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1—Approval of the Business Combination—Conditions to Closing of the Business Combination.” The Closing is expected to occur in the second half of 2019. Pursuant to Amendment No. 1 to the Stock Purchase Agreement, the Stock Purchase Agreement may be terminated by the Company or the Sellers holding a majority of the Ordinary Shares if the Closing has not occurred by December 12, 2019, provided that such right to terminate shall not be available to any party whose breach of a representation or warranty or covenant made under the Stock Purchase Agreement by such party results in the Closing not having occurred on or before December 12, 2019.

For a description of the conditions to the completion of the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—Conditions to Closing of the Business Combination.”

Q: What do you 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 Business Combination will affect you as a stockholder. You should then vote 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: Who can vote at the special meeting?

A: Only holders of record of the Company’s common stock, including those shares held as a constituent part of our units, at the close of business on [●], 2019 are entitled to have their vote counted at the special meeting and any adjournments or postponements thereof. On this record date, 11,636,542 shares of common stock were outstanding and entitled to vote.

Stockholder of Record: Shares Registered in Your Name. If on the record date your shares or units were registered directly in your name with the Company’s transfer agent, Continental Stock Transfer & Trust Company, then you are a stockholder of record. As a stockholder of record, you may vote in person at the special meeting or vote by proxy. Whether or not you plan to attend the special meeting in person, the Company urges you to fill out and return the enclosed proxy card to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank. If on the record date your shares or units were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar

 

22


Table of Contents

organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the special meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the special meeting unless you request and obtain a valid proxy from your broker or other agent.

Q: How do you vote?

A: If you were a holder of record of our Common Stock on [●], 2019, the record date for the Special Meeting, you may vote with respect to the proposals in person at the Special Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. 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 follow the instructions provided by 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, you will need to bring to the Special Meeting a legal proxy from your broker, bank or nominee authorizing you to vote these shares.

Voting by Mail. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Votes submitted by mail must be received by 10:00 a.m., eastern time, on [●], 2019.

Voting in Person at the Meeting. If you attend the Special Meeting and plan to vote in person, we will provide you with a ballot at the Special Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Special Meeting. For additional information, please see the section entitled “Special Meeting of Company Stockholders” beginning on page 107 of this proxy statement.

Q: What will happen if you abstain from voting or fail to vote at the Special Meeting?

A: At the Special Meeting, we 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, a failure to vote or an abstention will have the same effect as a vote “AGAINST” the Charter Amendment Proposals, while only an abstention (and not a failure to vote) will have the same effect as a vote “AGAINST” the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal. For purposes of approval, failure to vote will have no effect on the Director Election Proposal.

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

A: Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

Q: If you are not going to attend the Special Meeting in person, should you return your proxy card instead?

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

 

23


Table of Contents

Q: If your shares are held in “street name,” will your broker, bank or nominee automatically vote your 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. We believe the proposals presented to the stockholders at this Special Meeting will be considered non-discretionary and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting. If you do not provide instructions with your proxy, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes 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, bank or other nominee to vote your shares in accordance with directions you provide.

Q: May you change your vote after you have mailed your signed proxy card?

A: Yes. You may change your vote by sending a later-dated, signed proxy card to our Secretary at the address listed below so that it is received by our 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 our Secretary, which must be received by our Secretary prior to the Special Meeting.

Q: What should you do if you 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 for the Special Meeting?

A: We will pay the cost of soliciting proxies for the Special Meeting. We have engaged MacKenzie to assist in the solicitation of proxies for the Special Meeting. We have agreed to pay MacKenzie a fee of $9,000, plus disbursements, and will reimburse MacKenzie for its reasonable out-of-pocket expenses and indemnify MacKenzie and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of our Common Stock for their expenses in forwarding soliciting materials to beneficial owners of our Common Stock and in obtaining voting instructions from those owners. Our 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: 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:

c/o GigCapital, Inc.

2479 E. Bayshore Rd., Suite 200

Palo Alto, CA 94303

Attention: Secretary

Telephone: (650) 276-7040

 

24


Table of Contents

You may also contact our proxy solicitor at:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

Telephone: (212) 929-5500 (Call Collect)

or

Call Toll-Free: (800) 322-2885

E-mail: proxy@mackenziepartners.com

To obtain timely delivery, our 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 our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my Redemption Rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:

Continental Stock Transfer & Trust Company

1 State Street-30th Floor

New York, New York 10004

Attention: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

25


Table of Contents

SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information contained in this proxy statement and does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the Annexes and accompanying financial statements of the Company and Kaleyra, to fully understand the proposed Business Combination (as described below) before voting on the proposals to be considered at the Special Meeting (as described below). Please see the section entitled “Where You Can Find More Information” beginning on page 271 of this proxy statement.

Unless otherwise specified, all share calculations assume (i) there are no additional redemptions other than those that have already occurred on June 5, 2019, which means that the exercise of Redemption Rights by the Company’s public stockholders of less than 50% of the Offering Shares, (ii) no inclusion of any shares of Common Stock issuable upon the exercise of the Company’s warrants, (iii) 8,616,819 shares of Common Stock are issued to the Sellers at Closing, (iv) the Company does not issue any additional Common Stock between the date of the Stock Purchase Agreement and the Closing Date, (vi) no issuance of any shares under the Kaleyra, Inc. 2019 Incentive Plan, (vii) the acceptance for cancellation of 3,199,109 public rights in the Rights Tender Offer at a purchase price of $0.99 per right and (viii) conversion of 498,256 private placement rights and 11,175,891 public rights into 1,167,415 shares of Common Stock upon completion of the Business Combination, the holders of which have agreed not to tender such rights in response to the Rights Tender Offer.

Parties to the Business Combination

The Company

The Company is a Private-to-Public Equity (PPE) company, also known as a blank check company or a special purpose acquisition company, incorporated on October 9, 2017, as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The public units began trading on the NYSE under the symbol “GIG.U” on December 8, 2017. On January 16, 2018, the Company announced that the holders of the Company’s units may elect to separately trade the securities underlying such units. On January 17, 2018, the shares, warrants and rights began trading on the NYSE under the symbols “GIG”, “GIG.WS” and “GIG.RT” respectively. We intend to apply to continue the listing of our publicly-traded common stock and warrants on NYSE under the symbols “KLR” and “KLR WS” respectively, upon the Closing.

The mailing address of the Company’s principal executive office is c/o GigCapital, Inc., 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303.

Sellers

The Sellers are Esse Effe, Maya, Hong Kong Permanent Shine Limited, a company formed under the laws of Hong Kong, Ipai Terry Hsiao, Giacomo Dall’Aglio, Alex Milani, Luca Giardina Papa, Filippo Monastra, Matteo Castelucci, Kirk Tsai, Justyna Miziolek, Erjon Metko, Claudio Ippolito, Andrea Riccardi, and Francesco Vizzone.

Kaleyra

Kaleyra is a CPaaS company that provides its customers with a trusted cloud communications platform (the “Platform”) that seamlessly integrates software services and applications for business-to-consumer



 

26


Table of Contents

communications between Kaleyra’s customers and their end-user customers and partners on a global basis. The demand for cloud communications is increasingly driven by the growing, and often mandated, need for enterprises to undertake a digital transformation that includes omni-channel, mobile first interactive end-user customer communications. This complements new workflows that Kaleyra’s customers have developed which are driven by software and artificial intelligence to automate certain end-user customer-facing processes before, during and after transactions. These communications are increasingly managed through mobile network operators as the gateway to reach end-user consumers’ mobile devices. Kaleyra’s Platform enables these communications by integrating mobile alert notifications and interactive capabilities to reach and engage end user customers.

Kaleyra’s vision is to be the CPaaS provider which best aligns with its customers’ communication requirements, or the most trusted provider, in the world. This requires a combination of security, compliance and integration capabilities that protects the integrity and privacy of Kaleyra’s customers’ transactions and includes other key features such as ease of provisioning, reliable network connectivity, high availability for scaling, redundancy, embedded regulatory compliance, configurable monitoring and reporting. Kaleyra believes the percentage of CPaaS customers that will require high levels of security, compliance and ease of integration will represent an increasingly larger portion of the market, better enabling Kaleyra to set itself apart from its competition.

For more information about Kaleyra, please see the sections entitled “Information About Kaleyra,” “Kaleyra’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management After the Business Combination.”

The Business Combination Proposal

On February 22, 2019, the Company entered into the Stock Purchase Agreement, by and among the Company, Kaleyra, Sellers’ Representative, and each of the Sellers. The Stock Purchase Agreement provides that, among other things, the Company will acquire outstanding and issued Ordinary Shares of Kaleyra. For more information about the transactions contemplated in the Stock Purchase Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination” beginning on page 115 of this proxy statement. Copies of the Stock Purchase Agreement and Amendment No. 1 to the Stock Purchase Agreement are attached to this proxy statement as Annex A and Annex B, respectively.

Consideration to the Sellers in the Business Combination

Pursuant to the Stock Purchase Agreement, the Sellers will sell, transfer, assign, convey and deliver to the Company all of the outstanding Ordinary Shares of Kaleyra. In accordance with, and subject to the Stock Purchase Agreement, each Seller will be entitled to receive his, her or its share, as specified in the Stock Purchase Agreement, of the Aggregate Closing Consideration, in addition to a contingent right to receive the Earn-Out Shares. The Aggregate Closing Consideration shall consist of a combination of Cash Consideration, Common Stock Consideration and the Notes for the Note Principal Amount. Each of Esse Effe and Maya will receive its portion of the Aggregate Closing Consideration in the form of a combination of Common Stock Consideration, Cash Consideration and Notes. Each of the other Company Stockholders will receive his, her or its portion of the Aggregate Closing Consideration solely in the form of Common Stock Consideration. The aggregate value of each component of the Aggregate Closing Consideration will be determined by the amount of the Redemption Percentage pursuant to the Redemption Rights (as defined our Charter) and Article IX of our Charter. The Stock Purchase Agreement apportions each component of the Aggregate Closing Consideration according to five Redemption Ranges, which Redemption Ranges were determined during arms’ length negotiation of the Stock Purchase Agreement, as further described in the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Background of the Business



 

27


Table of Contents

Combination.” The Redemption Ranges only apply to Redemption Rights for the public shares and do not take into account the 35.12% of our issued and outstanding shares of Common Stock held by our Initial Stockholders, as our Initial Stockholders have agreed to waive their Redemption Rights with respect to any shares of Common Stock they may hold (other than any public shares, in the case of Cowen Investments) in connection with the consummation of the Business Combination. The Aggregate Closing Consideration for each such Redemption Range, by component of the Aggregate Closing Consideration, is as follows:

 

     Cash Consideration      Common Stock
Consideration

(in shares of the
Company’s Common Stock)
     Note Principal
Amount
 

Redemption Percentage is equal to or greater than 87.5%

   $ 0        10,181,819      $ 15,000,000  

Redemption Percentage is greater than 75.0% but less than 87.5%

   $ 3,750,000        9,781,819      $ 11,250,000  

Redemption Percentage is greater than 62.5% but less than or equal to 75.0%

   $ 7,500,000        9,381,819      $ 7,500,000  

Redemption Percentage is equal to or greater than 50.0% but less than or equal to 62.5%

   $ 11,250,000        8,999,319      $ 3,750,000  

Redemption Percentage is less than 50.0%

   $ 15,000,000        8,616,819      $ 0  

The Common Stock Consideration is subject to the following adjustments:

 

   

(1) If (A) the Debt of Kaleyra and its subsidiaries at the Closing, minus (B) the cash of Kaleyra and its subsidiaries (the “Closing Kaleyra Group Net Debt”) is more than $19,000,000, then the number of shares of Common Stock included in the Common Stock Consideration, as otherwise calculated, will be reduced by (x) such number of shares of Common Stock as is equal to the U.S. dollar amount by which Closing Kaleyra Group Net Debt exceeds $19,000,000 (expressed as a whole number rather than as a currency), divided by (y) 10;

 

   

(2) If the Closing Kaleyra Group Net Debt is less than $17,000,000, the number of shares of Common Stock included in the Common Stock Consideration, as otherwise calculated, shall be increased by such number of shares of Common Stock as is equal to (x) the U.S. dollar amount by which $17,000,000 exceeds the Closing Kaleyra Group Net Debt (expressed as a whole number rather than as a currency), divided by (y) 10; and

 

   

(3) If (A) the Debt of Kaleyra and its subsidiaries at the Closing that is due and payable prior to July 1, 2020, minus (B) the cash of Kaleyra and its subsidiaries (the “Closing Kaleyra Group Net Short-Term Debt”), is greater than $5,000,000, the number of shares of Common Stock included in the Common Stock Consideration, as otherwise adjusted pursuant to (1) or (2) above, shall be reduced by (x) such number of shares of Common Stock as is equal to the dollar amount by which Closing Kaleyra Group Net Short-Term Debt exceeds $5,000,000 (expressed as a whole number rather than as a currency), divided by (y) 10.

Assuming no adjustments are made pursuant to the provisions of the Stock Purchase Agreement described above and a Redemption Percentage of less than 50%, the aggregate consideration payable to the Sellers at Closing would have a value of $103,753,236, based on the closing price of our Common Stock on June 28, 2019, which was $10.30 per share, and is comprised of $15,000,000 of cash, 8,616,819 shares of Common Stock and $0 in aggregate principal amount of the Notes.

Under the Stock Purchase Agreement, the Sellers may be entitled to receive up to an additional 4,292,272 Earn-Out Shares, having an aggregate value of $44,210,402, based on the closing price of our



 

28


Table of Contents

Common Stock on June 28, 2019, if certain targets are met with respect to pro forma revenue of the post-combination company and the Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2019 fiscal year and/or 2020 fiscal year. For more information about the consideration payable to Seller, please see the section entitled “Proposal No. 1—Approval of the Business Combination.”

Related Agreements

Founder Shares Agreement

The Founders entered into the Founder Shares Agreement with the Company, Kaleyra and the Sellers Representative on February 22, 2019 with regard to their Founder Shares.

Pursuant to the terms of the Founder Shares Agreement, each Founder agreed that a portion of the Founder Earn-Out Shares will be forfeited in the event that either the 2019 Earn-Out Shares or the 2020 Earn-Out Shares are not issued in full. The aggregate number of Founder Earn-Out Shares will be determined as follows, based on the applicable Redemption Range:

 

     Redemption Percentage  
     Less than
50.0%
     Equal to or
greater
than 50.0%
but
less than or
equal
to 62.5%
     Greater
than
62.5% but
less
than or
equal to
75.0%
     Greater
than
75.0% but
less
than 87.5%
     Equal to or
greater
than 87.5%
 

Aggregate Founder Earn-Out Shares

     251,686        629,220        1,090,646        1,552,074        2,013,504  

The dates and amount of the lapse of the risk of forfeiture of the Founder Earn-Out Shares are as follows:

 

   

The lapse of the risk of forfeiture of 50% of the Founder Earn-Out Shares (the “2019 Sponsor Earn-Out Shares”) will irrevocably occur if the 2019 Earn-Out Shares are issued by the Company; provided, that the Earn-Out Reduction (as described below) shall also apply to the 2019 Founder Earn-Out Shares (provided that the 2019 Founder Earn-Out Shares shall be finally forfeited to the Company without consideration if it is finally determined that the 2019 Earn-Out Shares are not earned and issuable);

 

   

The lapse of the risk of forfeiture of 50% of the Founder Earn-Out Shares (the “2020 Founder Earn-Out Shares”) will irrevocably occur if the 2020 Earn-Out Shares are issued by the Company; provided, that the Earn-Out Reduction shall also apply to the 2020 Founder Earn-Out Shares (provided that the 2020 Founder Earn-Out Shares shall be finally forfeited to the Company without consideration if it is finally determined that the 2020 Earn-Out Shares are not earned and issuable); and

 

   

For any Founder Earn-Out Shares for which the risk of forfeiture has not yet lapsed, or been forfeited, pursuant to the provisions above, the lapse of the risk of forfeiture shall irrevocably occur if and when any Earn-Out Shares become earned and issuable under the Purchase Agreement due to an Acceleration Event (as described below).

The “Earn-Out Reduction” is as follows: to the extent that the requisite level of Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for a fiscal year for the issuance of the Founder Earn-Out Shares is achieved but the requisite level of revenue is not so achieved, as long as the revenue for such fiscal year is at least 80% of the requisite level of revenue for the issuance of Founder Earn-Out Shares, then the aggregate 2019 Founder Earn-Out Shares or 2020 Founder Earn-Out Shares, as applicable, will be deemed earned and issuable, but in an amount reduced by 0.5% for every 1.0% revenue for such fiscal year is below the revenue target for such fiscal year.



 

29


Table of Contents

An “Acceleration Event” is a (i) a liquidation, dissolution or winding up, or bankruptcy of the post-combination company, or (ii) change of control of the post-combination during the period when Earn-Out Shares and Founder Earn-Out Shares can be earned (the “Earn-Out Period”), and in the event of (ii) the value of the aggregate consideration received by each holder of Company Common Stock with respect to each share of Company Common Stock held by such holder equals at least $10.00 per share of Company Common Stock (subject to appropriate adjustments for stock splits, stock dividends, combinations and other recapitalizations).

In addition, each Founder has irrevocably and unconditionally agreed that, prior to the lapse of the risk of forfeiture of the Founder Earn-Out Shares, such Founder shall not transfer all or any portion of such Founder Earn-Out Shares, other than to a permitted transferee (as described in a letter agreement, dated December 7, 2017, between the Company and Founders, attached as Exhibit 10.1 to the Current Report on Form 8-K as filed with the SEC on December 12, 2017) who enters into a written agreement for the benefit of the parties to the Founder Shares Agreement pursuant to which such permitted transferee agrees to be bound by the provisions of the Founder Shares Agreement provided that, following such transfer, such Founder continues to beneficially own such transferred Founder Earn-Out Shares for all purposes, including voting rights.

Until Founder Earn-Out Shares have either been forfeited or the risk of forfeiture has lapsed, an amount equal to any dividends or distributions that would have been payable by Company to the Founders with respect to their Founder Earn-Out Shares if the risk of forfeiture of the Founder Earn-Out Shares had lapsed prior to the record date for such dividends or distributions shall be withheld by the Company for the benefit of the Founders with respect to the Founder Earn-Out Shares (the “Withheld Amount”). If and when the risk of forfeiture of the Founder Earn-Out Shares lapses, the Company shall release to each Founder, the aggregate amount of the Withheld Amount attributable to such Founder’s Founder Earn-Out Shares for which the risk of forfeiture has lapsed and, if applicable, shall continue to withhold any remaining Withheld Amount that is attributable to the Founder Earn-Out Shares or which the risk of forfeiture has not yet lapsed until such risk of forfeiture has lapsed, in which case such remaining Withheld Amount shall be released to the Founders with respect to their Founder Earn-Out Shares. If all or any portion of the Founder Earn-Out Shares are forfeited to the Company, then the portion of the Withheld Amount attributable to the portion of the Founder Earn-Out Shares that have been forfeited to the Company shall be automatically forfeited to the Company without consideration and with no further action required of any person.

Registration Rights Agreement

On December 7, 2017, the Company and certain holders of Company Common Stock entered into a registration rights agreement (the “Existing Registration Rights Agreement”), a copy of which is attached as Exhibit 10.8 to the Current Report on Form 8-K as filed with the SEC on December 12, 2017. Under the terms of the Stock Purchase Agreement, and upon Closing, the parties to the Existing Registration Rights Agreement will amend and restate the Existing Registration Rights Agreement with the Registration Rights Agreement to add the Sellers who receive shares of securities of the Company. Pursuant to the Registration Rights Agreement, such Sellers and their transferees (if any) will be granted certain rights, including but not limited to, the right to request registration for resale under the Securities Act, of securities of the Company received by Sellers pursuant to the Stock Purchase Agreement, subject to certain conditions set forth in the Registration Rights Agreement. A copy of the Registration Rights Agreement is attached as Exhibit C of Annex A to this proxy statement. For more information, please see “Proposal No. 1—Approval of the Business Combination.—Registration Rights Agreement.”

Kaleyra, Inc. 2019 Incentive Plan

Our Board has approved the Kaleyra, Inc. 2019 Incentive Plan, subject to stockholder approval of the Kaleyra, Inc. 2019 Incentive Plan at the Special Meeting. The Kaleyra, Inc. 2019 Incentive Plan is intended to help the Company (i) attract and retain key personnel by providing them the opportunity to acquire an equity interest in the



 

30


Table of Contents

Company or other incentive compensation measured by reference to the value of Common Stock and (ii) align the interests of key personnel with those of the Company’s stockholders by granting options, stock appreciation rights, restricted stock awards, restricted stock unit awards and/or other stock-based awards consistent with the terms of the Kaleyra, Inc. 2019 Incentive Plan. For more information about the Kaleyra, Inc. 2019 Incentive Plan, please see the section entitled “Proposal No. 5—Approval of the Kaleyra, Inc. 2019 Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan—Summary of the Incentive Plan.”

Redemption Rights

Pursuant to our Charter, as amended, holders of public shares may elect to have their public shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes paid and payable and amounts previously redeemed), by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any public shares to the extent that such redemption would result in the Company having net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of less than $5,000,001. As of [•], 2019, this would have amounted to approximately $[•] per share. Notwithstanding the foregoing, a holder of public shares, together with any affiliate of him or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from seeking Redemption Rights with respect to more than 15% of the public shares.

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 the post-combination company. 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 our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Rights Tender Offer

We have commenced the Rights Tender Offer to purchase up to 14,873,256 of our rights (constituting all of our public rights and rights included in the units purchase in the private placement prior to our IPO) at a purchase price of $0.99 per right, subject to certain conditions as further described in this proxy statement. The Rights Tender Offer will expire one minute after 11:59 p.m., New York City time, on the day of the Special Meeting.

We have also entered into Forward Share Purchase Agreements with each of Greenhaven and KAF with respect to the rights currently held by each of them and any Additional Rights they may acquire prior to the closing of the Business Combination. Each of Greenhaven and KAF have agreed to a “lock-up” which requires each of them to hold, and not to offer, sell, contract to sell, pledge, transfer, assign, or otherwise dispose of, directly or indirectly, or hedge (including any transactions involving any derivative securities of the Company and including any short sales involving any of the Company’s securities), the rights (including any Additional Rights), and any shares of Common Stock that the rights (including any Additional Rights) convert into, until, for Greenhaven, the later of the sixtieth day after the consummation of the Business Combination or January 1, 2020, and for KAF, the earlier of the sixtieth day after the consummation of the Business Combination or February 15, 2020, including not to tender the rights (or any Additional Rights) to the Company in response to the Rights Tender Offer. Notwithstanding the forgoing, Greenhaven and KAF may each after the consummation of the Business Combination sell the shares of Common Stock into which these rights convert at a price of at least $10.50 per share. We have also agreed with each of Greenhaven and KAF that at the expiration of the “lock-up” period, they have the option to sell such shares to us. We may enter into similar agreements with other right holders, including Yakira with whom the non-binding letter of intent provides that it will not deliver its rights in



 

31


Table of Contents

response to the Rights Tender Offer. We are informed that Greenhaven, KAF and Yakira currently hold approximately 11,175,891 rights in the aggregate which they would be prohibited from tendering in response to the Rights Tender Offer. The average price the Company has agreed to pay to such holders for their 1,117,589 shares into which the 11,175,891 rights will convert on a per right pre-conversion basis is approximately $1.06 per right. In addition, in the event that Greenhaven and KAF acquire the maximum number of Additional Rights that we have agreed that could be subject to the Forward Share Purchase Agreements, the sum of such Additional Rights plus such rights as Greenhaven, KAF and Yakira currently hold would result in no rights being tendered in response to the Rights Tender Offer.

Impact of the Business Combination on the Company’s Public Float

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders will own approximately 40.46% of the post-combination company’s outstanding Common Stock; (ii) our Initial Stockholders will own approximately 19.31% of the post-combination company’s outstanding Common Stock and (iii) the Sellers will own approximately 40.23% of the post-combination company’s outstanding Common Stock. These ownership percentages assume that (a) there are no additional redemptions of the Offering Shares by the Company’s public stockholders other than those that have already occurred on June 5, 2019, (b) 8,616,819 shares of Common Stock are issued to the Sellers at Closing, and (c) the Company does not issue any additional shares of Common Stock between the date of the Stock Purchase Agreement and the Closing Date. The above-stated ownership percentages with respect to the post-combination company do not take into account: (a) warrants that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares under the Kaleyra, Inc. 2019 Incentive Plan, a copy of which is attached to this proxy statement as Annex D, including up to 1,290,909 restricted stock units to be awarded to service providers of Kaleyra following the Business Combination pursuant to the terms of the Stock Purchase Agreement or (c) the conversion of 3,199,109 public rights into 319,911 shares of Common Stock which are subject to the Rights Tender Offer, but do take into account the conversion of 498,256 private placement rights into 49,826 shares of Common Stock upon the completion of the Business Combination, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer. If the actual facts are different than these assumptions (which they are likely to be), the ownership percentage retained by the Company’s public stockholders in the post-combination company will be different from the above-stated ownership percentage.

The following table illustrates varying ownership levels in the Company, assuming varying levels of redemptions by the Company’s public stockholders:(1)

 

     No Additional
Redemptions
    Maximum
Redemptions
 

The public stockholders

     40.46     27.10

Initial Stockholders

     19.31     22.31

The Sellers

     40.23     50.59

Total

     100.00     100

 

(1)

This table, other than the maximum redemption scenario wherein all of our currently outstanding public shares other than the 3,908,705 public shares that are the subject of the non-binding letters of intent with Yakira, Glazer and Nomura are redeemed, reflects the assumptions as set forth in the preceding paragraph.

The Charter Amendment Proposals

Upon the Closing, our Charter will be amended promptly to reflect the Charter Amendment Proposals to:

 

   

provide for the classification of our Board into three classes of directors with staggered terms of office and to make certain related changes (Proposal No. 2); and



 

32


Table of Contents
   

provide for certain additional changes, including but not limited to changing the post-combination company’s corporate name from “GigCapital, Inc.” to “Kaleyra, Inc.” and eliminating certain provisions specific to our status as a blank check company, which our Board believes are necessary to adequately address the needs of the post-combination company (Proposal No. 3).

Please see the sections entitled “Proposal No. 2—Classification of the Board of Directors” and “Proposal No. 3—Approval of Additional Amendments to Current Certificate of Incorporation in Connection with the Business Combination” for more information.

The Director Election Proposal

Six directors will be voted upon by our stockholders at the special meeting to serve for staggered terms of three years in three separate classes. All of the Company’s incumbent directors will resign and our Board intends to nominate six directors for election at the special meeting. If all director nominees are elected and the Business Combination is consummated, our board of directors will consist of Dario Calogero, Dr. Avi Katz, Neil Miotto, John Mikulsky, Simone Fubini and Matteo Lodrini. See the sections entitled “Proposal No. 4—Election of Directors” and “Management After the Business Combination.”

Other Proposals

In addition, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve and adopt the Kaleyra, Inc. 2019 Incentive Plan, a copy of which is attached to this proxy statement as Annex C, including the authorization of the initial share reserve under the Kaleyra, Inc. 2019 Incentive Plan (Proposal No. 5); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal and the Charter Amendment Proposals (which proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal and the Charter Amendment Proposals) (Proposal No. 6).

Please see the sections entitled “Proposal No. 5—Approval of the Kaleyra, Inc. 2019 Incentive Plan, Including the Authorization of the Initial Share Reserve under the Incentive Plan” and “Proposal No. 6—The Adjournment Proposal” for more information.

Date, Time and Place of Special Meeting

The Special Meeting will be held on [●], 2019 at 10:00 a.m., local time, at the offices of the Company located at 2479 E. Bayshore Rd., Suite 200, Palo Alto, California 94303, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

Voting Power and Record Date

Only Company stockholders of record at the close of business on [●], 2019, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of 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 11,636,542 shares of Common Stock outstanding and entitled to vote, of which 7,549,536 are public shares and 4,087,006 are Founder Shares and Insider Shares held by our Initial Stockholders.



 

33


Table of Contents

Accounting Treatment

The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, the Company will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on Kaleyra’s operations comprising substantially all of the ongoing operations of the post-combination company, Kaleyra’s senior management comprising substantially all of the senior management of the post-combination company and the existence of a large minority voting interest in the Company. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Kaleyra issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be the historical operations of Kaleyra.

Appraisal Rights

Appraisal rights are not available to our stockholders in connection with the Business Combination.

Proxy Solicitation

Proxies may be solicited by mail. The Company has engaged MacKenzie to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting of Company Stockholders—Revoking Your Proxy.”

Interests of Certain Persons in the Business Combination

In considering the recommendation of the Board to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, the Founders and the existing directors and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. The Board was aware of and considered these interests, among other matters, in evaluating the Business Combination, negotiating the Stock Purchase Agreement and other transaction agreements, and recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination.

These interests include, among other things:

 

   

the fact that our Initial Stockholders cannot redeem any of the shares of Common Stock that they hold in connection with a stockholder vote to approve a proposed initial business combination and such Initial Stockholders will lose their entire investment in us if an initial business combination is not consummated by December 12, 2019;

 

   

the fact that the Founders paid an aggregate of $5,007,560 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at $40,270,060 (based upon a $10.00 per share price for our Common Stock);

 

   

the fact that the Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their shares of Common Stock they hold (other than any public shares, in the case of Cowen Investments) if the Company fails to complete an initial business combination by December 12, 2019;



 

34


Table of Contents
   

the fact that the Founders paid an aggregate of $4,982,560 for their 498,256 private placement units, including the rights and warrants that are a constituent part of the private placement units, and that such private placement units will be worthless if a business combination is not consummated by December 12, 2019;

 

   

the continued right of the Founders to hold our Common Stock and the shares of Common Stock to be issued to such Founders upon conversion of the rights and exercise of their private placement warrants following the Business Combination, subject to certain vesting restrictions and lock-up periods;

 

   

that fact that our 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 the Company has discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (i) $10.00 per public share; or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, 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 the IPO 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, our Sponsor will not be responsible to the extent of any liability for such third party claims. There is no assurance that our Sponsor will be able to satisfy its obligations. The per-share liquidation price for the public shares is anticipated to be approximately $[●] (based on the amount expected to be in trust at the time of the special meeting). Nevertheless, the Company cannot assure you that the per share distribution from the trust account, if the Company liquidates, will not be less than $[●], plus interest, due to unforeseen claims of potential creditors

 

   

the anticipated continuation of certain members of the Board as directors of the post-combination company;

 

   

the continued indemnification of the Company’s existing directors and officers and the continuation of the Company’s directors’ and officers’ liability insurance after the Business Combination; and

 

   

that, at the Closing the Company will amend and restate the Existing Registration Rights Agreement that the Company and certain holders of Common Stock entered into, which provides certain stockholders and their permitted transferees with registration rights.

Reasons for the Approval of the Business Combination

In approving the Stock Purchase Agreement and the Business Combination and recommending that the Company’s stockholders approve the Stock Purchase Agreement and the Business Combination, the Board considered the following positive factors, although not weighted or in any order of significance:

 

   

favorable trends of the CPaaS market;

 

   

analysis of Kaleyra’s market position, technology platform and financial position;

 

   

Kaleyra’s organic and acquisition growth opportunities;

 

   

the role of Kaleyra management and employees ; and

 

   

review of financial models and forecasts and other information made available to us.

In the prospectus for our IPO, we also identified the following general criteria and guidelines that we expected to apply when evaluating any potential acquisition, including analyzing:

 

   

underlying fundamentals of the target business;



 

35


Table of Contents
   

external factors affecting the target business;

 

   

anticipated contribution that our combined team can make to growth of the business; and

 

   

opportunity for superior investment return.

The criteria and situations described above were not intended to be exhaustive and we indicated our evaluation of any particular initial business combination might reflect other considerations, factors and criteria deemed relevant by our management in effecting the relevant transaction, consistent with our business objective and strategy.

For more detailed information about our decision-making process, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Company’s Board of Directors’ Reasons for Approving the Business Combination.”

Conditions to Closing of the Business Combination

Conditions to Each Party’s Obligations

Consummation of the Business Combination is conditioned on the affirmative approval of holders of a majority of the shares of outstanding the Company Common Stock, and the Company having, upon the Closing and after giving effect to any redemption of the Offering Shares, net tangible assets of at least $5,000,001.

In addition, the consummation of the Business Combination is conditioned upon, among other things, (i) all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any governmental authority required to consummate the Business Combination having been filed, expired, been terminated, occurred or been obtained, as applicable, pursuant to applicable law, (ii) there being no temporary restraining order, preliminary or permanent injunction or other order issued by any governmental authority prohibiting or preventing the Business Combination and no proceeding brought by a governmental authority seeking any of the foregoing; and there having been no applicable law enacted, entered, enforced or deemed applicable to the Business Combination which makes the Business Combination illegal, (iii) the required vote of the Company’s stockholders to approve the Stock Purchase Agreement, the ancillary agreements, the issuances of stock and notes and payment of cash, and the other transactions contemplated under the Stock Purchase Agreement have been obtained in accordance the Company’s Charter and the DGCL and (iv) the election or appointment to the Board of Dr. Avi Katz, Neil Miotto, John Mikulsky, Dario Calogero, Simone Fubini, Matteo Lodrini and an additional director unanimously approved by each of the foregoing, who is qualified as an independent director under NYSE rules. Esse Effe and Maya are affiliated with Simone Fubini and Dario Calogero, respectively.

Conditions to the Company’s Obligations

The obligations of the Company to consummate the Transaction are further conditioned upon, among other things:

 

   

The representations and warranties of Kaleyra and the Sellers being true and correct as of February 22, 2019 and (except to the extent such representations and warranties speak as of an earlier date, which representations and warranties shall be true and correct as of such date) as of the Closing Date as though made on and as of the Closing Date, except for any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or material adverse effect), individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Kaleyra and its subsidiaries, taken as a whole;



 

36


Table of Contents
   

Kaleyra performing in all material respects all obligations required to be performed by it prior to the Closing Date;

 

   

Kaleyra not experiencing a material adverse effect; and

 

   

Kaleyra delivering, or causing to be delivered certificates confirming the satisfaction of conditions set forth in the Stock Purchase Agreement and regarding the status of Kaleyra and each of its subsidiaries.

Conditions to the Sellers’ Obligations

The obligations of the Sellers to consummate the Transaction are further conditioned upon, among other things:

 

   

The representations and warranties of the Company being true and correct as of February 22, 2019 and (except to the extent such representations and warranties speak as of an earlier date, which representations and warranties shall be true and correct as of such date) as of the Closing Date as though made on and as of the Closing Date, except for any failures to be true and correct that (without giving effect to any qualifications or limitations as to materiality or material adverse effect), individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on Kaleyra;

 

   

The Company performing in all material respects all its obligations required to be performed by it prior to the Closing Date;

 

   

The Company not experiencing a material adverse effect;

 

   

The Company having amended its charter and delivering evidence thereof to Kaleyra;

 

   

The securities issued to the Sellers being approved for listing on the NYSE; and

 

   

The Company delivering, or causing to be delivered:

 

   

certificates confirming the satisfaction of conditions set forth in the Stock Purchase Agreement and regarding the status of the Company;

 

   

a copy of the Founder Shares Agreement duly executed by each Sponsor;

 

   

an amended and restated registration rights agreement, duly executed by the Company and each Founder;

 

   

the Cash Consideration and the Common Stock Consideration; and

 

   

the Notes, duly executed by the Company.

Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Conditions to Closing of the Business Combination” for additional information.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s 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 and the Adjournment Proposal requires the affirmative vote of holders of a majority of the shares of our Common Stock represented in



 

37


Table of Contents

person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting will not be counted towards the number of shares of Common Stock required to validly establish a quorum, and if a valid quorum is otherwise established, such failure to vote will have no effect on the outcome of any vote on the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established and will have the same effect as a vote “AGAINST” the Business Combination Proposal, the Incentive Plan Proposal and the Adjournment Proposal. For purposes of approval, failure to vote will have no effect on the Director Election Proposal.

The approval of the Charter Amendment Proposals requires the affirmative vote of the holders of a majority of the outstanding shares of our Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or an abstention from voting with regard to any of the Charter Amendment Proposals will have the same effect as a vote “AGAINST” such Charter Amendment Proposal.

The Business Combination is conditioned on the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal at the Special Meeting. The Incentive Plan Proposal is conditioned on the approval of the Business Combination Proposal, the Charter Amendment Proposals and the Director Election Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement. It is important for the Company’s stockholders to note that in the event that the Business Combination Proposal and the Charter Amendment Proposals do not receive the requisite vote for approval, the Company will not consummate the Business Combination. If the Company does not consummate the Business Combination and fails to complete an initial business combination by December 12, 2019, the Company will be required to dissolve and liquidate the Trust Account by returning the then remaining funds in such account to the public stockholders.

Independent Director Oversight

The Board includes four independent directors. In connection with the Business Combination, the independent directors, Messrs. Miotto, Mikulsky, Porter and Wang, took an active role in evaluating and providing guidance to the Company’s management in negotiating the proposed terms of the Business Combination, including the Stock Purchase Agreement, the Related Agreements and the amendments to our Charter to take effect upon the completion of the Business Combination. As part of their evaluation of the Business Combination, the independent directors were aware of the potential conflicts of interest with the Sponsor that could arise with regard to the proposed terms of the Stock Purchase Agreement, the Related Agreements and the amendments to the Charter to take effect upon the completion of the Business Combination. The independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Board, the Stock Purchase Agreement and the Business Combination. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Independent Director Oversight.”

Recommendation to Company Stockholders

The Board believes that each of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal the Incentive Plan Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and its stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals.



 

38


Table of Contents

Risk Factors

In evaluating the Business Combination and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 48 of this proxy statement. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and Kaleyra to complete the Business Combination or (ii) the business, cash flows, financial condition and results of operations of the post-combination company.



 

39


Table of Contents

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data for the Company as of June 30, 2019 and September 30, 2018, for the nine months ended June 30, 2019, and for the period from October 9, 2017 (inception) through September 30, 2018. Such data for the period as of September 30, 2018 and for the period from October 9, 2017 (inception) through September 30, 2018 have been derived from the audited financial statements of the Company, which are included elsewhere in this proxy statement. Such data as of and for the nine months ended June 30, 2019 have been derived from the unaudited financial statements of the Company included elsewhere in this proxy statement. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About the Company Prior to the Business Combination” and in our financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement.

 

     As of
June 30,
2019
    As of
September 30,
2018
 
     (Unaudited)        

($ in thousand)

    

Balance Sheet Data:

    

Working capital deficit

   $ (3,859   $ (345

Cash and cash equivalents

     329       597  

Cash and marketable securities held in Trust Account

     77,838       144,964  

Total assets

     78,362       145,899  

Total liabilities

     4,228       1,059  

Common stock subject to possible redemption

     69,134       139,840  

Shareholders’ equity

     5,000       5,000  

 

     Nine months
ended
June 30,
2019
    Period from
October 9, 2017
(Date of
Inception)
through
September 30,
2018
 
     (Unaudited)        

($ in thousand, except share and per share amounts)

    

Statements of Operations Data:

    

Revenue

   $ —       $ —    

Loss from operations

     (2,137     (1,880

Interest income

     2,261       1,815  

Net loss

     (525     (665

Basic and diluted net loss per share

     (0.37     (0.40

Weighted average shares outstanding excluding shares subject to possible redemption—basic and diluted

     4,153,252       4,048,626  


 

40


Table of Contents

SELECTED CONSOLIDATED HISTORICAL FINANCIAL

AND OTHER INFORMATION OF KALEYRA

The following table sets forth summary historical financial information for Kaleyra as of and for the six months ended June 30, 2019 and 2018 and as of and for the years ended December 31, 2018 and 2017; for Solutions Infini as of and for the three months ended June 30, 2018 and as of and for the year ended March 31, 2018; and for Buc Mobile as of and for the seven months ended July 31, 2018 and as of and for the year ended December 31, 2017. Such information for Kaleyra for the years ended December 31, 2018 and 2017 have been derived from the audited consolidated financial statements of Kaleyra; for Solutions Infini for the three months ended June 30, 2018 and for the year ended March 31, 2018 have been derived from the audited financial statements of Solutions Infini; and for Buc Mobile for seven months ended July 31, 2018 and for the year ended December 31, 2017 have been derived from the audited financial statements of Buc Mobile, each as included elsewhere in this proxy statement. Such information for Kaleyra as of and for the six months ended June 30, 2019 and 2018 have been derived from the unaudited condensed consolidated financial statements of Kaleyra. Management has prepared the unaudited condensed consolidated financial information set forth below on the same basis as Kaleyra’s audited consolidated financial statements and has included all adjustments, consisting of only normal recurring adjustments, that it considers necessary for a fair presentation of our financial position and operating results for such periods. Kaleyra’s historical results are not necessarily indicative of the results to be expected in any future period, and Kaleyra’s interim results are not necessarily indicative of the results to be expected for the full fiscal year. The information below is only a summary and should be read in conjunction with the sections entitled “Kaleyra Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information About Kaleyra” and in Kaleyra’s consolidated financial statements and the related notes, included elsewhere in this proxy statement.

Kaleyra

Consolidated Statement of Operations Data:

 

     Six Months Ended June 30,      Year Ended December 31,  
             2019                      2018                  2018              2017      
($ in thousand)                     

Revenue

   $ 58,596      $ 26,406      $ 77,845      $ 43,149  

Gross profit

     11,272        4,410        15,420        8,326  

(Loss)/income from operations

     (2,018      (659      (5,525      1,456  

Net (loss)/income

     (2,681      (821      (7,100      494  

Consolidated Balance Sheet Data:

 

     As of
June 30,
2019
     As of
December 31,
2018
     As of
December 31,
2017
 
($ in thousand)                     

Cash and cash equivalents

   $ 8,734      $ 8,207      $ 10,545  

Total assets

     51,946        77,133        43,697  

Total current liabilities

     62,318        54,631        32,422  

Total liabilities

     81,680        72,207        41,710  

Total shareholders’ equity

     2,589        4,926        1,987  


 

41


Table of Contents

Buc Mobile—pre-acquisition financial statements

Statement of Operations Data for Buc Mobile:

 

     Seven Months Ended
July 31, 2018
     Year Ended
December 31, 2017
 
($ in thousand)       

Revenue

   $ 3,650      $ 5,052  

Gross profit

     1,151        1,612  

Loss from operations

     (361      (439

Net loss

     (381      (485

Balance Sheet Data for Buc Mobile:

 

     As of
July 31,
2018
     As of
December 31,

2017
 
($ in thousand)       

Cash and cash equivalents

   $ 283      $ 116  

Total assets

     1,479        1,257  

Total liabilities

     1,824        1,642  

Shareholders’ deficit

     (345      (385

Solutions Infini—pre-acquisition financial statements

Statement of Operations Data for Solutions Infini:

 

     Three Months Ended
June 30, 2018
     Year Ended
March 31, 2018
 
(in Indian rupees)       

Revenue

     623,616,587        1,955,932,970  

Gross profit

     139,022,314        323,627,372  

Income from operations

     60,678,075        80,236,836  

Net income

     39,726,191        37,724,392  

Balance Sheet Data for Solutions Infini:

 

     As of
June 30,
2018
     As of
March 31,
2018
 
(in Indian rupees)       

Cash and cash equivalents

     75,788,894        184,821,163  

Total assets

     773,319,669        769,863,230  

Total current liabilities

     542,804,699        604,364,117  

Total liabilities

     640,364,770        678,488,717  

Equity of the owners of the parent

     132,834,474        91,280,684  


 

42


Table of Contents

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The Company is providing the following selected unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the transactions.

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 combines the historical consolidated balance sheet of Kaleyra as of June 30, 2019 with the historical balance sheet of the Company as of June 30, 2019, giving effect to the Business Combination as if it had been consummated as of that date.

The unaudited pro forma condensed combined statements of operations are presented using the Company’s fiscal year end, and as the fiscal year end of Kaleyra differs from the Company’s most recent fiscal year end, the statements of operation for it are being brought up to within 93 days of the Company’s fiscal year.

In accordance with the preceding, the unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2019 combines the historical consolidated statement of operations of Kaleyra for the nine months ended June 30, 2019 with the historical statement of operations of the Company for the nine months ended June 30, 2019, giving effect to the Business Combination as if it had been consummated as of October 9, 2017 (Date of Inception).

The historical consolidated statement of operations of Kaleyra for the nine months ended June 30, 2019 include, in addition to the six months ended June 30, 2019, the historical consolidated statement of operation of Kaleyra for the three months ended December 31, 2018 which are also included in the historical consolidated statement of operations of Kaleyra for the twelve months ended December 31, 2018 that are used in the preparation of the unaudited pro forma condensed combined statement of operations for the twelve months.

The unaudited pro forma condensed combined statement of operations for the twelve months, combines the historical consolidated statement of operations of Kaleyra for the twelve months ended December 31, 2018, the historical statement of operations of Solutions Infini for the six months ended June 30, 2018, and the historical statement of operations of Buc Mobile for the seven months ended July 31, 2018, with the historical consolidated statement of operations of the Company for the period from October 9, 2017 (inception) through September 30, 2018, giving effect to the Business Combination as if it had occurred as of October 9, 2017 (Date of Inception).

The following selected unaudited pro forma financial statements give effect to the following transactions:

 

   

The Business Combination;

 

   

The release of all of the funds held in the Company’s Trust Account;

 

   

Upon the consummation of the Business Combination, the payment by the Company of the Aggregate Closing Consideration to the Sellers (as further described below); and

 

   

The payment by the Company of fees, expenses and other amounts associated with the Business Combination out of funds released from the Company’s Trust Account, to the extent required.

The selected pro forma data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of the post-combination company appearing elsewhere in this proxy statement and the accompanying notes to the unaudited condensed combined pro forma financial statements. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements and related notes of the Company and Kaleyra, Solutions Infini and Buc Mobile for the applicable periods included in this proxy statement. The selected pro forma data have been presented for informational purposes only and are not necessarily indicative of what the post-combination company’s financial position or results of operations actually would have been had the business combination been completed as of the dates indicated. In addition, the selected pro forma data does not purport to project the future financial position or operating results of the post-combination company.



 

43


Table of Contents

The selected unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemptions for cash of the Company’s public shares:

 

   

Scenario 1—Assuming no additional redemptions of public shares for cash: This presentation assumes that none of the Company’s stockholders exercise Redemption Rights, other than those which did so exercise Redemption Rights on June 5, 2019, with respect to their public shares upon the consummation of the Business Combination.

 

   

Scenario 2—Assuming maximum redemptions of public shares for cash: This presentation assumes that the Company’s public stockholders exercise their Redemption Rights with respect to a maximum of 3,640,786 public shares, constituting all of our currently outstanding public shares other than the 3,908,705 public shares that are the subject of the non-binding letters of intent with Yakira, Glazer and Nomura, upon consummation of the Business Combination at a redemption price of approximately $10.45 per share.

Included in the shares outstanding and weighted average shares outstanding as presented in the selected pro forma condensed combined financial statements under Scenario 1 are 8,565,619 shares, and under Scenario 2 are 9,330,619 shares, of Common Stock to be issued to the Sellers in the connection with the Business Combination. The currently outstanding warrants of the Company to purchase a total of 11,154,942 shares of Common Stock at an exercise price of $11.50 per share will continue to be outstanding after the Closing of the Business Combination. Considering the assumed nominal per share market price of $10.30 per share, the Company’s warrants are not dilutive on a pro forma basis. However, the potential dilutive impact will ultimately be recognized based on the actual market price on the date of measurement. We also do not take into account any of the 3,199,109 public rights which are subject to the Rights Tender Offer and which could be converted into 319,911 shares of Common Stock, but do take into account the 498,256 private placement rights which will be converted into 49,826 shares of Common Stock upon the completion of the Business Combination, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer.

At the Closing of the Business Combination, under Scenario 1, it is expected that current stockholders of Kaleyra will hold approximately 40.08% of the issued and outstanding shares of Common Stock, and the existing stockholders of the Company will hold approximately 59.92% of the issued and outstanding shares of Common Stock (assuming that the Company has not raised additional equity capital as permitted under the Stock Purchase Agreement).

As we expect that we will enter into agreements with each of Yakira, Glazer and Nomura on the terms set forth in each of the non-binding letters of intent, and that an aggregate of 3,908,750 shares of Common Stock will not be redeemed by them, Scenario 2 assumes a Redemption Range for purposes of the Stock Purchase Agreement and the Founder Shares Agreement with a Redemption Percentage that is greater than 62.5% but less than or equal to 75.0%. At the Closing of the Business Combination, under Scenario 2, it is expected that current stockholders of Kaleyra will hold approximately 50.45% of the issued and outstanding shares of Common Stock, and the existing stockholders of the Company will hold approximately 49.55% of the issued and outstanding shares of Common Stock (assuming that the Company has not raised additional equity capital as permitted under the Stock Purchase Agreement).



 

44


Table of Contents

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands except share and per share amounts)

 

    Historical     Kaleyra Equivalent Pro
Forma Per Share Data
    Combined Pro Forma  
    GigCapital, Inc     Kaleyra, SPA     Scenario 1
(Assuming No
Additional
Redemptions

into Cash)
    Scenario 2
(Assuming
Maximum
Redemptions

into Cash)
    Scenario 1
(Assuming No
Additional
Redemptions

into Cash)
    Scenario 2
(Assuming
Maximum
Redemptions
into Cash)
 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations – Nine Months ended June 30, 2019

           

Book value per Share (4)

  $ 1.14     $ 23.41     $ 33     $ (162 )    $ 0.29     $ (1.40

Net loss available to common shareholders

  $ (525   $ (8,367       $ (6,501   $ (6,501

Net loss per share available to common stockholders – basic and diluted (4)

  $ (0.37   $ (75.66   $ (29.67   $ (34.61   $ (0.26   $ (0.30

Cash dividends per share (3)

  $ —       $ —       $ —       $ —         NA       NA  

Weighted average shares outstanding – basic and diluted

    4,153,252       110,593           25,477,198       21,836,412  

Selected Unaudited Pro Forma Condensed Combined Statement of Operations – 12 months (2)

           

Book value per share

  $ 1.20     $ 44.54       N/A (1     N/A (1)       N/A (1)       N/A (1)  

Net loss available to common shareholders

  $ (665   $ (7,341       $ (9,221   $ (9,221

Net loss per share available to common stockholders – basic and diluted (4)

  $ (0.40   $ (66.38   $ (41.85   $ (49.33   $ (0.36   $ (0.42

Cash dividends per share (3)

  $ —       $ —       $ —       $ —         NA       NA  

Weighted average shares outstanding – basic and diluted

    4,048,626       110,593           25,617,684       21,731,786  

 

(1)

Pro forma balance sheet for 12 month period is not required and as such, no such calculation included in this table.

(2)

For GigCapital, Inc, the 12 months is the period from October 9, 2017 (Date of Inception) through September 30, 2018 and for Kaleyra the 12 months is the 12 month period ended December 31, 2018.

(3)

No dividends have been paid by GigCapital or Kaleyra.

(4)

The equivalent pro forma basic per share data for Kaleyra are derived by multiplying the expected exchange ratio (116.26) in the Business Combination by the unaudited pro forma combined per share data.

 

Calculation of Exchange Ratio

   Scenario 1      Scenario 2  

Kaleyra Shares outstanding

     110,593        110,593  

GigCapital Shares to receive

     12,857,891        12,857,891  
  

 

 

    

 

 

 

Per Share Exchange Ratio

     116.26        116.26  
  

 

 

    

 

 

 


 

45


Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predicts,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement include, but are not limited to, statements about the:

 

   

benefits from the Business Combination;

 

   

ability to complete an initial business combination, including the Business Combination;

 

   

future financial performance following the Business Combination;

 

   

success in retaining or recruiting, or changes required in, our officers, key employees or directors following an initial business combination;

 

   

officers and directors allocating their time to other businesses and potentially having conflicts of interest with the Company’s business or in approving our initial business combination, as a result of which they would then receive expense reimbursements;

 

   

public securities’ potential liquidity and trading;

 

   

use of proceeds not held in the Trust Account or available to the Company from interest income on the Trust Account balance; and

 

   

impact from the outcome of any known and unknown litigation.

Forward-looking statements in this proxy statement include, but are not limited to, statements about Kaleyra’s or the post-combination company’s:

 

   

ability to grow and retain its client base;

 

   

ability to provide effective client support and induce our customers to renew and upgrade the offerings and services it provides for them;

 

   

ability to expand its sales organization to address effectively existing and new markets that it intends to target;

 

   

ability to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;

 

   

expectations regarding future expenditures;

 

   

future mix of revenue and effect on gross margins;

 

   

attraction and retention of qualified employees and key personnel;

 

   

ability to compete effectively in a competitive industry;

 

   

ability to protect and enhance its corporate reputation and brand;

 

   

expectations concerning our relationships and actions with its partners and other third parties;

 

   

impact from future regulatory, judicial, and legislative changes in its industry;

 

   

ability to locate and acquire complementary technologies or services and integrate those into Kaleyra’s business; and

 

   

future arrangements with, or investments in, other entities or associations.

 

46


Table of Contents

These forward-looking statements are based on information available 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 our views as of any subsequent date, and we do not undertake 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.

In addition, statements that the Company or Kaleyra “believes” and similar statements reflect such parties’ beliefs and opinions on the relevant subject. These statements are based upon information available to such party as of the date of this proxy statement, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that either the Company or Kaleyra has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

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, our 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 Stock Purchase Agreement;

 

   

the outcome of any legal proceedings that may be instituted against the Company, Kaleyra or others following announcement of the Business Combination and the transactions contemplated in the Stock Purchase Agreement;

 

   

the inability to complete the transactions contemplated by the Stock Purchase Agreement due to the failure to obtain approval of the stockholders of the Company or Kaleyra or other conditions to closing in the Stock Purchase Agreement;

 

   

the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the Business Combination;

 

   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of the Company to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

 

   

costs related to the proposed Business Combination;

 

   

the possibility that the Company or Kaleyra may be adversely impacted by other economic, business, and/or competitive factors;

 

   

future exchange and interest rates; and

 

   

other risks and uncertainties indicated in this proxy statement, including those under “Risk Factors” in this proxy statement, and other filings that have been made or will be made with the SEC by the Company.

 

47


Table of Contents

RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the Special Meeting. The following risk factors that apply to the business and operations of Kaleyra will also apply to the business and operations of the post-combination company following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may harm the business, cash flows, financial condition and results of operations of the post-combination company. These risk factors are not exhaustive and investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of Kaleyra and the post-combination company. You should carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” Kaleyra may face additional risks and uncertainties that are not presently known to it, or that Kaleyra currently deems immaterial, which may also impair Kaleyra’s business or financial condition. The following discussion should be read in conjunction with the consolidated financial statements and notes to the financial statements included herein.

Risks Relating to Kaleyra

The market in which Kaleyra participates is highly competitive, and if Kaleyra does not compete effectively, its business, results of operations and financial condition could be harmed.

The market for cloud communications is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments. The principal competitive factors in Kaleyra’s market include completeness of offering, credibility with developers, global reach, ease of integration and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as the cost of deploying and using Kaleyra’s services. Kaleyra’s competitors fall into two primary categories:

 

   

CPaaS companies that offer a narrower set of software Application Programming Interfaces (“APIs”), less robust customer support and fewer other features while relying on third-party networks and physical infrastructure; and

 

   

Network service providers that offer limited developer functionality on top of their own networks and physical infrastructure.

Some of Kaleyra’s competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, a larger global reach, larger budgets and significantly greater resources than Kaleyra does. In addition, they have the operating flexibility to bundle competing products and services at little or no incremental cost, including offering them at a lower price as part of a larger sales transaction. As a result, Kaleyra’s competitors may be able to respond more quickly and effectively than Kaleyra can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors may offer services that address one or a limited number of functions at lower prices, with greater depth than Kaleyra’s services or in different geographies. Kaleyra’s current and potential competitors may develop and market new services with comparable functionality to Kaleyra’s services, and this could lead to Kaleyra having to decrease prices in order to remain competitive. In addition, some of Kaleyra’s competitors have lower list prices than us, which may be attractive to certain customers even if those services have different or lesser functionality. If Kaleyra is unable to maintain Kaleyra’s current pricing due to the competitive pressures, its margins will be reduced and Kaleyra’s business, results of operations and financial condition would be adversely affected. Customers utilize Kaleyra’s services in many ways and use varying levels of functionality that Kaleyra’s services offer or are capable of supporting or enabling within their applications.

 

48


Table of Contents

Customers that use many of the features of Kaleyra’s services or use Kaleyra’s services to support or enable core functionality for their applications may have difficulty or find it impractical to replace Kaleyra’s services with a competitor’s services, while customers that use only limited functionality may be able to more easily replace Kaleyra’s services with competitive offerings.

With the introduction of new services and new market entrants, Kaleyra expects competition to intensify in the future. In addition, some of Kaleyra’s customers choose to use Kaleyra’s services and Kaleyra’s competitors’ services at the same time. Moreover, as Kaleyra expands the scope of Kaleyra’s services, Kaleyra may face additional competition. Further, customers and consumers may choose to adopt other forms of electronic communications or alternative communication platforms, including developing necessary networks and platforms in-house.

Furthermore, if Kaleyra’s competitors were to merge such that the combined entity would be able to compete fully with Kaleyra’s service offering, then Kaleyra’s business, results of operations and financial condition may be adversely affected. If one or more of Kaleyra’s competitors were to merge or partner with another of Kaleyra’s competitors, the change in the competitive landscape could also adversely affect Kaleyra’s ability to compete effectively. In addition, pricing pressures and increased competition generally could result in reduced revenue, reduced margins, increased losses or the failure of Kaleyra’s services to achieve or maintain widespread market acceptance.

Kaleyra’s current and potential competitors have developed and may develop in the future product solutions that are available internationally. To the extent that customers seek product solutions that include support and scaling internationally, they may choose to use other service providers to fill their communication service needs. Each of these factors could harm Kaleyra’s business by leading to reduced revenues, slower growth and lower brand name recognition than Kaleyra’s competitors.

If Kaleyra is unable to expand or renew sales to existing clients, or attract new customers, Kaleyra’s growth could be slower than it expects and its business may be harmed.

Kaleyra’s future growth depends upon expanding sales of Kaleyra’s technology offerings and services with existing customers and with new customers. Kaleyra’s customers may not purchase Kaleyra’s technology offerings and services, or Kaleyra’s customers may reduce their purchasing volumes, if Kaleyra does not demonstrate the value proposition for their investment, and Kaleyra may not be able to replace existing customers with new customers. In addition, Kaleyra’s customers may not renew their contracts with Kaleyra on the same terms, or at all, because of dissatisfaction with Kaleyra’s service. If Kaleyra’s customers do not renew their contracts, Kaleyra’s revenue may grow more slowly than expected, may not grow at all, or may decline. Additionally, increasing incremental sales to Kaleyra’s current client base may require increasingly sophisticated and costly sales efforts that are targeted at senior management. Kaleyra plans to continue expanding its sales efforts but it may be unable to hire qualified sales personnel, may be unable to successfully train those sales personnel that Kaleyra is able to hire, and sales personnel may not become fully productive on the timelines that it has projected, or at all. Additionally, although Kaleyra dedicates significant resources to sales and marketing programs, these sales and marketing programs may not have the desired effect and may not expand sales. Kaleyra cannot assure you that its efforts will increase sales to existing customers or additional revenue. If Kaleyra’s efforts to upsell to its customers are not successful, its future growth may be limited.

Kaleyra’s ability to achieve significant growth in revenue in the future will also depend upon its ability to attract new customers. This may be particularly challenging where an organization has already invested substantial personnel and financial resources to integrate competing technology offerings and services into its business, as such organization may be reluctant or unwilling to invest in new technology offerings and services. If Kaleyra fails to attract new customers and maintain and expand those client relationships, its revenue may grow more slowly than expected and its business may be harmed.

 

49


Table of Contents

Kaleyra currently generates significant revenue from its largest customers, and the loss or decline in revenue from any of these customers could limit Kaleyra’s revenue and results of operations.

In the six months ended June 30, 2019, in calendar years 2018 and 2017, Kaleyra’s 10 largest customers generated an aggregate of 48.5%, 66% and 95% of its revenue, respectively. In the event that Kaleyra’s large customers do not continue to use its products, use fewer of its products, or use its products in a more limited capacity, or not at all, Kaleyra’s revenue could be limited and Kaleyra’s business could be harmed.

Kaleyra must increase the network traffic and resulting revenue from the services that it offers to realize its targets for anticipated revenue growth, cash flow and operating performance.

Kaleyra must increase the network traffic and resulting revenue from its inbound and outbound voice calling, text messaging, telephone numbers and related services at acceptable margins to realize Kaleyra’s targets for anticipated revenue growth, cash flow and operating performance. If Kaleyra does not maintain or improve its current relationships with existing key customers; is not able to expand the available capacity on its network to meet its customers’ demands in a timely manner; does not develop new large enterprise customers; or its customers determine to obtain these services from either their own network or from one of Kaleyra’s competitors, then Kaleyra may be unable to increase or maintain its revenue at acceptable margins.

Kaleyra’s business depends on customers increasing their use of Kaleyra’s services and any loss of customers or decline in their use of Kaleyra’s services could reduce Kaleyra’s profitability.

Kaleyra’s ability to grow and generate incremental revenue depends, in part, on Kaleyra’s ability to maintain and grow its relationships with existing customers and to have them increase their usage of Kaleyra’s Platform. If Kaleyra’s customers do not increase their use of Kaleyra’s services, then Kaleyra’s revenue may decline and Kaleyra’s results of operations may be harmed. Customers generally are charged based on the usage of Kaleyra’s services. Many of Kaleyra’s customers do not have long-term contractual financial commitments to Kaleyra and, therefore, many of Kaleyra’s customers may reduce or cease their use of Kaleyra’s services at any time without penalty or termination charges. Kaleyra cannot accurately predict customers’ usage levels and the loss of customers or reductions in their usage levels of Kaleyra’s services may each have a negative impact on Kaleyra’s business, results of operations and financial condition and may cause Kaleyra’s dollar-based net retention rate to decline in the future if Kaleyra’s customers are not satisfied with Kaleyra’s services. If a significant number of customers cease using, or reduce their usage of, Kaleyra’s services, then Kaleyra may be required to spend significantly more on sales and marketing than Kaleyra’s currently plan to spend in order to maintain or increase revenue from customers. Such additional sales and marketing expenditures could reduce Kaleyra’s profitability and harm its business.

Demand for Kaleyra’s technology offerings and services could be adversely affected by volatile, negative, or uncertain economic conditions and the effects of these conditions on Kaleyra’s customers’ businesses.

Kaleyra’s revenue and profitability depend on the demand for its technology offerings and services, which could be negatively affected by numerous factors, many of which are beyond Kaleyra’s control. Volatile, negative, or uncertain economic conditions affect Kaleyra’s customers’ businesses and the markets Kaleyra serves. Such economic conditions in Kaleyra’s markets have undermined, and could in the future undermine, business confidence in Kaleyra’s markets and cause Kaleyra’s customers to reduce or defer their spending on new technology offerings and services, or may result in customers reducing, delaying or eliminating spending under existing contracts with Kaleyra, which would negatively affect Kaleyra’s business. Growth in the markets Kaleyra serves could be at a slow rate, or could stagnate or contract, in each case for an extended period of time. Ongoing economic volatility and uncertainty and changing demand patterns affect Kaleyra’s business in a number of other ways, including making it more difficult to accurately forecast client demand and effectively build Kaleyra’s revenue and resource plans.

Economic volatility and uncertainty is particularly challenging because it may take some time for the effects and changes in demand patterns resulting from these and other factors to manifest themselves in Kaleyra’s

 

50


Table of Contents

business and results of operations. Changing demand patterns from economic volatility and uncertainty could harm Kaleyra’s business and results of operations.

Kaleyra has limited experience with respect to determining the optimal prices for its products.

Kaleyra charges its customers based on their use of its products. Kaleyra expects that it may need to change its pricing from time to time. In the past Kaleyra has sometimes reduced their prices either for individual customers in connection with long-term agreements or for a particular product. One of the challenges to Kaleyra’s pricing is that the fees that they pay to network service providers over whose networks Kaleyra transmits communications can vary daily or weekly and are affected by volume and other factors that may be outside of Kaleyra’s control and difficult to predict. This can result in Kaleyra incurring increased costs that Kaleyra may be unable or unwilling to pass through to its customers, which could harm Kaleyra’s business.

Further, as competitors introduce new products or services that compete with ours or reduce their prices, Kaleyra may be unable to attract new customers or retain existing customers based on Kaleyra’s historical pricing. As Kaleyra expands internationally, Kaleyra also must determine the appropriate price to enable Kaleyra to compete effectively internationally. Moreover, enterprises, which are a primary focus for Kaleyra’s direct sales efforts, may demand substantial price concessions. In addition, if the mix of products sold changes, including for a shift to Internet protocol (“IP”) based products, then Kaleyra may need to, or choose to, revise its pricing. As a result, in the future Kaleyra may be required or choose to reduce its prices or change its pricing model, which could harm Kaleyra’s business.

Breaches of Kaleyra’s networks or systems, or those of Amazon Web Services (“AWS”) or Kaleyra’s other service providers, could compromise the integrity of its products, platform and data, result in significant data losses and otherwise harm its business.

Kaleyra depends upon its information technology (“IT”) systems to conduct virtually all of its business operations, ranging from Kaleyra’s internal operations and research and development activities to its marketing and sales efforts and communications with Kaleyra’s customers and business partners. Individuals or entities may attempt to penetrate Kaleyra’s network security, or that of its platform, and to cause harm to Kaleyra’s business operations, including by misappropriating its proprietary information or that of its customers, employees and business partners or to cause interruptions of Kaleyra’s products and platform. In particular, cyberattacks and other malicious Internet-based activity continue to increase in frequency and in magnitude generally, and cloud-based companies have been targeted in the past. In addition to threats from traditional computer hackers, malicious code (such as malware, viruses, worms, and ransomware), employee theft or misuse, password spraying, phishing, credential stuffing, and denial-of-service attacks, Kaleyra also faces threats from sophisticated organized crime, nation-state, and nation-state supported actors who engage in attacks (including advanced persistent threat intrusions) that add to the risk to Kaleyra’s systems (including those hosted on AWS or other cloud services), internal networks, its customers’ systems and the information that they store and process. While Kaleyra devotes significant financial and personnel resources to implement and maintain security measures, because the techniques used by such individuals or entities to access, disrupt or sabotage devices, systems and networks change frequently and may not be recognized until launched against a target, Kaleyra may be required to make further investments over time to protect data and infrastructure as cybersecurity threats develop, evolve and grow more complex over time. Kaleyra may also be unable to anticipate these techniques, and Kaleyra may not become aware in a timely manner of such a security breach, which could exacerbate any damage Kaleyra experiences. Additionally, Kaleyra depends upon its employees and contractors to appropriately handle confidential and sensitive data, including customer data, and to deploy Kaleyra’s IT resources in a safe and secure manner that does not expose Kaleyra’s network systems to security breaches or the loss of data. Any data security incidents, including internal malfeasance by its employees or a third party’s fraudulent inducement of Kaleyra’s employees to disclose information, unauthorized access or usage, virus or similar breach or disruption of Kaleyra’s or its service providers, such as AWS or service providers, could result in loss of confidential information, damage to Kaleyra’s reputation, erosion of customer trust, loss of customers, litigation,

 

51


Table of Contents

regulatory investigations, fines, penalties and other liabilities. Accordingly, if Kaleyra’s cybersecurity measures or those of AWS or Kaleyra’s service providers, fail to protect against unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the mishandling of data by Kaleyra’s employees and contractors, then Kaleyra’s reputation, customer trust, business, results of operations and financial condition could be adversely affected. While Kaleyra maintains errors, omissions, and cyber liability insurance policies covering certain security and privacy damages, Kaleyra cannot be certain that its existing insurance coverage will continue to be available on acceptable terms or will be available in sufficient amounts to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.

To deliver Kaleyra’s products, Kaleyra relies on network service providers and Internet service providers for its network service and connectivity.

Kaleyra currently interconnects with network service providers around the world to enable the use by Kaleyra’s customers of its products over their networks. Kaleyra expects that it will continue to rely heavily on network service providers for these services going forward. Kaleyra’s reliance on network service providers has reduced Kaleyra’s operating flexibility, ability to make timely service changes and control quality of service. In addition, the fees that Kaleyra is charged by network service providers may change daily or weekly, while Kaleyra does not typically change its customers’ pricing as rapidly.

At times, some network service providers have instituted additional fees due to regulatory, competitive or other industry related changes that increase Kaleyra network costs. For example, in 2018 Kaleyra was subject to a pricing increase of more than 10% from certain mobile network service providers for delivered messages. While Kaleyra has historically responded to these types of fee increases through a combination of further negotiating efforts with Kaleyra’s network service providers, absorbing the increased costs or changing Kaleyra’s prices to customers, here Kaleyra identified a unique strategy that allowed it to change its customers prices without effecting Kaleyra’s business. There is no guarantee that Kaleyra will continue to be able to use the same strategy in the future without a material negative impact to Kaleyra business. Additionally, Kaleyra’s ability to respond to any new fees may be constrained if all network service providers in a particular market impose equivalent fee structures, if the magnitude of the fees is disproportionately large when compared to the underlying prices paid by Kaleyra customers, or if the market conditions limit Kaleyra ability to increase the price Kaleyra charges its customers.

Furthermore, some of these network service providers do not have long-term committed contracts with Kaleyra and may terminate their agreements with Kaleyra without notice or restriction. If a significant portion of Kaleyra’s network service providers stop providing Kaleyra with access to their infrastructure, fail to provide these services to Kaleyra on a cost-effective basis, cease operations, or otherwise terminate these services, the delay caused by qualifying and switching to other network service providers could be time consuming and costly and could adversely affect Kaleyra’s business, results of operations and financial condition. Further, if problems occur with Kaleyra’s network service providers, it may cause errors or poor quality communications with Kaleyra’s products, and it could encounter difficulty identifying the source of the problem. The occurrence of errors or poor quality communications on Kaleyra’s products, whether caused by Kaleyra’s platform or a network service provider, may result in the loss of Kaleyra’s existing customers or the delay of adoption of Kaleyra’s products by potential customers and may adversely affect its business, results of operations and financial condition.

Kaleyra also interconnects with Internet service providers around the world to enable the use of Kaleyra’s communication products by its customers, and Kaleyra expects that it will continue to rely heavily on Internet service providers for network connectivity going forward. Kaleyra’s reliance on Internet service providers reduces Kaleyra’s control over quality of service and exposes Kaleyra to potential service outages and rate fluctuations. If a significant portion of Kaleyra’s Internet service providers stop providing Kaleyra with access to their network infrastructure, fail to provide access on a cost-effective basis, cease operations, or otherwise

 

52


Table of Contents

terminate access, the delay caused by qualifying and switching to other Internet service providers could be time consuming and costly and could harm Kaleyra’s business and operations.

If Kaleyra is unable to expand its relationships with existing technology partner customers and add new technology partner customers, Kaleyra’s business could be harmed.

Kaleyra believes that the continued growth of its business depends in part upon developing and expanding strategic relationships with technology partner customers. Technology partner customers embed Kaleyra software products in their solutions, such as software applications for contact centers and sales force and marketing automation, and then sell such solutions to other businesses. When potential customers do not have the available developer resources to build their own applications, Kaleyra refers them to either its technology partners who embed Kaleyra’s products in the solutions that they sell to other businesses or Kaleyra’s consulting partners who provide consulting and development services for organizations that have limited software development expertise to build Kaleyra’s platform into their software applications.

As part of Kaleyra’s growth strategy, it intends to expand Kaleyra’s relationships with existing technology partner customers and add new technology partner customers. If Kaleyra fails to expand its relationships with existing technology partner customers or establish relationships with new technology partner customers in a timely and cost-effective manner, or at all, then Kaleyra’s business, results of operations and financial condition could be adversely affected. Additionally, even if Kaleyra is successful at building these relationships but there are problems or issues with integrating Kaleyra’s products into the solutions of these customers, Kaleyra’s reputation and ability to grow its business may be harmed.

Kaleyra’s investments in new services and technologies may not be successful.

Kaleyra continues to invest in new services and technologies. The complexity of these solutions, Kaleyra’s learning curve in developing and supporting them, and significant competition in the markets for these solutions could make it difficult for Kaleyra to market and implement these solutions successfully. Additionally, there is a risk that Kaleyra’s customers may not adopt these solutions widely, which would prevent Kaleyra from realizing expected returns on these investments. Even if these solutions are successful in the market, they still rely on third-party hardware and software and Kaleyra’s ability to meet stringent service levels. If Kaleyra is unable to deploy these solutions successfully or profitably, it could adversely impact its business.

If Kaleyra fails to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing regulations, and changing customer needs, requirements or preferences, Kaleyra’s products may become less competitive.

The market for communications in general, and cloud communications in particular, is subject to rapid technological change, evolving industry standards, changing regulations, as well as changing customer needs, requirements and preferences. The success of Kaleyra’s business will depend, in part, on Kaleyra’s ability to adapt and respond effectively to these changes on a timely basis. If Kaleyra is unable to develop new products that satisfy Kaleyra customers and provide enhancements and new features for Kaleyra’s existing products that keep pace with rapid technological and industry change, Kaleyra business, results of operations and financial condition could be adversely affected. If new technologies emerge that are able to deliver competitive products and services at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely impact Kaleyra’s ability to compete effectively.

If Kaleyra loses any of its key personnel or is unable to attract and retain the talent required for its business, Kaleyra’s business could be disrupted and its financial performance could suffer.

Kaleyra’s success is heavily dependent upon its ability to attract, develop, engage, and retain key personnel to manage and grow its business, including Kaleyra’s key executive, management, sales, services, and technical personnel.

 

53


Table of Contents

Kaleyra’s future success will depend to a significant extent on the efforts of Kaleyra’s executive team including the leadership of Kaleyra’s Chief Executive Officer, Dario Calogero, as well as the continued service and support of other key employees. Kaleyra’s future success also will depend on its ability to attract and retain highly skilled technology specialists, engineers, and consultants, for whom the market is extremely competitive. All of Kaleyra’s officers and key employees are at-will employees, meaning that they can terminate their employment with Kaleyra at any time. Kaleyra’s inability to attract, develop, and retain key personnel could have an adverse effect on its relationships with its technology partners and customers and adversely affect Kaleyra’s ability to expand its offerings of technology offerings and services. Moreover, Kaleyra’s inability to train its sales, services, and technical personnel effectively to meet the rapidly changing technology needs of its customers could cause a decrease in the overall quality and efficiency of such personnel. Such consequences could harm Kaleyra’s business.

Kaleyra’s ability to attract and retain business and personnel may depend on its reputation in the marketplace.

Kaleyra believes its brand name and its reputation in the marketplace are important corporate assets that help distinguish Kaleyra’s technology offerings and services from those of competitors and also contribute to Kaleyra’s ability to recruit and retain talented personnel, in particular its engineers and consulting professionals. However, Kaleyra’s corporate reputation is potentially susceptible to material damage by events such as disputes with customers, cybersecurity breaches, service outages, internal control deficiencies, delivery failures, or compliance violations. Similarly, Kaleyra’s reputation could be damaged by actions or statements of current or former customers, directors, employees, competitors, vendors, partners, Kaleyra’s joint ventures or joint venture partners, adversaries in legal proceedings, legislators, or government regulators, as well as members of the investment community or the media. There is a risk that negative information about Kaleyra, even if based on rumor or misunderstanding, could adversely affect its business. Damage to Kaleyra’s reputation could be difficult, expensive and time-consuming to repair, could make potential or existing customers reluctant to select Kaleyra for new engagements, resulting in a loss of business, and could adversely affect Kaleyra’s recruitment and retention efforts. Damage to Kaleyra’s reputation could also reduce the value and effectiveness of Kaleyra’s brand name and could reduce investor confidence in Kaleyra, adversely affecting GigCapital’s share price.

Kaleyra has experienced rapid internal growth as well as growth through acquisitions in recent periods. If Kaleyra fails to manage its growth effectively, or its business does not grow as expected, Kaleyra’s operating results may suffer.

Kaleyra’s headcount and operations have grown substantially. Kaleyra had approximately 238 employees as of June 30, 2019, as compared with 60 employees as of December 31, 2017. This growth has placed, and will continue to place, a significant strain on Kaleyra’s operational, financial, and management infrastructure. Kaleyra anticipates further increases in headcount will be required to support increases in its technology offerings and continued expansion. To manage this growth effectively, Kaleyra must continue to improve its operational, financial, and management systems and controls by, among other things:

 

   

effectively attracting, training, and integrating a large number of new employees, particularly technical personnel and members of Kaleyra’s management and sales teams;

 

   

further improving Kaleyra’s key business systems, processes, and information technology infrastructure to support Kaleyra’s business needs;

 

   

enhancing Kaleyra’s information and communication systems to ensure that Kaleyra’s employees are well-coordinated and can effectively communicate with each other and Kaleyra’s customers; and

 

   

improving Kaleyra’s internal control over financial reporting and disclosure controls and procedures to ensure timely and accurate reporting of Kaleyra’s operational and financial results.

If Kaleyra fails to manage its expansion or implement Kaleyra’s new systems, or if Kaleyra fails to implement improvements or maintain effective internal controls and procedures, Kaleyra’s costs and expenses

 

54


Table of Contents

may increase more than expected and Kaleyra may not expand its client base, increase existing customer volumes and renewal rates, enhance its existing applications, develop new applications, satisfy its customers, respond to competitive pressures, or otherwise execute its business plan. If Kaleyra is unable to manage its growth, Kaleyra’s operating results likely will be harmed.

Future acquisitions could disrupt Kaleyra’s business and may divert management’s attention, and if unsuccessful, harm Kaleyra’s business.

Kaleyra may choose to expand by making additional acquisitions that could be material to its business. Acquisitions involve many risks, including the following:

 

   

an acquisition may negatively affect Kaleyra’s results of operations and financial condition because it may require Kaleyra to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose Kaleyra to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the Business Combination;

 

   

Kaleyra may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel, or operations of any company that it acquires, particularly if key personnel of the acquired company decide not to work for Kaleyra;

 

   

an acquisition may disrupt its ongoing business, divert resources, increase Kaleyra’s expenses, or distract its management;

 

   

an acquisition may result in a delay or reduction of client purchases for both Kaleyra and the company it acquired due to client uncertainty about continuity and effectiveness of service from either company;

 

   

Kaleyra may encounter difficulties in, or may be unable to, successfully sell any acquired technology offerings or services;

 

   

an acquisition may involve the entry into geographic or business markets in which Kaleyra has little or no prior experience or where competitors have stronger market positions;

 

   

the challenges inherent in effectively managing an increased number of employees in diverse locations;

 

   

the potential strain on its financial and managerial controls and reporting systems and procedures;

 

   

the potential known and unknown liabilities associated with an acquired company;

 

   

Kaleyra’s use of cash to pay for acquisitions would limit other potential uses for its cash;

 

   

if Kaleyra incurs additional debt to fund such acquisitions, such debt may subject Kaleyra to additional material restrictions on its ability to conduct its business as well as additional financial maintenance covenants;

 

   

the risk of impairment charges related to potential write-downs of acquired assets or goodwill in future acquisitions;

 

   

to the extent that Kaleyra issues a significant amount of equity or equity-linked securities in connection with future acquisitions, existing stockholders may be diluted and earnings per share may decrease; and

 

   

managing the varying intellectual property protection strategies and other activities of an acquired company.

Kaleyra may not succeed in addressing these or other risks or any other problems encountered in connection with the integration of any acquired business. The inability to integrate successfully the business, technologies, products, personnel, or operations of any acquired business, or any significant delay in achieving integration, could harm its business and results of operations.

 

55


Table of Contents

Kaleyra may experience quarterly fluctuations in its operating results due to a number of factors, which makes its future results difficult to predict and could cause its operating results to fall below expectations.

Kaleyra’s quarterly operating results have fluctuated in the past and Kaleyra expects them to fluctuate in the future due to a variety of factors, many of which are outside of Kaleyra’s control. As a result, Kaleyra’s past results may not be indicative of its future performance and comparing Kaleyra’s operating results on a period-to-period basis may not be meaningful. In addition to the other risks described in this proxy statement, factors that may affect Kaleyra’s quarterly operating results include:

 

   

changes in spending on collaboration and technology offerings and services by Kaleyra’s current or prospective customers;

 

   

pricing Kaleyra’s technology offerings and services effectively so that Kaleyra is able to attract and retain customers without compromising its operating results;

 

   

attracting new customers and increasing Kaleyra’s existing customers’ use of Kaleyra’s technology offerings and services;

 

   

the mix between wholesale and retail maintenance new contracts and renewals;

 

   

client renewal rates and the amounts for which agreements are renewed;

 

   

seasonality and its effect on client demand;

 

   

awareness of Kaleyra’s brand;

 

   

changes in the competitive dynamics of Kaleyra’s market, including consolidation among competitors or customers and the introduction of new technologies and technology enhancements;

 

   

changes to the commission plans, quotas, and other compensation-related metrics for Kaleyra’s sales representatives;

 

   

the amount and timing of payment for operating expenses, particularly sales and marketing expense;

 

   

Kaleyra’s ability to manage its existing business and future growth, domestically and internationally;

 

   

unforeseen costs and expenses related to the expansion of Kaleyra’s business, operations, and infrastructure, including disruptions in Kaleyra’s hosting network infrastructure and privacy and data security; and

 

   

general economic and political conditions in Kaleyra’s domestic and international markets.

Kaleyra may not be able to accurately forecast the amount and mix of future technology offerings and services, size or duration of contracts, revenue, and expenses and, as a result, Kaleyra’s operating results may fall below its estimates. Risks related to confidentiality and security provisions or privacy laws will increase as Kaleyra continues to grow its cloud-based offerings and services and store and process increasingly large amounts of Kaleyra’s customers’ confidential information and data and host or manage parts of Kaleyra’s customers’ businesses, especially in industries involving particularly sensitive data such as the financial services industry and the healthcare industry. The loss or unauthorized disclosure of sensitive or confidential client or employee data, including personal data, whether through breach of computer systems, systems failure, employee negligence, fraud or misappropriation, or otherwise, could damage Kaleyra’s reputation and cause it to lose customers. Similarly, unauthorized access to or through Kaleyra’s information systems and networks or those Kaleyra develops or manages for its customers, whether by Kaleyra’s employees or third parties, could result in negative publicity, legal liability, and damage to Kaleyra’s reputation, which could in turn harm Kaleyra’s business and results of operations.

 

56


Table of Contents

If Kaleyra causes disruptions in its customers’ businesses or provides inadequate service, Kaleyra’s customers may have claims for substantial damages against Kaleyra, which could cause Kaleyra to lose customers, have a negative effect on Kaleyra’s reputation, and adversely affect its results of operations.

If Kaleyra makes errors in the course of delivering services for its customers or business partners, or fails to consistently meet its service level obligations or other service requirements of Kaleyra’s customers, these errors or failures could disrupt Kaleyra’s client’s business, which could result in a reduction in its revenue or a claim for substantial damages against Kaleyra. In addition, a failure or inability by Kaleyra to meet a contractual requirement could subject Kaleyra to penalties, cause Kaleyra to lose customers or damage Kaleyra’s brand or corporate reputation, and limit Kaleyra’s ability to attract new business.

The services Kaleyra provides are often critical to Kaleyra’s customers’ businesses. Certain of Kaleyra’s client contracts require Kaleyra to comply with security obligations including maintaining network security and backup data, ensuring Kaleyra’s network is virus-free, maintaining business continuity planning procedures, and verifying the integrity of employees that work with Kaleyra’s customers by conducting background checks. Any failure in a client’s system, failure of Kaleyra’s data center, cloud or other offerings, or breach of security relating to the services Kaleyra provides to the client could damage Kaleyra’s reputation or result in a claim for substantial damages against Kaleyra. Any significant failure of Kaleyra’s equipment or systems, or any major disruption to basic infrastructure in the locations in which Kaleyra operates, such as power and telecommunications, could impede Kaleyra’s ability to provide services to Kaleyra’s customers, have a negative impact on Kaleyra’s reputation, cause Kaleyra to lose customers, and adversely affect its results of operations.

Under Kaleyra’s client contracts, Kaleyra’s liability for breach of its obligations is in some cases limited pursuant to the terms of the contract. Such limitations may be unenforceable or otherwise may not protect it from liability for damages. In addition, certain liabilities, such as claims of third parties for which Kaleyra may be required to indemnify its customers, are generally not limited under Kaleyra’s contracts. The successful assertion of one or more large claims against Kaleyra in amounts greater than those covered by Kaleyra’s current insurance policies could harm Kaleyra’s financial condition. Even if such assertions against it are unsuccessful, Kaleyra may incur reputational harm and substantial legal fees.

The length and unpredictability of the sales cycle for Kaleyra’s technology offerings and services could delay new sales and cause Kaleyra’s revenue and cash flows for any given quarter to fail to meet Kaleyra’s projections or market expectations.

The sales cycle between Kaleyra’s initial contact with a potential client and the signing of a contract to provide technology offerings and services varies. As a result of the variability and length of the sales cycle, Kaleyra has a limited ability to forecast the timing of sales. A delay in or failure to complete transactions could harm Kaleyra’s business and financial results, and could cause Kaleyra’s financial results to vary significantly from quarter to quarter. Kaleyra’s sales cycle varies widely, reflecting differences in Kaleyra’s potential customers’ decision-making processes, procurement requirements, and budget cycles, and is subject to significant risks over which Kaleyra has little or no control, including:

 

   

Kaleyra’s customers’ budgetary constraints and priorities;

 

   

the timing of Kaleyra’s customers’ budget cycles; and

 

   

the length and timing of customers’ approval processes.

Kaleyra’s technology offerings and services could infringe upon the intellectual property rights of others or Kaleyra might lose its ability to utilize the intellectual property of others.

Kaleyra cannot be sure that its brand, technology offerings, and services, including, for example, the software solutions of others that Kaleyra offers to its customers, do not infringe on the intellectual property rights of third parties, and these third parties could claim that Kaleyra or its customers are infringing upon their

 

57


Table of Contents

intellectual property rights. These claims could harm Kaleyra’s reputation, cause Kaleyra to incur substantial costs or prevent Kaleyra from offering some services or solutions in the future or require Kaleyra to rebrand. Any related proceedings could require Kaleyra to expend significant resources over an extended period of time. In most of Kaleyra’s contracts, Kaleyra agrees to indemnify its customers for expenses and liabilities resulting from claimed infringements of the intellectual property rights of third parties. Any claims or litigation in this area, regardless of merit, could be time-consuming and costly, damage Kaleyra’s reputation, and/or require Kaleyra to incur additional costs to obtain the right to continue to offer a service or solution to its customers. If Kaleyra cannot secure this right at all or on reasonable terms, or, alternatively, substitute a non-infringing technology, Kaleyra’s business, results of operations, or financial condition could be harmed. Similarly, if Kaleyra is unsuccessful in defending a trademark claim, Kaleyra could be forced to re-brand, which could harm its business, results of operations, or financial condition. Additionally, in recent years, individuals and firms have purchased intellectual property assets where their sole or primary purpose is to assert claims of infringement against technology providers and customers that use such technology. Any such action naming Kaleyra or its customers could be costly to defend or lead to an expensive settlement or judgment against Kaleyra Moreover, such an action could result in an injunction being ordered against Kaleyra’s client or Kaleyra’s own services or operations, causing further damages.

If Kaleyra is unable to protect its intellectual property rights from unauthorized use or infringement by third parties, its business could be adversely affected.

Kaleyra’s success depends, in part, upon its ability to protect its proprietary methodologies and other intellectual property. Existing laws offer only limited protection of Kaleyra’s intellectual property rights, and the protection in some countries in which Kaleyra operates or may operate in the future may be very limited. Kaleyra relies upon a combination of confidentiality policies, nondisclosure and other contractual arrangements, and trade secret, copyright, and trademark laws to protect its intellectual property rights. These laws are subject to change at any time and could further limit its ability to protect its intellectual property. There is uncertainty concerning the scope of available intellectual property protection for software and business methods, which are fields in which Kaleyra relies on intellectual property laws to protect its rights. The validity and enforceability of any intellectual property right Kaleyra obtains may be challenged by others and, to the extent it has enforceable intellectual property rights, those intellectual property rights may not prevent competitors from reverse engineering its proprietary information or independently developing technology offerings and services similar to or duplicative of Kaleyra. Further, the steps Kaleyra takes in this regard might not be adequate to prevent or deter infringement or other misappropriation of its intellectual property by competitors, former employees or other third parties, and Kaleyra might not be able to detect unauthorized use of, or take appropriate and timely steps to enforce, its intellectual property rights. Enforcing Kaleyra’s rights might also require considerable time, money, and oversight, and Kaleyra may not be successful in enforcing its rights.

Kaleyra’s use of open source software could negatively affect its ability to sell Kaleyra’s products and subject Kaleyra to possible litigation.

Kaleyra’s products and Platform incorporate open source software, and Kaleyra expects to continue to incorporate open source software in its products and Platform in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on Kaleyra’s ability to commercialize its products and Platform. Moreover, although Kaleyra has implemented policies to regulate the use and incorporation of open source software into Kaleyra’s products and Platform, Kaleyra cannot be certain that it has not incorporated open source software in Kaleyra products or Platform in a manner that is inconsistent with such policies. If Kaleyra fail to comply with open source licenses, Kaleyra may be subject to certain requirements, including requirements that it offer Kaleyra’s products that incorporate the open source software for no cost, that Kaleyra make available source code for modifications or derivative works Kaleyra creates based upon, incorporating or using the open source software and that it license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third party that distributes such open source

 

58


Table of Contents

software were to allege that Kaleyra has not complied with the conditions of one or more of these licenses, Kaleyra could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from generating revenue from customers using products that contained the open source software and required to comply with onerous conditions or restrictions on these products. In any of these events, Kaleyra and its customers could be required to seek licenses from third parties in order to continue offering Kaleyra’s products and Platform and to re-engineer Kaleyra’s products or Platform or discontinue offering its products to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require Kaleyra to devote additional research and development resources to re-engineer Kaleyra’s products or Platform, which could result in customer dissatisfaction and could harm Kaleyra’s business.

If Kaleyra is unable to collect its receivables from, or bill its unbilled services to its customers, its business and results of operations could be adversely affected.

Kaleyra’s business depends on its ability to successfully obtain payment from its customers of the amounts they owe Kaleyra for technology offerings sold or services performed. Kaleyra typically evaluates the financial condition of its customers and usually bills and collects on relatively short cycles. Kaleyra maintains allowances against receivables and unbilled services. Actual losses on client balances could differ from those that Kaleyra currently anticipate and, as a result, Kaleyra might need to adjust its allowances. There is no guarantee that Kaleyra will accurately assess the creditworthiness of its customers. Macroeconomic conditions could also result in financial difficulties for Kaleyra’s customers, including limited access to the credit markets, insolvency, or bankruptcy, and, as a result, could cause customers to delay payments to Kaleyra, request modifications to their payment arrangements that could increase Kaleyra’s receivables balance, or default on their payment obligations to Kaleyra. Timely collection of client balances also depends on Kaleyra’s ability to complete its contractual commitments and bill and collect its contracted revenue. If Kaleyra is unable to meet its contractual requirements, it might experience delays in collection of and/or be unable to collect its client balances. In addition, if Kaleyra experiences an increase in the time to bill and to collect for its services, Kaleyra’s cash flows could be negatively impacted.

Changes in accounting rules could adversely affect Kaleyra’s future financial results.

Kaleyra is headquartered in Milan, Italy, and has historically prepared its financial statements in conformity with Italian GAAP. In connection with the prospective Business Combination, Kaleyra prepared consolidated financial statements in accordance with U.S. GAAP. U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board, the SEC, the American Institute of Certified Public Accountants, and various other bodies formed to interpret and create appropriate accounting policies. Technology offerings, and the manner in which they are bundled, are technologically complex and the characterization of these technology offerings requires judgment to apply revenue recognition policies. Any mischaracterization of these technology offerings could result in misapplication of revenue recognition policies. Future periodic assessments required by current or new accounting standards may result in non-cash changes and/or changes in presentation or disclosure. In addition, any change in accounting standards may influence Kaleyra’s clients’ decision to purchase from Kaleyra or to finance transactions with Kaleyra, which could harm Kaleyra’s business.

The market for Kaleyra’s products and platform is new and unproven, may decline or experience limited growth and is dependent in part on developers continuing to adopt its platform and use its products.

Kaleyra was founded in 1999. Kaleyra has been developing and providing a cloud-based platform that enables developers and organizations to integrate voice, messaging and other communications capabilities into their software applications. This market is relatively new and unproven and is subject to a number of risks and uncertainties. Kaleyra believes that its revenue currently constitutes a significant portion of the total revenue in this market, and therefore, Kaleyra believes that its future success will depend in large part on the growth, if any, of this market. The utilization of APIs by developers and organizations to build communications functionality

 

59


Table of Contents

into their applications is still relatively new, and developers and organizations may not recognize the need for, or benefits of, Kaleyra products and platform. Moreover, if they do not recognize the need for and benefits of Kaleyra products and platform, they may decide to adopt alternative products and services to satisfy some portion of their business needs. In order to grow Kaleyra business and extend Kaleyra market position, Kaleyra intend to focus on educating developers and other potential customers about the benefits of Kaleyra products and platform, expanding the functionality of Kaleyra products and bringing new technologies to market to increase market acceptance and use of Kaleyra platform. Kaleyra’s ability to expand the market that Kaleyra products and platform address depends upon a number of factors, including the cost, performance and perceived value associated with such products and platform. The market for Kaleyra’s products and platform could fail to grow significantly or there could be a reduction in demand for Kaleyra products as a result of a lack of developer acceptance, technological challenges, competing products and services, decreases in spending by current and prospective customers, weakening economic conditions and other causes. If Kaleyra’s market does not experience significant growth or demand for Kaleyra products decreases, then Kaleyra’s business and operations could be harmed.

Kaleyra’s Platform must integrate with a variety of network, hardware, mobile and software platforms and technologies, and its need to continuously modify and enhance Kaleyra’s products and platform to adapt to changes and innovation in these technologies. For example, Apple, Google and other cell-phone operating system providers or inbox service providers may develop new applications or functions intended to filter spam and unwanted phone calls, messages or other communications. Similarly, Kaleyra’s network service providers may adopt new filtering technologies in an effort to combat spam or robocalling. Such technologies may inadvertently filter desired messages or calls to or from Kaleyra’s customers. If cell-phone operating system providers, network service providers, Kaleyra’s customers or their end users adopt new software platforms or infrastructure, Kaleyra may be required to develop new versions of its products to work with those new platforms or infrastructure. This development effort may require significant resources, which would adversely affect Kaleyra’s business, results of operations and financial condition. Any failure of Kaleyra’s products and platform to operate effectively with evolving or new platforms and technologies could reduce the demand for Kaleyra’s products. If Kaleyra is unable to respond to market changes in a cost-effective manner, Kaleyra’s products may become less marketable and less competitive or obsolete.

Kaleyra’s future success depends in part on its ability to drive the adoption of its products by international customers.

In the six months ended June 30, 2019, and the year ended December 31, 2018, Kaleyra derived 77.1% and 88.9% of its revenue, respectively, from customer accounts located in Italy and India. The future success of Kaleyra’s business will depend, in part, on Kaleyra ability to expand its customer base worldwide in new geographies. While Kaleyra has been rapidly expanding its sales efforts internationally, Kaleyra’s experience in selling its products outside of Italy and India is limited. As a result, Kaleyra’s investment in marketing its products to these potential customers may not be successful. If Kaleyra is unable to increase the revenue that it derives from international customers, Kaleyra’s business and results of operations could be harmed.

Kaleyra’s global operations are subject to complex risks, some of which might be beyond its control.

Kaleyra is headquartered in Milan, Italy, has a sizable presence in India, and operates in other countries throughout the world. In addition, Kaleyra’s customers have operations throughout the world, and Kaleyra derives a substantial part of its revenue internationally. As a result, Kaleyra may be subject to risks inherently associated with international operations, including risks associated with foreign currency exchange rate fluctuations, difficulties in enforcing intellectual property and/or contractual rights, the burdens of complying with a wide variety of foreign laws and regulations, potentially adverse tax consequences, tariffs, quotas, and other barriers, potential difficulties in collecting accounts receivable, international hostilities, terrorism, and natural disasters. Expansion of international operations also increases the likelihood of potential or actual violations of domestic and international anticorruption laws, such as the Foreign Corrupt Practices Act, or of U.S.

 

60


Table of Contents

and international export control and sanctions regulations. Kaleyra may also face difficulties integrating any new facilities in different countries into its existing operations, as well as integrating employees that it hires in different countries into its existing corporate culture. If Kaleyra is unable to manage the risks of its global operations, its business could be harmed.

Kaleyra is in the process of expanding its international operations, which exposes Kaleyra to significant risks.

Kaleyra is continuing to expand its international operations to increase its revenue from customers outside of Italy, India and the U.S. as part of Kaleyra’s growth strategy. Between 2017 and 2019, Kaleyra’s international headcount grew from 60 employees to 238 employees. Kaleyra expects to open additional international offices and hire employees to work at these offices in order to reach new customers and gain access to additional technical talent. Operating in international markets requires significant resources and management attention and will subject Kaleyra to regulatory, economic and political risks in addition to those Kaleyra already faces in Italy, India and the U.S. Because of Kaleyra’s limited experience with international operations or with developing and managing sales in additional international markets beyond Italy and India, Kaleyra’s international expansion efforts may not be successful.

In addition, Kaleyra will face risks in doing business internationally that could adversely affect its business, including:

 

   

exposure to political developments in the United Kingdom (“U.K.”), including the planned departure of the U.K. from the European Union (the “EU”) in 2019, which has created an uncertain political and economic environment, instability for businesses and volatility in global financial markets;

 

   

the difficulty of managing and staffing international operations and the increased operations, travel, infrastructure and legal compliance costs associated with servicing international customers and operating numerous international locations;

 

   

Kaleyra’s ability to effectively price its products in competitive international markets;

 

   

new and different sources of competition;

 

   

Kaleyra’s ability to comply with General Data Protection Regulation (“GDPR”), which went into effect on May 25, 2018;

 

   

potentially greater difficulty collecting accounts receivable and longer payment cycles;

 

   

higher or more variable network service provider fees outside of the U.S.;

 

   

the need to adapt and localize Kaleyra’s products for specific countries;

 

   

the need to offer customer support in various languages;

 

   

difficulties in understanding and complying with local laws, regulations and customs in non-U.S. jurisdictions;

 

   

understanding and reconciling different technical standards, data privacy and telecommunications regulations, registration and certification requirements outside the U.S., which could prevent customers from deploying Kaleyra’s products or limit their usage;

 

   

export controls and economic sanctions administered by the U.S. Department of Commerce Bureau of Industry and Security and the U.S. Treasury Department’s Office of Foreign Assets Control;

 

   

compliance with various anti-bribery and anti-corruption laws such as the U.S. Foreign Corrupt Practices Act and United Kingdom Bribery Act of 2010;

 

   

tariffs and other non-tariff barriers, such as quotas and local content rules;

 

   

more limited protection for intellectual property rights in some countries;

 

61


Table of Contents
   

adverse tax consequences;

 

   

fluctuations in currency exchange rates, which could increase the price of Kaleyra’s products outside of the U.S., increase the expenses of Kaleyra’s international operations and expose Kaleyra to foreign currency exchange rate risk;

 

   

currency control regulations, which might restrict or prohibit Kaleyra’s conversion of other currencies into U.S. dollars;

 

   

restrictions on the transfer of funds;

 

   

deterioration of political relations between the U.S. and other countries; and

 

   

political or social unrest or economic instability in a specific country or region in which Kaleyra operates, which could have an adverse impact on Kaleyra’s operations in that location.

Also, due to costs from Kaleyra’s international expansion efforts and network service provider fees outside of the U.S., which generally are higher than domestic rates, Kaleyra’s gross margin for international customers is typically lower than its gross margin for domestic customers. As a result, Kaleyra’s gross margin may be impacted and fluctuate as Kaleyra expands its operations and customer base worldwide.

Kaleyra’s failure to manage any of these risks successfully could harm Kaleyra’s business and international operations.

Kaleyra’s operations are subject to regulation and require Kaleyra to obtain and maintain several governmental licenses and permits. If Kaleyra violates those regulatory requirements or fail to obtain and maintain those licenses and permits, including payment of related fees, if any, Kaleyra may not be able to conduct its business. Moreover, those regulatory requirements could change in a manner that significantly increases Kaleyra’s costs or otherwise adversely affects Kaleyra’s operations.

In the ordinary course of operating Kaleyra’s network and providing its services, Kaleyra must obtain and maintain a variety of telecommunications and other licenses and authorizations. Kaleyra also must comply with a variety of regulatory obligations. There can be no assurance Kaleyra can maintain its licenses or that they will be renewed upon their expiration. Kaleyra’s failure to obtain or maintain necessary licenses, authorizations or to comply with the obligations imposed upon license holders, including the payment of fees, may cause sanctions or additional costs, including the revocation of authority to provide services.

Kaleyra’s operations are subject to regulation at the national level and, often, at the state and local levels. Kaleyra’s operations will become subject to additional regulation by other countries as Kaleyra expands to international markets. Changes to existing regulations or rules, or the failure to regulate going forward in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency 911 services interconnection and other areas, in general or particular to Kaleyra’s industry, may increase costs, restrict operations or decrease revenue. As Kaleyra expands internationally, Kaleyra will also become subject to telecommunications laws and regulations in the foreign countries where Kaleyra offers its products. Kaleyra’s international operations are subject to country-specific governmental regulation that may increase its costs or impact its products and Platform or prevent Kaleyra from offering or providing Kaleyra’s products in certain countries. Kaleyra’s inability or failure to comply with telecommunications and other laws and regulations could cause the temporary or permanent suspension of Kaleyra’s operations, and if Kaleyra cannot provide emergency calling functionality through its Platform to meet any new federal or state requirements, or any applicable requirements from other countries, the competitive advantages that Kaleyra currently has may not persist, adversely affecting Kaleyra ability to obtain and to retain enterprise customers which could have an adverse impact on Kaleyra’s business.

 

62


Table of Contents

Kaleyra’s products and Platform and its business are subject to a variety of U.S. and international laws and regulations, including those regarding data protection and information security, and Kaleyra customers may be subject to regulations related to the handling and transfer of certain types of sensitive and confidential information. Any failure of Kaleyra’s products to comply with or enable its customers and channel partners to comply with applicable laws and regulations could harm Kaleyra’s business.

Kaleyra and its customers that use Kaleyra’s products may be subject to data protection-related laws and regulations that impose obligations in connection with the collection, processing and use of personal data, financial data, health or other similar data. The U.S. federal and various state and foreign governments have adopted or proposed limitations on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information of individuals. The U.S. Federal Trade Commission and numerous state attorneys general are applying federal and state consumer protection laws to impose standards on the online collection, use and dissemination of data, and to the security measures applied to such data.

Similarly, many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and use of personally identifiable information obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often more restrictive than those in the U.S. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personally identifiable information that identifies or may be used to identify an individual, such as names, telephone numbers, message addresses and, in some jurisdictions, IP addresses and other online identifiers.

For example, in April 2016 the EU adopted the GDPR, which took full effect on May 25, 2018. GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. Given the breadth and depth of changes in data protection obligations, preparing to meet the requirements of GDPR has required significant time and resources, including a review of Kaleyra’s technology and systems currently in use against the requirements of GDPR. There are also additional EU laws and regulations (and member states’ implementations thereof) which govern the protection of consumers and of electronic communications. If Kaleyra’s efforts to comply with GDPR or other applicable EU laws and regulations are not successful, Kaleyra may be subject to penalties and fines that would adversely impact Kaleyra’s business and results of operations, and Kaleyra’s ability to conduct business in the EU could be significantly impaired.

Furthermore, outside of the EU, Kaleyra continues to see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws in the U.S. For example, on June 28, 2018, California enacted the California Consumer Privacy Act (“CCPA”), which takes effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase Kaleyra’s compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase Kaleyra’s potential liability and adversely affect its business.

Kaleyra continues to see jurisdictions imposing data localization laws, which require personal information, or certain subcategories of personal information to be stored in the jurisdiction of origin. These regulations may inhibit Kaleyra’s ability to expand into those markets or prohibit Kaleyra from continuing to offer services in those markets without significant additional costs.

The uncertainty and changes in the requirements of multiple jurisdictions may increase the cost of compliance, delay or reduce demand for Kaleyra’s services, restrict Kaleyra’s ability to offer services in certain

 

63


Table of Contents

locations, impact Kaleyra’s customers’ ability to deploy its solutions in certain jurisdictions, or subject Kaleyra to sanctions, by national data protection regulators.

Additionally, although Kaleyra endeavors to have its products and Platform comply with applicable laws and regulations, these and other obligations may be modified, they may be interpreted and applied in an inconsistent manner from one jurisdiction to another, and they may conflict with one another, other regulatory requirements, contractual commitments or Kaleyra’s internal practices

Kaleyra also may be bound by contractual obligations relating to its collection, use and disclosure of personal, financial and other data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy- or data protection-related organizations that require compliance with their rules pertaining to privacy and data protection.

Kaleyra expects that there will continue to be new proposed laws, rules of self-regulatory bodies, regulations and industry standards concerning privacy, data protection and information security in the U.S., the EU and other jurisdictions, and Kaleyra cannot yet determine the impact such future laws, rules, regulations and standards may have on Kaleyra’s business. Moreover, existing U.S. federal and various state and foreign privacy- and data protection-related laws and regulations are evolving and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current or enact new laws and regulations regarding privacy- and data protection-related matters. Because global laws, regulations and industry standards concerning privacy and data security have continued to develop and evolve rapidly, it is possible that Kaleyra or its products or Platform may not be, or may not have been, compliant with each such applicable law, regulation and industry standard and compliance with such new laws or to changes to existing laws may impact Kaleyra’s business and practices, requires Kaleyra to expend significant resources to adapt to these changes, or to stop offering Kaleyra’s products in certain countries. These developments could harm Kaleyra’s business.

Any failure or perceived failure by Kaleyra, its products or its Platform to comply with new or existing U.S., EU or other foreign privacy or data security laws, regulations, policies, industry standards or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, personally identifiable information or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties, adverse publicity or potential loss of business.

Kaleyra is subject to privacy and data security obligations in the United States. Any failure to comply with applicable laws, regulations or contractual obligations may harm Kaleyra’s business. The Federal Communications Commission (“FCC”), other federal agencies or state attorneys general could fine or subject Kaleyra to other adverse actions that may negatively impact Kaleyra’s business reputation. If Kaleyra is subject to an investigation or suffers a breach, Kaleyra may incur costs or be subject to forfeitures and penalties that could reduce Kaleyra’s profitability.

Kaleyra is subject to privacy and data security laws and regulations that impose obligations in connection with the collection, processing and use of personal data. Federal and state laws or proposed laws impose limits on, or requirements regarding, the collection, distribution, use, security and storage of personally identifiable information (“PII”) of individuals. Kaleyra sees increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws in the U.S. For example, in 2018, California enacted the CCPA, which becomes effective on January 1, 2020. As discussed above, the CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase Kaleyra’s compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent state privacy legislation in the U.S., which could increase Kaleyra’s potential liability and adversely affect its business.

 

64


Table of Contents

Kaleyra also may be bound by contractual obligations relating to Kaleyra’s collection, use and disclosure of personal data or may find it necessary or desirable to join industry or other self-regulatory bodies or other privacy or security related organizations that require compliance with their rules pertaining to privacy and data protection.

Kaleyra is subject to individual or joint jurisdiction of the FCC, the Federal Trade Commission, and state attorneys general with respect to privacy and data security obligations. If Kaleyra was to suffer or if one of Kaleyra’s customers were to suffer a breach, Kaleyra may be subject to the jurisdiction of a variety of federal agencies’ jurisdictions as well as state attorneys general. Kaleyra may have to comply with a variety of data breach laws at the federal and state levels, comply with any resulting investigations, as well as offer mitigation to customers and potential end users of certain customers to which Kaleyra provides services. Kaleyra could also be subject to fines, forfeitures and other penalties that may adversely impact Kaleyra’s business.

Any failure or perceived failure by Kaleyra, its products or its Platform to comply with new or existing U.S. privacy or data security laws, regulations, policies, industry standards or contractual or legal obligations, or any security incident that results in the unauthorized access to, or acquisition, release or transfer of, PII or other customer data may result in governmental investigations, inquiries, enforcement actions and prosecutions, private litigation, fines and penalties, adverse publicity or potential loss of business.

The storage, processing and use of personal information and related data subjects Kaleyra to evolving governmental laws and regulation, commercial standards, contractual obligations and other legal obligations related to consumer and data privacy, which may have a material impact on Kaleyra’s costs, use of Kaleyra’s services, or expose Kaleyra to increased liability.

Federal, state, local and foreign laws and regulations, commercial obligations and industry standards, each provide for obligations and restrictions with respect to data privacy and security, as well as the collection, storage, retention, protection, use, processing, transmission, sharing, disclosure and protection of personal information and other customer data, including customer proprietary network information under applicable federal law. The evolving nature of these obligations and restrictions subjects Kaleyra to the risk of differing interpretations, inconsistency or conflicts among countries or rules, and creates uncertainty regarding their application to Kaleyra’s business.

These obligations and restrictions may limit Kaleyra’s ability to collect, store, process, use, transmit and share data with Kaleyra’s customers, employees and third-party providers and to allow Kaleyra’s customers to collect, store, retain, protect, use, process, transmit, share and disclose data with others through Kaleyra’s services. Compliance with, and other burdens imposed by, such obligations and restrictions could increase the cost of Kaleyra’s operations and impact its ability to market its services through effective segmentation.

Failure to comply with obligations and restrictions related to applicable data protection laws, regulations, standards, and codes of conduct, as well as Kaleyra’s own posted privacy policies and contractual commitments could subject Kaleyra to lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in Kaleyra’s services, and loss of users, which could materially harm Kaleyra’s business. Because these obligations and restrictions have continued to develop and evolve rapidly, it is possible that Kaleyra may not be, or may not have been, compliant with each such obligation and restriction. Additionally, third-party contractors may have access to customer or employee data. If these or other third-party vendors violate obligations and restrictions related to applicable data protection laws or Kaleyra’s policies, such violations may also put Kaleyra’s customers’ or employees’ information at risk and could in turn harm Kaleyra’s business.

 

65


Table of Contents

United States federal legislation and international laws impose certain obligations on the senders of commercial communications, which could minimize the effectiveness of Kaleyra’s Platform, and establish financial penalties for non-compliance, which could increase the costs of Kaleyra’s business.

The Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM Act) establishes certain requirements for commercial messages and transactional messages and specifies penalties for the transmission of messages that are intended to deceive the recipient as to source or content. Among other things, the CAN-SPAM Act, obligates the sender of commercial messages to provide recipients with the ability to “opt-out” of receiving future commercial communications from the sender. In addition, some states have passed laws regulating commercial communication practices that are significantly more restrictive and difficult to comply with than the CAN-SPAM Act. For example, Utah and Michigan prohibit the sending of communication messages that advertise products or services that minors are prohibited by law from purchasing (e.g., alcoholic beverages, tobacco products, illegal drugs) or that contain content harmful to minors (e.g., pornography) to message addresses listed on specified child protection registries. Some portions of these state laws may not be preempted by the CAN-SPAM Act. In addition, certain non-U.S. jurisdictions, such as Australia, Canada, and the EU, have enacted laws that regulate sending messages, and some of these laws are more restrictive than U.S. laws. For example, some foreign laws prohibit sending broad categories of messages unless the recipient has provided the sender advance consent to receipt of such messages, or in other words has “opted-in” to receiving such communications. If Kaleyra were found to be in violation of the CAN-SPAM Act, applicable state laws governing messages not preempted by the CAN-SPAM Act or foreign laws regulating the distribution of messages, whether as a result of violations by Kaleyra’s customers or its own acts or omissions, Kaleyra could be required to pay large penalties, which would adversely affect its financial condition, significantly harm Kaleyra’s business, injure Kaleyra’s reputation and erode customer trust. The terms of any injunctions, judgments, consent decrees or settlement agreements entered into in connection with enforcement actions or investigations against Kaleyra in connection with any of the foregoing laws may also require Kaleyra to change one or more aspects of the way Kaleyra operates its business, which could impair Kaleyra’s ability to attract and retain customers or could increase its operating costs.

Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may diminish the demand for Kaleyra’s products.

The future success of Kaleyra’s business depends upon the continued use of the Internet as a primary medium for commerce, communications and business applications. Federal, state or foreign government bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the use of the Internet as a commercial medium. Changes in these laws or regulations could require Kaleyra to modify its products and Platform in order to comply with these changes. In addition, government agencies or private organizations have imposed and may impose additional taxes, fees or other charges for accessing the Internet or commerce conducted via the Internet. These laws or charges could limit the growth of Internet-related commerce or communications generally or result in reductions in the demand for Internet-based products and services such as Kaleyra’s products and Platform. In addition, the use of the Internet as a business tool could be adversely affected due to delays in the development or adoption of new standards and protocols to handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility and quality of service. The performance of the Internet and its acceptance as a business tool has been adversely affected by “viruses”, “worms”, and similar malicious programs. If the use of the Internet is reduced as a result of these or other issues, then demand for Kaleyra’s products could decline, which could impair Kaleyra’s business and reduce its financial results.

Certain of Kaleyra’s products are subject to telecommunications-related regulations, and future legislative or regulatory actions could harm Kaleyra’s business.

As Kaleyra continues to expand internationally, Kaleyra has become subject to telecommunications laws and regulations in the foreign countries where Kaleyra offers its products. For example, in Italy, Kaleyra holds a

 

66


Table of Contents

license to be a fixed line operator and is subject to the Electronic Communications Code, or the ECC, which has been enacted with Legislative Decree no. 259/2003, as amended, which transposed a package of European Directives adopted in 2002 and amended in 2009; the National Numbering Plan, issued with AGCom’s resolution no. 8/15/CIR as amended, which governs the usage of national numbers for the provision of electronic communications services as a whole; resolutions on the use of alphanumeric indications for the identification of the calling subject in SMS (so-called Alias), that are periodically issued by AGCom, starting from AGCom’s resolution no. 42/13/CIR; and GDPR.

Kaleyra’s international operations are subject to country-specific governmental regulation and related actions that have increased and may continue to increase Kaleyra’s costs or impact its products and Platform or prevent Kaleyra from offering or providing Kaleyra’s products in certain countries. Certain of Kaleyra’s products may be used by customers located in countries where voice and other forms of IP communications may be illegal or require special licensing or in countries on a U.S. embargo list. Even where Kaleyra’s products are reportedly illegal or become illegal or where users are located in an embargoed country, users in those countries may be able to continue to use Kaleyra’s products in those countries notwithstanding the illegality or embargo. Kaleyra may be subject to penalties or governmental action if consumers continue to use its products in countries where it is illegal to do so, and any such penalties or governmental action may be costly and may harm Kaleyra’s business and damage its brand and reputation. Kaleyra may be required to incur additional expenses to meet applicable international regulatory requirements or be required to discontinue those services if required by law or if Kaleyra cannot or will not meet those requirements. Any of the foregoing could harm Kaleyra’s business.

If Kaleyra is unable to effectively process local number and toll-free number portability provisioning in a timely manner or to obtain or retain direct inward dialing numbers and local or toll-free numbers, Kaleyra’s business and results of operations may be adversely affected.

Kaleyra’s future success depends in part on its ability to procure large quantities of local and toll-free direct inward dialing numbers (“DIDs”), in the U.S. and foreign countries at a reasonable cost and without restrictions. Kaleyra’s ability to procure, distribute and retain DIDs depends on factors outside of Kaleyra’s control, such as applicable local jurisdiction specific regulations, the practices of network service providers that provide DIDs, such as offering DIDs with conditional minimum volume call level requirements, the cost of these DIDs and the level of overall competitive demand for new DIDs.

In addition, in order to procure, distribute and retain telephone numbers from the EU or certain other regions, Kaleyra may be required to register with the local telecommunications regulatory authorities, some of which have been increasingly monitoring and regulating the categories of phone numbers that are eligible for provisioning to Kaleyra’s customers. Kaleyra has registered and is in the process of registering in various countries in which Kaleyra does business, but in some countries, the regulatory regime around provisioning of phone numbers is unclear, subject to change over time, and sometimes may conflict from jurisdiction to jurisdiction. Furthermore, these regulations and governments’ approaches to their enforcement, as well as Kaleyra’s products and services, are still evolving and Kaleyra may be unable to maintain compliance with applicable regulations, or enforce compliance by Kaleyra’s customers, on a timely basis or without significant cost. Also, compliance with these types of regulation may require changes in products or business practices that result in reduced revenue. If Kaleyra or its customers use phone numbers in these countries in a manner that violates applicable rules and regulations, Kaleyra may also be subject to significant penalties or governmental action, including government-initiated audits and, in extreme cases, may be precluded from doing business in that particular country. In the event of such non-compliance, Kaleyra may be forced to reclaim phone numbers from Kaleyra’s customers, which could result in loss of customers, breach of contract claims, loss of revenue, reputational harm, and erosion of customer trust, all of which could harm Kaleyra’s business and reputation.

Due to their limited availability, there are certain popular area code prefixes that Kaleyra generally cannot obtain. Kaleyra’s inability to acquire or retain DIDs for its operations would make Kaleyra’s voice and messaging products less attractive to potential customers in the affected local geographic areas. In addition,

 

67


Table of Contents

future growth in Kaleyra’s customer base, together with growth in the customer bases of other providers of cloud communications, has increased, which increases Kaleyra’s dependence on needing sufficiently large quantities of DIDs. It may become increasingly difficult to source larger quantities of DIDs as Kaleyra’s scale and its need to pay higher costs for DIDs, and DIDs may become subject to more stringent regulation or conditions of usage such as the registration and on-going compliance requirements discussed above could harm Kaleyra’s business.

Kaleyra customers’ and other users’ violation of Kaleyra’s policies or other misuse of Kaleyra’s Platform to transmit unauthorized, offensive or illegal messages, spam, phishing scams, and website links to harmful applications or for other fraudulent or illegal activity could damage Kaleyra’s reputation, and Kaleyra may face a risk of litigation and liability for unauthorized, inaccurate, or fraudulent information distributed via Kaleyra’s Platform.

The actual or perceived improper sending of text messages may subject Kaleyra to potential risks, including liabilities or claims relating to consumer protection laws. For example, the TCPA restricts telemarketing and the use of automatic text messages without proper consent. The scope and interpretation of the laws that are or may be applicable to the delivery of text messages are continuously evolving and developing. If Kaleyra does not comply with these laws or regulations or if Kaleyra becomes liable under these laws or regulations due to the failure of Kaleyra’s customers to comply with these laws by obtaining proper consent, Kaleyra could face direct liability.

Moreover, despite Kaleyra’s ongoing and substantial efforts to limit such use, certain customers may use Kaleyra’s Platform to transmit unauthorized, offensive or illegal messages, spam, phishing scams, and website links to harmful applications, reproduce and distribute copyrighted material or the trademarks of others without permission, and report inaccurate or fraudulent data or information. These issues also arise with respect to a portion of those users who use Kaleyra’s Platform on a free trial basis. These actions are in violation of Kaleyra’s policies. However, Kaleyra’s efforts to defeat spamming attacks and other fraudulent activity will not prevent all such attacks and activity, such use of Kaleyra’s Platform could damage Kaleyra’s reputation and it could face claims for damages, copyright or trademark infringement, defamation, negligence, or fraud. Moreover, Kaleyra customers’ and other users’ promotion of their products and services through Kaleyra’s Platform might not comply with federal, state, and foreign laws. Kaleyra relies on contractual representations made to Kaleyra by its customers that their use of Kaleyra’s Platform will comply with Kaleyra’s policies and applicable law, including, without limitation, Kaleyra’s message communication policy. Although Kaleyra will retain the right to verify that customers and other users are abiding by certain contractual terms, Kaleyra’s Authorized Use Policy and Kaleyra’s message communication policy and, in certain circumstances, to review their distribution lists, Kaleyra’s customers and other users are ultimately responsible for compliance with Kaleyra’s policies, and it does not systematically audit Kaleyra’s customers or other users to confirm compliance with Kaleyra’s policies. Kaleyra cannot predict whether Kaleyra’s role in facilitating its customers’ or other users’ activities would expose Kaleyra to liability under applicable law. Even if claims asserted against Kaleyra do not result in liability, Kaleyra may incur substantial costs in investigating and defending such claims. If Kaleyra is found liable for its customers’ or other users’ activities, Kaleyra could be required to pay fines or penalties, redesign business methods or otherwise expend resources to remedy any damages caused by such actions and to avoid future liability.

Kaleyra may be subject to governmental export controls and economic sanctions regulations that could impair Kaleyra’s ability to compete in international markets due to licensing requirements and could subject Kaleyra to liability if Kaleyra is not in compliance with applicable laws.

Certain of Kaleyra’s products and services may be subject to export control and economic sanctions regulations, including the U.S. Export Administration regulations, U.S. Customs regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of Kaleyra’s products and the provision of Kaleyra’s services must be made in compliance with these laws and regulations. Although Kaleyra takes precautions to prevent its products from

 

68


Table of Contents

being provided in violation of such laws, Kaleyra is aware of previous exports of certain of Kaleyra’s products to a small number of persons and organizations that are the subject of U.S. sanctions or located in countries or regions subject to U.S. sanctions. If Kaleyra fails to comply with these laws and regulations, Kaleyra and certain of its employees could be subject to substantial civil or criminal penalties, including: the possible loss of export privileges; fines, which may be imposed on Kaleyra and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular deployment may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, changes in Kaleyra’s products or services, or changes in applicable export or economic sanctions regulations may create delays in the introduction and deployment of Kaleyra’s products and services in international markets, or, in some cases, prevent the export of Kaleyra’s products or provision of Kaleyra’s services to certain countries or end users. Any change in export or economic sanctions regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or technologies targeted by such regulations, could also result in decreased use of Kaleyra’s products and services, or in its decreased ability to export Kaleyra’s products or provide Kaleyra’s services to existing or prospective customers with international operations. Any decreased use of Kaleyra’s products and services or limitation on Kaleyra’s ability to export its products and provide its services could harm Kaleyra’s business.

Further, Kaleyra incorporates encryption technology into certain of its products. Various countries regulate the import of certain encryption technology, including through import permitting and licensing requirements, and have enacted laws that could limit Kaleyra’s customers’ ability to import its products into those countries. Encryption products and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of exports of encryption products, or Kaleyra’s failure to obtain required approval for Kaleyra’s products, when applicable, could harm Kaleyra’s international sales and adversely affect Kaleyra’s revenue. Compliance with applicable regulatory requirements regarding the export of Kaleyra’s products and provision of Kaleyra’s services, including with respect to new releases of Kaleyra’s products and services, may create delays in the introduction of Kaleyra’s products and services in international markets, prevent Kaleyra’s customers with international operations from deploying its products and using Kaleyra’s services throughout their globally-distributed systems or, in some cases, prevent the export of Kaleyra’s products or provision of Kaleyra’s services to some countries altogether.

Kaleyra faces a risk of litigation resulting from customer misuse of Kaleyra’s services and software to make or send unauthorized calls and/or text messages in violation of the Telephone Consumer Protection Act.

Calls and/or text messages originated by Kaleyra’s customers may subject Kaleyra to potential risks. For example, the TCPA restricts telemarketing and the use of technologies that enable automatic calling and/or text messages without proper consent. This may result in civil claims against Kaleyra and requests for information through third-party subpoenas or regulatory investigations. The scope and interpretation of the laws that are or may be applicable to the making and/or delivery of calls and/or text messages are continuously evolving and developing. If Kaleyra does not comply with these laws or regulations or if Kaleyra becomes liable under these laws or regulations due to the failure of Kaleyra’s customers to comply with these laws by obtaining proper consent, Kaleyra could become subject to lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in Kaleyra services, loss of users and other adverse consequences, which could harm Kaleyra’s business.

The effects of increased regulation of IP-based service providers are unknown.

While the FCC has to date generally subjected IP-based service providers to less stringent regulatory oversight than traditional common carriers, the FCC has imposed certain regulatory obligations on providers of voice-over-internet protocol (“VoIP”) services, including the obligations to contribute to the Universal Service Fund, to provide 911 services and/or to comply with the Communications Assistance for Law Enforcement Act. Some states have imposed taxes, fees and/or surcharges on VoIP telephony services. The imposition of additional regulations could have a material adverse effect on Kaleyra’s business.

 

69


Table of Contents

If Kaleyra experiences excessive credit card or fraudulent activity, Kaleyra could incur substantial costs.

Kaleyra’s customers may choose to authorize Kaleyra to bill their credit card accounts directly for service fees that Kaleyra charges. If people pay for Kaleyra’s services with stolen credit cards, Kaleyra could incur substantial third-party vendor costs for which Kaleyra may not be reimbursed. Further, Kaleyra’s customers provide it with credit card billing information online, and Kaleyra does not review the physical credit cards used in these transactions, which increases Kaleyra’s risk of exposure to fraudulent activity. Kaleyra also incur charges, which Kaleyra refers to as chargebacks, from the credit card companies from claims that the customer did not authorize the credit card transaction to purchase Kaleyra’s services. If the number of unauthorized credit card transactions becomes excessive, Kaleyra could be assessed substantial fines for excess chargebacks, and Kaleyra could lose the right to accept credit cards for payment.

Kaleyra’s products may also be subject to fraudulent usage, including but not limited to revenue share fraud, domestic traffic pumping, subscription fraud, premium text message scams and other fraudulent schemes. Although Kaleyra’s customers are required to set passwords or personal identification numbers to protect their accounts, third parties have in the past been, and may in the future be, able to access and use their accounts through fraudulent means. Furthermore, spammers attempt to use Kaleyra’s products to send targeted and untargeted spam messages. Kaleyra cannot be certain that its efforts to defeat spamming attacks will be successful in eliminating all spam messages from being sent using Kaleyra’s Platform. In addition, a cybersecurity breach of Kaleyra’s customers’ systems could result in exposure of their authentication credentials, unauthorized access to their accounts or fraudulent calls on their accounts, any of which could harm Kaleyra’s reputation with its customers and result in the incurrence of substantial costs for Kaleyra.

Unfavorable conditions in Kaleyra’s industry or the global economy or reductions in spending on information technology and communications could lower Kaleyra’s revenue and harm its business.

Kaleyra’s results of operations may vary based on the impact of changes in Kaleyra’s industry or the global economy on Kaleyra’s customers. Kaleyra’s results of operations depend in part on demand for information technology and cloud communications. In addition, Kaleyra’s revenue is dependent on the usage of Kaleyra’s products, which in turn is influenced by the scale of business that Kaleyra’s customers are conducting. To the extent that weak economic conditions result in a reduced volume of business for, and communications by, Kaleyra’s customers and prospective customers, demand for, and use of, Kaleyra’s products may decline. Furthermore, weak economic conditions may make it more difficult to collect on outstanding accounts receivable. Kaleyra has generated a portion of its revenue from small and medium-sized businesses, and Kaleyra expects this to continue to increase in the foreseeable future. Small and medium-sized business may be affected by economic downturns to a greater extent than enterprises, and typically have more limited financial resources, including capital borrowing capacity, than enterprises. If Kaleyra’s customers reduce their use of Kaleyra’s products, or prospective customers delay adoption or elect not to adopt Kaleyra products, as a result of a weak economy, this could lower Kaleyra’s revenue and harm its business.

Kaleyra may require additional capital to support Kaleyra’s business, and this capital might not be available on acceptable terms, if at all.

Kaleyra intends to continue to make investments to support Kaleyra’s business and may require additional funds. In particular, Kaleyra may seek additional funds to develop new products and enhance Kaleyra’s Platform and existing products, expand Kaleyra’s operations, including Kaleyra’s sales and marketing organizations and Kaleyra’s presence outside of the U.S., improve Kaleyra’s infrastructure or acquire complementary businesses, technologies, services, products and other assets. In addition, Kaleyra may use a portion of its cash to satisfy tax withholding and remittance obligations related to outstanding restricted stock units. Accordingly, Kaleyra may need to engage in equity or debt financings to secure additional funds. If Kaleyra raises additional funds through future issuances of equity or convertible debt securities, Kaleyra’s stockholders could suffer significant dilution, and any new equity securities Kaleyra issues could have rights, preferences and privileges superior to those of

 

70


Table of Contents

holders of Kaleyra’s common stock. Any debt financing that Kaleyra may secure in the future could involve restrictive covenants relating to Kaleyra’s capital raising activities and other financial and operational matters, which may make it more difficult for Kaleyra to obtain additional capital and to pursue business opportunities. Kaleyra may not be able to obtain additional financing on terms favorable to Kaleyra, if at all. If Kaleyra is unable to obtain adequate financing or financing on terms satisfactory to Kaleyra when Kaleyra requires it, Kaleyra’s ability to continue to support its business growth, scale its infrastructure, develop product enhancements and to respond to business challenges could be significantly impaired and could harm Kaleyra’s business.

Kaleyra’s business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or terrorism.

A significant natural disaster, such as an earthquake, fire or flood, occurring at Kaleyra’s headquarters, at one of Kaleyra’s other facilities or where a business partner is located could adversely affect Kaleyra’s business, results of operations and financial condition. Further, if a natural disaster or man-made problem were to affect Kaleyra’s service providers, this could adversely affect the ability of Kaleyra’s customers to use its products and Platform. In addition, natural disasters and acts of terrorism could cause disruptions in Kaleyra’s or its customers’ businesses, national economies or the world economy as a whole. Kaleyra also rely on its network and third-party infrastructure and enterprise applications and internal technology systems for Kaleyra’s engineering, sales and marketing, and operations activities. Although Kaleyra maintains incident management and disaster response plans, in the event of a major disruption caused by a natural disaster or man-made problem, Kaleyra may be unable to continue its operations and may endure system interruptions, reputational harm, delays in Kaleyra’s development activities, lengthy interruptions in service, breaches of data security and the loss of critical data.

In addition, computer malware, viruses and computer hacking, fraudulent use attempts and phishing attacks have become more prevalent in Kaleyra’s industry, have occurred on Kaleyra’s Platform in the past and may occur on Kaleyra Platform in the future. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, integrity and availability of Kaleyra’s products and technical infrastructure to the satisfaction of Kaleyra’s users may harm Kaleyra’s reputation and Kaleyra’s ability to retain existing users and attract new users.

If Kaleyra’s goodwill or intangible assets become impaired, Kaleyra may be required to record a significant charge to earnings.

Kaleyra’s review of it intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of June 30, 2019, Kaleyra carried a net $27,795 thousand of goodwill and intangible assets. An adverse change in market conditions, particularly if such change has the effect of changing one of Kaleyra’s critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to Kaleyra’s goodwill or intangible assets. Any such charges may adversely affect Kaleyra’s results of operations.

Kaleyra has identified material weaknesses in its internal control over financial reporting. If Kaleyra’s remediation of these material weaknesses is not effective or if Kaleyra experiences additional material weaknesses in the future or otherwise fails to maintain an effective system of internal control over financial reporting in the future, Kaleyra may not be able to produce timely and accurate financial statements and comply with applicable regulations, which may adversely affect investor confidence and the value of our common stock.

Prior to the Business Combination, Kaleyra has been a private company with limited accounting personnel to adequately execute its accounting process and other supervisory resources with which to address its internal

 

71


Table of Contents

control over financial reporting. In connection with the audit of its financial statements for the years ended December 31, 2018 and 2017, Kaleyra identified material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

These material weaknesses included the following:

 

   

lack of management review and approval of manual journal entries both at general ledger and consolidated level;

 

   

lack of management review and approval of the data used to support the accuracy of certain data utilized for bulk services billings to customers; and

 

   

lack of management review and control over the evaluation of the accounting for the acquisitions of Buc Mobile and Solutions Infini performed by Kaleyra with the support of specialists.

Neither Kaleyra nor its independent registered accounting firm was required to perform an evaluation of Kaleyra’s internal control over financial reporting as of and for the years ended December 31, 2018 and 2017. Had such an evaluation been performed, additional control deficiencies may have been identified, and those control deficiencies could have also represented one or more material weaknesses.

Kaleyra cannot assure you that the measures it has taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses it has identified or avoid potential future material weaknesses. If the steps Kaleyra takes do not correct the material weaknesses in a timely manner, it will be unable to conclude that Kaleyra maintains effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of its financial statements would not be prevented or detected on a timely basis.

If Kaleyra fails to remediate its existing material weaknesses or identify new material weaknesses in its internal controls over financial reporting, if Kaleyra is unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if it is unable to conclude that its internal controls over financial reporting are effective, or if its independent registered public accounting firm is unable to express an opinion as to the effectiveness of its internal controls over financial reporting when it is no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of its financial reports and the market price of Kaleyra’s common stock could be negatively affected. As a result of such failures, Kaleyra could also become subject to investigations by the stock exchange on which its securities are listed, the SEC, or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm its reputation and financial condition or divert financial and management resources from Kaleyra’s regular business activities.

Changes in the international and U.S. taxation business activities or the adoption of other tax reform policies could materially impact Kaleyra’s business, results of operations and financial condition.

Changes to tax laws in jurisdictions where Kaleyra currently does business may be enacted in the future and could impact the tax treatment of Kaleyra’s earnings. Due to the expansion of Kaleyra’s business activities into new geographic regions, any changes in the taxation of such activities may increase Kaleyra’s worldwide effective tax rate. An increase in overall tax rate could reduce Kaleyra’s cash flow and lower Kaleyra’s overall profitability.

Kaleyra’s global operations and structure subject Kaleyra to potentially adverse tax consequences.

Kaleyra generally conducts Kaleyra global operations through subsidiaries and report Kaleyra’s taxable income in various jurisdictions worldwide based upon Kaleyra’s business operations in those jurisdictions. In

 

72


Table of Contents

particular, Kaleyra’s intercompany relationships are subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Also, Kaleyra’s tax expense could be affected depending on the applicability of withholding and other taxes (including withholding and indirect taxes on software licenses and related intercompany transactions) under the tax laws of certain jurisdictions in which Kaleyra has business operations. The relevant revenue and taxing authorities may disagree with positions Kaleyra has taken generally, or Kaleyra’s determinations as to the value of assets sold or acquired or income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and Kaleyra’s position were not sustained, Kaleyra could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of Kaleyra’s operations.

Certain government agencies in jurisdictions where Kaleyra and its affiliates do business have had an extended focus on issues related to the taxation of multinational companies. In addition, the Organization for Economic Co-operation and Development is conducting a project focused on base erosion and profit shifting in international structures, which seeks to establish certain international standards for taxing the worldwide income of multinational companies. As a result of these developments, the tax laws of certain countries in which Kaleyra and its affiliates do business could change on a prospective or retroactive basis, and any such changes could increase Kaleyra‘s liabilities for taxes, interest and penalties, and therefore could harm Kaleyra’s business, cash flows, results of operations and financial position.

Kaleyra must continue to develop effective business support systems to implement customer orders and to provide and bill for services.

Kaleyra depends on its ability to continue to develop effective business support systems. This complicated undertaking requires significant resources and expertise and support from third-party vendors. Following the development of the business support systems, the data migration must be completed for the full benefit of the systems to be realized. Business support systems are needed for:

 

   

quoting, accepting and inputting customer orders for services;

 

   

provisioning, installing and delivering services;

 

   

providing customers with direct access to the information systems included in Kaleyra’s Platform so that they can manage the services they purchase from Kaleyra, generally through web-based customer portals; and

 

   

billing for services.

Because Kaleyra’s business provides for continued rapid growth in the number of customers that Kaleyra serves, the volume of services offered, as well as the integration of any acquired companies’ business support systems, if any, Kaleyra must continue to develop its business support systems on a schedule sufficient to meet proposed milestone dates. If Kaleyra fails to develop effective business support systems or complete the data migration into these systems, it could materially adversely affect Kaleyra’s ability to implement its business plans, realize anticipated benefits from Kaleyra’s acquisitions, if any, and meet Kaleyra’s financial goals and objectives.

If Kaleyra is not able to maintain and enhance Kaleyra’s brand and increase market awareness of Kaleyra and its services, then Kaleyra’s business could be harmed.

Kaleyra believes that maintaining and enhancing Kaleyra’s brand identity and increasing market awareness of Kaleyra and its services are critical to achieving widespread acceptance of Kaleyra and its Platform, as well as to strengthen Kaleyra’s relationships with its existing customers and to Kaleyra’s ability to attract new customers. The successful promotion of Kaleyra’s brand will depend largely on Kaleyra’s continued marketing efforts, Kaleyra’s ability to continue to offer high quality services and Kaleyra’s ability to successfully differentiate Kaleyra’s services from competing products and services. Kaleyra’s brand promotion activities may

 

73


Table of Contents

not be successful or yield increased revenue. In addition, independent industry analysts often provide reviews of Kaleyra’s services and competing products and services, which may significantly influence the perception of Kaleyra’s services in the marketplace. If these reviews are negative or not as strong as reviews of Kaleyra’s competitors’ services, then Kaleyra’s brand may be harmed.

From time to time, Kaleyra’s customers have complained about Kaleyra’s services, such as complaints about Kaleyra’s pricing and customer support. If Kaleyra does not handle customer complaints effectively, then Kaleyra’s brand and reputation may suffer, Kaleyra’s customers may lose confidence in Kaleyra and they may reduce or cease their use of Kaleyra’s services. In addition, many of Kaleyra’s customers post and discuss on social media about products and services, including Kaleyra’s products and its Platform. Kaleyra’s success depends, in part, on Kaleyra’s ability to generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers seek and share information. If actions Kaleyra takes or changes it makes to its services or Platform upset these customers, then their online commentary could negatively affect Kaleyra’s brand and reputation. Complaints or negative publicity about Kaleyra, its services or Platform could harm Kaleyra’s ability to attract and retain customers.

The promotion of Kaleyra’s brand also requires Kaleyra to make substantial expenditures, and Kaleyra anticipates that these expenditures will increase as Kaleyra’s market becomes more competitive and as Kaleyra expands into new markets. To the extent that these activities increase revenue, this revenue still may not be enough to offset the increased expenses Kaleyra incurs. If Kaleyra does not successfully maintain and enhance its brand, then Kaleyra’s business may not grow, Kaleyra may see its pricing power reduced relative to competitors and Kaleyra may lose customers, all of which could lower Kaleyra’s revenue and harm its business.

Any failure to deliver and maintain high-quality customer support may adversely affect Kaleyra’s relationships with its customers and prospective customers and could adversely affect Kaleyra’s reputation, business, results of operations and financial condition.

Many of Kaleyra’s customers depend on Kaleyra’s customer support team to assist them in deploying or using Kaleyra’s services effectively, to help them resolve post-deployment issues quickly and to provide ongoing support. If Kaleyra does not devote sufficient resources or are otherwise unsuccessful in assisting Kaleyra’s customers effectively, it could adversely affect Kaleyra’s ability to retain existing customers and could prevent prospective customers from adopting Kaleyra’s services. Kaleyra may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. Kaleyra also may be unable to modify the nature, scope and delivery of its customer support to compete with changes in the support services provided by Kaleyra’s competitors. Increased demand for customer support, without corresponding revenue, could increase Kaleyra’s costs and harm its business and operations. Kaleyra’s sales are highly dependent on Kaleyra’s business reputation and on positive recommendations from existing customers. Any failure to deliver and maintain high-quality customer support, or a market perception that Kaleyra does not maintain high-quality customer support, could harm Kaleyra’s reputation and business.

Indemnity provisions in various agreements potentially expose Kaleyra to substantial liability for intellectual property infringement and other losses.

Kaleyra’s agreements with customers and other third parties typically include indemnification or other provisions under which Kaleyra agrees to indemnify or otherwise be liable to them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by Kaleyra to property or persons or other liabilities relating to or arising from Kaleyra’s services or Platform or other acts or omissions. The term of these contractual provisions often survives termination or expiration of the applicable agreement. Large indemnity payments or damage claims from a contractual breach could harm Kaleyra’s business. Although Kaleyra normally contractually limit its liability with respect to such obligations, Kaleyra may still incur substantial liability related to them. Any dispute with a customer with respect to such obligations could harm Kaleyra’s relationship with that customer and other current and prospective customers and reduce demand for its services.

 

74


Table of Contents

Kaleyra is subject to litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely affect Kaleyra’s results of operations.

In the ordinary course of business, Kaleyra is subject to various claims and litigation. Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources. In accordance with customary practice, Kaleyra maintains insurance against some, but not all, of these potential claims. Kaleyra may elect not to obtain insurance if Kaleyra believes that the cost of available insurance is excessive relative to the risks presented. The levels of insurance Kaleyra maintains may not be adequate to fully cover any and all losses or liabilities. Further, Kaleyra may not be able to maintain insurance at commercially acceptable premium levels or at all. If any significant judgment, claim (or a series of claims) or other event is not fully insured or indemnified against, it could have a material adverse impact on Kaleyra’s business, financial condition and results of operations. There can be no assurance as to the actual amount of these liabilities or the timing thereof. Kaleyra cannot be certain that the outcome of current or future litigation will not harm its business and results of operations.

Kaleyra may be liable for the information that content owners or distributors distribute over Kaleyra’s network.

The law relating to the liability of private network operators for information carried on or disseminated through their networks remains unsettled. While Kaleyra disclaims any liability for third-party content in Kaleyra’s services agreements, Kaleyra may become subject to legal claims relating to the content disseminated on Kaleyra’s network, even though such content is owned or distributed by Kaleyra customers or a customer of Kaleyra customers. For example, lawsuits may be brought against Kaleyra claiming that material distributed using Kaleyra’s network was inaccurate, offensive or violated the law or the rights of others. Claims could also involve matters such as defamation, invasion of privacy and copyright infringement. In addition, the law remains unclear over whether content may be distributed from one jurisdiction, where the content is legal, into another jurisdiction, where it is not. Companies operating private networks have been sued in the past, sometimes successfully, based on the nature of material distributed, even if the content is not owned by the network operator and the network operator has no knowledge of the content or its legality. It is not practical for Kaleyra to monitor all of the content distributed using Kaleyra’s network. Kaleyra may need to take costly measures to reduce Kaleyra’s exposure to these risks or to defend ourselves against such claims, which could increase Kaleyra’s costs and harm its results of operations.

Defects or errors in Kaleyra’s services could diminish demand for Kaleyra’s services, harm Kaleyra’s business and subject Kaleyra to liability.

Kaleyra’s customers use its services for important aspects of their businesses, and any errors, defects or disruptions to Kaleyra’s services and any other performance problems with Kaleyra’s services could damage its customers’ businesses and, in turn, hurt Kaleyra’s brand and reputation. Kaleyra provides regular updates to Kaleyra’s services, which have in the past contained, and may in the future contain, undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived errors, failures or bugs in Kaleyra’s services could result in negative publicity, loss of or delay in market acceptance of Kaleyra’s Platform, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event, Kaleyra may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. In addition, Kaleyra may not carry insurance sufficient to compensate Kaleyra for any losses that may result from claims arising from defects or disruptions in Kaleyra’s services. As a result, Kaleyra’s brand and reputation could be harmed.

 

75


Table of Contents

Risks Related to the Company and the Business Combination

The Company has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. If the Company is unable to consummate a business combination, including the Business Combination, its public stockholders may be forced to wait until after December 12, 2019 before receiving distributions from the Trust Account.

The Company is a development stage blank check company, and as it has no operating history and is subject to a mandatory liquidation and subsequent dissolution requirement. The Company has until December 12, 2019 to complete a business combination. The Company has no obligation to return funds to investors prior to such date unless (i) it consummates a business combination prior thereto or (ii) it seeks to amend its current certificate of corporation prior to consummation of a business combination, and only then in cases where investors have sought to convert or sell their shares to the Company. Only after the expiration of this full time period will public security holders be entitled to distributions from the Trust Account if the Company is unable to complete a business combination. Accordingly, investors’ funds may be unavailable to them until after such date and to liquidate their investment, public security holders may be forced to sell their public shares, rights or warrants, potentially at a loss. In addition, if the Company fails to complete an initial business combination by December 12, 2019, there will be no Redemption Rights or liquidating distributions with respect to the rights and warrants, which will expire worthless, unless the Company amends its Charter to extend its life and certain other agreements it has entered into.

The Company’s independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about its ability to continue as a “going concern.”

As of June 30, 2019, the Company had $77,838 thousand in cash held in trust, and a working capital deficit of $3,859 thousand. Further, the Company has incurred and expects to continue to incur significant costs in pursuit of its financing and acquisition plans, including the Stock Purchase Agreement. The Company cannot assure you that its plans to raise capital or to consummate an initial business combination, including the Stock Purchase Agreement, will be successful. These factors, among others, raise substantial doubt about its ability to continue as a going concern. The financial statements contained elsewhere in this proxy statement do not include any adjustments that might result from its inability to consummate the Business Combination or its inability to continue as a going concern.

Subsequent to the consummation of the Business Combination, the post-combination company may be required to 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 stock price, which could cause you to lose some or all of your investment.

Although the Company has conducted due diligence on Kaleyra, the Company cannot assure you that this diligence revealed all material issues that may be present in Kaleyra’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the Company’s and Kaleyra’s control will not later arise. As a result, the post-combination company may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in losses. Even if the Company’s due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the Company’s preliminary risk analysis. Even though these charges may be non-cash items and may not have an immediate impact on the post-combination company’s liquidity, the fact that the post-combination company reports charges of this nature could contribute to negative market perceptions about it or its securities. In addition, charges of this nature may cause the post-combination company to be unable to obtain future financing on favorable terms or at all.

 

76


Table of Contents

The Initial Stockholders have agreed to vote in favor of such initial business combination, regardless of how the Company’s public stockholders vote.

Unlike some other blank check companies in which the initial stockholders agree to vote their Founder Shares in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, the Initial Stockholders have agreed (i) to vote their shares in favor of any proposed business combination, including the Business Combination, (ii) not to convert their shares in connection with a stockholder vote to approve a proposed initial business combination, and (iii) not to sell any such shares to the Company in a tender offer in connection with any proposed business combination. Our Initial Stockholders have agreed to vote their shares in favor of the Business Combination Proposal. As a result, we would need only 1,731,266, or approximately 22.9%, of the 7,549,536 public shares, to be voted in favor of the Stock Purchase Agreement in order to have the Business Combination approved. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case if the Initial Stockholders agreed to vote their Founder Shares, private placement shares and Insider Shares in accordance with the majority of the votes cast by the Company’s public stockholders.

The unaudited pro forma condensed combined financial information included in this proxy statement may not be indicative of what the Company’s actual financial position or results of operations would have been.

The unaudited pro forma condensed combined financial information in this proxy statement is presented solely for illustrative purposes only and is not necessarily indicative of what the Company’s actual financial position or results of operations would have been had the Business Combination completed on the dates indicated. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for more information.

If third parties bring claims against the Company, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.10 per share.

The Company’s placing of funds in trust may not protect those funds from third party claims against the Company. Although the Company has sought to have all vendors and service providers the Company engages and prospective target businesses the Company negotiated with execute agreements with the Company waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Company’s public stockholders, they may not execute such agreements. Furthermore, even if such entities execute such agreements with the Company, they may seek recourse against the Trust Account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of the Company’s public stockholders. If the Company is unable to complete a business combination and distribute the proceeds held in trust to the Company’s public stockholders, the Sponsor has agreed (subject to certain exceptions described elsewhere in this proxy statement) that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.10 per share by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered or contracted for or products sold to the Company. However, it may not be able to meet such obligation. Therefore, the per-share distribution from the Trust Account may be less than $10.10, plus interest, due to such claims.

Additionally, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company’s which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in the Company’s bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, the Company may not be able to return to the Company’s public stockholders at least $10.10. The Sponsor may not have sufficient funds to satisfy its indemnity obligations, as its only assets are securities of the Company. The Company has not asked the Sponsor to reserve for such indemnification obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for the Company’s initial business combination, including the Business Combination, and redemptions could be reduced to less than $10.10 per public share.

 

77


Table of Contents

The Company’s stockholders may be held liable for claims by third parties against the Company to the extent of distributions received by them.

The Company’s Charter provides that it will continue in existence only until December 12, 2019. If the Company has not completed a business combination by such date, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including any interest earned on the funds held in the Trust Account net of interest that may be used by the Company to pay its franchise and income taxes payable and up to $100,000 for dissolution expenses, divided by the number of then outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and our Board, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

If the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against the Company which is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by the Company’s stockholders. Furthermore, because GigCapital intends to distribute the proceeds held in the public shares to the Company’s public stockholders promptly after expiration of the time the Company has to complete an initial business combination, this may be viewed or interpreted as giving preference to the Company’s public stockholders over any potential creditors with respect to access to or distributions from the Company’s assets. Furthermore, our Board may be viewed as having breached their fiduciary duties to the Company’s creditors and/or may have acted in bad faith, and thereby exposing itself and the Company to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors. The Company cannot assure you that claims will not be brought against it for these reasons.

Neither the Company nor its stockholders will have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total aggregate closing consideration in the event that any of the representations and warranties made by Kaleyra in the Business Combination ultimately proves to be inaccurate or incorrect.

The representations and warranties made by Kaleyra and the Company to each other in the Stock Purchase Agreement will not survive the consummation of the Business Combination. As a result, the Company and its stockholders will not have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total merger consideration if any representation or warranty made by Kaleyra in the Stock Purchase Agreement proves to be inaccurate or incorrect. Accordingly, to the extent such representations or warranties are incorrect, the Company would have no indemnification claim with respect thereto and its financial condition or results of operations could be adversely affected.

If the Company does not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.”

If the Company does not file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of shares of Common Stock that holders will receive upon exercise of the warrants will be fewer than it would have been had such holder exercised its warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their

 

78


Table of Contents

warrants for cash if a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants is available. Under the terms of the warrant agreement, the Company has agreed to use its best efforts to meet these conditions and to file and maintain a current and effective prospectus relating to the Common Stock issuable upon exercise of the warrants until the expiration of the warrants. However, the Company cannot assure you that it will be able to do so. If the Company is unable to do so, the potential “upside” of the holder’s investment in the Company may be reduced or the warrants may expire worthless.

Even if the Company consummates the Business Combination, there is no guarantee that the warrants will ever be in the money, and they may expire worthless and the terms of warrants may be amended.

The exercise price for the warrants is $11.50 per share of Common Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

In addition, the Company’s warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 65% of the then outstanding public warrants to make any other change. Accordingly, the Company may amend the terms of the warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although the Company’s ability to amend the terms of the warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares and their respective affiliates and associates have of Common Stock purchasable upon exercise of a warrant.

The Company may amend the terms of the rights in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding rights.

The rights are issued in registered form under a right agreement between Continental Stock Transfer & Trust Company, as rights agent, and the Company. The right agreement provides that the terms of the rights may be amended without the consent of any holder to cure any ambiguity or correct any defective provision. The right agreement requires the approval by the holders of at least 65% of the then outstanding rights in order to make any change that adversely affects the interests of the registered holders.

The Company has no obligation to net cash settle the rights or warrants.

In no event will the Company have any obligation to net cash settle the rights or warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of the rights or warrants upon consummation of an initial business combination, including the Business Combination, or exercise of the warrants. Accordingly, the rights and Warrants may expire worthless.

The Company’s ability to successfully effect the Business Combination and to be successful thereafter will be totally dependent upon the efforts of its key personnel, including Kaleyra’s key personnel, all of whom are expected to join the Company following the Business Combination. While the Company intends to closely scrutinize any individuals it engages after the Business Combination, it cannot assure you that its assessment of these individuals will prove to be correct.

The Company’s ability to successfully effect the Business Combination is dependent upon the efforts of key personnel of Kaleyra and of the Company, including Dr. Avi Katz, the Company’s Executive Chairman, and Dario Calogero, Kaleyra’s Chief Executive Officer. Although the Company expects all of Kaleyra’s key personnel to remain with the post-combination company following the Business Combination, it is possible that

 

79


Table of Contents

the post-combination company will lose some key personnel, the loss of which could negatively impact the operations and profitability of the post-combination company. While the post-combination company intends to closely scrutinize any individuals it engages after the Business Combination, it cannot assure you that its assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a public company which could cause the post-combination company to have to expend time and resources helping them become familiar with such requirements. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect its operations.

The Company’s Founders, directors and officers have interests in the Business Combination which may be different from or in addition to (and which may conflict with) the interests of its stockholders.

The Company’s Founders, officers and directors and their respective affiliates and associates have interests in and arising from the Business Combination that are different from or in addition to (and which may conflict with) the interests of the Company’s public stockholders, which may result in a conflict of interest. These interests include:

 

   

the fact that our Initial Stockholders cannot redeem any of the shares of Common Stock that they hold in connection with a stockholder vote to approve a proposed initial business combination and such Initial Stockholders will lose their entire investment in us if an initial business combination is not consummated by December 12, 2019;

 

   

the fact that the Founders paid an aggregate of $5,007,560 for the Founder Shares and such securities will have a significantly higher value at the time of the Business Combination, which if unrestricted and freely tradable would be valued at $40,270,060 (based upon a $10.00 per share price for our Common Stock);

 

   

the fact that the Initial Stockholders have agreed to waive their rights to liquidating distributions from the Trust Account with respect to their shares of Common Stock they hold (other than any public shares, in the case of Cowen Investments) if the Company fails to complete an initial business combination by December 12, 2019;

 

   

the fact that the Founders paid an aggregate of $4,982,560 for their 498,256 private placement units, including the rights and warrants that are a constituent part of the private placement units, and that such private placement units will be worthless if a business combination is not consummated by December 12, 2019;

 

   

the continued right of the Founders to hold our Common Stock and the shares of Common Stock to be issued to such Founders upon conversion of the rights and exercise of their private placement warrants following the Business Combination, subject to certain vesting restrictions and lock-up periods;

 

   

that fact that our 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 the Company has discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (i) $10.00 per public share; or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, 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 the IPO 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, our Sponsor will not be responsible to the extent of any liability for such third party claims. There is no assurance that our Sponsor will be able to satisfy its obligations. The per-share liquidation price for the public shares is anticipated to be approximately $[●] (based on the amount expected to be in trust at the time of the special meeting). Nevertheless, the Company cannot assure you that the per share distribution from the trust account, if the Company liquidates, will not be less than $[●], plus interest, due to unforeseen claims of potential creditors

 

80


Table of Contents
   

the anticipated continuation of certain members of the Board as directors of the post-combination company;

 

   

the continued indemnification of the Company’s existing directors and officers and the continuation of the Company’s directors’ and officers’ liability insurance after the Business Combination; and

 

   

that, at the Closing the Company will amend and restate the Existing Registration Rights Agreement that the Company and certain holders of Common Stock entered into, which provides certain stockholders and their permitted transferees with registration rights.

In addition, certain directors of the Company intend to become executive officers following the Closing of the Business Combination. These interests may influence the Company’s directors in making their recommendation that you vote in favor of the approval of the Business Combination.

Stockholders of the post-combination company may not be able to enforce judgments entered by United States courts against certain of our officers and directors.

We are incorporated in the State of Delaware. However, following the Business Combination, some of our directors and executive officers may reside outside of the U.S. As a result, stockholders of the post-combination company may not be able to effect service of process upon those persons within the U.S. or enforce against those persons judgments obtained in U.S. courts.

A market for the Company’s securities may not continue, which would adversely affect the liquidity and price of its securities.

Following the Business Combination, the price of the post-combination company’s securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for the Company’s securities following the Business Combination may never develop or, if developed, it may not be sustained. In addition, the price of the post-combination company’s securities after the Business Combination can vary due to general economic conditions and forecasts, the post-combination company’s general business condition and the release of the post-combination company’s financial reports. Additionally, if the post-combination company’s securities are not listed on, or become delisted from, the NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of the post-combination company’s securities may be more limited than if the post-combination company’s securities were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

There can be no assurance that the Company will be able to comply with the continued listing standards of the NYSE.

The Company’s Common Stock, Units, Warrants and rights are currently listed on NYSE. The Company intends to list its Common Stock and Warrants immediately following the Closing of the Stock Purchase Agreement on the NYSE, respectively. The Company’s ability to list on the NYSE may depend on the number of its shares that are redeemed. If, after the Business Combination, the NYSE delists the post-combination company’s securities from trading on its exchange for failure to meet the listing standards, the post-combination company’s and its stockholders could face significant material adverse consequences including:

 

   

a limited availability of market quotations for the post-combination company’s securities;

 

   

a determination that the Common Stock is a “penny stock” which will require brokers trading in its Common Stock to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the Common Stock;

 

81


Table of Contents
   

a limited amount of analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

If the post-combination company fails to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if its products or services are not adopted as expected, the combined company will not be able to compete effectively.

The post-combination company will operate in a highly competitive, quickly changing environment, and the combined company’s future success depends on its ability to develop or acquire, and introduce new products and services that achieve broad market acceptance. The post-combination company’s ability to successfully introduce and market new products is unproven. Because the post-combination company will have a limited operating history and the market for its products, including newly acquired or developed products, is rapidly evolving, it is difficult to predict the combined company’s operating results, particularly with respect to any new products that it may introduce. The post-combination company’s future success will depend in large part upon its ability to identify demand trends in the market in which it will operate and quickly develop or acquire, and design, manufacture and sell, products and services that satisfy these demands in a cost-effective manner.

In order to differentiate the post-combination company’s products and services from competitors’ products, the post-combination company will need to increase focus and capital investment in research and development, including software development. If any products currently sold by, and services offered by, Kaleyra do not continue, or if the post-combination company’s new products or services fail to achieve widespread market acceptance, or if we are unsuccessful in capitalizing on opportunities in the market in which the post-combination company will operate, the post-combination company’s future growth may be slowed and its business, results of operations and financial condition could be materially adversely affected. Successfully predicting demand trends is difficult, and it is very difficult to predict the effect that introducing a new product or service will have on existing product or service sales. It is possible that the post-combination company may not be successful with its new products and services, and as a result the post-combination company’s future growth may be slowed and its business, results of operations and financial condition could be materially adversely affected. Also, the post-combination company’s may not be able to respond effectively to new product or service announcements by competitors by quickly introducing competitive products and services.

In addition, the post-combination company may acquire companies and technologies in the future. In these circumstances, the combined company may not be able to successfully manage integration of the new product and service lines with the combined company’s existing suite of products and services. If the post-combination company is unable to effectively and successfully further develop these new product and service lines, the post-combination company may not be able to increase or maintain sales (as compared to sales of Kaleyra on a standalone basis), and the post-combination company’s gross margin (as compared to sales of Kaleyra on a standalone basis) may be adversely affected.

Furthermore, the success of the post-combination company’s new products will depend on several factors, including, but not limited to, market demand costs, timely completion and introduction of these products, prompt resolution of any defects or bugs in these products, the post-combination company’s ability to support these products, differentiation of new products from those of the post-combination company’s competitors, market acceptance of these products, delays and quality issues in releasing new products and services. The occurrence of one or more of the foregoing factors may result in lower quarterly revenue than expected, and the post-combination company may in the future experience product or service introductions that fall short of its projected rates of market adoption.

If the post-combination company’s products fail to achieve and sustain sufficient market acceptance, the combined company’s revenue will be adversely affected.

The post-combination company’s success will depend on its ability to develop and market products that are recognized and accepted as reliable, enabling and cost-effective. Some potential customers of the combined

 

82


Table of Contents

company may already use products similar to what Kaleyra currently offers and similar to what the post-combination company may offer in the future and may be reluctant to replace those products with what Kaleyra currently offers or which the combined company may offer in the future. Market acceptance of the post-combination company’s products and technology will depend on many factors, including the post-combination company’s ability to convince potential customers that the post-combination company’s products and technology are an attractive alternative to existing products and technology. Prior to adopting the post-combination company’s products and technology, some potential customers may need to devote time and effort to testing and validating the post-combination company’s systems. Any failure of the post-combination company’s systems to meet these customer benchmarks could result in potential customers choosing to retain their existing systems or to purchase systems other than the combined company’s.

If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of the Company’s securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the Closing may decline. The market values of the Company’s securities at the time of the Business Combination may vary significantly from their prices on the date the Business Combination was executed, the date of this proxy statement, or the date on which the Company’s stockholders vote on the Business Combination.

In addition, following the Business Combination, fluctuations in the price of the Company’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for Kaleyra’s stock and trading in the shares of Company Common Stock has not been active. Accordingly, the valuation ascribed to Kaleyra and Company Common Stock in the Business Combination may not be indicative of the price that will prevail in the trading market following the Business Combination. If an active market for the Company’s securities develops and continues, the trading price of the Company’s securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond the Company’s control. Any of the factors listed below could have a material adverse effect on your investment in the Company’s securities and the Company’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.

Factors affecting the trading price of the Company’s securities following the Business Combination may include:

 

   

actual or anticipated fluctuations in the post-combination company’s quarterly financial results or the quarterly financial results of companies perceived to be similar to the post-combination company;

 

   

changes in the market’s expectations about the post-combination company’s operating results;

 

   

success of competitors;

 

   

the post-combination company’s operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning the post-combination company or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to the post-combination company’s;

 

   

the post-combination company’s ability to market new and enhanced services and products on a timely basis;

 

   

changes in laws and regulations affecting the post-combination company’s business;

 

   

commencement of, or involvement in, litigation involving the Company;

 

83


Table of Contents
   

changes in the post-combination company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of the post-combination company’s securities available for public sale;

 

   

any major change in the board or management;

 

   

sales of substantial amounts of Common Stock by the post-combination company’s directors, executive officers or significant stockholders or the perception that such sales could occur; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of its operating performance. The stock market in general and the NYSE have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Company’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s stock price regardless of the Company’s business, prospects, financial condition or results of operations. A decline in the market price of the Company’s securities also could adversely affect the Company’s ability to issue additional securities and the Company’s ability to obtain additional financing in the future.

Following the Business Combination, if securities or industry analysts do not publish or cease publishing research or reports about the Company, its business, or its market, or if they change their recommendations regarding the Company’s securities adversely, the price and trading volume of the Company’s securities could decline.

The trading market for the post-combination company’s securities will be influenced by the research and reports that industry or securities analysts may publish about the post-combination company, its business, its market, or its competitors. Securities and industry analysts do not currently, and may never, publish research on the post-combination company. If no securities or industry analysts commence coverage of the post-combination company, the post-combination company’s stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination company, change their recommendation regarding the post-combination company’s stock adversely, or provide more favorable relative recommendations about the post-combination company’s competitors, the price of the post-combination company’s securities would likely decline. If any analyst who may cover the post-combination company were to cease coverage of the post-combination company or fail to regularly publish reports on it, the post-combination company could lose visibility in the financial markets, which could cause its stock price or trading volume to decline.

Following the Business Combination, we may be required to purchase up to 5,346,250 shares of Common Stock pursuant to forward share purchase agreements, thereby reducing cash available to us for other purposes.

GigCapital has entered into Forward Share Purchase Agreements with each of Greenhaven and KAF with respect to the rights currently held by each of them and any Additional Rights they may acquire prior to the closing of the Business Combination whereby the post-combination company may be obligated to purchase the shares into which these rights convert at the option of Greenhaven and KAF. If either Greenhaven or KAF exercise their respective options, the post-combination company will have to expand funds to purchase those shares, which will reduce the cash available to it for other purposes. GigCapital is also in the process of negotiating additional forward share purchase arrangements with each of Yakira, Glazer and Nomura, which would provide that each of Yakira, Glazer and Nomura would not redeem shares of Common Stock that they each hold in connection with the Business Combination, and would instead either hold such shares for a period of time following the consummation of the Business Combination, and at the end of such time period they will each have the right at their option to sell such shares to the post-combination company, or during such time period each of them will sell such shares in the market at a price of at least $10.50 per share. Following the closing of the Business Combination, we will either deposit into escrow accounts, in the case of Yakira or Glazer, the aggregate cash amount necessary to purchase the shares, or, in the case of Nomura, we will transfer from the Trust Account an

 

84


Table of Contents

amount of cash equal to (a) the aggregate number of shares held by Nomura multiplied by (b) the per share redemption amount for our shares of Common Stock. As a result, these amounts will not be available to the post-combination company unless and until any of Yakira, Glazer or Nomura sell such shares in the market. In addition, if Yakira or Glazer sell shares to the post-combination company, the per share price shall be equal to (a) the per share redemption amount for our shares of Common Stock, plus (b) $0.03 per share for each month following the Business Combination that Yakira or Glazer has held the shares. Furthermore, if Nomura sells shares to the post-combination company, Nomura will keep that portion of the cash transferred to it following the closing of the Business Combination attributable to such shares sold to the post-combination company, plus an accrual amount equal to the per share redemption amount multiplied by 2.75% per annum if the shares are sold to the post-combination company at the end of one year following the Business Combination, or 3.50% per annum if the shares are sold to the post-combination company at the end of two years following the Business Combination. If we enter into such additional forward share purchase arrangements and shares are sold to the post-combination company, this will also reduce the cash available to us for other purposes. For a detailed description of the various forward purchase arrangements, see the section entitled “Proposal No. 1—Approval of the Business Combination—Letters of Intent Note to Redeem Public Shares” and “Proposal No. 1—Approval of the Business Combination—Rights Tender Offer—Agreements Not to Tender.

The future sales of shares by existing stockholders and future exercise of registration rights may adversely affect the market price of the Company’s common stock.

Sales of a substantial number of shares of the Company’s common stock in the public market could occur at any time. If the Company’s stockholders sell, or the market perceives that the Company’s stockholders intend to sell, substantial amounts of the Company’s common stock in the public market, the market price of the Company’s common stock could decline.

In connection with their initial purchase of our securities, the initial stockholders were granted registration rights pursuant to the Existing Registration Rights Agreement. In connection with the Business Combination, the Company agreed to amend and restate the Existing Registration Rights Agreement with the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, after the date of closing of the Business Combination, the Sellers’ Representative, Cowen or the holders of at least a majority-in-interest of the then-outstanding shares issued to or issuable to the Initial Stockholders, and the shares issued in the Business Combination (collectively, the “Registrable Securities”) will be entitled to make up to three demands (not counting any demand by Cowen to register our securities) that we register the Registrable Securities. Such registration rights are subject to certain requirements and limitations as set forth in the Registration Rights Agreement. In addition, and subject to certain requirements and limitations as set forth in the Registration Rights Agreement, the holders of the Registrable Securities have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of the Business Combination. Notwithstanding the foregoing, Cowen, and Messrs. Silverberg and Bernstein may not exercise their demand and “piggyback” registration rights after five and seven years, respectively, after December 7, 2017 and may not exercise their demand rights on more than one occasion. The Company will bear the expenses incurred in connection with the filing of any such registration statements, provided, that the Company is not required to pay for any registration if the request for such registration is subsequently withdrawn at the request of the holders of a majority of the Registrable Securities to be registered in such registration.

Warrants will become exercisable for Company Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to the Company stockholders.

The Company issued public warrants to purchase 10,781,250 shares of Common Stock as part of the Company’s IPO and in connection with the Company’s IPO, the Company issued an aggregate of 373,692 private placement warrants as part of the private placement units to the Sponsor. Each whole warrant is exercisable to purchase one share of Common Stock at $11.50 per share. To the extent such warrants are exercised, additional shares of Common Stock will be issued, which will result in dilution to the then existing holders of the Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Common Stock.

 

85


Table of Contents

The Company’s public stockholders may experience dilution as a consequence of, among other transactions, the issuance of Common Stock as consideration in the Stock Purchase Agreement. Having a minority share position may reduce the influence that the Company’s current stockholders have on the management of the Company.

It is anticipated that, upon the closing of the Stock Purchase Agreement, (i) the Company’s public stockholders will own approximately 40.46% of the post-combination company’s outstanding Common Stock; (ii) our Initial Stockholders will own approximately 19.31% of the post-combination company’s outstanding Common Stock and (iii) the Sellers will own approximately 40.23% of the post-combination company’s outstanding Common Stock. These ownership percentages assume that (a) there are no additional redemptions of the Offering Shares by the Company’s public stockholders other than those that have already occurred on June 5, 2019, (b) 8,616,819 shares of Common Stock are issued to the Sellers at Closing, and (c) the Company does not issue any additional shares of Common Stock between the date of the Stock Purchase Agreement and the Closing Date.

These relative percentages reflect the automatic conversion of 498,256 private rights into approximately 49,826 shares of Common Stock upon completion of the Business Combination, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer, and assume no issuance of Earn-Out Shares in the Stock Purchase Agreement. The ownership percentage with respect to the post-combination company following the Business Combination does not take into account (i) the exercise of warrants outstanding following the Business Combination, (ii) the issuance of any shares under the Kaleyra, Inc. 2019 Incentive Plan or (iii) the conversion of 3,199,109 public rights into 319,911 shares of Common Stock which are subject to the Rights Tender Offer. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained the Company’s existing stockholders in the Company will be different.

The post-combination company may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

The post-combination company has the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of the Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date the post-combination company sends the notice of redemption to the warrant holders. If and when the warrants become redeemable by the post-combination company, the post-combination company may exercise its redemption right even if the post-combination company is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the private placement warrants and warrants underlying the units issuable upon conversion of working capital loan will be redeemable by the post-combination company so long as they are held by their initial purchasers or their permitted transferees.

Anti-takeover provisions contained in the proposed second amended and restated certificate of incorporation as well as provisions of Delaware law, could impair a takeover attempt.

The proposed second amended and restated certificate of incorporation will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. The post-combination company is also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and

 

86


Table of Contents

may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for the post-combination company’s securities. These provisions are described in the “The Charter Amendment Proposals.”

Activities taken by the Company’s affiliates to purchase, directly or indirectly, public shares will increase the likelihood of approval of the Business Combination Proposal and the other Proposals and may affect the market price of the Company’s securities.

The Company’s Founders, directors, officers, advisors or their affiliates may purchase shares in privately negotiated transactions either prior to or following the consummation of the Business Combination. None of the Company’s Founders, directors, officers, advisors or their affiliates will make any such purchases when such parties 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. Although none of the Company’s Founders, directors, officers, advisors or their affiliates currently anticipate paying any premium purchase price for such public shares, in the event such parties do, the payment of a premium may not be in the best interest of those stockholders not receiving any such additional consideration. There is no limit on the number of shares that could be acquired by the Company’s Founders, directors, officers, advisors or their affiliates, or the price such parties may pay.

If such transactions are effected, the consequence could be to cause the Business Combination to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the Business Combination Proposal and other proposals and would likely increase the chances that such Proposals would be approved. If the market does not view the Business Combination positively, purchases of public shares may have the effect of counteracting the market’s view, which would otherwise be reflected in a decline in the market price of the Company’s securities. In addition, the termination of the support provided by these purchases may materially adversely affect the market price of the Company’s securities.

As of the date of this proxy statement, no agreements with respect to the private purchase of public shares by the Company or the persons described above have been entered into with any such investor or holder. The Company will file a Current Report on Form 8-K 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.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect the Company’s business, investments and results of operations.

The Company is subject to laws, regulations and rules enacted by national, regional and local governments. In particular, the Company is required to comply with certain SEC, NYSE and other legal or regulatory requirements, including the NYSE upon the transfer of its listing. Compliance with, and monitoring of, applicable laws, regulations and rules may be difficult, time consuming and costly. Those laws, regulations and rules and their interpretation and application may also change from time to time and those changes could have a material adverse effect on the Company’s business, investments and results of operations. In addition, a failure to comply with applicable laws, regulations and rules, as interpreted and applied, could have a material adverse effect on the Company’s business and results of operations.

The Company’s structure if the Business Combination is approved may be inefficient from the point of view of taxes.

If the stockholders approve the Business Combination, Kaleyra will become a controlled foreign corporation for U.S. federal income tax purposes. This means that a substantial part of the net income, if any, of Kaleyra and its non-U.S. subsidiaries will be taxable to the Company without regard to whether a dividend is paid to the Company,

 

87


Table of Contents

subject to available foreign tax credits and a special deduction. Moreover, because Kaleyra has a U.S. subsidiary, the resulting structure (sometimes referred to as a “sandwich structure”) would be subject to multiple levels of tax. Generally speaking, it is difficult to simplify a sandwich structure without incurring taxes in one or more jurisdictions.

Risks Related to the Redemption

If you or a “group” of stockholders of which you are a part are deemed to hold an aggregate of 15% or more of Company Common Stock issued in the Company’s IPO, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such shares issued in the Company’s IPO.

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 in the aggregate his, her or its shares or, if part of such a group, the group’s shares, of 15% or more of the shares of Common Stock included in the units sold in the Company’s IPO. The Company refers to such shares in excess of an aggregation of 15% or more of the shares sold in the Company’s IPO as “Unredeemable Shares.” In order to determine whether a stockholder is acting in concert or as a group with another stockholder, the Company will require each public stockholder seeking to exercise Redemption Rights to certify to the Company whether such stockholder is acting in concert or as a group with any other stockholder. Such certifications, together with other public information relating to stock ownership available to the Company at that time, such as Section 13D, Section 13G and Section 16 filings under the Exchange Act, will be the sole basis on which the Company makes the above-referenced determination. Your inability to redeem any Unredeemable Shares will reduce your influence over the Company’s ability to consummate the Business Combination and you could suffer a material loss on your investment in the Company if you sell Unredeemable Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Unredeemable Shares if the Company consummates the Business Combination. As a result, in order to dispose of such shares, you would be required to sell your stock in open market transactions, potentially at a loss. Notwithstanding the foregoing, stockholders may challenge the Company’s determination as to whether a stockholder is acting in concert or as a group with another stockholder in a court of competent jurisdiction.

There is no guarantee that a stockholder’s decision whether to redeem their shares for a pro rata portion of the Trust Account will put the stockholder in a better future economic position.

The Company can give no assurance as to the price at which a stockholder may be able to sell its public shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in the Company’s share price, and may result in a lower value realized now than a stockholder of the Company might realize in the future had the stockholder redeemed their shares. Similarly, if a stockholder does not redeem their shares, the stockholder will bear the risk of ownership of the public shares after the consummation of any initial business combination, and there can be no assurance that a stockholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement. A stockholder should consult the stockholder’s own tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.

If the Company’s stockholders fail to comply with the redemption requirements specified in this proxy statement, they will not be entitled to redeem their shares of Company Common Stock for a pro rata portion of the funds held in the Trust Account.

Holders of public shares are not required to affirmatively vote either for or against the Business Combination Proposal or any other proposal in order to exercise their rights to redeem their shares for a pro rata portion of the Trust Account. In order to exercise their Redemption Rights, they are required to submit a request in writing and deliver their stock (either physically or electronically) to the Company’s transfer agent at least

 

88


Table of Contents

two (2) business days prior to the Special Meeting. Stockholders electing to redeem their shares will receive their pro rata portion the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to it to pay the Company’s franchise and income taxes, calculated as of two (2) business days prior to the anticipated consummation of the Business Combination. See the section titled “Special Meeting of Company Stockholders—Redemption Rights” for additional information on how to exercise your Redemption Rights.

The Company’s stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must comply with specific requirements for redemption that may make it more difficult for them to exercise their Redemption Rights prior to the deadline.

The Company’s public stockholders who wish to redeem their shares for a pro rata portion of the Trust Account must, among other things as fully described in the section titled “Special Meeting of Company Stockholders—Redemption Rights,” tender their certificates to the Company’s transfer agent or deliver their shares to the transfer agent electronically through the DTC at least two business days prior to the Special Meeting. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and the Company’s transfer agent will need to act to facilitate this request. It is the Company’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because GigCapital does not have any control over this process or over the brokers, which the Company refers to as “DTC,” it may take significantly longer than two weeks to obtain a physical stock certificate. If it takes longer than anticipated to obtain a physical certificate, stockholders who wish to redeem their shares may be unable to obtain physical certificates by the deadline for exercising their Redemption Rights and thus will be unable to redeem their shares.

The ability to execute the Company’s strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares in connection with the Business Combination.

Depending upon the aggregate amount of cash consideration the Company would be required to pay for all shares of Common Stock that are validly submitted for redemption, the post-combination company may be required to increase the financial leverage the post-combination company’s business would have to support. This may negatively impact its ability to execute on its own future strategic plan.

Risks Related to the Company and the Business Combination

Our Board did not obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the business combination.

Our Board did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the Business Combination. In analyzing the Business Combination, our Board and management conducted due diligence on Kaleyra and researched the industry in which it operates and concluded that the Business Combination was in the best interest of our stockholders. Accordingly, investors will be relying solely on the judgment of our Board in valuing Kaleyra’s business, and our Board may not have properly valued such business. The lack of a third-party valuation or fairness opinion may also lead an increased number of stockholders to vote against the proposed business combination or demand redemption of their shares for cash, which could potentially impact the ability to consummate the Business Combination or the operations of the post-combination company.

The Company may be a “controlled company” within the meaning of the applicable rules of the NYSE and, as a result, may qualify for exemptions from certain corporate governance requirements. If the Company relies on these exemptions, its stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon the Closing, depending on the number of shares of Common Stock redeemed by the Company’s public stockholders, the Sellers may control a majority of the voting power of the post-combination company’s

 

89


Table of Contents

outstanding Common Stock, and the Company may then be a “controlled company” within the meaning of applicable rules of the NYSE upon the Closing of the Business Combination. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements:

 

   

that a majority of the board consists of independent directors;

 

   

for an annual performance evaluation of the nominating and corporate governance and compensation committees;

 

   

that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibility.

If available, the post-combination company may use these exemptions now or in the future. As a result, the post-combination company’s stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance requirements.

The Company’s proposed second amended and restated charter provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware and the federal district courts of the United States of America will be the sole and exclusive forums for substantially all disputes between the Company and its stockholders, which could limit the Company’s stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, or employees.

Our amended and restated certificate of incorporation will require, to the fullest extent permitted by law, that derivative actions brought in our name, actions against our directors, officers, and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel except any action (A) as to which the Court of Chancery in the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, (C) for which the Court of Chancery does not have subject matter jurisdiction, or (D) any action arising under the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall have concurrent jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to the forum provisions in our amended and restated certificate of incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, or employees which may discourage lawsuits with respect to such claims, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder. However, there is no assurance that a court would enforce the choice of forum provision contained in our amended and restated certificate of incorporation. If a court were to find such provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, operating results and financial condition.

Our amended and restated certificate of incorporation will provide that the exclusive forum provision will be applicable to the fullest extent permitted by applicable law. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

 

90


Table of Contents

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The unaudited pro forma condensed combined balance sheet as of June 30, 2019 combines the historical consolidated balance sheet of Kaleyra as of June 30, 2019 with the historical balance sheet of the Company as of June 30, 2019, giving effect to the Business Combination as if it had been consummated as of that date.

The unaudited pro forma condensed combined statements of operations are presented using the Company’s fiscal year end, and as the fiscal year end of Kaleyra differs from the Company’s most recent fiscal year end, the statements of operation for it are being brought up to within 93 days of the Company’s fiscal year end.

In accordance with the preceding, the unaudited pro forma condensed combined statement of operations for the nine months ended June 30, 2019 combines the historical consolidated statement of operations of Kaleyra for the nine months ended June 30, 2019 with the historical statement of operations of the Company for the nine months ended June 30, 2019, giving effect to the Business Combination as if it had been consummated as of October 9, 2017 (Date of Inception).

The historical consolidated statement of operations of Kaleyra for the nine months ended June 30, 2019 include, in addition to the six months ended June 30, 2019, the historical consolidated statement of operation of Kaleyra for the three months ended December 31, 2018 which are also included in the historical consolidated statement of operations of Kaleyra for the twelve months ended December 31, 2018 that are used in the preparation of the unaudited pro forma condensed combined statement of operations for the twelve months.

The unaudited pro forma condensed combined statement of operations for the twelve months, combines the historical consolidated statement of operations of Kaleyra for the twelve months ended December 31, 2018, the historical statement of operations of Solutions Infini for the six months ended June 30, 2018, and the historical statement of operations of Buc Mobile for the seven months ended July 31, 2018, with the historical consolidated statement of operations of the Company for the period from October 9, 2017 (Date of Inception) through September 30, 2018, giving effect to the Business Combination as if it had occurred as of October 9, 2017 (Date of Inception).

The following unaudited pro forma financial statements give effect to the following transactions:

 

   

The Business Combination;

 

   

The release of all of the funds held in the Company’s Trust Account;

 

   

Upon the consummation of the Business Combination, the payment by the Company of the Aggregate Closing Consideration to the Sellers (as further described below);

 

   

The Rights Tender Offer (but not those rights which will not be tendered);

 

   

The conversion of 498,256 private placement rights and 11,175,891 public rights into 1,167,415 shares of Common Stock upon completion of the Business Combination as the holders of which have agreed not to tender such rights in response to the Rights Tender Offer;

 

   

The payment by the Company of fees, expenses and other amounts associated with the Business Combination out of funds released from the Company’s Trust Account, to the extent required;

 

   

The acquisition of control of Solutions Infini by Kaleyra; and

 

   

The acquisition of control of Buc Mobile by Kaleyra.

The Aggregate Closing Consideration shall consist of Cash Consideration, Common Stock Consideration and the Notes for the Note Principal Amount. Each of Esse Effe and Maya will receive its portion of the Aggregate Closing Consideration in the form of a combination of Common Stock Consideration, Cash Consideration and Notes. Each of the other Sellers will receive his, her or its portion of the Aggregate Closing Consideration solely in the form of Common Stock Consideration. The aggregate value of each component of the Aggregate Closing Consideration will be calculated based on the Redemption Percentage.

 

91


Table of Contents

As described in the section entitled “Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Consideration to Sellers in the Business Combination,” the Stock Purchase Agreement apportions each component of the Aggregate Closing Consideration according to five fixed Redemption Ranges. The aggregate amount of Common Stock Consideration is subject to the certain adjustments, see the section entitled Proposal No. 1—Approval of the Business Combination—The Stock Purchase Agreement—Consideration to Sellers in the Business Combination for details on the adjustments.

Assuming no adjustments are made pursuant to the provisions of the Stock Purchase Agreement and a Redemption Percentage of less than 50%, the Aggregate Closing Consideration would have a value of $103,753,236, based on the closing price of our Common Stock on June 28, 2019, which was $10.30 per share. The Sellers may be entitled to receive up to an additional 4,292,272 Earn-Out Shares, having an aggregate value of $44,210,402, based on the closing price of our Common Stock on June 28, 2019, if certain targets are met with respect to pro forma revenue of the post-combination company and the Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2019 fiscal year and/or 2020 fiscal year. In this circumstance, the aggregate of the value of the Aggregate Closing Consideration and the value of the Earn-Out Shares is in excess of 80% of the assets held in the Trust Account (less taxes payable on interest earned on the Trust Account).

Pursuant to the terms of the Company’s Charter, holders of the Company’s public shares have the opportunity to redeem all or a portion of their public shares upon the completion of the Business Combination at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Company’s Trust Account as of two business days prior to the consummation of the Business Combination, including interest (which interest shall be net of taxes payable), divided by the number of then outstanding public shares. The per-share amount the Company will distribute to holders of public shares who properly redeem their public shares will not be reduced by the deferred underwriting commissions the Company is required to pay to its underwriters for its IPO, which occurred in December 2017. The Initial Stockholders, our officers and our remaining directors have agreed to waive their Redemption Rights with respect to any shares of Common Stock (other than any public shares, in the case of Cowen Investments).

The Sellers will also receive Earn-out Shares if certain pro forma revenue and Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula thresholds specified in the Stock Purchase Agreement are met by the post-combination company and its subsidiaries in either or both of fiscal years 2019 and 2020, with a total of 4,292,272 shares of Common Stock being earnable for both such years in the aggregate.

The historical financial information of Kaleyra was derived from the unaudited condensed consolidated financial statements of Kaleyra as of and for the six months ended June 30, 2019 and the audited consolidated financial statements of Kaleyra as of and for the year ended December 31, 2018; the historical financial information of Solutions Infini was derived from the audited financial statements of Solutions Infini as of and for the three months ended June 30, 2018 and the audited financial statements of Solutions Infini as of and for the year ended March 31, 2018; and the historical financial information of Buc Mobile was derived from the audited financial statements of Buc Mobile as of and for the seven months ended July 31, 2018, each as included elsewhere in this proxy statement. The historical financial information of the Company was derived from the unaudited financial statements of the Company as of and for the nine months ended June 30, 2019 and the audited financial statements of the Company as of September 30, 2018 and for the period from October 9, 2017 (inception) through September 30, 2018, each as included elsewhere in this proxy statement. This information should be read together with Kaleyra’s and the Company’s financial statements and related notes. See “Kaleyra Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included elsewhere in this proxy statement.

Accounting for the Transactions

The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, the Company will be treated as the “acquired” company for financial reporting

 

92


Table of Contents

purposes. This determination was primarily based on Kaleyra’s operations comprising substantially all of the ongoing operations of the post-combination company, Kaleyra’s senior management comprising substantially all of the senior management of the post-combination company and the existence of a large minority voting interest in the Company. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Kaleyra issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be the historical operations of Kaleyra.

Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable and, with respect to the pro forma statements of operations, are expected to have a continuing impact on the results of the post-combination company. The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the post-combination company will experience. Kaleyra and the Company have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemptions for cash of the Company’s public shares:

 

   

Scenario 1Assuming no additional redemptions of public shares for cash: This presentation assumes that none of the Company’s stockholders exercise Redemption Rights, other than those which did so exercise Redemption Rights on June 5, 2019, with respect to their public shares upon the consummation of the Business Combination.

 

   

Scenario 2Assuming maximum redemptions of public shares for cash: This presentation assumes that the Company’s stockholders exercise their Redemption Rights with respect to a maximum of 3,640,786 public shares, constituting all of our currently outstanding public shares other than the 3,908,705 public shares that are the subject of the non-binding letters of intent with Yakira, Glazer and Nomura, upon consummation of the Business Combination at a redemption price of approximately $10.45 per share.

Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma condensed combined financial statements under Scenario 1 are 8,565,619 shares, and under Scenario 2 are 9,330,619 shares, of Common Stock to be issued to the Sellers in the connection with the Business Combination based on the Closing Kaleyra Group Net Debt as of June 30, 2019. The currently outstanding warrants of the Company to purchase a total of 11,154,942 shares of Common Stock at an exercise price of $11.50 per share will continue to be outstanding after the Closing of the Business Combination. Considering the assumed nominal per share market price of $10.30 per share, the Company’s warrants are not dilutive on a pro forma basis. However, the potential dilutive impact will ultimately be recognized based on the actual market price on the date of measurement. We also do not take into account any of the 3,199,109 public rights which are subject to the Rights Tender Offer and which could be converted into 319,911 shares of Common Stock, and the conversion of 11,175,891 public rights into 1,117,589 shares of Common Stock upon completion of the Business Combination that we have either agreed or entered into a non-binding letter of intent to purchase at a date 60 days following the completion of the Business Combination, and which the holders of such rights would not tender in response to the Rights Tender Offer.

At the Closing of the Business Combination, under Scenario 1, it is expected that current stockholders of Kaleyra will hold approximately 40.08% of the issued and outstanding shares of Common Stock, and the existing stockholders of the Company will hold approximately 59.92% of the issued and outstanding shares of Common

 

93


Table of Contents

Stock (assuming that the Company has not raised additional equity capital as permitted under the Stock Purchase Agreement). Under Scenario 1, the Aggregate Closing Consideration would have a value of $103,225,876, based on the closing price of our Common Stock on June 28, 2019 which was $10.30 per share. The Sellers may be entitled to receive up to an additional 4,292,272 Earn-Out Shares, having an aggregate value of $44,210,402, based on the closing price of our common stock on June 28, 2019, if certain targets are met with respect to pro forma revenue of the post-combination company and the Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2019 fiscal year and/or 2020 fiscal year.

As we expect that we will enter into agreements with each of Yakira, Glazer and Nomura on the terms set forth in each of the non-binding letters of intent, and that an aggregate of 3,908,750 shares of Common Stock will not be redeemed by them, Scenario 2 assumes a Redemption Range for purposes of the Stock Purchase Agreement and the Founder Shares Agreement with a Redemption Percentage that is greater than 62.5% but less than or equal to 75.0%. At the Closing of the Business Combination, under Scenario 2, it is expected that current stockholders of Kaleyra will hold approximately 50.45% of the issued and outstanding shares of Common Stock, and the existing stockholders of the Company will hold approximately 49.55% of the issued and outstanding shares of Common Stock (assuming that the Company has not raised additional equity capital as permitted under the Stock Purchase Agreement). Under Scenario 2, the Aggregate Closing Consideration would have a value of $111,105,376, based on the closing price of our Common Stock on June 28, 2019. The Sellers may be entitled to receive up to an additional 3,527,272 Earn-Out Shares, having an aggregate value of $36,330,902, based on the closing price of our Common Stock on June 28, 2019, if certain targets are met with respect to pro forma revenue of the post-combination company and the Post-Combination Company Pro Forma Adjusted EBITDA Earn-Out Formula for the 2019 fiscal year and/or 2020 fiscal year.

 

94


Table of Contents

PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF JUNE 30, 2019

(in thousands except share and per share amounts)

(unaudited)

 

                  

(C)

Scenario 1

(Assuming No Additional
Redemptions into Cash)

    

(C)

Scenario 2

(Assuming Maximum
Redemptions into Cash)

 
     (A)      (B)                            
     GigCapital,
Inc.
     Kaleyra
S.p.A
     Pro Forma
Adjustments
    Pro Forma
Balance Sheet
     Pro Forma
Adjustments
    Pro Forma
Balance Sheet
 

ASSETS

               

Current assets

               

Cash and cash equivalents

   $ 329      $ 8,734      $ 77,838  (1)       $ 77,838  (1)   
           156  (1)          156  (1)   
           (15,000 )(2)         (38,046 )(3)   
           (11,991 )(6)         (7,500 )(3)   
           733  (7)          (11,991 )(6)   
           (2,807 )(8)         20,000  (6)   
           (3,167 )(9)         733  (7)   
           (9,705 )(10)         (2,807 )(8)   
           (21,000 )(11)         (3,167 )(9)   
           (10,680 )(12)         (9,705 )(10)   
                (21,000 )(11)   
             13,440        (10,680 )(12)      2,894  

Restricted cash

           9,705  (10)         9,705  (10)   
           10,680  (12)      20,385        10,680  (12)      20,385  

Short-term marketable securities

        3,630          3,630          3,630  

Trade receivables

        35,953          35,953          35,953  

Prepaid expenses and accrued income

     39        883          922          922  

Other current assets

        2,746          2,746          2,746  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     368        51,946        24,762       77,076        14,216       66,530  

Property and equipment, net

        2,624          2,624          2,624  

Intangible assets, net

        10,431          10,431          10,431  

Goodwill

        17,364          17,364          17,364  

Deferred tax assets

        792        9  (5)       801        9  (5)       801  

Other long-term assets

        1,112          1,112          1,112  

Cash and marketable securities held in Trust Account

     77,838               
           (77,838 )(1)      —          (77,838 )(1)      —    

Interest receivable on cash held in trust account

     156           (156 )(1)       —          (156 )(1)       —    
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total Assets

   $ 78,362      $ 84,269      $ (53,223 )    $ 109,408      $ (63,769 )    $ 98,862  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)

               

Current liabilities:

               

Accounts payable

   $ 1,276      $ 45,506      $ (3,203 )(6)    $ 43,579      $ (3,203 )(6)    $ 43,579  

Deferred consideration for the acquisitions

        3,037        1,384  (5)      4,421        1,384  (5)      4,421  

Deferred consideration for the acquisitions due to related parties

        3,291        616  (5)       3,907        616  (5)       3,907  

Current portion of bank and other borrowings

        6,513          6,513          6,513  

Deferred revenue

        1,555          1,555          1,555  

Payable to employees and related parties

     44        976          1,020          1,020  

Other current liabilities

     203        1,440        9,705  (10)       $ 9,705  (10)   
           456  (10)       $ 456  (10)   
           578  (11)       $ 578  (11)   
           10,680  (12)      23,062      $ 10,680  (12)      23,062  

Accrued liabilities

     631             631          631  

Notes payable

     2,074           733  (7)          7,500  (3)   
           (2,807 )(8)         733  (7)   
             —          (2,807 )(8)      7,500  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     4,228        62,318        18,142       84,688        25,642       92,188  

 

95


Table of Contents
                

(C)

Scenario 1

(Assuming No Additional
Redemptions into Cash)

   

(C)

Scenario 2

(Assuming Maximum
Redemptions into Cash)

 
     (A)     (B)                          
     GigCapital,
Inc.
    Kaleyra
S.p.A
    Pro Forma
Adjustments
    Pro Forma
Balance Sheet
    Pro Forma
Adjustments
    Pro Forma
Balance Sheet
 

Bank and other borrowings

       10,305         10,305       20,000  (6)      30,305  

Long-term payable to employees

       1,249         1,249         1,249  

Preference shares

       640         640         640  

Preference shares due to related parties

       1,730         1,730         1,730  

Deferred consideration for the acquisitions

       1,567       (1,357 )(5)      210       (1,357 )(5)      210  

Deferred consideration for the acquisitions due to related parties

       1,163       (604 )(5)       559       (604 )(5)       559  

Deferred tax liabilities

       2,311         2,311         2,311  

Other long-term liabilities

       397         397         397  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     4,228       81,680       16,181       102,089       43,681       129,589  

Commitments and contingencies

            

Common stock subject to possible redemption, 7,238,641 shares as of June 30, 2019 at a redemption value of $10.00 per share

     69,134       —         (69,134 )(2)      —         (69,134 )(3)      —    

Stockholders’ equity (deficit)

            

Common stock

     1       121       (121 )(2)         (121 )(3)   
         2  (2)       3       2  (3)       3  

Additional paid-in capital

     6,190       10,066       69,255  (2)        31,209  (3)   
         (15,000 )(2)        (15,000 )(3)   
         (2 )(2)         (2 )(3)   
         (1,191 )(4)        (1,191 )(4)   
         (3,167 )(9)        (3,167 )(9)   
         (9,705 )(10)        (9,705 )(10)   
         (456 )(10)        (456 )(10)   
         (21,578 )(11)        (21,578 )(11)   
         (10,680 )(12)        (10,680 )(12)   
           23,732       14,314  (13)      —    

Accumulated other comprehensive income

     —         375         375         375  

Accumulated deficit

     (1,191     (7,973     1,191  (4)        1,191  (4)   
         (30 )(5)         (30 )(5)   
         (8,788 )(6)        (8,788 )(6)   
           (16,791     (14,314 )(13)      (31,105
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     5,000       2,589       (270 )      7,319       (38,316 )      (30,727 ) 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

   $ 78,362     $ 84,269     $ (53,223 )    $ 109,408     $ (63,769 )    $ 98,862  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

96


Table of Contents

Pro Forma Adjustments to the Unaudited Condensed Combined Balance Sheet

 

(A)

Derived from the unaudited condensed balance sheet of GigCapital, Inc. as of June 30, 2019.

(B)

Derived from the unaudited condensed consolidated balance sheet of Kaleyra S.p.A. as of June 30, 2019.

(C)

The total consideration under each of the two scenarios, after giving effect to a 51,200 share reduction to the Closing Share Consideration as a result of the calculated Net Debt as of June 30, 2019 is as follows:

 

(In thousands except share amounts)    Scenario 1
(Assuming No
Additional Redemptions
into Cash)
     Scenario 2
(Assuming Maximum
Redemptions into Cash)
 

Closing Share Consideration (in shares of the Company’s Common Stock) (1)

     8,565,619        9,330,619  

Share Consideration Dollars (2)

   $ 88,226      $ 96,105  

Cash Consideration

   $ 15,000      $ 7,500  

Note Principal amount

   $ —        $ 7,500  
  

 

 

    

 

 

 

Total Aggregate Closing Consideration

   $ 103,226      $ 111,105  

Contingent Consideration (Value of Earn-out Shares) (3)

   $ 44,210      $ 36,331  
  

 

 

    

 

 

 

Total Aggregate and Contingent Consideration

   $ 147,436      $ 147,436  
  

 

 

    

 

 

 

 

  (1)

Includes a reduction of 51,200 shares of Common Stock related to the net debt as of June 30, 2019. The final adjustment may differ as a result of the net debt as of the close of the Business Combination.

  (2)

Calculated at the closing price of the stock as of June 28, 2019 of $10.30.

  (3)

Earn-out Shares of 4,292,272 for Scenario 1 and 3,527,272 for Scenario 2 are valued for the calculation of the consideration at the closing price of the stock as of June 28, 2019 of $10.30. In the pro forma Balance Sheet these shares are recorded at par value of $0.0001 in the equity section and round in thousands to zero, therefore there is no specific entry reflected in the proforma adjustments.

The total consideration of $147,436 thousand, is greater than 80% of the original $146,700 thousand held in the Trust Account ($117,400 thousand), therefore the total consideration would satisfy the 80% test in the NYSE rules. The entries related to each component of the consideration are described further in Note 2 and Note 3 below.

 

(1)

To reflect the release of $77,838 thousand of investments and $156 thousand of interest receivable held in the Trust Account as all amounts held in the Trust Account are to be released upon the consummation of the Business Combination to either be used to satisfy the exercise of Redemption Rights or for use by the post-combination company.

(2)

Scenario 1 assumes no additional stockholders of the Company exercise their redemption rights. To reflect the surrender of Kaleyra shares ($121 thousand), transfer of the remaining 7,239 thousand shares of the Common Stock to permanent equity ($69,135 thousand), the issuance of 8,566 thousand shares of Common Stock ($0.0001 par value) and payment of $15,000 thousand cash to the Sellers.

(3)

Scenario 2 assumes the maximum number of shares are redeemed into cash by the stockholders of the Company and $38,046 thousand is paid out in cash on redemption. To reflect the cash payout for redemption, surrender of the Kaleyra shares ($121 thousand), the transfer of the remaining 3,598 thousand shares of Common Stock to permanent equity ($69,135 thousand), the issuance of 9,331 thousand shares of Common Stock ($0.0001 par value), payment of $7,500 thousand cash and issuance of a $7,500 thousand Note Payable to the Sellers.

(4)

To reflect the elimination of the historical accumulated deficit of GigCapital Inc, the accounting acquiree.

(5)

To reflect Kaleyra acceleration of $2,000 thousand in consideration from the Kaleyra and Buc Mobile business combination.

(6)

To reflect the payment of an estimated $11,991 thousand of legal, financial advisory and other professional fees related to the Business Combination, of which an estimated $5,319 thousand will be paid to Cowen and Chardan Capital Markets, LLC, as advisors to the Company, and an estimated $1,383 thousand will be paid in legal and accounting fees for the Company, in connection with the Business Combination. In addition, an

 

97


Table of Contents
  estimated $2,445 thousand will be paid to Northland and GCA Altium S.r.l., as advisors to Kaleyra, and an estimated $2,844 thousand will be paid in legal and accounting fees for Kaleyra, in connection with the Business Combination. Scenario 2 assumes the post-combination company is able to raise $20,000 thousand in a private debt placement.
(7)

To reflect the subsequent issuance of GigCapital extension and working capital notes in August 2019.

(8)

To reflect the repayment of the Company’s extension and working capital notes issued by the Company and payable upon the consummation of the Business Combination.

(9)

To reflect the conversion of rights held by insiders or covered by two forward share purchase agreements and an LOI into 1,167 thousand shares of Common Stock and to record the tender and acceptance for cancellation of the remaining 3,199 thousand rights (or such lesser number of public rights after subtracting those public rights that are subject to agreements for purchases of the shares into which the public rights convert after the closing of the Business Combination) public rights at a price of $0.99 per right in the Rights Tender Offer.

(10)

To reflect the establishment of an escrow account ($9,705 thousand) and the contingent liability for the purchase of 909 thousand Shares, assuming a holding period of six months from the close of the Business Combination, for $10.68 per share and 42 thousand Right Shares for $10.50 per share assuming holding period of 60 days from the date of the Business Combination as defined in the LOI with Yakira.

(11)

To reflect the cash payment and contingent liability for the purchase of 2,000 thousand Shares, assumed held for a period of 12 months from the date of the Business Combination, at approximately $10.79 per share, based on the Forward Purchase Price as defined in the LOI with Nomura.

(12)

To reflect the establishment of an escrow account ($10,680) and the contingent liability for the purchase of 1,000 thousand Shares at $10.68 per share assuming a holding period of six months from the close of the Business Combination as defined in the LOI with Glazer Capital Management.

(13)

To reclass negative additional paid-in capital to accumulated deficit.

 

98


Table of Contents

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED JUNE 30, 2019

(in thousands except share and per share amounts)

(unaudited)

 

    (A)     (B)     (C)     Scenario 1
(Assuming No Additional
Redemptions into Cash)
    Scenario 2
(Assuming Maximum
Redemptions into Cash)
 
    GigCapital, Inc.     Kaleyra, SPA     Kaleyra, SPA                          
    Nine months ended
June 30, 2019
    Three months ended
December 31, 2018
(Also included in
the Twelve Months
ended December 31,
2018 Statement of
Operations)
    Six months ended
June 30, 2019
    Pro Forma
Adjustments
    Pro Forma
Statement of
Operations
    Pro Forma
Adjustments
    Pro Forma
Statement
of
Operations
 

Revenue

  $ —       $ 27,815     $ 58,596         86,411         86,411  

Cost of revenue

      21,762       47,324         69,086         69,086  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    —         6,053       11,272       —         17,325       —         17,325  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

             

Research and development

      1,602       2,590         4,192         4,192  

Sales and marketing

      3,440       2,960         6,400         6,400  

General and administrative expenses

    2,137       5,927       7,740       (4,003 )(2)      11,801       (4,003 )(2)      11,801  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    2,137       10,969       13,290       (4,003     22,393       (4,003     22,393  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loss from operations

    (2,137     (4,916     (2,018     4,003       (5,068     4,003       (5,068
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income, net

      (77     (95       (172       (172

Financial expense, net

      (97     65         (32       (32

Foreign currency loss

      361       142         503         503  

Interest (income) on marketable securities held in Trust Account

    (2,261         2,261 (1)      —         2,261 (1)      —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    124       (5,103     (2,130     1,742       (5,367     1,742       (5,367
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

    649       583       551       (649 )(1)      1,134       (649 )(1)      1,134  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

  $ (525)     $ (5,686)     $ (2,681)     $ 2,391     $ (6,501)     $ 2,391     $ (6,501)  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per share attributable to common shareholders, basic and diluted

  $ (0.37)           $ (0.26)       $ (0.30
 

 

 

         

 

 

     

 

 

 

Weighted-average shares used in computing net loss per share attributable to common shareholders basic and diluted

    4,153,252           21,323,946 (3)      25,477,198       17,683,160 (3)      21,836,412  
 

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

 

99


Table of Contents

Pro Forma Adjustments to the Unaudited Condensed Combined Statement of Operations

 

(A)

Derived from the unaudited statement of operations of the Company for the nine months ended June 30, 2019.

(B)

Derived from the unaudited condensed consolidated statement of operations of Kaleyra for the three months ended December 31, 2018.

(C)

Derived from the unaudited condensed consolidated statement of operations of Kaleyra for the six months ended June 30, 2019.

(1)

Represents an adjustment to eliminate both the interest income on marketable securities held in the Trust Account as of the beginning of the period and the corresponding income tax expense.

(2)

To reflect the reversal of Business Combination related expenses included in the statements of operations incurred by GigCapital (approximately $1,200 thousand) and Kaleyra (approximately $2,803 thousand).

(3)

As the Business Combination is being reflected as if it had occurred on October 9, 2017 (Date of Inception), the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable to the Kaleyra stockholders in the Business Combination have been outstanding for the entire period presented. If the maximum number of shares are redeemed, this calculation is retroactively adjusted to eliminate such redeemed shares for the entire period.

 

100


Table of Contents

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

(in thousands except share and per share amounts)

(unaudited)

 

    (A)     (B)     (C)     (D)     (E)     (F)     (G)     (H)     (I)  
    GigCapital,
Inc.
    Kaleyra,
S.p.A.
    Buc
Mobile,
Inc.
    Solutions
Infini
Technologies
(India)
Private
Limited
    Solutions
Infini
Technologies
(India)
Private
Limited
    Buc Mobile,
Inc.
    Solutions
Infini
Technologies
(India)
Private
Limited
   

Scenario 1

(Assuming No Additional

Redemptions into Cash)

   

Scenario 2

(Assuming Maximum

Redemptions into Cash)

 
    Period from
October 9,
2017 (Date
of Inception)
through
September
30, 2018
    Twelve
months
ended
December
31, 2018
    Historical
financial
information
for the
seven
months
ended July
31, 2018
    Historical
financial
information
for the six
months

ended
June 30,

2018 in INR
    Historical
financial
information
for the six
months

ended
June 30,

2018 in USD
    Pro Forma
Adjustments
    Pro Forma
Adjustments
    Pro Forma
Adjustments
    Statement of Pro
Forma Operations
(A+B+C+E+F+G+H)
    Pro Forma
Adjustments
    Pro Forma
Statement of
Operations
(A+B+C+E+F+G+I)
 

Revenue

    $ 77,845     $ 3,650       Rs 1,110,102     $ 16,924     $ (1   $ (5     $ 98,413       $ 98,413  

Cost of revenue

      62,425       2,499       895,015       13,645       133       222         78,924         78,924  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    —         15,420       1,151       215,087       3,279       (134     (227     —         19,489       —         19,489  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

                        —    

Research and development

      3,368       609       44,191       674       (125     —           4,526         4,526  

Sales and marketing

      6,313       343       40,765       621       143       432         7,852         7,852  

General and administrative expenses

    1,880       11,359       560       61,571       939       (259     —           14,479         14,479  

(Income) on equity investments

      (95       —           —         95         —           —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

    1,880       20,945       1,512       146,527       2,234       (241     527       —         26,857       —         26,857  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

    (1,880     (5,525     (361     68,560       1,045       107       (754     —         (7,368     —         (7,368
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other income, net

      (297       (3,279     (50           (347       (347

Interest expense, net

      416       20       3,319       51       (18     —           469         469  

Foreign currency loss

      32         2,608       40       —         —           72         72  

Interest (income) on marketable securities held in Trust Account

    (1,815             —         —         1,815 (1)      —         1,815 (1)      —    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (65     (5,676     (381     65,912       1,004       125       (754     (1,815     (7,562     (1,815     (7,562
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax expense

    600       1,424       —         27,953       426       —         (191     (600 )(1)      1,659       (600 )(1)      1,659  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income

  $ (665   $ (7,100   $ (381     Rs 37,959     $ 578     $ 125     $ (563   $ (1,215   $ (9,221   $ (1,215   $ (9,221
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income loss per share attributable to common shareholders, basic and diluted

  $ (0.40   $ (69.8               $ (0.36     $ (0.42
 

 

 

   

 

 

               

 

 

     

 

 

 

Weighted-average shares used in computing net loss per share attributable to common shareholders basic and diluted

    4,048,626       101,707                 21,569,058 (3)      25,617,684       17,683,160 (3)      21,731,786