DEFM14A 1 defm14a020420_chaserg.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________

SCHEDULE 14A

SCHEDULE 14A INFORMATION

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Securities Exchange Act of 1934

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PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS
OF CHASERG TECHNOLOGY ACQUISITION CORP.

Dear ChaSerg Technology Acquisition Corp. Stockholders:

You are cordially invited to attend the special meeting of stockholders of ChaSerg Technology Acquisition Corp., a Delaware corporation, which is referred to as ChaSerg, on March 4, 2020, at 10:00 a.m. Pacific time, at 533 Airport Blvd, Suite 400, Burlingame, CA 94010. This proxy statement is dated February 10, 2020 and is first being mailed to stockholders of ChaSerg on February 11, 2020.

At the Special Meeting, ChaSerg stockholders will be asked to consider and vote upon proposals to:

1.      approve and adopt (i) the Merger Agreement, by and among ChaSerg, Grid Dynamics International, Inc., a digital transformation company (“Grid Dynamics”), and the other parties named therein, and (ii) the transactions contemplated by the Merger Agreement, including a business combination that will result in the existing business of Grid Dynamics being owned by ChaSerg, a Nasdaq-listed public company, and ChaSerg’s issuance of shares and payment of cash as merger consideration to Grid Dynamics’ pre-closing stockholders (collectively, the “Business Combination”). Upon the consummation of the Business Combination, ChaSerg will change its name to “Grid Dynamics Holdings, Inc.” (the “Successor”). The transactions contemplated by the Merger Agreement are more fully described under “Proposal No. 1: The Business Combination Proposal — Structure of the Business Combination” and are referred to herein as the “Business Combination,” and this proposal is referred to herein as the “Business Combination Proposal” or “Proposal No. 1”);

2.      approve, for purposes of complying with applicable listing rules of The NASDAQ Stock Market LLC (“NASDAQ”), the issuance of more than 20% of the number of shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock, which shall be converted to ChaSerg Common Stock prior to issuance, combined, outstanding prior to the Business Combination (this proposal is referred to herein as the “NASDAQ Proposal” or “Proposal No. 2”);

3.       consider and vote upon a proposal to approve the following material differences between the constitutional documents of the Successor that will be in effect upon the closing of the Business Combination and ChaSerg’s current amended and restated certificate of incorporation: (i) the name of the new public entity will be “Grid Dynamics Holdings, Inc.” as opposed to “ChaSerg Technology Acquisition Corp.”; (ii) the Successor’s certificate of incorporation will provide for the automatic conversion of all shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock into an equal number of shares of Successor Common Stock with a par value of $0.0001 per share as opposed to retaining the distinction between the ChaSerg Class A Common Stock and ChaSerg Class B Common Stock; (iii) remove various provisions applicable only to special purpose acquisition corporations that ChaSerg’s existing certificate of incorporation contains; (iv) Successor Charter will not contain a provision requiring the Delaware Chancery court to serve as the exclusive forum for stockholders to bring certain lawsuits (although a similar provision will be included in the bylaws) as opposed to the ChaSerg Charter which contains such a provision; and (v) Successor Charter will not include the various rights and privileges, including dilution adjustment, of ChaSerg Class B Common Stock that the ChaSerg Charter currently contains (this proposal is referred to herein as the “Charter Proposals” or “Proposal No. 3”);

4.      elect three directors to serve on our board of directors as Class I directors until the annual meeting of stockholders to be held in 2020, elect three directors to serve on our board of directors as Class II directors until the annual meeting of stockholders to be held in 2021, and elect two directors to serve on our board of directors as Class III directors until the annual meeting of stockholders to be held in 2022, in each case, until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal (the “Director Election Proposal” or “Proposal No. 4”);

5.      adopt and approve the ChaSerg Technology Acquisition Corp. 2020 Equity Incentive Plan (the “2020 Plan”) and the reservation of 16,300,000 shares of Successor Common Stock for issuance pursuant to awards granted thereunder (this proposal is referred to herein as the “Incentive Plan Proposal” or “Proposal No. 5”); and

 

6.      approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal and the Incentive Plan Proposal (this proposal is referred to herein as the “Adjournment Proposal” or “Proposal No. 6”).

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

The purchase price will be paid to Grid Dynamics stockholders as of immediately prior to the consummation of the Business Combination in a combination of stock and cash consideration. The aggregate merger consideration (the “Merger Consideration”) to be paid pursuant to the Merger Agreement will be an amount equal to: (i) $130,000,000, subject to certain reductions (the “Cash Consideration”), and (ii) 25,523,810 shares of Successor Common Stock, subject to certain closing adjustments (the “Share Consideration”).

In order to account for uncertainty as to the number of shares that will be redeemed by stockholders prior to the consummation of the Business Combination and to ensure that the Successor will have adequate cash for operations following the Closing, the Cash Consideration is subject to reduction in an amount equal to: $13,500,000 multiplied by (x) the difference between the balance of the Trust Account as at the date of the signing of the Merger Agreement minus the Available Parent Cash, divided by (y) 30% of the Trust Account balance as at the date of the signing of the Merger Agreement, where such adjustment amount can be no more than $13,500,000 and no less than $0. Any reduction of the Cash Consideration in accordance with the foregoing is offset by an increase in the Share Consideration by a number of shares of ChaSerg Common Stock equal to the quotient of (x) the amount of such reduction of the Cash Consideration divided by (y) the Parent Stock Signing Price (as defined below).

In order to, among other things, account for changes in cash, indebtedness and working capital of Grid Dynamics, the Share Consideration may be reduced by the following amounts as of the closing (a) the amount by which Grid Dynamics’ working capital is less than $10,000,000, (b) Grid Dynamics’ indebtedness, and (c) the amount, which may not exceed $15,000,000, by which Grid Dynamics’ Excess Cash Adjustment Amount (as defined below) is less than $29,000,000. The Share Consideration may be increased by (a) the amount by which Grid Dynamics’ working capital is greater than $10,000,000 and (b) the amount, which may not exceed $15,000,000, by which Grid Dynamics’ Excess Cash Adjustment Amount is greater than $29,000,000. The Excess Cash Adjustment Amount includes cash, cash equivalents and marketable securities of Grid Dynamics as of the Closing but is reduced by the amount of transaction triggered bonus payments and other retention bonus payments and increased by (x) fees and expenses incurred by Grid Dynamics in connection with the Business Combination as well as fees and expenses incurred in connection with specified acquisition transactions of Grid Dynamics, and (y) the aggregate exercise price of the cashed out portion of the Grid Dynamics Options (solely to the extent necessary to cause Excess Cash to equal $29,000,000).

In addition, the Share Consideration is also subject to adjustment for earnings before income taxes, depreciation and amortization (“EBITDA”) performance targets, whereby the Share Consideration is reduced by $1,500,000 for every $100,000 by which Grid Dynamics’ total EBITDA in the 2019 fiscal year, as estimated by Grid Dynamics, is below $23,800,000. The post-closing adjustment of the Share Consideration is capped at 857,143 shares of ChaSerg Class A Common Stock which will be placed in escrow at closing.

In connection with the Business Combination, each vested option to purchase the common stock of Grid Dynamics (a “Grid Dynamics Option”) held by a person other than a continuing service provider and a portion of each vested Grid Dynamics Option held by a continuing service provider will be canceled and converted into the right to receive an amount in cash based on the Merger Consideration and the exercise price of such Grid Dynamics Option. In addition, by virtue of the Mergers, each unvested Grid Dynamics Option held by a continuing service provider and a portion of each vested Grid Dynamics Option held by a continuing service provider will be assumed by ChaSerg and converted into an option to purchase shares of ChaSerg Common Stock with substantially the same terms and conditions (each, an “Assumed Option”), with equitable adjustments to the number of shares subject to the Assumed Option and exercise price of the Assumed Option. Any portion of a Grid Dynamics Option that is neither canceled and converted into the right to receive cash consideration nor assumed will be canceled immediately prior to the effective time of the Initial Merger.

Pursuant to ChaSerg’s amended and restated certificate of incorporation, ChaSerg is providing its Public Stockholders with the opportunity to redeem, in connection with the closing of the Business Combination, shares of ChaSerg Class A Common Stock 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 of the Business Combination) in the Trust Account that holds the proceeds (including interest but

 

less taxes payable and any interest that ChaSerg may withdraw for working capital) of ChaSerg’s initial public offering (“ChaSerg’s IPO”). As of September 30, 2019, based on funds in the Trust Account of approximately $223.5 million, ChaSerg’s stockholders who elect to redeem their shares of common stock would have received approximately $10.16 per share, excluding interest income earned and not previously released to pay up to $1.4 million of ChaSerg’s franchise and income taxes. Public Stockholders may elect to redeem their shares even if they vote “for” the Business Combination Proposal. A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (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 shares of ChaSerg Class A Common Stock included in the units sold in ChaSerg’s IPO. Holders of ChaSerg’s outstanding public warrants do not have redemption rights in connection with the Business Combination. The officers and directors of ChaSerg Technology Sponsor LLC, a Delaware limited liability company (the “Sponsor”), have agreed to waive their redemption rights in connection with the consummation of the Business Combination with respect to any shares of ChaSerg Class A Common Stock they may hold. The Sponsor owns approximately 21.4% of ChaSerg’s issued and outstanding shares of common stock, consisting of 5.5 million shares of ChaSerg Class B Common Stock (“Class B Common Stock” or “Founder Shares”) and 530,000 Placement Units. Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price. Sponsor and ChaSerg directors and officers have agreed to vote any shares of ChaSerg Class A Common Stock owned by them in favor of the Business Combination Proposal.

ChaSerg Class A Common Stock, units and warrants are currently listed on NASDAQ under the symbols “CTAC,” “CTACU” and “CTACW,” respectively. Certain of our shares of Class A Common Stock and warrants currently trade as units consisting of one share of ChaSerg Class A Common Stock and one-half of one redeemable warrant, and are listed on the NASDAQ under the symbol “CTACU.” Upon closing of the Business Combination, the units will be separated into the component securities upon the closing of the Business Combination and, as a result, will no longer trade as a separate security. Upon the consummation of the transaction, ChaSerg will change its name to “Grid Dynamics Holdings, Inc.” and we have applied to continue the listing of our common stock and warrants on the NASDAQ under the symbols “CTAC” and “CTACW,” respectively.

ChaSerg is providing this proxy statement and accompanying proxy card to ChaSerg stockholders in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting. Whether or not you plan to attend the Special Meeting, ChaSerg urges you to read this proxy statement carefully. Please pay particular attention to the section entitled “Risk Factors.”

ChaSerg’s President and Chief Financial Officer, Eric Benhamou, is a director of both ChaSerg and Grid Dynamics. In addition, he has direct and indirect ownership interests in both companies. As a result, the Business Combination is considered a transaction with an affiliate under the terms of our amended and restated certificate of incorporation. Under the terms of such amended and restated certificate of incorporation, we are not prohibited from pursuing a business combination with a company that is affiliated with our directors, provided we obtain an opinion from an independent investment banking firm that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view. For more information, see the sections entitled “Risk Factors — Risks Related to ChaSerg and the Business Combination — Sponsor and ChaSerg’s 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,” “Questions and Answers about the Proposals for the Stockholders — What interests do ChaSerg’s current officers and directors have in the Business Combination?” and “Proposal No. 1: The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

After careful consideration, the board of directors of ChaSerg has approved and adopted the Merger Agreement and the transactions contemplated therein and unanimously recommends that ChaSerg stockholders vote “FOR” adoption and approval of the Business Combination Proposal and “FOR” all other proposals presented to ChaSerg stockholders in this proxy statement. When you consider the recommendation by the board of directors of ChaSerg of these proposals, you should keep in mind that the directors and officers of ChaSerg have interests in the Business Combination that may conflict with your interests as a stockholder. See the section entitled “Proposal No. 1: The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

Approval of the Business Combination Proposal, the NASDAQ Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by ChaSerg stockholders present in person and represented by proxy and entitled to vote thereon. The eight nominees receiving the highest number of affirmative votes cast by stockholders present in person or represented by proxy and entitled to vote thereon shall be elected as directors under the Director Election Proposal. Approval of the Charter Proposals requires a

 

vote of a majority of outstanding shares of the common stock voting together as a single class and a majority of the outstanding voting power of the Class B Common Stock voting together as a single class. The class vote of the Class B Common Stock has already been obtained by a written consent. The board of directors has already approved each of the proposals.

Each redemption of shares of ChaSerg Class A Common Stock by ChaSerg Public Stockholders will decrease the amount in the Trust Account, which held total assets of approximately $223.5 million as of September 30, 2019, which ChaSerg intends to use for the purposes of consummating the Business Combination within the time period described in this proxy statement and to pay approximately $6.3 million in deferred underwriting commissions to the underwriters of ChaSerg’s IPO. ChaSerg will not consummate the Business Combination if the redemption of Public Shares would result in ChaSerg’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act (or any successor rule)) in excess of $5.0 million.

Your vote is very important. If you are a registered stockholder, please vote your shares as soon as possible to ensure that your vote is counted, regardless of whether you expect to attend the Special Meeting in person, by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. The transactions contemplated by the Merger Agreement will be consummated only if the proposals hereby, other than the Incentive Plan Proposal and the Adjournment Proposal, are approved at the Special Meeting. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement. If any of the proposals, other than the Incentive Plan Proposal or the Adjournment Proposal, is not approved, the other proposals will not be presented to stockholders for a vote.

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 CHASERG REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO CHASERG’S TRANSFER AGENT BY THE REDEMPTION DEADLINE (AS DEFINED HEREIN). YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC 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 ChaSerg’s board of directors, I would like to thank you for your support and look forward to the successful completion of the Business Combination.

February 10, 2020

Sincerely,

   
     

/s/ Lloyd Carney

   

Lloyd Carney

   

Chief Executive Officer, Member of the ChaSerg Board of Directors

   

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 February 10, 2020 and is first being mailed to stockholders on February 11, 2020.

 

ChaSerg Technology Acquisition Corp.
533 Airport Blvd, Suite 400
Burlingame, CA 94010

NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS OF CHASERG TECHNOLOGY ACQUISITION CORP.

TO BE HELD MARCH 4, 2020

To the Stockholders of ChaSerg Technology Acquisition Corp.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders, referred to as the “Special Meeting,” of ChaSerg Technology Acquisition Corp., a Delaware corporation, which is referred to as “ChaSerg” will be held on March 4, 2020, at 10:00 a.m. Pacific time, at 533 Airport Blvd, Suite 400, Burlingame, CA 94010. You are cordially invited to attend the Special Meeting for the following purposes:

1.      The Business Combination Proposal — approve and adopt (i) the Merger Agreement, by and among ChaSerg, Grid Dynamics International, Inc., a digital transformation company (“Grid Dynamics”), and the other parties named therein, and (ii) the transactions contemplated by the Merger Agreement, including a business combination that will result in the existing business of Grid Dynamics being owned by ChaSerg, a Nasdaq-listed public company, and ChaSerg’s issuance of shares and payment of cash as merger consideration to Grid Dynamics’ selling stockholders (collectively, the “Business Combination”). Upon the consummation of the Business Combination, ChaSerg will change its name to “Grid Dynamics Holdings, Inc.” (the “Successor”). The transactions contemplated by the Merger Agreement are more fully described under “Proposal No. 1: The Business Combination Proposal — Structure of the Business Combination” and are referred to herein as the “Business Combination,” and this proposal is referred to herein as the “Business Combination Proposal” or “Proposal No. 1”);

2.      The NASDAQ Proposal — To approve, for purposes of complying with applicable listing rules of The NASDAQ Stock Market LLC (“NASDAQ”), the issuance of more than 20% of the number of shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock, which shall be converted to ChaSerg Common Stock prior to issuance, combined, outstanding prior to the Business Combination (this proposal is referred to herein as the “NASDAQ Proposal” or “Proposal No. 2”);

3.      The Charter Proposals — To consider and vote upon a proposal to approve the following material differences between the constitutional documents of the Successor that will be in effect upon the closing of the Business Combination and ChaSerg’s current amended and restated certificate of incorporation: (i) the name of the new public entity will be “Grid Dynamics Holdings, Inc.” as opposed to “ChaSerg Technology Acquisition Corp.”; (ii) the Successor’s certificate of incorporation will provide for the automatic conversion of all shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock into an equal number of shares of Successor Common Stock with a par value of $0.0001 per share as opposed to retaining the distinction between the ChaSerg Class A Common Stock and ChaSerg Class B Common Stock; (iii) remove various provisions applicable only to special purpose acquisition corporations that ChaSerg’s existing certificate of incorporation contains; (iv) Successor Charter will not contain a provision requiring the Delaware Chancery court to serve as the exclusive forum for stockholders to bring certain lawsuits (although a similar provision will be included in the bylaws) as opposed to the ChaSerg Charter which contains such a provision; and (v) Successor Charter will not include the various rights and privileges, including dilution adjustment, of ChaSerg Class B Common Stock that the ChaSerg Charter currently contains (this proposal is referred to herein as the “Charter Proposals” or “Proposal No. 3”);

4.      The Director Election Proposal — To elect three directors to serve on our board of directors as Class I directors until the annual meeting of stockholders to be held in 2020, elect three directors to serve on our board of directors as Class II directors until the annual meeting of stockholders to be held in 2021, and elect two directors to serve on our board of directors as Class III directors until the annual meeting of stockholders to be held in 2022, in each case, until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal (the “Director Election Proposal” or “Proposal No. 4”);

 

5.      The Incentive Plan Proposal — To adopt and approve the ChaSerg Technology Acquisition Corp. 2020 Equity Incentive Plan (the “2020 Plan”) and the reservation of 16,300,000 shares of Successor Common Stock for issuance pursuant to awards granted thereunder (this proposal is referred to herein as the “Incentive Plan Proposal” or “Proposal No. 5”); and

6.      The 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 if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal and the Incentive Plan Proposal (this proposal is referred to herein as the “Adjournment Proposal” or “Proposal No. 6”).

Only stockholders of record of ChaSerg at the close of business on February 5, 2020 are entitled to notice of and to vote at the Special Meeting and any adjournments or postponements of the Special Meeting. A complete list of ChaSerg stockholders of record entitled to vote at the Special Meeting will be available for 10 days before the Special Meeting at the principal executive offices of ChaSerg for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting.

Pursuant to ChaSerg’s amended and restated certificate of incorporation, ChaSerg is providing its Public Stockholders with the opportunity to redeem, in connection with the closing of the Business Combination, shares of ChaSerg Class A Common Stock 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 of the Business Combination) in the Trust Account that holds the proceeds (including interest but less taxes payable and any interest that ChaSerg may withdraw for working capital) of ChaSerg’s initial public offering (“ChaSerg’s IPO”). As of September 30, 2019, based on funds in the Trust Account of approximately $223.5 million, ChaSerg’s stockholders who elect to redeem their shares of common stock would have received approximately $10.16 per share, excluding interest income earned and not previously released to pay up to $1.4 million of ChaSerg’s franchise and income taxes. Public Stockholders may elect to redeem their shares even if they vote “for” the Business Combination Proposal. A Public Stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (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 shares of ChaSerg Class A Common Stock included in the units sold in ChaSerg’s IPO. Holders of ChaSerg’s outstanding public warrants do not have redemption rights in connection with the Business Combination. The officers and directors of ChaSerg Technology Sponsor LLC, a Delaware limited liability company (the “Sponsor”), have agreed to waive their redemption rights in connection with the consummation of the Business Combination with respect to any shares of ChaSerg Class A Common Stock they may hold. The Sponsor owns approximately 21.4% of ChaSerg’s issued and outstanding shares of common stock, consisting of 5.5 million shares of Class B Common Stock and 530,000 Placement Units. Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price. Sponsor and ChaSerg directors and officers have agreed to vote any shares of ChaSerg Class A Common Stock owned by them in favor of the Business Combination Proposal.

Approval of the Business Combination Proposal, the NASDAQ Proposal, the Incentive Plan Proposal, the Director Election Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by ChaSerg stockholders present in person and represented by proxy and entitled to vote thereon. The eight nominees receiving the highest number of affirmative votes cast by stockholders present in person or represented by proxy and entitled to vote thereon shall be elected as directors under the Director Election Proposal. Approval of the Charter Proposals requires a vote of a majority of outstanding shares of the common stock voting together as a single class and a majority of the outstanding voting power of the Class B Common Stock voting together as a single class. The class vote of the Class B Common Stock has already been obtained by a written consent. The board of directors has already approved each of the proposals.

As of September 30, 2019, there was approximately $223.5 million in the Trust Account, which ChaSerg intends to use for the purposes of consummating a business combination within the time period described in this proxy statement and to pay approximately $6.3 million in deferred underwriting commissions to the underwriters of ChaSerg’s IPO. Each redemption of shares of ChaSerg Class A Common Stock by its Public Stockholders will decrease the amount in the Trust Account. ChaSerg will not consummate the Business Combination if (i) the redemption of Public Shares would result in ChaSerg’s failure to have net tangible assets (as determined in

 

accordance with Rule 3a51-1(g)(1) of the Exchange Act (or any successor rule)) in excess of $5.0 million or (ii) if the total cash and cash equivalents of ChaSerg are not at least 70% of the Trust Account balance as of the date of signing of the Merger Agreement.

Your attention is directed to the proxy statement accompanying this notice (including the annexes thereto) for a more complete description of the proposed Business Combination and related transactions and each of the proposals. We encourage you to read this proxy statement carefully.

Your vote is important. Proxy voting permits stockholders unable to attend the Special Meeting to vote their shares through a proxy. By appointing a proxy, your shares will be represented and voted in accordance with your instructions. You can vote your shares by completing and returning your proxy card, or submit your proxy by telephone, fax, or over the Internet (if those options are available to you) in accordance with the instructions on the enclosed proxy card or voting instruction card. Proxy cards that are signed and returned but do not include voting instructions will be voted by the proxy as recommended by the board of directors. You can change your voting instructions or revoke your proxy at any time prior to the Special Meeting by following the instructions included in this proxy statement and on the proxy card.

Even if you plan to attend the Special Meeting in person, it is strongly recommended that you complete and return your proxy card before the Special Meeting date to ensure that your shares will be represented at the Special Meeting if you are unable to attend. You are urged to review carefully the information contained in the enclosed proxy statement prior to deciding how to vote your shares. You may also access our proxy materials at the following website: https://www.cstproxy.com/chasergtechnology/sm2020.

By Order of the ChaSerg Board of Directors,

February 10, 2020

   
     

/s/ Lloyd Carney

   

Lloyd Carney

   

Chief Executive Officer and Member of the ChaSerg Board of Directors

   

 

ADDITIONAL INFORMATION

The accompanying document is the proxy statement of ChaSerg for its Special Meeting of its stockholders. You can obtain the documents ChaSerg files with the SEC through the SEC website at www.sec.gov or by requesting a copy in writing or by telephone at the appropriate address or telephone number below:

ChaSerg Technology Acquisition Corp.
533 Airport Blvd, Suite 400
Burlingame, CA 94010
Attn: Chief Executive Officer
Telephone: (619) 736-6855

You may also contact our proxy solicitor, MacKenzie, at:

1407 Broadway, 27th Floor
New York, New York 10018
Toll-Free: (800) 322-2885
Call collect: (212) 929-5500
Email: proxy@mackenziepartners.com

In addition, if you have questions about the Business Combination or this proxy statement, would like additional copies of this proxy statement or need to obtain proxy cards or other information related to the proxy solicitation, please contact MacKenzie Partners, the proxy solicitor for ChaSerg, toll-free at (800) 322-2885. You will not be charged for any of these documents that you request.

See the section entitled “Where You Can Find More Information” of this proxy statement for further information.

Information contained on the ChaSerg or Grid Dynamics websites is expressly not incorporated by reference into this proxy statement.

To obtain timely delivery of the documents, you must request them no later than five business days before the date of the applicable Special Meeting, or no later than February 26, 2020.

 

TABLE OF CONTENTS

 

Page

CERTAIN DEFINED TERMS

 

1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

4

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

 

5

SUMMARY OF THE PROXY STATEMENT

 

15

SELECTED HISTORICAL FINANCIAL INFORMATION OF CHASERG

 

24

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF GRID Dynamics

 

25

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

26

RISK FACTORS

 

28

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

55

SPECIAL MEETING OF ChaSerg STOCKHOLDERS

 

68

CAPITALIZATION

 

73

Proposal No. 1: THE BUSINESS COMBINATION PROPOSAL

 

74

Proposal No. 2: THE NASDAQ PROPOSAL

 

109

Proposal No. 3: THE CHARTER PROPOSALS

 

110

Proposal No. 4: THE DIRECTOR ELECTION PROPOSAL

 

112

Proposal No. 5: THE INCENTIVE PLAN PROPOSAL

 

117

Proposal No. 6: THE ADJOURNMENT PROPOSAL

 

124

INFORMATION ABOUT ChaSerg

 

125

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

 

140

INFORMATION ABOUT GRID Dynamics

 

144

GRID Dynamics MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

151

ChaSerg Current Management and Board of Directors

   

SUCCESSOR MANAGEMENT and Board of Directors Following THE BUSINESS COMBINATION

 

167

EXECUTIVE COMPENSATION

 

175

BENEFICIAL OWNERSHIP OF SECURITIES

 

181

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

183

DESCRIPTION OF ChaSerg Securities

 

185

DESCRIPTION OF SUCCESSOR Securities

 

197

PRICE RANGE OF SECURITIES AND DIVIDENDS

 

200

APPRAISAL RIGHTS

 

202

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

 

202

Householding Information

 

202

SUBMISSION OF STOCKHOLDER PROPOSALS

 

202

FUTURE STOCKHOLDER PROPOSALS

 

202

WHERE YOU CAN FIND MORE INFORMATION

 

203

     

Index to Financial Statements

 

F-1

     

Annexes

   
     

Annex A — Agreement and Plan of Merger

 

A-1

Annex B — Form of Second Amended and Restated Certificate of Incorporation

 

B-1

Annex C — ChaSerg Technology Acquisition Corp. 2020 Equity Incentive Plan

 

C-1

Annex D — Opinion of BTIG, LLC, ChaSerg’s Financial Advisor

 

D-1

i

CERTAIN DEFINED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our” and “ChaSerg” refer to ChaSerg Technology Acquisition Corp.

In this document:

Additional Equity Amount” means additional shares of ChaSerg Class A Common Stock (a) that have the same rights, privileges and preferences as the shares of ChaSerg Class A Common Stock to be issued to the Selling Securityholders pursuant to the terms of the Merger Agreement (with no additional securities or economic inducements, except to the extended funded solely by the Sponsor or as otherwise expressly consented to by the Grid Dynamics in advance of such issuance) and (b) at a price per share not less than $10.00.

Adjusted EBITDA” means, with respect to Grid Dynamics, net income before interest income/expense, provision for income taxes and depreciation and amortization, and further adjusted for the impact of stock-based compensation expense, transaction-related costs (which include, when applicable, professional fees, retention bonuses, and consulting, legal and advisory costs related to Grid Dynamics’ merger and acquisition and capital-raising activities), impairment of goodwill and other income/expenses, net (which includes mainly interest income and expense, foreign currency transaction losses and gains, fair value adjustments and other miscellaneous expenses).

Adjusted Net Income” means, with respect to Grid Dynamics, net income adjusted for the impact of stock-based compensation, transaction-related costs, impairment of goodwill, other income/expenses, net, and the tax impacts of these adjustments.

Adjusted Pro Forma Diluted EPS” means, with respect to Grid Dynamics, Adjusted Net Income, divided by the pro forma diluted weighted average number of common shares outstanding for the period (assuming the Business Combination was consummated on January 1, 2018). The pro forma share count is used to facilitate comparability with future periods.

“ASL” means Automated Systems Holdings Limited, a company incorporated in Bermuda with limited liability.

Available Parent Cash” is equal to the total cash and cash equivalents of ChaSerg, including the funds remaining in the Trust Account after deducting (A) the amount required to satisfy the Redemption and (B) any taxes due on any accrued interest on the Trust Account (as defined below) and including the Additional Equity Amount (as defined above) (if any).

“BGV” means Benhamou Global Ventures.

Business Combination” means the Mergers of ChaSerg and Grid Dynamics pursuant to the Merger Agreement.

Cantor” means Cantor Fitzgerald & Co.

ChaSerg’s IPO” or “Our IPO” mean ChaSerg’s initial public offering of its units, common stock and warrants pursuant to a registration statement on Form S-1 declared effective by the SEC on October 4, 2018 (SEC File No. 333-227300).

Certificate of Incorporation” means ChaSerg’s current certificate of incorporation, as amended.

Cash Consideration Reallocation Amount” is an amount equal to (a) $13,500,000 multiplied by (b) (x) the Trust Account Balance at Signing (as defined below) minus the Available Parent Cash (as defined below), divided by (y) 30% of the Trust Account Balance at Signing, provided that the Cash Consideration Reallocation Amount shall never be less than zero or greater than $13,500,000.

CEE” refers to Central and Eastern Europe.

ChaSerg” or “Parent” mean ChaSerg Technology Acquisition Corp.

CIS” refers to the Commonwealth of Independent States.

Closing” means the closing of the Business Combination.

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

DGCL” means the Delaware General Corporation Law.

Director Election Proposal” means the proposal to be considered at the ChaSerg Special Meeting to elect the members of the board of directors of Successor.

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DWAC” means the depository trust company’s deposit/withdrawal at custodian system.

Earnout Shares” refers to up to 1,090,000 shares of ChaSerg common stock held by Sponsor and 110,000 shares of ChaSerg common stock held by Cantor that each of Sponsor and Cantor agreed, in an amended and restated side letter with ChaSerg, dated as of January 26, 2020 (the “Side Letter”), to refrain from selling, transferring or otherwise disposing of.

Excess Shares” refers to those shares of ChaSerg common stock over an aggregate of 15% of the shares sold in ChaSerg’s IPO that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), is restricted from seeking redemption rights with respect to without our prior consent.

Existing Holders” refers to those certain holders of ChaSerg equity securities party to the Registration Rights Agreement.

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

Founder Shares” means ChaSerg’s Class B Common Stock.

GAAP” means U.S. generally accepted accounting principles.

Grid Dynamics” refers to Grid Dynamics International, Inc., a California corporation.

Initial Merger” refers to the merger of Merger Sub 1 with and into Grid Dynamics, with Grid Dynamics surviving the merger on the terms and subject to the conditions set forth in the Merger Agreement.

Merger Agreement” means the Agreement and Plan of Merger, dated as of November 13, 2019, by and among ChaSerg, Merger Sub 1, Merger Sub 2, Grid Dynamics and ASL, solely in its capacity as Grid Dynamics Representative, as it may be amended from time to time.

Mergers” refers to the mergers of Merger Sub 1 with and into Grid Dynamics and Grid Dynamics with and into Merger Sub 2 pursuant to the Merger Agreement.

“Merger Sub 1” refers to CS Merger Sub 1, Inc., a California corporation and a wholly owned subsidiary of ChaSerg.

“Merger Sub 2” refers to CS Merger Sub 2, LLC, a Delaware limited liability company and a wholly owned subsidiary of ChaSerg.

Minimum Available ChaSerg Cash Amount” means an amount equal to 70% of the Trust Account Balance at Signing.

NASDAQ” means The NASDAQ Stock Market, LLC.

Placement Units” refers to the 640,000 Units issued in private placement transactions by ChaSerg in October 2018.

Proposals” means the Business Combination Proposal, the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal (if presented).

Public Stockholders” means the holders of ChaSerg Class A Common Stock that were sold in ChaSerg’s IPO (whether they were purchased in the IPO or thereafter in the open market).

Public Shares” means ChaSerg Shares sold in ChaSerg’s IPO (whether they were purchased in the IPO or thereafter in the open market).

Record Date” means February 5, 2020.

Redemption Price” means an amount equal to price at which each Public Share is redeemed pursuant to the Redemption Rights. The Redemption Price will be calculated two business days prior to the consummation of the Business Combination in accordance with ChaSerg’s Certificate of Incorporation as currently in effect.

Redemption” means the right of the holders of ChaSerg Shares to have their shares redeemed in accordance with the procedures set forth in this proxy statement.

Redemption Deadline” refers to the deadline for exercising redemption rights, which shall be 5:00 p.m. (Eastern Time) on March 2, 2020, the second business day prior to the Special Meeting (subject to any extension approved by ChaSerg’s board of directors). You are not required to have held your shares as of the Record Date in order to demand redemption of your shares on or prior to the Redemption Deadline.

2

Registrable Securities” refers, in connection with the Registration Rights Agreement, to (i) shares of ChaSerg Class A Common Stock held by any Existing Holders immediately following the Closing, (ii) any Placement Units and (iii) any other equity securities of ChaSerg issued or issuable with respect to any securities referenced in clause (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization.

Registration Rights Agreement” means that certain amended and restated registration rights agreement among ChaSerg, Sponsor and certain holders party thereto (the “Existing Holders”), which provides for registration rights to such parties.

Sarbanes-Oxley Act” the Sarbanes-Oxley Act of 2002.

SEC” means the United States Securities and Exchange Commission.

Second Step Merger” refers to the merger of Grid Dynamics with and into Merger Sub 2, with Merger Sub 2 surviving on the terms and subject to the conditions set forth in the Merger Agreement.

Share Consideration Adjustment Value” means zero (0), (a) plus the Working Capital Surplus (if any) or minus Working Capital Shortfall (if any), as applicable, minus (b) Closing Indebtedness, (c) plus the Excess Cash Surplus (if any) or minus the Excess Cash Shortfall (if any), as applicable, minus (d) the Target Performance Stock Consideration Adjustment (which calculation shall be made as of 11:59 pm Pacific Time on the day immediately preceding the Closing Date), plus (e) the Cash Consideration Reallocation Amount (if any).

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

Selling Securityholders” refers to holders of common stock of Grid Dynamics and options to purchase common stock of Grid Dynamics, as of the time immediately before the Business Combination.

Special Meeting” means the special meeting of the stockholders of ChaSerg, to be held at 10:00 a.m. Pacific Time on March 4, 2020, at 533 Airport Blvd, Suite 400, Burlingame, CA 94010, and any adjournments or postponements thereof.

Sponsor” refers to ChaSerg Technology Sponsor LLC, a Delaware limited liability company.

Stockholders’ Agreement” means that stockholder agreement entered into as of November 13, 2019 and effective as of the Closing, among ChaSerg and each of the Sponsor, BGV, GDB International Investment Limited, GDD International Holding Company, Leonard Livschitz, Victoria Livschitz, ASL and certain other individuals and entities who are party thereto.

Successor” refers to ChaSerg following the consummation of the Business Combination.

Target Performance Stock Consideration Adjustment” is an amount equal $1,500,000 for every $100,000 by which Grid Dynamics’ reasonable estimate of earnings before income taxes, depreciation and amortization is below $23,800,000. The Target Performance Stock Consideration Adjustment shall equal zero if the Estimated Performance Target is above $23,800,000.

“Teamsun” means Beijing Teamsun Technology Co. Ltd., a company listed on the Shanghai Stock Exchange (stock code 600410).

“Teamsun Affiliate” means an individual who is the single largest stockholder (based on direct and beneficial ownership of voting securities) of Teamsun.

“Teamsun HK” means Teamsun Technology (HK) Limited, a company incorporated in Hong Kong with registered number 0895726.

Trust Account” means the account established by ChaSerg for the benefit of its Public Stockholders.

Trust Account Balance at Signing” refers to an amount of $223,915,741.

Unit” consists of one share of ChaSerg Class A Common Stock and one half of one redeemable warrant for ChaSerg Class A Common Stock.

Voting Agreements” means those voting agreements delivered by each of ASL, Teamsun HK, Teamsun Affiliate and BGV to ChaSerg.

3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement includes “forward-looking statements” that are not historical facts, and involve risks and uncertainties that could cause actual results of ChaSerg and Grid Dynamics to differ materially from those expected and projected. These forward-looking statements can be identified by the use of forward-looking terminology, including the words “believes,” “estimates,” “anticipates,” “expects,” “intends,” “plans,” “may,” “will,” “potential,” “projects,” “predicts,” “continue,” or “should,” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include, without limitation, statements concerning:

•        ChaSerg’s ability to consummate the Business Combination, including the satisfaction of the closing conditions to the Business Combination;

•        the timing of the completion of the Business Combination; and

•        ChaSerg’s and Grid Dynamics’ expectations with respect to future performance and anticipated financial impacts of the Business Combination.

These forward-looking statements involve significant risks and uncertainties that could cause the actual results to differ materially from the expected results. Most of these factors are outside ChaSerg’s and Grid Dynamics’ control and are difficult to predict. Factors that may cause such differences include, but are not limited to:

•        the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement or could otherwise cause the Business Combination to fail to close;

•        any inability to complete the Business Combination, including due to failure to obtain approval of the stockholders of ChaSerg or other conditions to Closing in the Merger Agreement;

•        the receipt of an unsolicited offer from another party for an alternative business transaction that could interfere with the Business Combination;

•        the inability to maintain the listing of the shares of common stock of the post-acquisition company on The NASDAQ Stock Market following the Business Combination;

•        the risk that the Business Combination 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, competition, the ability of the Successor to grow and manage growth profitably and retain its key employees;

•        costs related to the Business Combination;

•        changes in applicable laws or regulations;

•        the outcome of any legal proceedings that may be instituted against ChaSerg and Grid Dynamics following the execution of the Merger Agreement and the Business Combination;

•        the possibility that Grid Dynamics or the Successor may be adversely affected by other economic, business and/or competitive factors; and

•        other risks and uncertainties indicated in this proxy statement, including those under the section entitled “Risk Factors,” and in ChaSerg’s other filings with the SEC.

ChaSerg cautions that the foregoing list of factors is not exclusive. ChaSerg cautions readers not to place undue reliance upon any forward-looking statements, which speak only as of the date made. ChaSerg does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Further information about factors that could materially affect ChaSerg, including its results of operations and financial condition, is set forth under “Risk Factors” in Part I, Item 1A of ChaSerg’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and in Part II, Item 1A of ChaSerg’s Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2019, June 30, 2019 and September 30, 2019.

4

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The following questions and answers 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 ChaSerg stockholders. We urge stockholders to read carefully this entire proxy statement, including the annexes and the other documents referred to herein.

Q:     Why is ChaSerg seeking my approval of the Business Combination?

A:     ChaSerg stockholders are being asked to consider and vote upon a proposal to approve and adopt the Merger Agreement, among other proposals. Following the consummation of the Business Combination pursuant to the terms of the Merger Agreement, the business of Grid Dynamics will be become part of ChaSerg. A copy of the Merger Agreement is attached to this proxy statement as Annex A.

ChaSerg Class A Common Stock, units and warrants are currently listed on NASDAQ under the symbols “CTAC,” “CTACU” and “CTACW,” respectively.

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:     What is being voted on at the Special Meeting?

A:     Below are proposals on which ChaSerg stockholders are being asked to vote.

1.      The Business Combination Proposal — To approve and adopt the Business Combination and the other transactions contemplated by the Merger Agreement;

2.      The NASDAQ Proposal — To approve, for purposes of complying with applicable NASDAQ listing rules, the issuance of more than 20% of the number of shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock, which shall be converted to ChaSerg Common Stock prior to issuance, combined, outstanding prior to the Business Combination;

3.       The Charter Proposals — To consider and vote upon a proposal to approve the following material differences between the constitutional documents of the Successor that will be in effect upon the closing of the Business Combination and ChaSerg’s current amended and restated certificate of incorporation: (i) the name of the new public entity will be “Grid Dynamics Holdings, Inc.” as opposed to “ChaSerg Technology Acquisition Corp.”; (ii) the Successor’s certificate of incorporation will provide for the automatic conversion of all shares of ChaSerg Class A Common Stock and ChaSerg Class B Common Stock into an equal number of shares of Successor Common Stock with a par value of $0.0001 per share as opposed to retaining the distinction between the ChaSerg Class A Common Stock and ChaSerg Class B Common Stock; (iii) remove various provisions applicable only to special purpose acquisition corporations that ChaSerg’s existing certificate of incorporation contains; (iv) Successor Charter will not contain a provision requiring the Delaware Chancery court to serve as the exclusive forum for stockholders to bring certain lawsuits (although a similar provision will be included in the bylaws) as opposed to the ChaSerg Charter which contains such a provision; and (v) Successor Charter will not include the various rights and privileges, including dilution adjustment, of ChaSerg Class B Common Stock that the ChaSerg Charter currently contains;

4.      The Director Election Proposal — To elect three directors to serve on our board of directors as Class I directors until the annual meeting of stockholders to be held in 2020, elect three directors to serve on our board of directors as Class II directors until the annual meeting of stockholders to be held in 2021, and elect two directors to serve on our board of directors as Class III directors until the annual meeting of stockholders to be held in 2022, in each case, until such director’s successor has been duly elected and qualified, or until such director’s earlier death, resignation, retirement or removal (the “Director Election Proposal” or “Proposal No. 4”);

5

5.      The Incentive Plan Proposal — To adopt and approve the 2020 Plan and the reservation of 16,300,000 shares of Successor Common Stock for issuance pursuant to awards granted thereunder (this proposal is referred to herein as the “Incentive Plan Proposal” or “Proposal No. 5”); and

6.      The 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 if, based upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal and the Incentive Plan Proposal (this proposal is referred to herein as the “Adjournment Proposal” or “Proposal No. 6”).

Q:     Are the proposals conditioned on one another?

A:     The approval of each of the Business Combination Proposal, the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal and the Incentive Plan Proposal is conditioned on the approval of each other proposal, other than the Adjournment Proposal. 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, the NASDAQ Proposal, the Charter Proposals or the Director Election Proposal does not receive the requisite vote for approval, then we will not consummate the Business Combination. Unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, if ChaSerg does not consummate the Business Combination and fails to complete an initial business combination by April 10, 2020, ChaSerg will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to its Public Stockholders.

Q:     Why am I receiving these proxy materials?

A:     You are receiving proxy materials in connection with the solicitation of proxies by the board of directors of ChaSerg because you were a stockholder of ChaSerg as of February 5, 2020, the Record Date for the Special Meeting. In accordance with the DGCL and ChaSerg’s Certificate of Incorporation, in order to complete the merger, ChaSerg stockholders holding a majority of the outstanding shares of ChaSerg Class A Common Stock as of the Record Date must vote to adopt the Merger Agreement. A copy of the Merger Agreement is attached to this proxy statement as Annex A. ChaSerg will submit the Merger Agreement to its stockholders for adoption at the Special Meeting. For more information, see the section entitled “Special Meeting of ChaSerg Stockholders.”

This proxy statement, which you should read carefully, contains important information about the Business Combination, the Merger Agreement, the Special Meeting and the matters to be voted on thereat. The enclosed materials allow you to submit a proxy to vote your shares of ChaSerg Class A Common Stock without attending the Special Meeting and to ensure that your shares of ChaSerg Class A Common Stock are represented and voted at the Special Meeting.

Your vote is very important. Even if you plan to attend the Special Meeting, we encourage you to submit a proxy as soon as possible.

Q:     What will happen in the Business Combination?

A:     As part of the Business Combination, Merger Sub 1 will be merged with and into Grid Dynamics, with Grid Dynamics surviving the merger on the terms and subject to the conditions set forth in the Merger Agreement and (ii) as part of the same overall transaction, immediately following the Initial Merger, Grid Dynamics will be merged with and into Merger Sub 2, with Merger Sub 2 surviving on the terms and subject to the conditions set forth in the Merger Agreement. Concurrently with the Mergers, ChaSerg will issue the Share Consideration to the Selling Securityholders and cash held in the Trust Account will be used to pay the Cash Consideration to the Selling Securityholders and to pay certain fees and expenses in connection with the Business Combination. Upon the consummation of the transaction, ChaSerg will change its name to “Grid Dynamics Holdings, Inc.” and maintain its listing on NASDAQ. A copy of the Merger Agreement is attached to this proxy statement as Annex A.

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Q:     What equity stake will current stockholders of ChaSerg and Selling Securityholders hold in the post-combination company after the closing?

A:     It is anticipated that, upon completion of the Business Combination, ChaSerg’s existing Public Stockholders will own approximately 42% of ChaSerg, Sponsor will own approximately 9% of the common stock of ChaSerg, and existing Grid Dynamics management and the Selling Securityholders will own approximately 49% of the outstanding common stock of ChaSerg. These levels of ownership interests assume that no holder of ChaSerg Class A Common Stock elects to redeem its shares and that approximately 25.5 million shares of common stock of ChaSerg are issued (including approximately 4.1 million shares of common stock issuable upon the exercise of fully-vested options), and does not take into account warrants to purchase common stock of ChaSerg that will remain outstanding following the Business Combination. In addition, these percentages of ownership do not take into account the 1,090,000 Earnout Shares that Sponsor and 110,000 Earnout Shares that Cantor are prohibited from selling, transferring or otherwise disposing of until the price of Successor’s Common Stock reaches certain thresholds specified in the Side Letter Sponsor and Cantor entered into with ChaSerg described in “Proposal No. 1 — The Business Combination Proposal — Description of the Merger Agreement — Side Letter”. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by ChaSerg’s existing stockholders in the post-combination company will be different.

The table below illustrates the ownership of the common stock of ChaSerg by ChaSerg’s existing Public Stockholders assuming various redemption scenarios:

 

Number of Shares Redeemed

 

Ownership by ChaSerg Public
Stockholders

2,200,000

 

39.1

%

4,400,000

 

36.0

%

6,600,000

 

32.7

%

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

A:     There are a number of closing conditions in the Merger Agreement, including the approval by the stockholders of ChaSerg of each of the proposals hereby other than the Adjournment Proposal.

In addition, it is a condition to closing that cash available at closing is equal to or greater than cash required to pay the cash merger consideration and make other cash payments required by the Merger Agreement, including payments to any stockholders electing to redeem their Public Shares.

For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, see the section entitled “Proposal No. 1: The Business Combination Proposal — The Merger Agreement.”

Q:     What happens if I sell my shares of ChaSerg Class A Common Stock before the Special Meeting?

A:     The Record Date for the Special Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of ChaSerg Class A 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. If you transfer your shares of ChaSerg Class A Common Stock prior to the Record Date, you will have no right to vote those shares at the Special Meeting.

Q:     What constitutes a quorum at the Special Meeting?

A:     Holders of a majority of the voting power of all outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote at the Special Meeting, constitute a quorum. Accordingly, a ChaSerg 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. In the absence of a quorum, the chairman of the meeting has power to adjourn the Special Meeting.

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

A:     Approval of the Business Combination Proposal, the NASDAQ Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present

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in person or represented by proxy at the Special Meeting and entitled to vote thereon. Accordingly, a ChaSerg stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or any broker non-votes will have no effect on the outcome of any vote on these proposals assuming a quorum is present.

The eight nominees receiving the highest number of affirmative votes cast by stockholders present in person or represented by proxy and entitled to vote thereon shall be elected as directors under the Director Election Proposal.

Approval of the Charter Proposals requires a vote of a majority of outstanding shares of the common stock voting together as a single class and a majority of the outstanding voting power of the Class B Common Stock voting together as a single class. The class vote of the Class B Common Stock has already been obtained by a written consent. Accordingly, a ChaSerg stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or abstention or any broker non-votes will have the same effect as a vote “AGAINST” this proposal.

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

A:     ChaSerg stockholders are entitled to one vote at the Special Meeting for each share of common stock held of record as of February 5, 2020, the Record Date for the Special Meeting. As of the close of business on the Record Date, there were 28,140,000 outstanding shares of ChaSerg Class A Common Stock.

Q:     How will the Sponsor and ChaSerg’s directors and officers vote?

A:     The Sponsor and ChaSerg’s directors and officers have agreed to vote their Founder Shares, as well as any Public Shares purchased during or after ChaSerg’s IPO in favor of the Business Combination and the other proposals herein. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case if Sponsor and ChaSerg’s directors and officers agreed to vote their Founder Shares and any other shares they may own in accordance with the majority of the votes cast by ChaSerg Public Stockholders.

Q:     What interests do ChaSerg’s current officers and directors have in the Business Combination?

A:     The Sponsor, members of ChaSerg’s board of directors and its executive officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interest. These interests include:

•        Eric Benhamou, ChaSerg’s President and Chief Financial Officer, is (i) a director of Grid Dynamics, (ii) an officer, director and general partner of BGV Opportunity Fund L.P., a Delaware limited partnership, which is a stockholder of Grid Dynamics and is a beneficial stockholder of ChaSerg, (iii) a holder of options to purchase common shares of Grid Dynamics, (iv) entitled to receive consideration in the Business Combination, and (v) a director and an officer of ChaSerg and a beneficial stockholder of ChaSerg; he is expected to continue as a director of Successor following the Business Combination. As a result, the Business Combination is considered a transaction with an affiliate under the terms of our amended and restated certificate of incorporation. Under the terms of such amended and restated certificate of incorporation, we are not prohibited from pursuing an business combination with a company that is affiliated with our directors, provided we obtain an opinion from an independent investment banking firm that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view (such as the opinion of BTIG, LLC attached hereto as Annex D).

•        Lloyd Carney is a director and an officer of ChaSerg and a beneficial stockholder of ChaSerg and he is expected to serve as chairman of the board of directors of Successor following the Business Combination.

These interests may influence ChaSerg’s directors in making their recommendation that you vote in favor of the approval of the Business Combination. For more information, see the sections entitled “Risk Factors — Risks Related to ChaSerg and the Business Combination — Sponsor and ChaSerg’s 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” and “Proposal No. 1: The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

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Q:     Did the board of directors of ChaSerg obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

A:     Yes. The board of directors of ChaSerg received the opinion of BTIG, LLC as to the fairness, from a financial point of view and as of the date of such opinion, of the Consideration (as defined in “Summary of the Proxy Statement — Opinion of ChaSerg’s Financial Advisor”) in connection with the Business Combination. Please see the section entitled “Proposal No. 1: The Business Combination Proposal — Opinion of ChaSerg’s Financial Advisor” and the opinion of BTIG, LLC attached hereto as Annex D for additional information.

         As noted elsewhere in the proxy statement, the Business Combination is considered a transaction with an affiliate under the terms of our amended and restated certificate of incorporation. Under the terms of such amended and restated certificate of incorporation, we are not prohibited from pursuing a business combination with a company that is affiliated with our directors, provided we obtain an opinion from an independent investment banking firm that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view.

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

A:     Pursuant to ChaSerg’s Certificate of Incorporation, unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, if the Business Combination Proposal is not approved and ChaSerg does not otherwise consummate an alternative business combination by April 10, 2020, ChaSerg will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the Public Stockholders.

Q:     Do I have redemption rights?

A:      Pursuant to ChaSerg’s Certificate of Incorporation, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with ChaSerg’s Certificate of Incorporation. As of September 30, 2019, based on funds in the Trust Account of approximately $223.5 million, ChaSerg’s stockholders who elect to redeem their shares of common stock would have received approximately $10.16 per share, excluding interest income earned and not previously released to pay up to $1.4 million of ChaSerg’s franchise and income taxes. If a holder exercises its redemption rights, then such holder will be exchanging its shares of ChaSerg Class A Common Stock for cash and will no longer own shares of ChaSerg. 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 ChaSerg’s transfer agent prior to the Redemption Deadline. You are not required to have held your shares as of the Record Date in order to demand redemption of your shares on or prior to the Redemption Deadline. See the section entitled “Special Meeting of ChaSerg Stockholders — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

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

A:     No. You may exercise your redemption rights regardless of whether, or how, you vote on the Business Combination Proposal or any other proposal herein. If you received your shares of ChaSerg Class A Common Stock after the Record Date, you may still redeem the shares if you deliver them by the Redemption Deadline. You are not required to have held your shares as of the Record Date in order to demand redemption of your shares on or prior to the Redemption Deadline. As a result, the Merger 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 ChaSerg with a potentially less liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of NASDAQ.

Q:     How do I exercise my redemption rights?

A:     In order to exercise your redemption rights, you must (i) if you hold public units, separate the underlying shares of ChaSerg Class A Common Stock and warrants, and (ii) prior to the Redemption Deadline (which is 5:00 p.m. (Eastern Time) on March 2, 2020, the second business day prior to the Special Meeting), tender your shares of ChaSerg Class A Common Stock physically or electronically and submit a request in writing that ChaSerg redeem your shares of ChaSerg Class A Common Stock for cash to Continental Stock Transfer & Trust Company, ChaSerg’s transfer agent, at the following address:

Continental Stock Transfer & Trust Company
1 State Street, 30th Floor
New York, NY 10004

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You must also affirmatively certify in your request 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 the Public Shares, together with any affiliate of his 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 shares of common stock included in the units sold in ChaSerg’s IPO, 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 will not be redeemed for cash.

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 ChaSerg’s transfer agent prior to the Redemption Deadline, or to deliver their shares to the transfer agent electronically using The Depository Trust Company’s (DTC) 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.

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 ChaSerg’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, ChaSerg does not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Any demand for redemption, once made, may be withdrawn at any time until the Redemption Deadline and thereafter, with ChaSerg’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to ChaSerg’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that ChaSerg’s transfer agent return the shares (physically or electronically). You may make such request by contacting ChaSerg’s transfer agent at the phone number or address listed under the question “Who can help answer my questions?” below.

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

A:     The U.S. federal income tax consequences of exercising your redemption rights depend on your particular facts and circumstances. See the section entitled “Proposal No. 1: The Business Combination Proposal — Certain U.S. Federal Income Tax Considerations to ChaSerg Class A Common Stockholders Exercising Redemption Rights.” ChaSerg urges you to consult your tax advisor regarding the tax consequences of exercising your redemption rights.

Q:     If I am a ChaSerg warrant holder, can I exercise redemption rights with respect to my warrants?

A:     No. The holders of ChaSerg warrants have no redemption rights with respect to such warrants.

Q:     Do holders of ChaSerg Class A Common Stock have appraisal rights if they object to the proposed Business Combination?

A:     Appraisal rights are not available to holders of ChaSerg Class A 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 released to pay (i) a portion of the merger consideration pursuant to the Merger Agreement, (ii) ChaSerg stockholders who properly exercise their redemption rights, (iii) $6.3 million in deferred underwriting commissions to the underwriters of ChaSerg’s IPO in connection with the Business Combination, (iv) certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that are incurred by ChaSerg in connection with the transactions contemplated by the Business Combination and pursuant to the terms of the Merger Agreement, and (v) the remainder will go onto the ChaSerg balance sheet at Closing.

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Q:     What will happen if more than the maximum number of shares allowed for by the conditions to the Merger Agreement are redeemed?

A:     The Merger Agreement includes as a condition to closing the Business Combination that, after giving effect to any redemptions and the receipt of any additional equity sold by ChaSerg, the total cash and cash equivalents of ChaSerg be at least 70% of the Trust Account balance as of the date of signing of the Merger Agreement. While such condition is subject to waiver in a writing executed by both ChaSerg and Grid Dynamics, and, in the event such a waiver were executed, ChaSerg would notify investors by filing a Form 8-K with the SEC, neither ChaSerg nor Grid Dynamics expect to execute such a waiver. In addition, while ChaSerg’s current amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, ChaSerg is not permitted to redeem Public Shares in an amount that would cause ChaSerg’s net tangible assets to be less than $5,000,001 (or else ChaSerg would be subject to the SEC’s “penny stock” rules under Rule 3a51-1) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to ChaSerg’s initial business combination. As a result, ChaSerg will not be able to complete the Business Combination if a substantial number of its stockholders elect to redeem their shares.

In the event the aggregate cash consideration ChaSerg would be required to pay for all Public Shares that are validly submitted for redemption plus any amount required to satisfy cash obligations pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to ChaSerg, we may be required to borrow additional amounts or seek additional investment, in each case subject to the terms and conditions of the Merger Agreement. In addition, if a larger number of shares are submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the Trust Account or arrange for third-party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels.

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

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

If, as a result of the termination of the Merger Agreement or otherwise, unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, ChaSerg is unable to complete the Business Combination or another initial business combination transaction by April 10, 2020, ChaSerg’s Certificate of Incorporation provides that it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our Public Stockholders may only receive $10.00 per share, and our warrants will expire worthless.

ChaSerg expects that the amount of any distribution its Public Stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Business Combination, subject in each case to ChaSerg’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law. Holders of Founder Shares have waived any right to any liquidation distribution with respect to those shares.

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

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

A:     The closing of the Business Combination is expected to take place in the first quarter of 2020. Closing is expected to occur on or about March 9, 2020.

Unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, the Merger Agreement may be terminated by either ChaSerg or Grid Dynamics if the closing of the Business Combination has not occurred by April 10, 2020.

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

Q:     What do I need to do now?

A:     You are urged to read carefully and consider the information contained in this proxy statement, including the annexes, and to consider how the 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:     How do I vote?

A:     If you were a holder of record of ChaSerg common stock on February 5, 2020, 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, obtain a legal proxy from your broker, bank or nominee.

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

A:     At the Special Meeting, ChaSerg 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.

Approval of the Business Combination Proposal, the NASDAQ Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the Special Meeting and entitled to vote thereon. Accordingly, a ChaSerg stockholder’s abstention, failure to vote by proxy or to vote in person at the Special Meeting will have no effect on the outcome of any vote on these proposals assuming a quorum is present.

The eight nominees receiving the highest number of affirmative votes cast by stockholders present in person or represented by proxy and entitled to vote thereon shall be elected as directors under the Director Election Proposal.

Approval of the Charter Proposals requires a vote of a majority of outstanding shares of the common stock voting together as a single class and a majority of the outstanding voting power of the Class B Common Stock voting together as a single class. The class vote of the Class B Common Stock has already been obtained by a written consent. Accordingly, a ChaSerg stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or abstention will have the same effect as a vote “AGAINST” this proposal.

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

A:     Signed and dated proxies received by ChaSerg 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.

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

A:     Yes. Whether you plan to attend the Special Meeting or not, please read 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.

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

A:     No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. ChaSerg believes the proposals presented to the stockholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. If you do not provide instructions with your proxy, your 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 to vote your shares in accordance with directions you provide. It is anticipated that there will not be any “broker non-votes” for the special meeting.

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

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

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

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

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

A:     ChaSerg will pay the cost of soliciting proxies for the Special Meeting. ChaSerg has engaged MacKenzie Partners, Inc. (“MacKenzie”) to assist in the solicitation of proxies for the Special Meeting. ChaSerg has agreed to pay MacKenzie a fee of $12,500. ChaSerg will reimburse MacKenzie for reasonable out-of-pocket expenses and will indemnify MacKenzie and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages, liabilities and/or damages. ChaSerg will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of ChaSerg’s Class A Common Stock for their expenses in forwarding soliciting materials to beneficial owners of ChaSerg’s Class A 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.

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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:

ChaSerg Technology Acquisition Corp.
533 Airport Blvd, Suite 400
Burlingame, CA 94010
Telephone: (619) 736-6855

You may also contact our proxy solicitor, MacKenzie, at:

1407 Broadway, 27th Floor
New York, New York 10018
Toll-Free: (800) 322-2885
Call collect: (212) 929-5500
Email: proxy@mackenziepartners.com

To obtain timely delivery, ChaSerg stockholders must request the materials no later than five (5) business days prior to the Special Meeting.

You may also obtain additional information about ChaSerg 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 ChaSerg’s 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:

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

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SUMMARY OF THE PROXY STATEMENT

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

Parties to the Business Combination

ChaSerg Technology Acquisition Corp.

ChaSerg Technology Acquisition Corp. (“ChaSerg,” “Parent,” “we,” “us,” and “our”) is an early stage blank check company formed as a Delaware corporation for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

ChaSerg Class A Common Stock, units and warrants are currently listed on NASDAQ under the symbols “CTAC,” “CTACU,” and “CTACW,” respectively. Certain of our shares of Class A Common Stock and warrants currently trade as units consisting of one share of ChaSerg Class A Common Stock and one-half of one redeemable warrant, and are listed on the NASDAQ under the symbol “CTACU.” Upon closing of the Business Combination, the units will be separated into the component securities upon the closing of the Business Combination and, as a result, will no longer trade as a separate security. Upon the consummation of the transaction, ChaSerg will change its name to “Grid Dynamics Holdings, Inc.” and we have applied to continue the listing of our common stock and warrants on the NASDAQ under the symbols “CTAC” and “CTACW,” respectively.

The mailing address for ChaSerg’s principal executive office is 533 Airport Blvd, Suite 400, Burlingame, CA 94010.

For more information about ChaSerg, see the sections entitled “ChaSerg Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information about ChaSerg.”

Grid Dynamics International, Inc.

Grid Dynamics International, Inc. (“Grid Dynamics”) is an emerging leader in driving enterprise-level digital transformation in Fortune 1000 companies. Since its inception in 2006 in Menlo Park, California, as a grid and cloud consultancy firm, Grid Dynamics has been on the forefront of digital transformation, working on big ideas like cloud computing, NOSQL, DevOps, microservices, big data and artificial intelligence (“AI”), and quickly established itself as a provider of choice for technology and digital enterprise companies. Grid Dynamics is currently majority owned by Automated Systems Holdings Limited (“ASL”), a company incorporated in Bermuda with limited liability and publicly traded on the Hong Kong Stock Exchange. ASL is a subsidiary of Beijing Teamsun Technology Co. Ltd., a company listed on the Shanghai Stock Exchange. Grid Dynamics was acquired by ASL on April 7, 2017.

The mailing address of Grid Dynamics’ principal executive offices is 5000 Executive Parkway, Suite 520, San Ramon, CA 94583.

For more information about Grid Dynamics, see the sections entitled “Grid Dynamics Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information about Grid Dynamics.”

The Business Combination

On November 13, 2019, ChaSerg entered into the Merger Agreement to effect a business combination by and among (i) ChaSerg, (ii) Merger Sub 1, (iii) Merger Sub 2, (iv) Grid Dynamics, and (v) ASL, solely in its capacity as representative of the securityholders of Grid Dynamics immediately prior to the consummation of the Business Combination. Upon the consummation of the transactions contemplated by the Merger Agreement, (i) Grid Dynamics will become a wholly-owned subsidiary of ChaSerg; and (ii) ChaSerg will change its name to “Grid Dynamics Holdings, Inc.”; and (iii) the Selling Securityholders (other than the Selling Securityholders who have properly demanded appraisal rights in accordance with the DGCL in connection with the transactions described in the Merger Agreement) will be entitled to receive the merger consideration set forth in the Merger Agreement as described below. The merger consideration consists of a combination of cash and equity consideration.

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The Merger Agreement provides for ChaSerg’s acquisition of the outstanding capital stock and other equity interests of Grid Dynamics through two mergers of newly formed acquisition vehicles, Merger Sub 1 and Merger Sub 2. Pursuant to the Merger Agreement, the Business Combination will be effected through the following steps: (i) Merger Sub 1 will be merged with and into Grid Dynamics, with Grid Dynamics surviving the merger on the terms and subject to the conditions set forth in the Merger Agreement (the “Initial Merger”), and (ii) as part of the same overall transaction, immediately following the Initial Merger, Grid Dynamics will be merged with and into Merger Sub 2, with Merger Sub 2 surviving on the terms and subject to the conditions set forth in the Merger Agreement (the “Second Step Merger” and, together with the Initial Merger, the “Mergers”). The Merger Agreement is attached as Annex A hereto and you are encouraged to read it in its entirety.

The Grid Dynamics Selling Securityholders as of immediately prior to the consummation of the Business Combination will, upon consummation of the Business Combination, receive a combination of stock and cash consideration. The aggregate merger consideration (the “Merger Consideration”) to be paid pursuant to the Merger Agreement will be comprised of equity and cash as follows:

•        cash consideration of $130,000,000 subject to certain adjustments (the “Cash Consideration”); and

•        25,523,810 shares of Successor Common Stock, subject to certain adjustments (the “Share Consideration”).

The Merger Consideration is more fully described in “Proposal No. 1: Approval of the Business Combination — Description of the Merger Agreement — Consideration to the Selling Securityholders in the Business Combination.”

Immediately prior to the effective time of the Initial Merger, each vested option to purchase the common stock of Grid Dynamics (a “Grid Dynamics Option”) held by a person other than a continuing service provider and a portion of each vested Grid Dynamics Option held by a continuing service provider will be cancelled and converted into the right to receive an amount in cash based on the Merger Consideration and the exercise price of such Grid Dynamics Option. In addition, by virtue of the Mergers, each unvested Grid Dynamics Option held by a continuing service provider and a portion of each vested Grid Dynamics Option held by a continuing service provider will be assumed by ChaSerg and converted into an option to purchase shares of ChaSerg Class A Common Stock with substantially the same terms and conditions (each, an “Assumed Option”), with equitable adjustments to the number of shares subject to the Assumed Option and exercise price of the Assumed Option. Any portion of a Grid Dynamics Option that is neither cancelled and converted into the right to receive cash consideration or assumed will be cancelled immediately prior to the effective time of the Initial Merger.

Organizational Structure

The following diagram illustrates the organizational structure of ChaSerg immediately prior to the Business Combination:

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The following diagram illustrates the organizational structure of Grid Dynamics immediately prior to the Business Combination:

The following diagram illustrates the structure of Successor immediately following the Business Combination, including the approximate ownership percentage of each listed stockholder or stockholder group assuming both (1) that no Public Stockholders of ChaSerg exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account and (2) that stockholders holding 6,600,000 of ChaSerg’s Public Shares exercise their redemption rights and that such shares are redeemed for their pro rata share (approximately $10.16 per share) of the funds in the Trust Account.(1) For additional information regarding the risks of the ownership structure of Successor immediately following the Business Combination please see the risk factors entitled, “Existing Grid Dynamics Stockholders and ChaSerg Founders will have significant influence over us after completion of the Business Combination” and “Sponsor, ASL and the other stockholders that are party to the Stockholders’ Agreement will control the direction of Successor’s business, and the concentrated ownership of Successor’s common stock will prevent you and other stockholders from influencing significant decisions” under the section entitled “Risk Factors—Risks Related to ChaSerg and the Business Combination.”

____________

(1)      Excludes 1,090,000 Earnout Shares that are owned by the Sponsor and 110,000 Earnout Shares that are owned by Cantor and held in escrow as specified in the Side Letter. The Earnout Shares will convert to Class A common stock upon the closing of the Business Combination. The release of the Earnout Shares is subject to achieving the price thresholds as set per the terms of the Side Letter. The Earnout Shares are not included as part of the capitalization table as the Sponsor and Cantor will not have possession of their Earnout Shares at closing. However, while the Earnout Shares are held in escrow, the Sponsor and Cantor shall have full ownership rights to their Earnout Shares, including the right to vote such shares and to receive dividends and distributions thereon.

Conditions to Closing of the Business Combination

Conditions to Each Party’s Obligations

The obligations of all parties to consummate the Business Combination are subject to the satisfaction, or written waiver by the parties, at or prior to the closing of the following conditions:

•        the approval of Grid Dynamics’ stockholders;

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•        the approval of ChaSerg stockholders at a special meeting of ChaSerg stockholders;

•        the approval of the stockholders of ASL, including Teamsun Technology (HK) Limited (“Teamsun HK”), a company listed on The Stock Exchange of Hong Kong Limited (“HKEX”);

•        no governmental entity shall have enacted, issued, promulgated, enforced or entered any order, judgment, injunction, ruling, edict or other decree, whether temporary, preliminary or permanent, enacted, issued, promulgated, enforced or entered which is in effect and has the effect of making the Business Combination illegal, otherwise restraining or prohibiting consummation of any material transactions or causing any of the material transactions contemplated by the Merger Agreement to be rescinded following completion of the Business Combination;

•        the approval of the stockholders of Beijing Teamsun Technology Co. Ltd. (“Teamsun”), including the largest stockholder of Teamsun (the “Teamsun Affiliate”);

•        the receipt of requisite government and securities exchange approvals, including approval related to the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended (“HSR”), and approval from the HKEX;

•        no actions shall have been commenced against ChaSerg, Merger Sub 1, Merger Sub 2 or Grid Dynamics that would restrain or prohibit the consummation of the Business Combination;

•        immediately prior to the Business Combination, ChaSerg having at least $5,000,001 in net tangible assets in the Trust Account, (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act); and

•        after giving effect to the Redemption and the receipt of any additional equity sold by ChaSerg, the Available Parent Cash shall be no less than the total cash and cash equivalents of Parent, including the funds remaining in the Trust Account after deducting (A) the amount required to satisfy the Redemptions and (B) any taxes due on any accrued interest on the Trust Account, is less than 70% of the Trust Account Balance at Signing.

Conditions to the Obligations of ChaSerg, Merger Sub 1 and Merger Sub 2

The obligations of ChaSerg, Merger Sub 1 and Merger Sub 2 to consummate the Business Combination are subject to the satisfaction, or written waiver by the parties, at or prior to the closing of the following conditions:

•        the accuracy of the representations and warranties of Grid Dynamics;

•        the performance by Grid Dynamics of its covenants and conditions required by the Merger Agreement;

•        the absence of any Material Adverse Effect with respect to Grid Dynamics since December 31, 2018;

•        the delivery of certain closing deliverables specified in the Merger Agreement;

•        a requirement that holders of no more than 10% of the shares of Grid Dynamics, as of immediately prior to the Closing, shall have exercised (or be entitled to exercise) statutory appraisal rights under Section 1300 of the California General Corporation Law with respect to the shares of Grid Dynamics;

•        the execution by certain key executives and key employees of employment agreements of relating to post-Closing employment;

•        approval by Grid Dynamics’ Stockholders required pursuant to Section 280G(b)(5)(B) of the Code and the treasury regulations thereunder;

•        confirmation that, upon closing, Grid Dynamics has no less than $20,000,000 in certain cash on hand and cash equivalents;

•        the adoption and approval by Grid Dynamics and all requisite stockholders of Grid Dynamics of the amendment to the Grid Dynamics’ certificate of incorporation.

18

Conditions to the Obligations of Grid Dynamics

The obligations of Grid Dynamics to consummate the Business Combination are subject to the satisfaction, or written waiver by the parties, at or prior to the closing of the following conditions:

•        the accuracy of the representations and warranties of ChaSerg, Merger Sub 1 and Merger Sub 2;

•        the performance by each of ChaSerg, Merger Sub 1 and Merger Sub 2 of its covenants and conditions required by the Merger Agreement;

•        the delivery of certain closing deliverables specified in the Merger Agreement;

•        the approval of a new equity incentive plan of ChaSerg; and

•        the appointment of the board of directors of ChaSerg to serve immediately following the Closing.

Regulatory Matters

At any time before or after consummation of the Business Combination, notwithstanding the early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act” or “HSR”), the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. ChaSerg cannot assure you that the Antitrust Division of the United States Department of Justice, the U.S. Federal Trade Commission, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, ChaSerg cannot assure you as to its result. ChaSerg and Grid Dynamics will file required forms under the HSR Act with the Antitrust Division of the United States Department of Justice and the U.S. Federal Trade Commission.

As ASL is a company listed on the Main Board of the HKEX, it is subject to the Rules Governing the Listing of Securities on the HKEX (the “HKEX Listing Rules”). The Business Combination constitutes a spin-off under the HKEX Listing Rules and would require prior approval from the HKEX. ASL has submitted a proposal in relation to the proposed spin-off to the HKEX for approval and the HKEX has confirmed that ASL may proceed with the proposed spin-off. Separately the Business Combination constitutes a very substantial disposal and very substantial acquisition under the HKEX Listing Rules and are subject to the reporting, announcement and independent shareholders’ approval requirements under the HKEX Listing Rules.

Related Agreements

The Registration Rights Agreement

We will enter into an amended and restated registration rights agreement with our Sponsor and certain holders party thereto (the “Existing Holders”) (as amended and restated, the “Registration Rights Agreement”). Under the Registration Rights Agreement, within 45 calendar days after consummation of the Business Combination, we will be required to register for resale Successor Common Stock issuable for (i) shares of ChaSerg Class A Common Stock held by any Existing Holders immediately following the Closing, (ii) any Placement Units and (iii) any other equity securities of ChaSerg issued or issuable with respect to any securities referenced in clause (i) and (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization (collectively, “Registrable Securities”). Based on the foregoing, we will be required to register such Registrable Securities pursuant to the Registration Rights Agreement. The holders of a majority-in-interest of the Registrable Securities held by the Existing Holders and any of their permitted transferees will be entitled to demand that we register the resale of such securities under certain circumstances. The Existing Holders and their permitted transferees will also have certain “piggy back” registration rights with respect to registration statements and rights to require us to register for resale such securities. For more information about the Registration Rights Agreement, see the section entitled “Proposal No. 1: The Business Combination Proposal — Description of the Merger Agreement — The Registration Rights Agreement.”

Voting Agreements

Certain Grid Dynamics stockholders and holders of equity interests in the corporate parents of Grid Dynamics, including ASL, Teamsun HK, the Teamsun Affiliate and Benhamou Global Ventures (“BGV”) have entered into voting agreements with ChaSerg (each a “Voting Agreement” and collectively, the “Voting Agreements”). Under the Voting Agreements, each party agrees to vote all of their shares of Grid Dynamics or its parent entities (as

19

applicable) in favor of the Merger Agreement and related transactions, refrain from transferring any such shares prior to the consummation of the Business Combination and, where applicable, use reasonable best efforts to obtain any required regulatory approvals. For more information about the Voting Agreements, see the section entitled “Proposal No. 1: The Business Combination Proposal — Description of the Merger Agreement — The Registration Rights Agreement.”

Stockholders’ Agreement

On November 13, 2019, and effective as of the Closing, ChaSerg and each of the Sponsor, BGV, GDB International Investment Limited, GDD International Holding Company, Leonard Livschitz, Victoria Livschitz and ASL (together with any individuals or entities that are signatories thereto or hereafter become party to the agreement, the “Voting Parties”) entered into a Stockholders’ Agreement, pursuant to which, among other things, the Voting Parties will agree (i) to take all necessary action to cause the Board to be comprised of eight directors effective immediately following the Closing, (ii) to grant each of ASL and Sponsor rights to designate two directors for election to the Board (and the Voting Parties will vote in favor of such designees), (iii) to designate the Chief Executive Officer of the Successor for election to the Board, and (iv) to designate three unaffiliated designates for election to the Board. See “Proposal No. 1: The Business Combination Proposal — Description of the Merger Agreement — Stockholders’ Agreement” for additional information.

Lock-Up Agreements

At the Closing, each of ASL, Teamsun HK, the Teamsun Affiliate, BGV and holders of at least 15,000 shares of Grid Dynamics’ common shares will enter into a Lock-Up Agreement with ChaSerg in substantially the form attached to the Merger Agreement (each, a “Lock-Up Agreement” and collectively, the “Lock-Up Agreements”). In each such Lock-Up Agreement, each such holder will agree not to sell or otherwise transfer its shares in ChaSerg during the period commencing from the Closing and ending on the earlier of (A) one year after the completion of the Business Combination or (B) subsequent to the Business Combination, (x) if the last sale price of ChaSerg Class A Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Business Combination, or (y) the date on which ChaSerg completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of its stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Side Letter

On January 26, 2020, the Sponsor and Cantor entered into a side letter (“Side Letter”) with ChaSerg pursuant to which, among other things, each of the Sponsor and Cantor agreed to refrain from selling, transferring or otherwise disposing of up to 1,090,000 and 110,000 shares, respectively, of its common stock in ChaSerg (such portion, the “Earnout Shares”) until certain release events have been realized. Under the terms of the Side Letter, each of the Sponsor and Cantor will be able to sell or transfer one-third of its respective Earnout Shares upon the price of ChaSerg’s Class A Common Stock reaching a price of $12.00 per share, an additional one-third of its respective Earnout Shares upon the stock price reaching a price of $13.50 per share and the final one-third of its respective Earnout Shares upon the stock price reaching a price of $15.00 per share, in each case where such price targets were achieved for a minimum of 20 days out of a 30-day trading period during the applicable earn out period.

Approval of the Business Combination by Shareholders of Grid Dynamics

On November 29, 2019, the requisite number of shareholders of Teamsun voted in favor of all resolutions presented for a vote of shareholders approving the terms of the Business Combination. On January 22, 2020, the requisite number of shareholders of ASL voted in favor of all resolutions presented for a vote of shareholders approving the terms of the Business Combination. Effective January 24, 2020, all shareholders of Grid Dynamics executed an Action by Written Consent of the Shareholders approving the Business Combination, the Merger Agreement and the terms thereof.

Interests of Certain Persons in the Business Combination

In considering the recommendation of ChaSerg’s board of directors to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, the Sponsor and certain members of ChaSerg’s board of directors and executive officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. ChaSerg’s board of directors was aware of

20

and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in 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:

•        Unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, if the Business Combination or another business combination is not consummated by April 10, 2020, ChaSerg will cease all operations except for the purpose of winding up, redeeming 100% of the outstanding Public Shares for cash and, subject to the approval of its remaining stockholders and its board of directors, dissolving and liquidating. In such event, the Founder Shares held by the Sponsor and certain of ChaSerg’s directors, which were acquired for an aggregate purchase price of $25,000, would be worthless because the holders are not entitled to participate in any conversion or distribution with respect to such shares. Such shares had an aggregate market value of $58,740,000 based upon the closing price of $10.68 per share on NASDAQ on November 25, 2019.

•        Eric Benhamou, ChaSerg’s President and Chief Financial Officer, is (i) a director of Grid Dynamics, (ii) an officer, director and general partner of BGV Opportunity Fund L.P., a Delaware limited partnership, which is a stockholder of Grid Dynamics and is a beneficial stockholder of ChaSerg, (iii) a holder of options to purchase common shares of Grid Dynamics, (iv) entitled to receive consideration in the Business Combination, and (v) a director and an officer of ChaSerg and an indirect beneficial stockholder of ChaSerg; he is expected to continue as a director of Successor following the Business Combination. As a result, the Business Combination is considered a transaction with an affiliate under the terms of our amended and restated certificate of incorporation. Under the terms of such amended and restated certificate of incorporation, we are not prohibited from pursuing a business combination with a company that is affiliated with our directors, provided we obtain an opinion from an independent investment banking firm that commonly renders valuation opinions that our initial business combination is fair to our company from a financial point of view (such as the opinion of BTIG, LLC attached hereto as Annex D). See the section entitled “Proposal No. 1: The Business Combination Proposal — Interests of Certain Persons in the Business Combination.”

•        Lloyd Carney is a director and an officer of ChaSerg and a beneficial stockholder of ChaSerg and he is expected to serve as chairman of the board of directors of Successor following the Business Combination.

The ChaSerg Board’s Reasons for the Approval of the Business Combination

After careful consideration, ChaSerg’s board of directors recommends that ChaSerg’s stockholders vote “FOR” each of the Proposals.

For a more complete description of ChaSerg’s board of directors’ reasons for the approval of the Business Combination and its recommendation, see the section entitled “Proposal No. 1: The Business Combination Proposal — Board of Directors’ Reasons for the Approval of the Business Combination.”

Opinion of ChaSerg’s Financial Advisor

In making its determination with respect to the Business Combination, ChaSerg’s board of directors also considered the financial analyses prepared by BTIG, and the opinion of BTIG as of November 8, 2019, as to (i) the fairness, from a financial point of view, to ChaSerg of the Merger Consideration to be paid pursuant to the draft Merger Agreement and (ii) whether the business acquired had a fair market value equal to at least 80% of the amount held by ChaSerg in trust for the benefit of its Public Stockholders (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account).

ChaSerg’s board of directors retained BTIG to provide a fairness opinion in connection with its consideration of the Business Combination. On November 8, 2019, at a meeting of ChaSerg’s board of directors held to evaluate the proposed transaction, BTIG delivered an oral opinion, subsequently confirmed by delivery of a written opinion to ChaSerg’s board of directors, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth therein, (i) the Merger Consideration to be paid by ChaSerg in the Business Combination pursuant to the draft Merger Agreement is fair, from a financial point of view, to ChaSerg, and (ii) the fair market value of Grid Dynamics equals or exceeds 80% of the amount held by ChaSerg in trust for the benefit of its Public Stockholders (excluding the deferred underwriting commissions and taxes payable on the interest earned on the Trust Account).

The full text of the written opinion of BTIG, dated November 8, 2019, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with

21

the opinion, is attached to this proxy statement as Annex D. The following summary of BTIG’s opinion in this proxy statement is qualified in its entirety by reference to the full text of the opinion. BTIG provided its opinion for the information and assistance of ChaSerg’s board of directors in connection with its consideration of the Business Combination. BTIG’s opinion was not intended to and does not constitute a recommendation as to how any holder of ChaSerg Class A Common Stock should vote or take any action with respect to the Business Combination or any other matter.

For a more complete description of the financial analyses prepared by BTIG, and the opinion of BTIG as of November 8, 2019, see the section entitled “Proposal No. 1: The Business Combination Proposal — Opinion of ChaSerg’s Financial Advisor.”

Redemption Rights

Pursuant to ChaSerg’s Certificate of Incorporation, holders of Public Shares of Class A Common Stock may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with ChaSerg’s Certificate of Incorporation. As of September 30, 2019, based on funds in the Trust Account of approximately $223.5 million, ChaSerg’s stockholders who elect to redeem their shares of common stock would have received approximately $10.16 per share, excluding interest income earned and not previously released to pay up to $1.4 million of ChaSerg’s franchise and income taxes. If a holder exercises its redemption rights, then such holder will be exchanging its shares of ChaSerg’s Class A Common Stock for cash and will no longer own shares of ChaSerg. 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 ChaSerg’s transfer agent by the Redemption Deadline, which is 5:00 p.m. (Eastern Time) on March 2, 2020, the second business day prior to the Special Meeting. Holders are not required to have held their shares as of the Record Date in order to demand redemption of their shares on or prior to the Redemption Deadline. For the procedures to be followed if you wish to redeem your shares for cash, see the section entitled “Special Meeting of Stockholders — Redemption Rights”.

Other Proposals

In addition to the Business Combination Proposal, ChaSerg stockholders will be asked to vote on the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal. For more information about the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Adjournment Proposal, see the sections entitled “Proposal No. 2: The NASDAQ Proposal,” “Proposal No. 3: The Charter Proposals,” “Proposal No. 4: The Director Election Proposal,” “Proposal No. 5: The Incentive Plan Proposal” and “Proposal No. 6: The Adjournment Proposal.”

Board of Directors of Successor Following the Business Combination

Upon consummation of the Business Combination, we anticipate that the board of directors of Successor will consist of eight directors. For additional information, see the section entitled “Successor Management and Board of Directors Following the Business Combination” for additional information.

Date, Time and Place of Special Meeting

The Special Meeting will be held at 10:00 a.m. Pacific time, on March 4, 2020, at 533 Airport Blvd, Suite 400, Burlingame, CA 94010, or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals included in this proxy statement.

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast at the Special Meeting if you owned shares of ChaSerg common stock at the close of business on February 5, 2020, which is the Record Date for the Special Meeting. You are entitled to one vote for each share of ChaSerg 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 28,140,000 shares of ChaSerg common stock outstanding, of which 22,640,000 are ChaSerg Class A Common Stock and 5,500,000 are ChaSerg Class B Common Stock.

Accounting Treatment

The Business Combination will be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, ChaSerg will be treated

22

as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of Grid Dynamics issuing stock for the net assets of ChaSerg, accompanied by a recapitalization. The net assets of ChaSerg will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Grid Dynamics.

Appraisal Rights

There are no appraisal rights available to ChaSerg’s stockholders in connection with the Business Combination.

Proxy Solicitation

Proxies may be solicited by mail. ChaSerg has engaged MacKenzie to assist in the solicitation of proxies. If a ChaSerg 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 ChaSerg Stockholders — Revoking Your Proxy.”

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of ChaSerg stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the voting power of all outstanding shares of Class A Common Stock and Class B Common Stock entitled to vote at the Special Meeting, is represented at the Special Meeting in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

Approval of the Business Combination Proposal, the NASDAQ Proposal, the Incentive Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at the Special Meeting and entitled to vote thereon. Accordingly, a ChaSerg stockholder’s abstention, failure to vote by proxy or to vote in person at the Special Meeting or any broker non-votes will have no effect on the outcome of any vote on these proposals assuming a quorum is present.

The eight nominees receiving the highest number of affirmative votes cast by stockholders present in person or represented by proxy and entitled to vote thereon shall be elected as directors under the Director Election Proposal.

Approval of the Charter Proposals requires a vote of a majority of outstanding shares of the common stock voting together as a single class and a majority of the outstanding voting power of the Class B Common Stock voting together as a single class. The class vote of the Class B Common Stock has already been obtained by a written consent. Accordingly, a ChaSerg stockholder’s failure to vote by proxy or to vote in person at the Special Meeting or abstention or any broker non-votes will have the same effect as a vote “AGAINST” this proposal.

The Business Combination Proposal is conditioned on the approval of each of the other proposals in this proxy statement other than the Incentive Plan Proposal and the Adjournment Proposal. Each of the NASDAQ Proposal, the Charter Proposals, the Director Election Proposal and the Incentive Plan Proposal are conditioned on the approval of the Business Combination Proposal and each other proposal other than the Incentive Plan Proposal and the Adjournment Proposal. 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 the Business Combination Proposal does not receive the requisite vote for approval, then ChaSerg will not consummate the Business Combination. Unless ChaSerg amends its Certificate of Incorporation to extend its life and certain other agreements it has entered into, if ChaSerg does not consummate the Business Combination and fails to complete an initial business combination by April 10, 2020, ChaSerg will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the Public Stockholders.

Recommendation to ChaSerg Stockholders

After careful consideration, the ChaSerg Board has unanimously determined that each of the proposals is fair to and in the best interests of ChaSerg and its stockholders and has unanimously approved such proposals. The Board recommends that stockholders vote “FOR” the Business Combination Proposal, “FOR” the NASDAQ Proposal, “FOR” the Charter Proposals, “FOR” the Director Election Proposal, “FOR” the Incentive Plan Proposal, and “FOR” the Adjournment Proposal.

Risk Factors

In evaluating the Proposals set forth in this proxy statement, you should carefully read this proxy statement, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.”

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SELECTED HISTORICAL FINANCIAL INFORMATION OF CHASERG

The following table sets forth selected historical financial information derived from ChaSerg’s unaudited condensed financial statements for and as of the nine months ended September 30, 2019 and 2018 and audited financial statements as of December 31, 2018 and for the period from May 21, 2018 (inception) through December 31, 2018, each of which is included elsewhere in this proxy statement.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the following summary financial information in conjunction with the section entitled “ChaSerg Management’s Discussion and Analysis of Financial Condition and Results of Operations” and ChaSerg’s financial statements and related notes appearing elsewhere in this proxy statement.

(in thousands)

 

Nine Months
ended
September 30,
2019

 

Nine Months
ended
September 30,
2018

 

As of
December 31,
2018 and for
the period from
May 21, 2018

(inception)
through
December 31,
2018

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

Total expenses

 

$

1,288

 

 

$

2

 

 

$

326

 

Net income (loss)

 

 

1,763

 

 

 

(2

)

 

 

615

 

Basic earnings per share

 

$

0.12

 

 

 

 

 

$

0.04

 

Diluted earnings per share

 

$

(0.13

)

 

 

 

 

$

(0.04

)

   

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

223,955

 

 

 

N/A

 

 

$

222,364

 

Total liabilities

 

 

7,974

 

 

 

N/A

 

 

 

8,145

 

Total redeemable ordinary shares

 

 

210,981

 

 

 

N/A

 

 

 

209,219

 

Total shareholders’ equity

 

$

5,000

 

 

 

N/A

 

 

$

5,000

 

   

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

 

 

 

Net cash (used in) operating activities

 

$

(2,050

)

 

 

(0

)

 

$

(304

)

Net cash provided by (used in) investing activities

 

 

1,397

 

 

 

 

 

 

(220,000

)

Net cash provided by financing activities

 

 

 

 

 

49

 

 

 

221,315

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF GRID Dynamics

The following table sets forth selected historical financial information derived from Grid Dynamics’ unaudited condensed financial statements as of and for the nine months ended September 30, 2019 and 2018 and audited consolidated financial statements of Grid Dynamics as of and for the years ended December 31, 2018 and 2017, each of which is included elsewhere in this proxy statement.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should read the following summary financial information in conjunction with the section entitled “Grid Dynamics Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Grid Dynamics’ financial statements and related notes appearing elsewhere in this proxy statement.

(in thousands)

 

As of and
for the Nine
Months ended
September 30,
2019

 

For the Nine
Months ended
September 30,
2018

 

As of and for
the Year ended
December 31,
2018

 

As of and for
the Year ended
December 31,
2017

Statement of Operations Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

 

$

86,325

 

 

$

66,376

 

 

$

91,865

 

 

$

70,684

 

Income from operations

 

 

11,480

 

 

 

11,904

 

 

 

13,829

 

 

 

13,107

 

Net income

 

 

8,700

 

 

 

8,316

 

 

 

9,228

 

 

 

13,184

 

Basic earnings per share

 

$

0.69

 

 

$

0.69

 

 

$

0.77

 

 

$

0.82

 

Diluted earnings per share

 

$

0.67

 

 

$

0.69

 

 

$

0.77

 

 

$

0.78

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

69,600

 

 

$

N/A

 

 

$

41,726

 

 

$

31,152

 

Total liabilities

 

 

8,892

 

 

 

N/A

 

 

 

8,347

 

 

 

6,757

 

Convertible preferred stock

 

 

9,187

 

 

 

N/A

 

 

 

 

 

 

 

Total shareholders’ equity

 

$

51,521

 

 

$

N/A

 

 

$

33,379

 

 

$

24,395

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Flow Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

10,816

 

 

$

9,400

 

 

$

10,584

 

 

$

5,540

 

Net cash (used in) investing activities

 

 

(2,099

)

 

 

(2,198

)

 

 

(3,079

)

 

 

(1,058

)

Net cash provided (used in) by financing activities

 

 

14,604

 

 

 

 

 

 

 

 

 

(4,715

)

25

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following summary unaudited pro forma condensed combined financial data (the “Summary Pro Forma Data”) give effect to the transactions contemplated by the Business Combination. The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, ChaSerg will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination will be treated as the equivalent of issuing stock for the net assets of ChaSerg, accompanied by a recapitalization. The net assets of ChaSerg will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of Grid Dynamics. The summary unaudited pro forma condensed combined balance sheet data as of September 30, 2019 give effect to the Business Combination as if it had occurred on September 30, 2019. The summary unaudited pro forma condensed combined statement of operations data for the nine months ended September 30, 2019 and year ended December 31, 2018 give effect to the Business Combination as if it had occurred on January 1, 2018.

The Summary 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 Successor appearing elsewhere in this proxy statement and the accompanying notes to the unaudited 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 ChaSerg and Grid Dynamics for the applicable periods included in this proxy statement. The Summary 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 Summary Pro Forma Data do not purport to project the future financial position or operating results of the post-combination company.

The unaudited pro forma condensed combined financial information has been prepared using the assumptions below with respect to the potential redemption into cash of the Company’s Class A Common Stock:

•        Assuming No Redemptions: This presentation assumes that no Public Stockholders of ChaSerg exercise redemption rights with respect to their Public Shares for a pro rata share of the funds in the Trust Account.

•        Assuming Maximum Redemptions: This presentation assumes that stockholders holding 6,600,000 of ChaSerg’s Public Shares exercise their redemption rights and that such shares are redeemed for their pro rata share (approximately $10.16 per share) of the funds in ChaSerg’s Trust Account. Per ChaSerg’s IPO registration statement, a Public Stockholder, together with any affiliate of his or hers, or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking conversion rights with respect to 15% or more of shares of ChaSerg Class A Common Stock sold in ChaSerg’s IPO. This scenario gives effect to ChaSerg’s public share redemptions of approximately 6,600,000 shares for aggregate redemption payments of $67.0 million. Aggregate redemption payments of $67.0 million were calculated as $223.5 million of cash in the Trust Account per the unaudited pro forma condensed combined balance sheet less $156.5 million of minimum cash balance required to be retained in the Trust Account as specified in the Merger Agreement. Public redemption of approximately 6,600,000 shares is calculated as $67.0 million redemption payments divided by the estimated per share redemption value of $10.16 ($223,495,864 in Trust Account per the unaudited pro forma condensed combined balance sheet divided by 22,000,000 Public Shares as of September 30, 2019). The Merger Agreement includes as a condition to closing the Business Combination that, after giving effect to any redemptions and the receipt of any additional equity sold by ChaSerg, the total cash and cash equivalents of ChaSerg be at least 70% of the Trust Account balance as of the date of signing of the Merger Agreement. While such condition is subject to waiver in a writing executed by both ChaSerg and Grid Dynamics, and, in the event such a waiver were executed, ChaSerg would notify investors by filing a Form 8-K with the SEC, neither ChaSerg nor Grid Dynamics expect to execute such a waiver. In addition, while ChaSerg’s current amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, ChaSerg is not permitted to redeem Public Shares in an amount that would cause ChaSerg’s net tangible assets to be less than $5,000,001 (or else ChaSerg would be subject to the SEC’s “penny stock” rules under Rule 3a51-1) or any greater net tangible asset or cash requirement which may be contained in the agreement relating to ChaSerg’s initial business combination. As a result, if a substantial number of its stockholders elect to redeem their shares, Sponsor or other investors may need to contribute additional capital or ChaSerg may not be able to complete the Business Combination.

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Assuming
No Redemptions

 

Assuming
Maximum
Redemptions

Select Unaudited Pro Forma Condensed Combined Statement of Operations Data

 

 

   

 

 

Nine Months Ended September 30, 2019 (in thousands, except share and per share information)

 

 

   

 

 

Revenue

 

$

86,325

 

$

86,325

Net income

 

 

7,904

 

 

7,904

Net income per share, Class A – basic and diluted

 

$

0.15

 

$

0.16

Weighted-average shares outstanding – basic and diluted

 

 

52,463,810

 

 

47,213,810

   

 

   

 

 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations Data

 

 

   

 

 

Year ended December 31, 2018 (in thousands, except share and per share information)

 

 

   

 

 

Revenue

 

$

91,865

 

$

91,865

Net income

 

 

9,081

 

 

9,081

Net income per share, Class A – basic and diluted

 

$

0.17

 

$

0.19

Weighted-average shares outstanding – basic and diluted

 

 

52,463,810

 

 

47,213,810

   

 

   

 

 

Selected Unaudited Pro Forma Condensed Combined Balance Sheet Data as of September 30, 2019 (in thousands)

 

 

   

 

 

Total assets

 

$

138,747

 

$

85,198

Total liabilities

 

 

7,638

 

 

7,638

Total stockholders’ equity

 

$

131,109

 

$

77,560

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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 apply to the business and operations of Grid Dynamics and its consolidated subsidiaries and 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 have a material adverse effect on the business, cash flows, financial condition and results of operations of 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.” We may face additional risks and uncertainties that are not presently known to us, or that we currently deem immaterial, which may also impair our business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to the Business of Grid Dynamics

Risks Related to Grid Dynamics’ Business, Operations and Industry

Grid Dynamics has a relatively short operating history and operates in a rapidly evolving industry, which makes it difficult to evaluate future prospects and may increase the risk that it will not continue to be successful.

Grid Dynamics was founded in 2006 and has a relatively short operating history in the technology services industry, which is competitive and continuously evolving, subject to rapidly changing demands and constant technological developments. As a result, success and performance metrics are difficult to predict and measure. Since services and technologies are rapidly evolving and each company within the industry can vary greatly in terms of the services it provides, its business model and its results of operations, it can be difficult to predict how any company’s services, including that of Grid Dynamics, will be received in the market.

While many Fortune 1000 enterprises, including Grid Dynamics’ clients, have been willing to devote significant resources to incorporate emerging technologies and related market trends into their business models, they may not continue to spend any significant portion of their budgets on services like those provided by Grid Dynamics in the future. Neither Grid Dynamics’ past financial performance nor the past financial performance of any other company in the technology services industry is indicative of how Grid Dynamics will fare financially in the future. Grid Dynamics’ future profits may vary substantially from those of other companies and Grid Dynamics’ past profits, making an investment in Grid Dynamics risky and speculative. If clients’ demand for Grid Dynamics’ services declines as a result of economic conditions, market factors or shifts in the technology industry, Grid Dynamics’ business, financial condition and results of operations would be adversely affected.

Grid Dynamics may be unable to effectively manage its growth or achieve anticipated growth, which could place significant strain on Grid Dynamics’ management personnel, systems and resources.

Continued growth and expansion may increase the challenges Grid Dynamics faces in recruiting, training and retaining sufficiently skilled professionals and management personnel, maintaining effective oversight of personnel and delivery centers, developing financial and management controls, coordinating effectively across geographies and business units, and preserving its culture and values. Failure to manage growth effectively could have a material adverse effect on the quality of the execution of Grid Dynamics’ engagements, its ability to attract and retain IT professionals, as well as its business, financial condition and results of operations.

In addition, as Grid Dynamics increases the size and complexity of projects that it undertakes with clients, adds new delivery sites, introduces new services or enters into new markets, Grid Dynamics may face new market, technological, operational, compliance and administrative risks and challenges, including risks and challenges unfamiliar to Grid Dynamics. Grid Dynamics may not be able to mitigate these risks and challenges to achieve its anticipated growth or successfully execute large and complex projects, which could materially adversely affect Grid Dynamics’ business, prospects, financial condition and results of operations.

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Grid Dynamics’ revenues are highly dependent on a limited number of clients and industries that are affected by seasonal trends, and any decrease in demand for outsourced services in these industries may reduce Grid Dynamics’ revenues and adversely affect Grid Dynamics’ business, financial condition and results of operations.

Grid Dynamics generates a significant portion of its revenues from its 10 largest clients and has a limited client base of fewer than 40 total clients. For example, Grid Dynamics generated approximately 88%, 94% and 94% of its revenue from its 10 largest clients during the nine month periods ended September 30, 2019 and 2018, and the year ended December 31, 2018, respectively and the three largest clients each accounted for 10% or more of Grid Dynamics’ revenue for the nine month periods ended September 30, 2019 and 2018, and the year ended December 31, 2018. Since Grid Dynamics derives substantially all of its revenue through time and materials contracts, which are mostly short-term in nature, a major client in one year may not provide the same level of revenues for Grid Dynamics in any subsequent year. In addition, a significant portion of Grid Dynamics’ revenues is concentrated in two specific industry verticals: digital retail and digital technology. Grid Dynamics’ growth largely depends on continued demand for its services from clients in these two industry verticals and other industries that it may target in the future, as well as on trends in these industries to outsource the type of services Grid Dynamics provides.

Grid Dynamics’ business is also subject to seasonal trends that impact its revenues and profitability between quarters, largely driven by the U.S. retail cycle, which drives the behavior of a significant portion of Grid Dynamics’ clients, and the timing of holidays in the countries in which Grid Dynamics operates. Excluding the impact of growth in its book of business, Grid Dynamics has historically recorded higher revenue and gross profit in the second and third quarters of each year compared to the first and fourth quarters of each year. The Christmas holiday season in Russia and Ukraine, for example, falls in the first quarter of the calendar year, resulting in reduced activity and billable hours. In addition, many of Grid Dynamics’ retail sector clients tend to slow their discretionary spending during the holiday sale season, which typically lasts from late November (before Thanksgiving) through late December (after Christmas). Such seasonal trends may cause reductions in Grid Dynamics’ profitability and profit margins during periods affected.

A reduction in demand for Grid Dynamics’ services and solutions caused by seasonal trends, downturn in any of Grid Dynamics’ targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing may result in a decrease in the demand for Grid Dynamics’ services and could have a material adverse effect on its business, financial condition and results of operations.

Grid Dynamics’ revenues are highly dependent on clients primarily located in the United States. Any economic downturn in the United States or disruptions in the credit markets may have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations.

The IT services industry is particularly sensitive to the economic environment and tends to decline during general economic downturns. Grid Dynamics derives nearly all of its revenues from clients in the United States. In the event of an economic downturn in the United States, existing and prospective clients may reduce or postpone their technology spending significantly, which may in turn lower the demand for Grid Dynamics’ services and may have a material adverse effect on its business, financial condition and results of operations. In addition, if a disruption in the credit markets were to occur, it could pose a risk to Grid Dynamics’ business if clients or vendors are unable to obtain financing to meet payment or delivery obligations to Grid Dynamics or if Grid Dynamics is unable to obtain necessary financing.

Grid Dynamics faces intense and increasing competition.

The market for technology and IT services is highly competitive and subject to rapid change and evolving industry standards and Grid Dynamics expects competition to persist and intensify. Grid Dynamics faces competition from offshore IT services providers in other outsourcing destinations with low wage costs such as India and China and other CEE countries, as well as competition from large, global consulting and outsourcing firms and in-house IT departments of large corporations. Clients tend to engage multiple IT services providers instead of using an exclusive IT services provider, which could reduce Grid Dynamics’ revenues to the extent that clients obtain services from competing companies. Clients may prefer services providers that have more locations or that are based in countries more cost-competitive, more stable or more secure than some of the emerging markets in which Grid Dynamics operates.

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Grid Dynamics’ primary competitors include IT service providers, such as EPAM Systems, Globant S.A. and Endava plc; global consulting and traditional IT services companies, such as Accenture PLC, Capgemini SE, Cognizant Technology Solutions Corporation and Tata Consultancy Services Limited; and in-house development departments of its clients. Many of Grid Dynamics’ present and potential competitors have substantially greater financial, marketing and technical resources, and name recognition than Grid Dynamics. Therefore, they may be able to compete more aggressively on pricing or devote greater resources to the development and promotion of technology and IT services and Grid Dynamics may be unable to retain its clients while competing against such competitors. Increased competition as well as Grid Dynamics’ inability to compete successfully may have a material adverse effect on Grid Dynamics’ business and results of operations.

Grid Dynamics’ ability to generate and retain business depends on its reputation.

Since Grid Dynamics’ business involves providing tailored services and solutions to clients, Grid Dynamics believes that its corporate reputation is a significant factor when an existing or prospective client is evaluating whether to engage Grid Dynamics’ services as opposed to those of its competitors. In addition, Grid Dynamics believes that its brand name and reputation also play an important role in recruiting, hiring and retaining highly skilled personnel.

However, Grid Dynamics’ brand name and reputation is potentially susceptible to damage by factors beyond its control, including actions or statements made by current or former clients and employees, competitors, vendors, adversaries in legal proceedings, government regulators and the media. There is a risk that negative information about Grid Dynamics, even if untrue, could adversely affect its business. Any damage to Grid Dynamics’ reputation could be challenging to repair, could make potential or existing clients reluctant to select Grid Dynamics for new engagements, could adversely affect its recruitment and retention efforts, and could also reduce investor confidence.

Grid Dynamics’ failure to successfully attract, hire, develop, motivate and retain highly skilled personnel could materially adversely affect Grid Dynamics’ business, financial condition and results of operations.

Grid Dynamics’ continued growth and success and operational efficiency is dependent on its ability to attract, hire, develop, motivate and retain highly skilled personnel, including IT engineers and other technical personnel, in the geographically diverse locations in which it operates. Competition for highly skilled IT professionals can be intense in the regions in which Grid Dynamics operates, and Grid Dynamics may experience significant employee attrition rates due to such competition. While Grid Dynamics’ management targets a voluntary attrition rate no higher than the mid-teen percentages, the significant market demand for highly skilled IT personnel and competitors’ activities may induce Grid Dynamics’ qualified personnel to leave and make it more difficult for Grid Dynamics to recruit new employees with suitable knowledge, experience and professional qualifications. Failure to attract, hire, develop, motivate and retain personnel with the skills necessary to serve its clients could decrease Grid Dynamics’ ability to meet and develop ongoing and future business and could materially adversely affect Grid Dynamics’ business, financial condition and results of operations.

Grid Dynamics’ success depends substantially upon the continuing efforts of its senior executives and key employees, and Grid Dynamics’ business may be severely disrupted if Grid Dynamics loses their services.

Grid Dynamics’ success depends substantially upon the continued services of its senior executives and other key employees. If Grid Dynamics loses the services of one or more of such senior executives or key employees either in connection with or following the Business Combination, Grid Dynamics’ business operations can be disrupted, and Grid Dynamics may not be able to replace them easily or at all. In addition, competition for senior executives and key personnel in Grid Dynamics’ industry is intense, and Grid Dynamics may be unable to retain its senior executives and key personnel or attract and retain new senior executives and key personnel in the future, in which case Grid Dynamics’ business may be severely disrupted.

Failure to adapt to rapidly changing technologies, methodologies and evolving industry standards may have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations.

Grid Dynamics operates in an industry characterized by rapidly changing technologies, methodologies and evolving industry standards. Grid Dynamics’ future success depends in part upon its ability to anticipate developments in its industry, enhance its existing services and to develop and introduce new services to keep pace with such changes and developments and to meet changing client needs.

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Development and introduction of new services and products is expected to become increasingly complex and expensive, involve a significant commitment of time and resources, and subject to a number of risks and challenges, including:

•        difficultly or cost in updating services, applications, tools and software and to develop new services quickly enough to meet clients’ needs;

•        difficultly or cost in making some features of software work effectively and securely over the Internet or with new or changed operating systems;

•        difficultly or cost in updating software and services to keep pace with evolving industry standards, methodologies, regulatory and other developments in the industries where Grid Dynamics’ clients operate; and

•        difficultly in maintaining a high level of quality as Grid Dynamics implements new technologies and methodologies.

Grid Dynamics may not be successful in anticipating or responding to these developments in a timely manner, or if it does respond, the services, technologies or methodologies Grid Dynamics develops or implements may not be successful in the marketplace. Furthermore, services, technologies or methodologies that are developed by competitors may render Grid Dynamics’ services non-competitive or obsolete. Grid Dynamics’ failure to adapt and enhance its existing services and to develop and introduce new services to promptly address the needs of its clients may have a material adverse effect on its business, financial condition and results of operations.

Security breaches, system failures or errors, and other disruptions to network security could result in disclosure of confidential information and expose Grid Dynamics to liability, which would cause its business and reputation to suffer.

Grid Dynamics often has access, or is required, to collect, process, transmit and store sensitive or confidential client and customer data, including intellectual property, proprietary business information of Grid Dynamics’ and its clients, and personally identifiable information of its clients, customers or employees, in Grid Dynamics’ data centers and on its networks. Despite Grid Dynamics’ security measures, Grid Dynamics’ information technology and infrastructure may be vulnerable to attacks by hackers or be breached due to human error, malfeasance or other disruptions. Any such breach or disruption could compromise Grid Dynamics’ networks and the information stored there could be accessed, publicly disclosed, misappropriated, lost or stolen. In addition, any failure or breach of security in a client’s system relating to the services Grid Dynamics provides could also result in disclosure of sensitive or confidential information. Any such breach, disruption or unauthorized disclosure of sensitive or confidential client or customer data could expose Grid Dynamics to liability, cause Grid Dynamics to lose clients and revenue, disrupt Grid Dynamics’ operations and the services provided to clients, damage Grid Dynamics’ reputation, cause a loss of confidence in Grid Dynamics’ products and services, require Grid Dynamics to expend significant resources to protect against further breaches and to rectify problems caused by these events, and result in significant financial and other potential losses.

Undetected software design defects, errors or failures may result in loss of business or in liabilities that could have a material adverse effect on Grid Dynamics’ reputation, business and results of operations.

Grid Dynamics’ services involve developing software solutions for its clients and Grid Dynamics may be required to make certain representations and warranties to its clients regarding the quality and functionality of its software. Given that Grid Dynamics’ software solutions have a high degree of technological complexity, they could contain design defects or errors that are difficult to detect or correct. Grid Dynamics cannot provide assurance that, despite testing by Grid Dynamics, errors or defects will not be found in its software solutions. Any such errors or defects could result in litigation, other claims for damages against Grid Dynamics, the loss of current clients and loss of, or delay in, revenues, loss of market share, a failure to attract new clients or achieve market acceptance, diversion of development resources, increased support or service costs, as well as reputational harm and thus could have a material adverse effect on Grid Dynamics’ reputation, business and results of operations.

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Failure to successfully deliver contracted services or causing disruptions to clients’ businesses may have a material adverse effect on Grid Dynamics’ reputation, business, financial condition and results of operations.

Grid Dynamics’ business is dependent on its ability to successfully deliver contracted services in a timely manner. Any partial or complete failure of Grid Dynamics’ equipment or systems, or any major disruption to basic infrastructure like power and telecommunications in the locations in which Grid Dynamics operates, could impede its ability to provide adequate services to its clients. In addition, if Grid Dynamics’ professionals make errors in the course of delivering services to its clients or fail to consistently meet the service requirements of a client, these errors or failures could disrupt the client’s business. Any failure to successfully deliver contracted services or causing disruptions to a client’s business, including the occurrence of any failure in a client’s system or breach of security relating to the services provided by Grid Dynamics, may expose Grid Dynamics to substantial liabilities and have a material adverse effect on Grid Dynamics’ reputation, business, financial condition and results of operations.

Additionally, Grid Dynamics’ clients may perform audits or require Grid Dynamics to perform audits and provide audit reports with respect to the controls and procedures that Grid Dynamics uses in the performance of services for its clients. Grid Dynamics’ ability to acquire new clients and retain existing clients may be adversely affected and Grid Dynamics’ reputation could be harmed if Grid Dynamics receives a qualified opinion, or if Grid Dynamics cannot obtain an unqualified opinion in a timely manner, with respect to Grid Dynamics’ controls and procedures in connection with any such audit. Grid Dynamics could also incur liability if Grid Dynamics’ controls and procedures, or the controls and procedures Grid Dynamics manages for a client, were to result in an internal control failure or impair Grid Dynamics’ client’s ability to comply with its own internal control requirements. If Grid Dynamics or Grid Dynamics’ partners fail to meet Grid Dynamics’ contractual obligations or otherwise breach obligations to Grid Dynamics’ clients, Grid Dynamics could be subject to legal liability, which may have a material and adverse effect on Grid Dynamics’ revenues and profitability.

Grid Dynamics relies on software, hardware and SaaS technologies from third parties that may be difficult to replace or that may cause errors or defects in, or failures of, Grid Dynamics’ services or solutions.

Grid Dynamics relies on software and hardware from various third parties as well as hosted SaaS applications from third parties to deliver Grid Dynamics’ services and solutions. If any of these software, hardware or SaaS applications become unavailable due to loss of license, extended outages, interruptions or because they are no longer available on commercially reasonable terms, there may be delays in the provisioning of Grid Dynamics’ services until equivalent technology is either developed by Grid Dynamics, or, if available, is identified, obtained and integrated, which could increase Grid Dynamics’ expenses or otherwise harm Grid Dynamics’ business. Furthermore, any errors or defects in or failures of third-party software, hardware or SaaS applications could result in errors or defects in or failures of Grid Dynamics’ services and solutions, which could be costly to correct and have an adverse effect on Grid Dynamics’ reputation, business, financial condition and results of operations.

Existing insurance coverage and limitation of liability provisions in service contracts may be inadequate to protect Grid Dynamics against losses.

Grid Dynamics maintains certain insurance coverage, including professional liability insurance, director and officer insurance, property insurance for certain of its facilities and equipment, and business interruption insurance for certain of its operations. However, Grid Dynamics does not insure for all risks in its operations and if any claims for injury are brought against Grid Dynamics, or if Grid Dynamics experiences any business disruption, litigation or natural disaster, Grid Dynamics might incur substantial costs and diversion of resources.

Most of the agreements Grid Dynamics has entered into with its clients require Grid Dynamics to purchase and maintain specified insurance coverage during the terms of the agreements, including commercial general insurance or public liability insurance, umbrella insurance, product liability insurance, and workers’ compensation insurance. Some of these types of insurance are not available on reasonable terms or at all in some countries in which Grid Dynamics operates.

Grid Dynamics’ liability for breach of its obligations is in some cases limited under client contracts. Such limitations may be unenforceable or otherwise may not protect Grid Dynamics from liability for damages. In addition, Grid Dynamics’ existing contracts may not limit certain liabilities, such as claims of third parties for which

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Grid Dynamics may be required to indemnify its clients. The successful assertion of one or more large claims against Grid Dynamics in amounts greater than those covered by Grid Dynamics’ current insurance policies could materially adversely affect Grid Dynamics’ business, financial condition and results of operations. Even if such assertions against Grid Dynamics are unsuccessful, Grid Dynamics may incur reputational harm and substantial legal fees.

Material weakness has been identified in Grid Dynamics’ internal control over financial reporting.

Grid Dynamics has identified a material weakness in its internal control over financial reporting that remains unremediated. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of Grid Dynamics’ financial statements will not be prevented or detected on a timely basis. Subsequent to the original issuance of the private company financial statements for the year ended December 31, 2018, the Company identified balances that were accounted for or presented incorrectly under GAAP relating to stock-based compensation, and the presentation of retention bonuses and depreciation on the consolidated statement of income and comprehensive income.

The material weakness identified was a lack of sufficient resources with appropriate depth and experience to interpret complex accounting guidance and prepare financial statements and related disclosures in accordance with GAAP.

Grid Dynamics was not required to perform an evaluation of internal control over financial reporting as of December 31, 2018 and 2017 in accordance with the provisions of the Sarbanes-Oxley Act as it was and currently is a private company. Had such an evaluation been performed, additional control deficiencies may have been identified by Grid Dynamics’ management, and those control deficiencies could have also represented one or more material weaknesses.

Grid Dynamics has taken steps to enhance its internal control environment, including hiring a new Chief Financial Officer effective December 2019, initiating a search to hire additional qualified accounting and financial reporting personnel, and starting the implementation of a new ERP system, which Grid Dynamics believes will enhance its internal control over financial reporting. Once all key hires in the finance function are in place, Grid Dynamics also plans to take additional steps to remediate the material weakness by integrating them into its process of implementing and enhancing key controls over financial reporting and conducting technical accounting training of key financial and accounting staff members involved in preparation and review of financial reporting and interpretation of technical accounting guidance. Although Grid Dynamics plans to complete this remediation process as quickly as possible, Grid Dynamics cannot at this time estimate how long it will take.

Grid Dynamics’ global business, especially in CIS and CEE countries, exposes it to significant legal, economic, tax and political risks.

Grid Dynamics has significant operations in certain emerging market economies, which creates legal, economic, tax and political risks. Risks inherent in conducting international operations include:

•        less established legal systems and legal ambiguities, inconsistencies and anomalies;

•        application and imposition of protective legislation and regulations relating to import or export, including tariffs, quotas and other trade protection measures;

•        difficulties in enforcing intellectual property and/or contractual rights;

•        bureaucratic obstacles and corruption;

•        compliance with a wide variety of foreign laws;

•        fluctuations in currency exchange rates;

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•        potentially adverse tax consequences;

•        competition from companies with more experience in a particular country or with international operations;

•        unstable political and military situations; and

•        overall foreign policy and variability of foreign economic conditions.

The legal systems of Russia, Ukraine, Poland and Serbia, where Grid Dynamics has significant operations, are often beset by legal ambiguities as well as inconsistencies and anomalies due to the relatively recent enactment of many laws that may not always coincide with market developments. Furthermore, legal and bureaucratic obstacles and corruption exist to varying degrees in each of these countries. In such environment, Grid Dynamics’ competitors may receive preferential treatment from the government, potentially giving them a competitive advantage. Governments may also revise existing contract rules and regulations or adopt new ones at any time and for any reason, and government officials may apply contradictory or ambiguous laws or regulations in ways that could materially adversely affect Grid Dynamics’ business and operations in such countries. Any of these changes could impair Grid Dynamics’ ability to obtain new contracts or renew or enforce contracts under which it currently provides services. Any new contracting methods could be costly or administratively difficult for Grid Dynamics to implement, which could materially adversely affect its business and operations. Grid Dynamics cannot guarantee that regulators, judicial authorities or third parties in Russia, Ukraine, Poland and Serbia will not challenge Grid Dynamics’ (including its subsidiaries’) compliance with applicable laws, decrees and regulations. In addition to the foregoing, selective or arbitrary government actions have included withdrawal of licenses, sudden and unexpected tax audits, criminal prosecutions and civil actions, all of which could have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations.

The banking and other financial systems in certain CIS and CEE countries that Grid Dynamics operates remain subject to periodic instability and generally do not meet the banking standards of more developed markets. A financing crisis or the bankruptcy or insolvency of banks through which Grid Dynamics receives, or with which it holds, funds may result in the loss of its deposits or adversely affect its ability to complete banking transactions in that region, which could materially adversely affect Grid Dynamics’ business and financial condition.

Furthermore, the emergence of new or escalated tensions in CIS and CEE countries, including the conflict with Russia in connection with the ongoing crisis in Ukraine, allegations of the Russian government interference in the 2016 U.S. presidential elections and state-sponsored cyberattacks, could further exacerbate tensions between such countries and the United States. Such tensions, concerns regarding information security, and potential imposition of additional sanctions by the United States and other countries may discourage existing or prospective clients to engage Grid Dynamics’ services, have a negative effect on Grid Dynamics’ ability to develop or maintain its operations in the countries where it currently operates, and disrupt Grid Dynamics’ ability to attract, hire and retain employees. The occurrence of any such event may have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations.

Grid Dynamics’ effective tax rate could be materially adversely affected by several factors.

Grid Dynamics conducts business globally and files income tax returns in multiple jurisdictions. Grid Dynamics’ effective tax rate could be materially adversely affected by several factors, including changes in the amount of income taxed by, or allocated to, the various jurisdictions in which Grid Dynamics operates that have differing statutory tax rates; changing tax laws, regulations and interpretations of such tax laws in multiple jurisdictions; and the resolution of issues arising from tax audits or examinations and any related interest or penalties. In particular, there have been significant changes to the taxation systems in CEE countries in recent years as the authorities have gradually replaced or introduced new legislation regulating the application of major taxes such as corporate income tax, VAT, corporate property tax, personal income taxes and payroll taxes. Furthermore, any significant changes to the Tax Cuts and Jobs Act (“U.S. Tax Act”) enacted in 2017, or to regulatory guidance associated with the U.S. Tax Act, could materially adversely affect Grid Dynamics’ effective tax rate.

The determination of Grid Dynamics’ provision for income taxes and other tax liabilities requires estimation, judgment and calculations where the ultimate tax determination may not be certain. Grid Dynamics’ determination of tax liability is always subject to review or examination by authorities in various jurisdictions. If a tax authority in any jurisdiction reviews any of Grid Dynamics’ tax returns and proposes an adjustment, including a determination

34

that the transfer prices and terms Grid Dynamics has applied are not appropriate, such an adjustment could have an adverse effect on Grid Dynamics’ business.

Grid Dynamics is unable to predict what tax reforms may be proposed or enacted in the future or what effect such changes would have on its business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices in jurisdictions in which it operates, could increase the estimated tax liability that Grid Dynamics has expensed to date and paid or accrued on its balance sheets, and otherwise affect its financial position, future results of operations, cash flows in a particular period and overall or effective tax rates in the future in countries where Grid Dynamics has operations, reduce post-tax returns to its stockholders and increase the complexity, burden and cost of tax compliance.

There may be adverse tax and employment law consequences if the independent contractor status of some of Grid Dynamics’ personnel or the exempt status of its employees is successfully challenged.

Certain of Grid Dynamics’ personnel are retained as independent contractors. The criteria to determine whether an individual is considered an independent contractor, or an employee are typically fact sensitive and vary by jurisdiction, as can the interpretation of the applicable laws. If a government authority or court makes any adverse determination with respect to some or all of Grid Dynamics’ independent contractors, Grid Dynamics could incur significant costs, including for prior periods, in respect of tax withholding, social security taxes or payments, workers’ compensation and unemployment contributions, and recordkeeping, or Grid Dynamics may be required to modify its business model, any of which could materially adversely affect Grid Dynamics’ business, financial condition and results of operations.

Globally mobile employees may potentially create additional tax liabilities for Grid Dynamics in different jurisdictions.

In performing services to clients, Grid Dynamics’ employees may be required to travel to various locations. Depending on the length of the required travel and the nature of employees’ activities the tax implications of travel arrangements vary, with generally more extensive tax consequences in cases of longer travel. Such tax consequences mainly include payroll tax liabilities related to employee compensation and, in cases envisaged by international tax legislation, taxation of profits generated by employees during their time of travel.

Grid Dynamics has internal procedures, policies and systems, including an internal mobility program, for monitoring its tax liabilities arising in connection with the business travel. However, considering that the tax authorities worldwide are paying closer attention to global mobility issues, Grid Dynamics’ operations may be adversely affected by additional tax charges related to the activity of its mobile employees.

Loss of taxation benefits related to Grid Dynamics’ employment-related taxes that are enjoyed in Russia could have a negative impact on Grid Dynamics’ operating results and profitability.

The Russian government provides qualified Russian IT companies with substantial tax benefits through a reduced social contribution charge rate program. This program resulted in savings for Grid Dynamics of approximately $2.1 million in the fiscal year ended December 31, 2018 and approximately $2.0 million in the fiscal year ended December 31, 2017. However, the reduced tax rates for social contributions (16% in total) are a temporary measure. In 2016, application of reduced rates was prolonged until 2023, after which the Russian government may take the decision to gradually increase the tax rates. If the Russian government were to change its favorable treatment of Russian IT companies by modifying or repealing its current favorable tax measures, or if Grid Dynamics becomes ineligible for such favorable treatment, it would significantly impact Grid Dynamics’ financial condition and results of operations.

Grid Dynamics’ business, financial condition and results of operations may be adversely affected by fluctuations in foreign currency exchange rates.

Grid Dynamics functional currency, as well as the functional currency of all of its subsidiaries, is the U.S. dollar. However, Grid Dynamics is exposed to foreign currency exchange transaction risk related to funding its non-U.S. operations and to foreign currency translation risk related to certain of its subsidiaries’ cash balances that are denominated in currencies other than the U.S. dollar as Grid Dynamics does not currently hedge its foreign currency exposure. In addition, Grid Dynamics’ profit margins are subject to volatility as a result of changes in foreign exchange rates. In the nine months ended September 30, 2019, approximately 22%, 13% and 11% of Grid Dynamics’ $74.8 million of combined cost of revenue and total operating expenses were denominated in the Russian ruble, Ukrainian hryvnia and Polish zloty, respectively. Any significant fluctuations in currency exchange rates may have

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a material impact on Grid Dynamics’ business and results of operations. In some countries, Grid Dynamics may be subject to regulatory or practical restrictions on the movement of cash and the exchange of foreign currencies, which would limit Grid Dynamics’ ability to use cash across its global operations and increase Grid Dynamics’ exposure to currency fluctuations. This risk could increase as Grid Dynamics continues expanding its global operations, which may include entering emerging markets that may be more likely to impose these types of restrictions. Currency exchange volatility caused by political or economic instability or other factors, could also materially impact Grid Dynamics’ results. See “Grid Dynamics Management’s Discussion and Analysis of Financial Condition and Results of Operations — Quantitative and Qualitative Disclosures about Market Risk — Foreign Currency Exchange Rate Risk” for more information about Grid Dynamics’ exposure to foreign currency exchange rates.

Grid Dynamics may be exposed to liability for actions taken by its subsidiaries.

In certain cases, Grid Dynamics may be jointly and severally liable for obligations of its subsidiaries. Grid Dynamics may also incur secondary liability and, in certain cases, liability to creditors for obligations of its subsidiaries in certain instances involving bankruptcy or insolvency.

In particular, under Article 53 part 1 of the Russian Civil Code, a “controlling person” of a legal entity may be held directly liable for losses that the entity suffers because of his or her “fault,” and any agreement that seeks to limit or waive such liability will not be valid. Generally, a controlling person is anyone who holds the power to determine the entity’s actions, including the right to direct the actions of officers or executives. When a controlling person causes losses, officers and executives may all be held jointly and severally liable (a parent entity may also be held jointly liable with a subsidiary for actions directed by the parent or made with its consent). Liability may also apply to stockholders or controlling persons when the company is a foreign legal entity but conducts its business primarily in Russia.

Further, an effective parent is secondarily liable for an effective subsidiary’s debts if the effective subsidiary becomes insolvent or bankrupt as a result of the action or inaction of the effective parent. In these instances, the other stockholders of the effective subsidiary may claim compensation for the effective subsidiary’s losses from the effective parent that caused the effective subsidiary to take action or fail to take action, knowing that such action or failure to take action would result in losses. Grid Dynamics could be found to be the effective parent of the subsidiaries, in which case it could become liable for their debts, which could have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations or prospects.

Grid Dynamics’ profitability may suffer if Grid Dynamics is unable to maintain its resource utilization and productivity levels.

As most of Grid Dynamics’ client projects are performed and invoiced on a time and materials basis, Grid Dynamics’ management tracks and projects billable hours as an indicator of business volume and corresponding resource needs for IT professionals. To maintain its gross profit margins, Grid Dynamics must effectively utilize its IT professionals, which depends on its ability to:

•        integrate and train new personnel;

•        efficiently transition personnel from completed projects to new assignments;

•        forecast customer demand for services; and

•        deploy personnel with appropriate skills and seniority to projects.

If Grid Dynamics experiences a slowdown or stoppage of work for any client, or on any project for which it has dedicated personnel or facilities, Grid Dynamics may be unable to reallocate these personnel or assets to other clients and projects to keep their utilization and productivity levels high. If Grid Dynamics is unable to maintain appropriate resource utilization levels, Grid Dynamics’ profitability may suffer.

If Grid Dynamics is unable to accurately estimate the cost of service or fail to maintain favorable pricing for its services, its contracts may be unprofitable.

In order for its contracts to be profitable, Grid Dynamics must be able to accurately estimate its costs to provide the services required by the contract and appropriately price its contracts. Such estimates and pricing structures used by Grid Dynamics for its contracts are highly dependent on internal forecasts, assumptions and

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predictions about its projects, the marketplace, global economic conditions (including foreign exchange volatility) and the coordination of operations and personnel in multiple locations with different skill sets and competencies. Due to the inherent uncertainties that are beyond Grid Dynamics’ control, Grid Dynamics may underprice its projects, fail to accurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts. In select cases, Grid Dynamics also offers volume discounts once a client reaches certain contractual spend thresholds, which may lower the reference price for a client or result in a loss of profits if Grid Dynamics does not accurately estimate the amount of discounts to be provided. Any increased or unexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks Grid Dynamics encounters in connection with the performance of its contracts, including those caused by factors outside its control, could make these contracts less profitable or unprofitable.

Grid Dynamics faces risks associated with having a long selling and implementation cycle for its services that require significant resource commitments prior to realizing revenues for those services.

Grid Dynamics has a long selling cycle for its services, which requires Grid Dynamics to expend substantial time and resources to educate clients on the value of Grid Dynamics’ services and its ability to meet their requirements. In certain cases, Grid Dynamics may begin work and incur costs prior to executing a contract. Grid Dynamics’ selling cycle is subject to many risks and delays over which it has little or no control, including the clients’ decisions to choose alternatives to Grid Dynamics’ services (such as other IT services providers or in-house resources) and the timing of clients’ budget cycles and approval processes. Therefore, selling cycles for new clients can be especially unpredictable and Grid Dynamics may fail to close sales with prospective clients to whom it has devoted significant time and resources. Any significant failure to generate revenues or delays in recognizing revenues after incurring costs related to sales or services processes could have a material adverse effect on Grid Dynamics’ business, financial condition and results of operations.

Failure to obtain engagements for and effectively manage increasingly large and complex projects may have an adverse effect on Grid Dynamics business, financial condition and results of operations.

Grid Dynamics’ operating results are dependent on the scale of its projects and the prices it is able to charge for its services. In order to successfully perform larger and more complex projects, Grid Dynamics needs to establish and maintain effective, close relationships with its clients, continue high levels of client satisfaction and develop a thorough understanding of its clients’ needs. Grid Dynamics may also face a number of challenges managing larger and more complex projects, including:

•        maintaining high quality control and process execution standards;

•        maintaining planned resource utilization rates on a consistent basis;

•        using an efficient mix of on-site, off-site and offshore staffing;

•        maintaining productivity levels;

•        implementing necessary process improvements;

•        recruiting and retaining sufficient numbers of highly skilled IT personnel; and

•        controlling costs.

There is no guarantee that Grid Dynamics may be able to overcome such challenges. In addition, large and complex projects may involve multiple engagements or stages, and there is a risk that a client may choose not to retain Grid Dynamics for additional stages or may cancel or delay additional planned engagements. Grid Dynamics’ failure to successfully obtain engagements for and effectively manage large and complex projects may have an adverse effect on Grid Dynamics business, financial condition and results of operations.

Increases in compensation expenses, including stock-based compensation expenses, could prevent Grid Dynamics from sustaining competitive advantage and result in dilution to stockholders.

Wages and other compensation costs in the countries in which Grid Dynamics maintains significant operations are lower than comparable wage costs in more developed countries. Wage inflation could increase Grid Dynamics’ cost of services as well as selling, general and administrative expenses and reduce its profitability.

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In addition, Grid Dynamics has granted certain equity-based awards under its equity incentive plans and expects to continue this practice following the Business Combination. See also “Proposal No. 5: The Incentive Plan Proposal.” For the nine month period ended September 30, 2019 and the year ended December 31, 2018, Grid Dynamics recorded $2.0 million and $1.8 million, respectively, of stock-based compensation expense related to the grant of options. If Grid Dynamics does not grant equity awards, or if Grid Dynamics reduces the value of equity awards it grants, Grid Dynamics may not be able to attract, hire and retain key personnel. If Grid Dynamics grants more equity awards to attract, hire and retain key personnel, the expenses associated with such additional equity awards could materially adversely affect its results of operations. The issuance of equity-based compensation may also result in dilution to stockholders.

Failure to collect receivables from, or bill for unbilled services to, clients may have a material adverse effect on Grid Dynamics’ results of operations and cash flows.

Grid Dynamics’ business depends on its ability to successfully obtain payment from its clients of the amounts they owe for work performed. Grid Dynamics usually bills and collects such amounts on relatively short cycles and maintains allowances for doubtful accounts. However, actual losses on client balances could differ from those that Grid Dynamics’ anticipate and, as a result, it might need to adjust its allowances.

There is no guarantee that Grid Dynamics will accurately assess the creditworthiness of its clients. If clients suffer financial difficulties, it could cause them to delay payments, request modifications to their payment arrangements that could increase Grid Dynamics’ receivables balance, or default on their payment obligations. In addition, some of Grid Dynamics’ clients may delay payments due to changes in internal payment procedures driven by rules and regulations to which they are subject. Timely collection of client balances also depends on Grid Dynamics’ ability to complete its contractual commitments and bill and collect contracted revenues. If Grid Dynamics is unable to meet its contractual requirements, Grid Dynamics may experience delays in collection of or inability to collect accounts receivable. If this occurs, Grid Dynamics’ results of operations and cash flows could be materially adversely affected.

Grid Dynamics may need additional capital and a failure to raise additional capital on terms favorable to Grid Dynamics, or at all, could limit its ability to grow its business and develop or enhance its service offerings to respond to market demand or competitive challenges.

Grid Dynamics may require additional cash resources due to changed business conditions or other future developments. If existing resources are insufficient to satisfy cash requirements, Grid Dynamics may seek to sell additional equity or debt securities or obtain one or more credit facilities. The sale of additional equity securities could result in dilution to stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require Grid Dynamics to agree to operating and financing covenants that would restrict its operations. Grid Dynamics’ ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including investors’ perception of, and demand for, securities of IT services companies, conditions in the capital markets in which Grid Dynamics may seek to raise funds, Grid Dynamics’ future results of operations and financial condition, and general economic and political conditions. Financing may not be available in amounts or on terms acceptable to Grid Dynamics, or at all, which could limit Grid Dynamics’ ability to grow its business and develop or enhance its service offerings to respond to market demand or competitive challenges.

War, terrorism, other acts of violence or natural or manmade disasters may affect the markets in which Grid Dynamics operates, Grid Dynamics’ clients and Grid Dynamics’ service delivery.

Grid Dynamics’ business may be adversely affected by instability, disruption or destruction in a geographic region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or manmade disasters, including famine, flood, fire, earthquake, storm or disease. Such events may cause clients to delay their decisions on spending for the services provided by Grid Dynamics and give rise to sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to Grid Dynamics’ personnel and to physical facilities and operations, which could materially adversely affect Grid Dynamics’ financial results.

Any significant disruption to communications and travel, including travel restrictions, may increase the difficulty of obtaining and retaining highly skilled professionals, and such events could make it difficult or impossible for Grid Dynamics to deliver services to its clients. Travel restrictions could cause Grid Dynamics to

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incur additional unexpected labor costs and expenses or could restrain Grid Dynamics’ ability to retain the highly skilled personnel Grid Dynamics needs for its operations. In addition, any extended disruptions of electricity, other public utilities or network services at its facilities, as well as system failures at, or security breaches in, Grid Dynamics’ facilities or systems, could also adversely affect Grid Dynamics’ ability to serve its clients.

Risks Related to Government Regulations

Failure to comply with privacy and data protection laws and regulations could lead to government enforcement actions, private litigation and adverse publicity.

On April 14, 2016, the European Parliament approved the General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018. The GDPR is directly applicable in every European Union member state, without the necessity of national implementation laws. The GDPR has a significant impact on how businesses can collect and process the personal data of individuals in the European Economic Area. The regulation contains many key changes, such as stronger enforcement, increased accountability, new approach to consent and data transfer, new privacy rights, data breach regulation, data protection officer appointment, data processing agreements and privacy impact assessment. In addition, California enacted legislation that has been dubbed the first “GDPR-like” law in the United States. The California Consumer Privacy Act (“CCPA”) creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. When it goes into effect on January 1, 2020, the CCPA will require covered companies to provide new disclosures to California consumers, provide such consumers new ways to opt-out of certain sales of personal information and allow for a new cause of action for data breaches. Furthermore, under Russian law, all data operators collecting personal data of Russian citizens through electronic communications, including the Internet, must ensure that its storage takes place in databases located in the territory of Russia. This law applies not only to local data controllers but also to data controllers established outside Russia to the extent they gather personal data relating to Russian nationals through websites aimed at the territory of Russia.

Grid Dynamics has been undertaking measures to comply with the GDPR, CCPA and other applicable privacy and data protection laws and regulations. The costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to Grid Dynamics may limit the use and adoption of Grid Dynamics’ products and solutions, alter the way Grid Dynamics conducts business and/or could otherwise have a material adverse impact on Grid Dynamics’ results of operations.

Grid Dynamics may be unsuccessful in establishing legitimate means of transferring data from the European Economic Area, Grid Dynamics may experience hesitancy, reluctance or refusal by multi-national clients to continue to use Grid Dynamics’ services due to the potential risk exposure to such clients as a result of the implementation of GDPR, and Grid Dynamics and Grid Dynamics’ clients are at risk of enforcement actions taken by the European Union data protection authority until such point in time that Grid Dynamics ensures that all data transfers to Grid Dynamics from the European Economic Area are legitimized. Grid Dynamics may find it necessary to establish systems to maintain EU-origin data in the European Economic Area, which may involve substantial expense and distraction from other aspects of Grid Dynamics’ business. Further, the costs of compliance with, and other burdens imposed by, such laws, regulations and policies that are applicable to Grid Dynamics, may limit the use and adoption of Grid Dynamics’ products and solutions and could have a material adverse impact on Grid Dynamics’ results of operations.

Furthermore, any failure or perceived failure (including as a result of deficiencies in Grid Dynamics’ policies, procedures or measures relating to privacy, data protection, marketing or client communications) by Grid Dynamics to comply with laws, regulations, policies, legal or contractual obligations, industry standards, or regulatory guidance relating to privacy or data security may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity and could cause Grid Dynamics’ clients to lose trust in it, which could have a material adverse effect on Grid Dynamics’ reputation, business, financial condition and results of operations.

Grid Dynamics expects that there will continue to be new proposed laws, regulations and industry standards relating to privacy, data protection, marketing, consumer communications and information security in the United States, the European Union, Russia and other jurisdictions, and Grid Dynamics cannot determine the impact such

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future laws, regulations and standards may have on its business. Future laws, regulations, standards and other obligations or any changed interpretation or enforcement of existing laws or regulations could impair its ability to develop and market new services and maintain and grow its client base and increase revenue.

Grid Dynamics is subject to laws and regulations restricting its operations, including export restrictions, economic sanctions and the Foreign Corrupt Practices Act and similar anti-corruption laws. If Grid Dynamics is not in compliance with applicable legal requirements, it may be subject to civil or criminal penalties and other remedial measures.

Grid Dynamics’ operations are subject to laws and regulations restricting its operations, including activities involving restricted countries, organizations, entities and persons that have been identified as unlawful actors or that are subject to U.S. sanctions imposed by the Office of Foreign Assets Control (“OFAC”) or other international economic sanctions that prohibit Grid Dynamics from engaging in trade or financial transactions with certain countries, businesses, organizations and individuals. Grid Dynamics is subject to the Foreign Corrupt Practices Act (“FCPA”), which prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtaining or keeping business or otherwise obtaining favorable treatment, and other laws concerning its international operations. The FCPA’s foreign counterparts contain similar prohibitions, although varying in both scope and jurisdiction. Grid Dynamics operates in many parts of the world that have experienced governmental corruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.

Grid Dynamics is currently in the process of developing and implementing formal controls and procedures to ensure that Grid Dynamics is in compliance with the FCPA, OFAC sanctions, and similar sanctions, laws and regulations. The implementation of such procedures may be time consuming and expensive and could result in the discovery of issues or violations with respect to the foregoing by Grid Dynamics or its employees, independent contractors, subcontractors or agents of which Grid Dynamics was previously unaware.

Grid Dynamics may not be completely effective in ensuring its compliance with all such applicable laws, which could result in Grid Dynamics being subject to criminal and civil penalties, disgorgement and other sanctions and remedial measures, and legal expenses. Likewise, any investigation of any potential violations of such laws by United States or other authorities could also have an adverse impact on Grid Dynamics’ reputation, business, financial condition and results of operations.

Changes to U.S. administration’s fiscal, political, regulatory and other policies may adversely affect business, financial condition and results of operations.

Recent events, including the policies introduced by the current U.S. presidential administration, have resulted in substantial regulatory uncertainty regarding international trade and trade policy. For example, the current U.S. presidential administration has called for substantial changes to trade agreements, has increased tariffs on certain goods imported into the United States and has raised the possibility of imposing significant, additional tariff increases. The announcement of unilateral tariffs on imported products by the United States has triggered retaliatory actions from certain foreign governments, including China and Russia, and may trigger retaliatory actions by other foreign governments, potentially resulting in a “trade war.” While Grid Dynamics cannot predict the extent to which the United States or other countries will impose quotas, duties, tariffs, taxes or other similar restrictions upon the import or export of Grid Dynamics’ products in the future, a “trade war” of this nature or other governmental action related to tariffs or international trade agreements could have an adverse impact on demand for Grid Dynamics’ services, sales and clients and affect the economies of the United States and various countries, having an adverse effect on Grid Dynamics’ business, financial condition and results of operations.

Negative publicity about offshore outsourcing or anti-outsourcing legislation and restriction on immigration may have an adverse effect on Grid Dynamics’ business.