F-4/A 1 d664234df4a.htm FORM F-4/A Form F-4/A
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As Filed with the Securities and Exchange Commission on August 12, 2019

Registration No. 333-229613

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 4

TO

FORM F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

MODERN MEDIA ACQUISITION CORP. S.A.

(Exact name of Registrant as specified in its charter)

 

 

 

Luxembourg   7370   Not Applicable

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

3414 Peachtree Road, Suite 480

Atlanta, Georgia 30326

(404) 443-1182

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

Lewis W. Dickey, Jr.

President and Chief Executive Officer

3414 Peachtree Road, Suite 480

Atlanta, Georgia 30326

(404) 443-1182

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of communications to:

Mitchell S. Nussbaum, Esq.

Loeb & Loeb LLP

345 Park Avenue

New York, New York 10154

(212) 407-4159

 

Mark L. Hanson, Esq.

Jones Day

1420 Peachtree Street, N.E., Suite 800

Atlanta, Georgia 30309

(404) 521-3939

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective and after all conditions under the Business Transaction Agreement are satisfied or waived.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

Emerging growth company  ☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction or state where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED AUGUST 12, 2019

PROXY STATEMENT FOR SPECIAL MEETING OF STOCKHOLDERS OF

MODERN MEDIA ACQUISITION CORP.

AND PROSPECTUS FOR ORDINARY SHARES AND WARRANTS

OF MODERN MEDIA ACQUISITION CORP. S.A.

 

 

Proxy Statement/Prospectus dated                , 2019

and first mailed to Modern Media Acquisition Corp. stockholders on or about                , 2019

To the Stockholders of Modern Media Acquisition Corp.:

You are cordially invited to attend the Special Meeting of the Stockholders of Modern Media Acquisition Corp. (“MMAC”), which will be held at                , Eastern time, on                , 2019, at                (the “Special Meeting”).

MMAC has entered into a business transaction agreement, dated as of January 24, 2019 (as amended, the “Business Transaction Agreement”), which provides for a business combination (the “Business Combination”) between MMAC and Akazoo Limited, a private company limited by shares incorporated under the laws of Scotland (“Akazoo”). The Business Combination is structured to efficiently combine the assets and businesses of MMAC and Akazoo into one new, publicly traded entity. The Business Combination will result in (1) stockholders of MMAC, equityholders of Akazoo and certain other equity investors together holding all of the outstanding Ordinary Shares of PubCo (as defined below) and (2) Akazoo becoming a wholly owned subsidiary of PubCo.

Pursuant to the Business Transaction Agreement, the Business Combination will be effected in three steps: (i) subject to the approval and adoption of the Business Transaction Agreement by the stockholders of MMAC, MMAC will merge with and into Modern Media Acquisition Corp. S.A., a Luxembourg public limited company (société anonyme) (“PubCo”), with PubCo remaining as the surviving publicly traded entity (the “Merger”); (ii) Unlimited Music S.A., a Luxembourg public limited company (société anonyme) (“LuxCo”), will acquire the entire issued share capital of Akazoo in consideration for issuing ordinary shares of LuxCo (“LuxCo Shares”) to the Akazoo shareholders (the “Share Exchange”) and (iii) LuxCo will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”). In addition to other customary closing conditions discussed herein, consummation of the Business Combination is conditioned upon there being not less than $53 million available between MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. As of June 30, 2019, MMAC had approximately $14.7 million in cash in its trust account. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments to purchase PubCo Units (as defined below) in a private placement offering on terms agreed to by the parties to the Business Transaction Agreement such that, together with cash available in MMAC’s trust account, PubCo would have at least an aggregate of $53 million of available cash after consummation of the Business Combination and the offering, before payment of any fees and expenses (such private placement offering, the “PIPE Financing”). The PIPE Financing is described in more detail in this proxy statement/prospectus. Based upon subscriptions and indications of interest received to date, MMAC and PubCo expect to successfully complete the PIPE Financing and the Business Combination. In addition, Akazoo may choose to waive the minimum cash condition. Nevertheless, there is no guarantee that the PIPE Financing or the other closing conditions will be satisfied or waived before September 17, 2019, the date on which MMAC must begin to liquidate its trust account pursuant to its Second Amended and Restated Certificate of Incorporation (the “MMAC Certificate of Incorporation”).

At the Special Meeting, MMAC stockholders will be asked to consider and vote upon a proposal, which is referred to herein as the “Business Combination Proposal,” to approve the Business Combination by the approval and adoption of the Business Transaction Agreement.

If MMAC stockholders approve the Business Combination Proposal and the parties consummate the Business Combination:

 

(i)

Immediately prior to the consummation of the Merger, each MMAC right (“MMAC Rights”) entitling the holder to receive one-tenth (1/10) of one share of MMAC’s common stock, par value $0.0001 per share (“MMAC Common Stock”) will be automatically converted into such fraction of MMAC Common Stock in accordance with the rights agreement governing such MMAC Rights; and

 

(ii)

Upon the consummation of the Merger:

 

  a.

Each share of MMAC Common Stock issued and outstanding immediately prior to the effective time of the Merger (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares), will convert into the right to receive one ordinary share of PubCo (a “PubCo Ordinary Share”); and

 

  b.

Each warrant to purchase MMAC Common Stock (“MMAC Warrants”) (or portion thereof) issued and outstanding immediately prior to effective time of the Merger will convert into a warrant to purchase one PubCo Ordinary Share (each, a “PubCo Warrant”) (or equivalent portion thereof). The PubCo Warrants will have and will be subject to substantially the same terms and conditions set forth in the MMAC Warrants.

 

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Immediately prior to the consummation of the Business Combination, all outstanding units of MMAC (each of which consists of one share of MMAC Common Stock, one MMAC Right and one-half of one MMAC Warrant) (the “MMAC Units”) will separate into their individual components of MMAC Common Stock, MMAC Rights and MMAC Warrants and will cease separate existence and trading.

It is anticipated that, upon the consummation of the Business Combination and PIPE Financing on its expected terms, PubCo will issue up to 49,044,831 PubCo Ordinary Shares and 17,670,000 PubCo Warrants. Of these securities, MMAC’s existing stockholders, including the sponsor (as defined herein), would hold an ownership interest of approximately 6,297,374 PubCo Ordinary Shares (approximately 12.8% of the issued and outstanding PubCo Ordinary Shares), Akazoo’s current equityholders would own an ownership interest of approximately 36,196,428 PubCo Ordinary Shares (approximately 73.8% of the issued and outstanding PubCo Ordinary Shares) and the equity investors purchasing PubCo Ordinary Shares in the PIPE Financing would own an ownership interest of approximately 5,926,029 PubCo Ordinary Shares (approximately 12.1% of the issued and outstanding PubCo Ordinary Shares). These relative percentages assume that none of MMAC’s existing public stockholders exercise their redemption rights, as discussed herein, and assume a successful PIPE Financing which includes the transfer of certain sponsor-forfeited PubCo Ordinary Shares and PubCo Warrants to certain investors in the PIPE Financing as an incentive, leaving PubCo with an aggregate $53 million of available cash after consummation of the Business Combination and PIPE Financing, before payment of any fees and expenses. These percentages also do not include any exercise or conversion of (i) MMAC Warrants or (ii) options or other convertible securities issued by Akazoo. Pursuant to the Business Transaction Agreement, the number of PubCo Ordinary Shares that Akazoo’s current equityholders will also receive in the Business Combination is the quotient of (A) the Akazoo Enterprise Value, divided by (B) the Per Share Redemption Amount (each, as defined in the Business Transaction Agreement).

If any of MMAC’s existing public stockholders exercise their redemption rights, the anticipated percentage ownership of MMAC’s existing stockholders will be reduced.

In addition to being asked to approve the Business Combination Proposal, MMAC stockholders will also be asked to consider and vote upon a proposal relating to adjournment of the Special Meeting under certain circumstances, which is more fully described in this proxy statement/prospectus.

The MMAC Units, MMAC Common Stock, MMAC Rights and MMAC Warrants are currently listed on the NASDAQ Capital Market under the symbols “MMDMU,” “MMDM,” “MMDMR” and “MMDMW,” respectively. PubCo intends to apply to list the PubCo Ordinary Shares and PubCo Warrants on the NASDAQ Stock Market under the symbols “SONG” and “SONGW,” respectively, in connection with the closing of the Business Combination. MMAC cannot assure you that the PubCo Ordinary Shares and PubCo Warrants will be approved for listing on NASDAQ.

Investing in PubCo securities involves a high degree of risk. See “Risk Factors” beginning on page 35 for a discussion of information that should be considered in connection with an investment in PubCo securities.

Pursuant to the MMAC Certificate of Incorporation, MMAC is providing its public stockholders with the opportunity to redeem all or a portion of their shares of MMAC Common Stock at a per-share price, payable in cash, equal to the aggregate amount then on deposit in MMAC’s trust account as of two business days prior to the consummation of the Business Combination, including interest, less taxes payable, divided by the number of then outstanding shares of MMAC Common Stock that were sold as part of the MMAC Units in MMAC’s initial public offering (“IPO”), which are referred to collectively as “public shares,” subject to the limitations described herein.

On May 17, 2017, MMAC completed its initial public offering (“IPO”). In connection with its IPO, MMAC issued 20,700,000 public shares for gross proceeds to MMAC from the IPO totaling $207,000,000. After taking into account the concurrent sale of MMAC Warrants in a private placement and certain fees and expenses, the total amount deposited in the trust account totaled $209,070,000.

In connection with MMAC’s February 2019 stockholder vote to extend the date by which MMAC must consummate a business combination from February 17, 2019 to June 17, 2019 (the “First Extension”), public stockholders had the opportunity to redeem all or a portion of their public shares. In connection with the First Extension, a total of 5,942,681 public shares were redeemed for a total amount of approximately $61 million. Following the completion of such redemptions, MMAC had approximately $152 million in cash remaining in the trust account and 14,757,319 public shares issued and outstanding.

On June 14, 2019, at a special meeting of the stockholders of MMAC, the stockholders approved a further extension of the date by which MMAC must consummate a business combination from June 17, 2019 to September 17, 2019 (the “Second Extension”).

In connection with the approval of the Second Extension, stockholders elected to redeem an aggregate of 13,350,654 public shares. Following the completion of such redemptions, MMAC had approximately $14.7 million in cash remaining in the trust account and 6,581,665 shares of common stock issued and outstanding.

MMAC estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $10.35 at the time of the Special Meeting. Public stockholders may elect to redeem their shares even if they vote for the Business Combination Proposal or do not vote at all.

Holders of outstanding MMAC Warrants and MMAC Rights do not have redemption rights in connection with the Business Combination.

 

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MMAC is providing this proxy statement/prospectus and accompanying proxy card to its 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. This proxy statement/prospectus is also being provided to persons who as at the date hereof hold equity securities, options or otherwise rights to be issued equity securities in the share capital of Akazoo, or LuxCo, as the case may be (“Akazoo equityholders”), as a prospectus in connection with their receipt of PubCo Ordinary Shares in the Business Combination.

Whether or not you plan to attend the Special Meeting, you are urged to read this proxy statement/prospectus (and any documents incorporated into this proxy statement/prospectus by reference) carefully and vote your shares of MMAC Common Stock using the accompanying proxy card.

MMAC’s board of directors (the “Board”) has approved the Business Combination and the Business Transaction Agreement and recommends that MMAC’s stockholders vote FOR each of the proposals to be presented to at the Special Meeting. When you consider the Board’s recommendation of these proposals, you should keep in mind that MMAC’s directors and officers have interests in the Business Combination that may conflict or differ from with your interests as a stockholder. See the section entitled “Proposal I — Approval of the Business Transaction Agreement and the Business Combination — Interests of MMAC Directors and Officers in the Business Combination”

Approval of the Business Combination Proposal requires the affirmative vote of holders of a majority of the outstanding shares of MMAC Common Stock. Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of MMAC Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. The Board has already approved the Business Transaction Agreement and the Business Combination.

MMAC has no specified maximum redemption threshold under the MMAC Certificate of Incorporation. It is a condition to closing under the Business Transaction Agreement, however, that MMAC has, in the aggregate, not less than $53.0 million of available cash in MMAC’s trust account or additional capital otherwise available upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although Akazoo may waive this condition. In the event that Akazoo waives this condition, MMAC does not intend to seek additional stockholder approval or to extend the time period in which its public stockholders can exercise their redemption rights. In no event, however, will MMAC redeem more than approximately 445,850 (32%) of its currently outstanding public shares because redeeming more than that amount would cause its net tangible assets to be less than $5,000,001. The redemption thresholds discussed above are estimates for illustration only, and are based on an implied share price of $10.35 per share of MMAC Common Stock. Accordingly, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash at the time of the Business Combination, then the parties may determine to consummate the Business Combination even if redemptions reduce MMAC’s net tangible assets to as low as $5,000,001. MMAC intends to notify MMAC stockholders by press release on or before consummation of the Business Combination that it has secured sufficient binding commitments for the PIPE Financing to satisfy the minimum cash condition under the Business Transaction Agreement or that Akazoo has otherwise waived this condition.

The sponsor and MMAC’s executive officers and independent directors have agreed to vote their shares of MMAC Common Stock in favor of the Business Combination Proposal. As of the date hereof, such persons are entitled to vote 5,175,000 shares of MMAC Common Stock, representing approximately 78.6% of all outstanding shares of MMAC Common Stock. Accordingly, stockholder approval of the Business Combination Proposal is assured. See “Special Meeting of MMAC Stockholders” and “Certain Agreements Related to the Business Combination – Voting Agreement.”

Your vote is very important. If you are a holder of record, you must vote by submitting the enclosed proxy card. Please vote as soon as possible to ensure that your vote is counted, regardless of whether you expect to attend the Special Meeting in person. Please complete, sign, date and return the enclosed proxy card in the postage-paid envelope provided.

If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of each of the proposals presented at the Special Meeting. 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 of stockholders and, if a quorum is present, will have the effect of a vote against the Business Combination Proposal and no effect on the adjournment proposal. 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.

On behalf of the Board, I thank you for your support and we look forward to the successful consummation of the Business Combination.

 

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Sincerely,

Lewis W. Dickey, Jr.

President, Chief Executive Officer and Chairman

Neither the Securities and Exchange Commission nor any state securities commission has determined if this attached proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

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Modern Media Acquisition Corp.

3414 Peachtree Road, Suite 480

Atlanta, Georgia 30326

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON                , 2019

TO THE STOCKHOLDERS OF MODERN MEDIA ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Modern Media Acquisition Corp., a Delaware corporation (“MMAC”), will be held at                on                , 2019 at                (the “Special Meeting”), for the purpose of considering and acting upon the following proposals:

 

  I.

The Business Combination Proposal—to approve the adoption of the Business Transaction Agreement, dated as of January 24, 2019 (as amended, the “Business Transaction Agreement”) which provides for a business combination (the “Business Combination”) between MMAC and Akazoo Limited, a private company limited by shares incorporated under the laws of Scotland (“Akazoo”). Pursuant to the Business Transaction Agreement, the Business Combination will be effected in three steps: (i) MMAC will merge with and into Modern Media Acquisition Corp. S.A., a Luxembourg public limited company (société anonyme) (“PubCo”), with PubCo remaining as the surviving publicly traded entity (the “Merger”); (ii) Unlimited Music S.A., a Luxembourg public limited company (société anonyme) (“LuxCo”), will acquire the entire issued share capital of Akazoo in consideration for issuing ordinary shares of LuxCo (“LuxCo Shares”) to the Akazoo shareholders (the “Share Exchange”) and (iii) LuxCo will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”).

 

  II.

The Adjournment Proposal—to consider and vote upon a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that, based upon the tabulated vote at the time of the Special Meeting, MMAC would not have been authorized to consummate the Business Combination (the “Adjournment Proposal”); and

 

  III.

Such other business as may properly come before the meeting or any adjournment or postponement thereof.

These proposals are described in the accompanying proxy statement/prospectus which you are urged to read in its entirety before voting.

The MMAC Board of Directors (the “Board”) has fixed the close of business on August 9, 2019, as the record date (the “Record Date”) for the determination of stockholders entitled to notice of and to vote at the Special Meeting and at any adjournment thereof. A list of the stockholders entitled to vote as of the Record Date at the Special Meeting will be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of ten calendar days before the Special Meeting at the offices of MMAC, 3414 Peachtree Road, Suite 480, Atlanta, Georgia 30326, telephone number of (404) 443-1182, General Counsel and Assistant Secretary: Adam Kagan, and at the time and place of the Special Meeting during the duration of the Special Meeting.

If MMAC does not consummate a business combination on or before September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, MMAC would be required to distribute the proceeds held in trust to its stockholders in accordance with the MMAC Certificate of Incorporation.

MMAC does not expect to transact any other business at the Special Meeting, except for business properly brought before the Special Meeting, or any adjournment or postponement thereof, by the Board.

Each MMAC stockholder who holds public shares of MMAC Common Stock has the right, regardless of such stockholder’s vote on the Business Combination Proposal, to demand that MMAC redeem such stockholder’s shares for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account as of two business days prior to the vote on the Business Combination Proposal, including interest earned on the trust account deposits (which interest shall be net of taxes payable), divided by the number of then outstanding public shares.

 

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MMAC estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $10.35 at the time of the Special Meeting. In no event will MMAC redeem its public shares in an amount that would cause MMAC’s net tangible assets to be less than $5,000,001 (so that MMAC is not subject to the SEC’s “penny stock” rules).

MMAC’s initial stockholders prior to the IPO, including the sponsor (collectively, the “initial stockholders”) have waived their rights to liquidating distributions from the trust account with respect to their shares of MMAC Common Stock acquired prior to the IPO (“founder shares”). As a consequence of such waivers, any liquidating distribution that is made will be only with respect to the public shares. There will be no distribution from the trust account with respect to MMAC Rights or MMAC Warrants, which will expire worthless in the event MMAC winds up.

Please sign, date and return your proxy card as soon as possible to make sure that your shares are represented at the Special Meeting. If you are a stockholder of record of MMAC Common Stock, you may also cast your vote in person at the Special Meeting. If your shares of MMAC Common Stock are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your shares.

For purposes of the Business Combination Proposal, under the MMAC Certificate of Incorporation, approval of the Business Combination Proposal will require the affirmative vote of a majority of the shares of outstanding MMAC Common Stock. It is a condition to closing under the Business Transaction Agreement, however, that MMAC has, in the aggregate, not less than $53,000,000 of available cash upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although such condition may be waived by Akazoo. Accordingly, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash at the time of the Business Combination, then the parties may determine to consummate the Business Combination, and in that case, redemptions could reduce MMAC’s net tangible assets to as low as $5,000,001. MMAC intends to notify MMAC stockholders by press release on or before consummation of the Business Combination that it has secured sufficient binding commitments for the PIPE Financing to satisfy the minimum cash condition under the Business Transaction Agreement or that Akazoo has otherwise waived this condition.

Since the Business Combination Proposal requires approval by a majority of the shares of outstanding MMAC Common Stock, abstentions or broker non-votes will count as votes “AGAINST” the Business Combination Proposal. The holders of all founder shares have agreed to vote their shares of MMAC Common Stock owned or acquired by them during or after MMAC’s IPO in favor of the Business Combination Proposal. As of the date hereof, such persons are entitled to vote 5,175,000 shares of MMAC Common Stock, representing approximately 78.6% of all outstanding shares of MMAC Common Stock. Accordingly, stockholder approval of the Business Combination Proposal is assured. See “Special Meeting of MMAC Stockholders” and “Certain Agreements Related to the Business Combination – Voting Agreement.”

For purposes of the Adjournment Proposal, approval requires the affirmative vote of the holders of a majority of the shares of MMAC Common Stock represented in person or by proxy and entitled to vote at the Special Meeting.

WHETHER YOU PLAN TO ATTEND THE SPECIAL MEETING OR NOT, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED. IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU DESIRE TO VOTE, SINCE IT IS NOT AN AFFIRMATIVE VOTE IN FAVOR OF A RESPECTIVE PROPOSAL, IT: (I) WILL HAVE THE EFFECT OF A VOTE “AGAINST” THE BUSINESS COMBINATION PROPOSAL AND (II) WILL HAVE NO EFFECT ON THE VOTE REGARDING THE ADJOURNMENT PROPOSAL.

SUCH A VOTE WILL NOT HAVE THE EFFECT OF EXERCISING YOUR RIGHT TO REQUIRE MMAC TO REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE TRUST ACCOUNT IN WHICH A SUBSTANTIAL PORTION OF THE NET PROCEEDS OF MMAC’S IPO ARE HELD (IN ORDER FOR A STOCKHOLDER TO EXERCISE HIS OR HER RIGHT TO HAVE HIS OR HER SHARES REDEEMED, HE OR SHE MUST FOLLOW THE REDEMPTION PROCEDURES SET FORTH IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS).

SEE THE SECTION ENTITLED “RISK FACTORS” BEGINNING ON PAGE 35 FOR A DISCUSSION OF VARIOUS FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH THE BUSINESS COMBINATION.

The accompanying proxy statement/prospectus incorporates important business and financial information about MMAC that is not included in or delivered with this document. This information is available without charge to security holders upon written or oral request. The request should be sent to: the offices of MMAC, 3414 Peachtree Road, Suite 480, Atlanta, Georgia 30326, telephone number of (404) 443-1182, Attention: General Counsel and Assistant Secretary Adam Kagan.

 

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To obtain timely delivery of requested materials, security holders must request the information no later than five days before the date they submit their proxies or attend the Special Meeting. The latest date to request the information to be received timely is                , 2019.

This proxy is being solicited on behalf of the Board, and MMAC will pay all costs of preparing, assembling and mailing the proxy materials. In addition to mailing out proxy materials, MMAC’s officers may solicit proxies by telephone or fax, without receiving any additional compensation for their services. MMAC has engaged the services of a professional proxy solicitation agent. Brokers, banks and other fiduciaries are requested to forward proxy materials to the beneficial owners of MMAC’s Common Stock.

The Solicitation Agent for the Special Meeting is:

Morrow Sodali LLC

You may obtain information regarding the Special Meeting

from the Solicitation Agent as follows:

470 West Avenue

Stamford, CT 06902

Tel: (800) 662-5200

Email: MMDM.info@morrowsodali.com

Banks and Brokerage Firms, please call: (203) 658-9400

The Board of Directors of Modern Media Acquisition Corp. unanimously recommends that you vote “FOR” Proposal I, the Business Combination Proposal, and “FOR” Proposal II, the Adjournment Proposal.

 

By Order of the Board of Directors,
Lewis W. Dickey, Jr.

President, Chief Executive Officer and Chairman

                    , 2019

 

 

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TABLE OF CONTENTS

 

     Page  

ABOUT THIS PROXY STATEMENT/PROSPECTUS

     1  

WHERE YOU CAN FIND MORE INFORMATION

     1  

IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

     2  

INDUSTRY AND MARKET DATA

     2  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     3  

QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE SPECIAL MEETING

     5  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     15  

SELECTED HISTORICAL FINANCIAL DATA OF PUBCO

     25  

SELECTED HISTORICAL FINANCIAL DATA OF MMAC

     26  

SELECTED HISTORICAL FINANCIAL DATA OF AKAZOO

     27  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     31  

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

     34  

RISK FACTORS

     35  

SPECIAL MEETING OF MMAC STOCKHOLDERS

     72  

PROPOSAL I APPROVAL OF THE BUSINESS TRANSACTION AGREEMENT AND THE BUSINESS COMBINATION

     77  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION

     88  

MATERIAL U.K. INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION

     99  

MATERIAL INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION IN THE GRAND DUCHY OF LUXEMBOURG

     106  

THE BUSINESS TRANSACTION AGREEMENT

     114  

CERTAIN AGREEMENTS RELATED TO THE BUSINESS COMBINATION

     119  

PROPOSAL II THE ADJOURNMENT PROPOSAL

     121  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

     122  

INFORMATION ABOUT AKAZOO

     129  

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

     139  

INFORMATION ABOUT MMAC

     150  

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

     156  

INFORMATION ABOUT PUBCO

     160  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT

     170  

MARKET FOR SECURITIES

     173  

SHARES ELIGIBLE FOR FUTURE SALE

     174  

DESCRIPTION OF PUBCO SHARE CAPITAL AND ARTICLES OF ASSOCIATION

     176  

COMPARISON OF STOCKHOLDERS’ RIGHTS

     183  

ENFORCEABILITY OF CIVIL LIABILITIES UNDER U.S. SECURITIES LAWS

     197  

LEGAL MATTERS

     199  

EXPERTS

     199  

FUTURE STOCKHOLDER PROPOSALS

     199  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     199  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF AKAZOO LIMITED

     F-1  

INDEX TO FINANCIAL STATEMENTS OF MODERN MEDIA ACQUISITION CORP.

     F-1  

ANNEX A—BUSINESS TRANSACTION AGREEMENT

     A-1  

PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS

     II-1  

 


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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form F-4 filed by PubCo (File No. 333-229613) with the U.S. Securities and Exchange Commission (“SEC”), constitutes a prospectus of PubCo under Section 5 of the U.S. Securities Act of 1933, as amended (the “Securities Act”) with respect to the PubCo Ordinary Shares to be issued to MMAC stockholders and to Akazoo equityholders, as well as the PubCo Warrants to be issued to holders of MMAC Warrants and the PubCo Ordinary Shares underlying such PubCo Warrants, if the Business Combination is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the Special Meeting of MMAC stockholders at which MMAC stockholders will be asked to consider and vote upon a proposal to approve the Business Combination by the approval and adoption of the Business Transaction Agreement, among other matters.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is not lawful to make any such offer or solicitation in such jurisdiction.

WHERE YOU CAN FIND MORE INFORMATION

As a foreign private issuer, PubCo will be required to file its Annual Report on Form 20-F with the SEC no later than 120 days following its fiscal year end. MMAC files reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read MMAC’s SEC filings, including this proxy statement/prospectus, over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document MMAC files with the SEC at the SEC public reference room located at 100 F Street, N.E., Room 1580 Washington, D.C., 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain copies of the materials described above at prescribed rates by writing to the SEC, Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.

Information and statements contained in this proxy statement/prospectus, or any annex to this proxy statement/prospectus, are qualified in all respects by reference to the copy of the relevant contract or other annex filed with this proxy statement/prospectus.

If you would like additional copies of this proxy statement/prospectus, or if you have questions about the Business Combination, you should contact MMAC’s proxy solicitor, Morrow Sodali, at (800) 662-5200 or by sending an e-mail to MMDM.info@morrowsodali.com.

All information contained in this proxy statement/prospectus relating to MMAC has been supplied by MMAC, and all such information relating to Akazoo, LuxCo or PubCo has been supplied by Akazoo. Information provided by either of MMAC or Akazoo does not constitute any representation, estimate or projection of the other party.

Neither MMAC, PubCo nor Akazoo has authorized anyone to give any information or make any representation about the Business Combination or their companies that is different from, or in addition to, that contained in this proxy statement/prospectus or in any of the materials that have been incorporated into this proxy statement/prospectus by reference. Therefore, if anyone does give you any such information, you should not rely on it. If you are in a jurisdiction where offers to exchange or sell, or solicitations of offers to exchange or purchase, the securities offered by this proxy statement/prospectus or the solicitation of proxies is unlawful, or if you are a person to whom it is unlawful to direct these types of activities, then the offer presented in this proxy statement/prospectus does not extend to you. The information contained in this proxy statement/prospectus speaks only as of the date of this proxy statement/prospectus unless the information specifically indicates that another date applies.

 

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IMPORTANT INFORMATION ABOUT IFRS AND NON-IFRS FINANCIAL MEASURES

Akazoo’s audited financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (the “IASB”). Akazoo refers in various places within this proxy statement/prospectus to EBITDA, EBITDA Margin, Adjusted Gross Profit and Free Cash Flow which are non-IFRS measures. EBITDA is defined as Net Income before Net finance costs, Income tax expense and Depreciation and amortization. EBITDA Margin is a financial measure not prepared in accordance with IFRS and is defined as EBITDA as a percentage of Revenue. Adjusted Gross Profit is defined as Gross Profit with Media Costs added back to it. Free Cash Flow is defined as net cash from operating activities less capital expenditures. These measures are more fully explained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Akazoo—Non-IFRS Financial Measures.” The presentation of this non-IFRS information is not meant to be considered in isolation or as a substitute for Akazoo’s consolidated financial results prepared in accordance with IFRS.

INDUSTRY AND MARKET DATA

In this proxy statement/prospectus, Akazoo relies on and refers to information and statistics regarding the markets in which it competes and other industry data. Akazoo obtained this information and these statistics from third-party sources, including reports by market research firms, such as the International Federation of the Phonographic Industry (“IFPI”), the GSM Association (“GSMA”) and MiDia Research, as well as financial firms. Akazoo has supplemented this information where necessary with its own internal estimates and information obtained from discussions with its customers, taking into account publicly available information about other industry participants and its management’s best view as to information that is not publicly available.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains a number of forward-looking statements, including statements about the financial conditions, results of operations, earnings outlook and prospects of PubCo, Akazoo and/or MMAC and may include statements for the period following the consummation of the proposed business combination. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of MMAC and Akazoo, as applicable, and are inherently subject to uncertainties and changes in circumstance and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors,” those discussed and identified in public filings made with the SEC by MMAC and the following:

 

   

expectations regarding Akazoo’s strategies and future financial performance, including Akazoo’s future business plans or objectives, prospective performance and opportunities, and competitors, revenues, customer acquisition and retention, products and services, pricing, marketing plans, operating expenses, market trends, liquidity, cash flows and uses of cash, capital expenditures, and Akazoo’s ability to maintain access to content and manage license relationships, and to invest in growth initiatives and pursue acquisition opportunities;

 

   

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

 

   

the outcome of any legal proceedings that may be instituted against Akazoo, MMAC and others following announcement of the Business Transaction Agreement and transactions contemplated therein;

 

   

the inability to complete the transactions contemplated by the Business Transaction Agreement due to the failure to secure sufficient binding commitments for the PIPE Financing or to satisfy other conditions necessary to consummate the Business Combination;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of Akazoo as a result of the announcement and consummation of the transactions contemplated by the Business Transaction Agreement;

 

   

the ability to recognize the anticipated benefits of the combination of Akazoo and MMAC;

 

   

costs related to the proposed Business Combination;

 

   

the amount of any redemptions by holders of MMAC Common Stock;

 

   

the concentration of voting power among MMAC and Akazoo’s major shareholders who have had substantial control over the respective companies and will continue to have substantial control over PubCo;

 

   

the sources and uses of cash;

 

   

the management and board composition of PubCo following the proposed Business Combination;

 

   

the successful initial listing and continued listing of PubCo’s securities on NASDAQ;

 

   

the limited liquidity and trading of MMAC’s and PubCo’s securities;

 

   

geopolitical risk and changes in applicable laws or regulations in Akazoo’s varying markets;

 

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the possibility that Akazoo and/or MMAC may be adversely affected by other economic, business, and/or competitive factors;

 

   

financial performance;

 

   

operational risk;

 

   

litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Akazoo’s resources;

 

   

fluctuations in exchange rates between the foreign currencies in which Akazoo typically does business and the Euro; and

 

   

the risks that the consummation of the Business Combination is substantially delayed or does not occur.

Should one or more of these risks or uncertainties materialize, or should any of the assumptions made by the management of MMAC and Akazoo prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

All subsequent written and oral forward-looking statements concerning the business combination or other matters addressed in this proxy statement/prospectus and attributable to Akazoo or MMAC or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this proxy statement/prospectus. Except to the extent required by applicable law or regulation, PubCo, Akazoo and MMAC undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this proxy statement/prospectus or to reflect the occurrence of unanticipated events.

 

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QUESTIONS AND ANSWERS ABOUT THE BUSINESS COMBINATION AND THE SPECIAL MEETING

The following questions and answers briefly address some commonly asked questions about the Business Combination and the proposals to be presented at the Special Meeting. These questions and answers do not include all the information that be important to stockholders. MMAC stockholders are encouraged to read carefully this entire proxy statement/prospectus, including the Annex and other documents referred to herein.

Who is Modern Media Acquisition Corp.?

Modern Media Acquisition Corp. (“MMAC”) is a blank check company formed in 2014 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities in the media, entertainment or marketing services industries. In May 2017, MMAC consummated its IPO from which it derived gross proceeds of $207,000,000, which were placed in a trust account.

Who is PubCo?

Modern Media Acquisition Corp. S.A. (“PubCo”) is a newly formed Luxembourg public limited company (société anonyme), formed to facilitate the Business Combination. Upon the consummation of the transactions contemplated by the Business Combination (i) MMAC will merge with and into PubCo, with PubCo as the surviving publicly traded entity and (ii) Akazoo will become a wholly owned subsidiary of LuxCo through the Share Exchange and LuxCo will then merge with and into PubCo, such that Akazoo continues as a wholly owned subsidiary of PubCo. PubCo intends to apply to have its ordinary shares and warrants (“PubCo Ordinary Shares” and “PubCo Warrants”, respectively) listed on NASDAQ under the symbols “SONG” and “SONGW,” respectively.

MMAC and Akazoo agreed that PubCo would be incorporated in, and operate out of, Luxembourg to facilitate PubCo’s ongoing business operations. Specifically, as Akazoo currently generates, and PubCo expects to generate in the future, most of its revenue in Euros, it is important for the company to be based in a jurisdiction in the European Union. Given the economic and financial uncertainties surrounding the United Kingdom’s currently contemplated exit from the European Union, the parties believe that Akazoo’s current jurisdiction of incorporation does not provide the necessary long-term stability for PubCo’s operations. Furthermore, one of Akazoo’s key competitors that currently has U.S. publicly traded equity is incorporated in Luxembourg. The parties believe that, all else being equal, incorporating PubCo in Luxembourg would strengthen the appeal of PubCo Ordinary Shares in the U.S. equity market because the market is already comfortable with a similar company in the same space.

Who is Akazoo?

Akazoo Limited (“Akazoo”) is a private company limited by shares incorporated under the laws of Scotland that provides online media streaming services to customers in developing markets.

Who is LuxCo?

Unlimited Music S.A. (“LuxCo”), a Luxembourg public limited company (société anonyme), was formed to facilitate the merger of Akazoo with PubCo. As part of the Business Combination, LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing, on a 100-for-1 basis, LuxCo shares (“LuxCo Shares”) to the Akazoo shareholders (the “Share Exchange”), such that the shareholdings of LuxCo will be identical immediately following the Share Exchange to that of Akazoo prior to the Share Exchange; and on the calendar day following the effective date of the MMAC’s merger with and into PubCo, LuxCo will merge (the “Luxembourg Merger”) with and into PubCo in accordance with Luxembourg law, with PubCo remaining as the surviving publicly traded entity. In connection with the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock). This transaction will result in Akazoo becoming a wholly owned subsidiary of PubCo.

Why am I receiving this proxy statement?

MMAC, Akazoo and PubCo have agreed to a transaction under the terms of a Business Transaction Agreement dated as of January 24, 2019 (as amended, the “Business Transaction Agreement”), pursuant to which MMAC and Akazoo will combine their businesses with PubCo, with PubCo remaining as the surviving publicly traded entity and Akazoo continuing as a wholly owned subsidiary of PubCo (the “Business Combination”). A copy of the Business Transaction Agreement, as amended is attached to this proxy statement/prospectus as “Annex A,” which we encourage you to review in its entirety.

The Business Combination is structured such that MMAC and LuxCo will each merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity and Akazoo continuing as a wholly owned subsidiary of PubCo. If the stockholders of MMAC approve the Business Transaction Agreement and the transactions contemplated thereby, PubCo, will acquire each of MMAC and Akazoo in a series of steps as outlined below:

 

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  i.

in accordance with Luxembourg law and the Delaware General Corporation Law (the “DGCL”), MMAC will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Merger”);

 

  ii.

no later than seven days prior to the effective date of the Merger, LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing LuxCo Shares to the Akazoo shareholders pursuant to the “Share Exchange”, acquire all outstanding convertible loan notes from the noteholders in Akazoo (the “Akazoo Noteholders”) in consideration for issuing convertible loan notes on materially the same terms in LuxCo and grant options to Akazoo optionholders (the “Akazoo Optionholders”) in LuxCo in consideration for the optionholders waiving their option to subscribe for equity in Akazoo such that the shareholdings of LuxCo will be identical immediately after the Share Exchange to that of Akazoo prior to the Share Exchange; and

 

  iii.

on the calendar day following the effective date of the Merger, the Akazoo Noteholders will convert their convertible loan notes in LuxCo, the Akazoo Optionholders will exercise their options in LuxCo, and immediately thereafter LuxCo will merge with and into PubCo in accordance with Luxembourg law, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”).

Following the consummation of the Luxembourg Merger, Akazoo will be a direct, wholly owned subsidiary of PubCo, and the current security holders of MMAC and Akazoo will be shareholders of PubCo.

In order to consummate the Business Combination, a majority of the shares of MMAC Common Stock outstanding as of at the close of Business on August 9, 2019 (the “Record Date”) must vote to approve and adopt the Business Transaction Agreement and the transactions contemplated thereby (the “Business Combination Proposal”). MMAC’s executive officers, independent directors and sponsor have agreed to vote their shares of MMAC Common Stock in favor of the Business Combination Proposal. As of the date hereof, such persons are entitled to vote 5,175,000 shares of MMAC Common Stock, representing approximately 78.6% of all outstanding shares of MMAC Common Stock. Accordingly, stockholder approval of the Business Combination Proposal is assured. See “Special Meeting of MMAC Stockholders” and “Certain Agreements Related to the Business Combination – Voting Agreement.”

MMAC will hold a Special Meeting of its stockholders to obtain this approval. This proxy statement/prospectus contains important information about the proposed Business Combination.

This proxy statement/prospectus also contains important information about the proposed Adjournment. You should read it carefully; in particular the section entitled “Risk Factors.”

We encourage you to vote as soon as possible after carefully reviewing this proxy statement/prospectus.

What is being voted on at the Special Meeting?

There are two proposals on which you are being asked to vote. The Business Combination Proposal is to approve the Business Transaction Agreement and the transactions contemplated thereby. As a result of the Business Combination, MMAC will merge with and into PubCo in the Merger and Akazoo will become a wholly owned subsidiary of PubCo through (1) the Share Exchange with LuxCo and (2) the subsequent Luxembourg Merger.

The Adjournment Proposal is to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that, based upon the tabulated vote at the time of the Special Meeting, MMAC would not have been authorized to consummate the Business Combination.

MMAC has agreed with the trustee to promptly liquidate if MMAC does not effect a business combination by September 17, 2019, unless that date is otherwise extended by MMAC’s stockholders.

Does the Board recommend voting for the approval of the proposals?

Yes. After careful consideration of the terms and conditions of these proposals, the Board has unanimously determined that each of the proposals are in the best interests of MMAC and its stockholders. The Board recommends that MMAC’s stockholders vote “FOR” each of the proposals.

How is management of MMAC voting?

MMAC’s initial stockholders, including all of its directors and officers, who purchased or received shares of MMAC Common Stock prior to MMAC’s IPO and may from time to time purchase MMAC Common Stock in the open market, together with their affiliates, owned an aggregate of approximately 78.6% of the outstanding shares of MMAC Common Stock (an aggregate of 5,175,000 shares of MMAC Common Stock) as of the Record Date. Because all of these persons have agreed to vote all of these shares in favor of the Business Combination Proposal, approval of the Business Combination is assured.

MMAC is not aware of any current plans for the sponsor or its directors, executive officers, advisors or their affiliates to purchase MMAC Common Stock from public stockholders in anticipation of the vote on the Business Combination Proposal.

 

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Because MMAC’s sponsor, directors and officers will also vote “FOR” the Adjournment Proposal, approval of the Adjournment Proposal is also assured.

Are any of the proposals conditioned on one another?

No. The Adjournment Proposal does not require the approval of the Business Combination Proposal to be effective. If MMAC does not consummate the Business Combination and fails to complete an initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, MMAC would be required to dissolve and liquidate its trust account by returning the then-remaining funds in such account to its public stockholders.

What is a quorum?

A quorum is the number of shares that must be represented, in person or by proxy, in order for business to be transacted at the Special Meeting.

More than one-half of the total number of shares of MMAC Common Stock outstanding as of the Record Date (a quorum) must be represented, either in person or by proxy, in order to transact business at the Special Meeting. Abstentions and broker non-votes are counted for purposes of determining the presence of a quorum. If there is no quorum, a majority of the shares present at the Special Meeting may adjourn the Special Meeting to another date.

Why is MMAC proposing the Business Combination?

MMAC is a blank check company formed specifically as a vehicle to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization or similar business combination with one or more businesses in the media, entertainment or marketing services industries. In the course of MMAC’s search for a business combination partner, MMAC investigated the potential acquisition of many entities in the media, entertainment and marketing services industries, including Akazoo, and concluded that Akazoo was the best candidate for a business combination with MMAC. For more details on MMAC’s search for a business combination partner and the Board’s reasons for selecting Akazoo as MMAC’s business combination partner, see the sections titled “Background of the Business Combination” and “MMAC’s Reasons for the Business Combination and Recommendation of MMAC’s Board” included in this proxy statement/prospectus.

What vote is required in order to approve the Business Combination Proposal?

The approval of the Business Combination Proposal will require the affirmative vote of a majority of the shares of MMAC Common Stock outstanding on the Record Date. The founding stockholders of MMAC, representing approximately 78.6% of the shares of MMAC Common Stock outstanding on the Record Date, have agreed to vote their shares of MMAC Common Stock owned or acquired by them in favor of the Business Combination Proposal. Accordingly, approval of the Business Combination Proposal is assured.

Since the Business Combination Proposal requires the affirmative vote of a majority of the shares of MMAC Common Stock outstanding on the Record Date, abstentions or broker non-votes will count as votes “AGAINST” the Business Combination Proposal.

What if I object to the Business Combination? Do I have appraisal rights?

Stockholders do not have appraisal rights in connection with the Business Combination under the DGCL.

Do I have redemption rights in connection with the Business Combination?

Pursuant to the MMAC Certificate of Incorporation, each MMAC stockholder who holds shares of MMAC Common Stock issued in MMAC’s initial public offering (the “IPO”) has the right to elect that MMAC redeem such stockholder’s shares for cash equal to a pro rata portion of the trust account. To properly elect redemption, MMAC stockholders must follow the procedures outlined in this proxy statement/prospectus under the heading “Special Meeting of MMAC Stockholders – Redemption Rights”. If the Business Combination is consummated and you properly complete the redemption procedures outlined herein, then your shares of MMAC Common Stock will be redeemed at a per-share price, payable in cash, equal to the aggregate amount then on deposit in MMAC’s trust account as of two business days prior to the consummation of the Business Combination, including interest, less taxes payable, divided by the number of then outstanding public shares, subject to certain limitations.

 

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MMAC estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $10.35 at the time of the Special Meeting.

In connection with tendering your shares for redemption, you must elect either to (x) physically tender your stock certificates to Continental Stock Transfer & Trust Company, MMAC’s transfer agent, at Continental Stock Transfer & Trust Company, 1 State Street, 30th Floor, New York, New York, 10004, Attn: Mark Zimkind, mzimkind@continentalstock.com, or (y) deliver your shares to the transfer agent electronically using The Depositary Trust Company’s (“DTC”) DWAC (Deposit/Withdrawal At Custodian) system, which election would likely be determined based on the manner in which you hold your shares. There may be a fee associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker this fee, and the broker may or may not pass this cost on to you. You must tender your shares in the manner described above prior to 5:00 p.m. Eastern Time on                , 2019 (two business days before the Special Meeting) in order to exercise your redemption rights in connection with the Business Combination.

Note that the delivery process can be accomplished by you, whether or not you are a record holder or your shares are held in “street name”, within a day, by simply contacting the transfer agent or your broker and requesting delivery of your shares through the DWAC system. MMAC believes this time period is sufficient for an average investor.

If you exercise your redemption rights, then you will be exchanging your shares of MMAC Common Stock for cash and will no longer own these shares of common stock and will not be entitled to receive any PubCo Ordinary Shares in connection with the Business Combination. If you redeem your shares of MMAC Common Stock but you remain in possession of any MMAC Warrants and have not sold or transferred them, you will still have the right to exercise the MMAC Warrants in accordance with the terms thereof, or, if the Business Combination is consummated, will receive PubCo Warrants in exchange for your MMAC Warrants, according to the terms of the Business Transaction Agreement.

If the Business Combination is not consummated: (i) then your shares will not be converted into cash at this time, even if you so elected, and (ii) assuming MMAC is unable to consummate another business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, then MMAC would be required to commence the liquidation process and you will be entitled to distribution upon liquidation. See the section titled “Redemption Rights” below in this proxy statement/prospectus.

Any request for redemption, once properly made, may be withdrawn at any time up to two days before the Special Meeting. Furthermore, if you delivered a certificate for redemption and subsequently decided prior to the Special Meeting not to elect redemption, you may simply request that the transfer agent return the certificate (physically or electronically) to you. The transfer agent will typically charge an additional fee for the return of the shares through the DWAC system.

If the Business Combination is not completed, your stock certificate will be automatically returned to you.

Holders of public shares of MMAC Common Stock have elected to redeem such shares such that MMAC currently has, in the aggregate, less than $53,000,000 of available cash. As such, MMAC is not currently able to satisfy a condition to consummation of the Business Combination and, unless the PIPE Financing is successful, Akazoo will not be required to consummate the Business Combination, although such condition to closing may be waived by Akazoo.

What are the interests of MMAC’s directors and executive officers in the Business Combination?

When you consider the recommendation of the Board to vote in favor of the approval of the Business Combination Proposal, you should keep in mind that MMAC’s directors and executive officers have interests in the Business Combination that are different from, or in addition to, your interests as a stockholder. For a full discussion of these interests, see the section titled “Interests of MMAC Directors and Officers in the Business Combination.” These interests include:

 

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The MMAC Certificate of Incorporation provides that if MMAC does not complete an initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, MMAC would be required to dissolve and liquidate. In the event of a dissolution:

 

   

The founder shares would become worthless, as the initial stockholders have waived any right to redemption with respect to their founder shares. Such shares had an estimated aggregate market value of approximately $54,234,000, based upon the closing price of MMAC Common Stock of $10.48 on NASDAQ on the Record Date for the Special Meeting;

 

   

MMAC’s sponsor, which is partially owned by Mr. Dickey, may be liable for certain claims against MMAC;

 

   

MMAC’s sponsor, officers and directors may not receive reimbursement of certain out-of-pocket expenses to which they are entitled; and

 

   

Certain rights related to indemnification provided by MMAC to its directors and officers would no longer be available.

 

   

If the Business Combination is consummated, the current directors and officers of MMAC would have the right to continued indemnification, and to receive the benefit of directors’ and officers’ liability insurance; and

 

   

If the Business Combination is consummated, certain current directors or officers of MMAC may continue to serve as directors or officers of PubCo and may be compensated for such service.

What vote is required in order to approve the Adjournment Proposal?

Adoption of the Adjournment Proposal requires the affirmative vote of the holders of a majority of the shares of MMAC Common Stock represented in person or by proxy and entitled to vote at the meeting. Accordingly, the failure to vote by proxy or to vote in person at the Special Meeting will not be counted for purposes of shares present to establish a quorum, and therefore will have no effect on the outcome of the vote. Abstentions will be counted in determining whether a quorum is present and therefore will have the same effect as a vote AGAINST the adjournment proposal. Adoption of the Adjournment Proposal is not conditioned upon the adoption of any of the other proposals.

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

Yes. Whether or not you plan to attend the Special Meeting, after carefully reading and considering the information contained in this proxy statement/prospectus, please complete and sign your proxy card. Then return the enclosed proxy card in the return envelope provided herewith as soon as possible, so that your shares may be represented at the Special Meeting.

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

MMAC 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. An abstention or failure to vote on the Business Combination Proposal count as a vote AGAINST the Business Combination Proposal, provided a quorum is present, and will have no effect on any redemption of your MMAC Common Stock. In order for a stockholder to convert his or her shares, he or she must follow the redemption procedures outlined below under the section entitled “Special Meeting of MMAC Stockholders — Redemption Rights.” An abstention on the Adjournment Proposal will have the same effect as a vote AGAINST that proposal.

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

Proxies received by MMAC without an indication of how the stockholders intend to vote on a proposal will be voted in favor of such proposal, in accordance with the Board’s unanimous recommendation.

 

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If my shares are held in “street name” by my broker, will my broker vote my shares for me?

If you hold your shares in “street name,” your bank or broker cannot vote your shares with respect to the Business Combination Proposal or the Adjournment Proposal without specific instructions from you, which are sometimes referred to in this proxy statement/prospectus as the broker “non-vote” rules. If you do not provide instructions with your proxy, your bank or broker may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a bank or broker is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will be counted for the purpose of determining the existence of a quorum, but will not count for purposes of determining the number of votes cast at the Special Meeting.

What do I do if I want to change my vote?

If you wish to change your vote, please send a later-dated, signed proxy card to MMAC’s General Counsel and Assistant Secretary, Adam Kagan, at MMAC’s corporate headquarters prior to the date of the Special Meeting or attend the Special Meeting and vote in person. You also may revoke your proxy by sending a notice of revocation to Adam Kagan at MMAC’s corporate headquarters, provided such revocation is received prior to the Special Meeting.

What consideration will be paid in connection with the Business Combination?

If the Business Combination is consummated and you do not otherwise properly elect to redeem your shares of MMAC Common Stock, your MMAC securities will be treated as follows:

 

  1)

immediately before consummation of the Merger, you will automatically receive one-tenth (1/10) of one share of MMAC Common Stock for each MMAC Right that you own; and

 

  2)

the MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) and MMAC Warrants, as applicable, that you own will be exchanged, pursuant to the Business Transaction Agreement, for PubCo Ordinary Shares (in the case of MMAC Common Stock) or PubCo Warrants (in the case of MMAC Warrants) upon the completion of the Business Combination.

If the Business Combination is consummated but you have elected and properly completed the procedures for a cash redemption, your shares of MMAC Common Stock will be redeemed at a per-share price, payable in cash, equal to the aggregate amount then on deposit in MMAC’s trust account as of two business days prior to the consummation of the Business Combination, including interest, net of taxes payable, divided by the number of then outstanding public shares, subject to certain limitations.

MMAC estimates that the per-share price at which public shares may be redeemed from cash held in the trust account will be approximately $10.35 at the time of the Special Meeting.

Existing Akazoo equityholders will receive an aggregate number of PubCo Ordinary Shares equal to an assumed Akazoo enterprise value of $380 million (less any cash payment to them, as discussed below) divided by the per share redemption price applicable to any redemptions by public stockholders of MMAC (such number of PubCo Ordinary Shares, the “Share Consideration”).

Additionally, subject to the terms of the Business Transaction Agreement, as consideration for the cancellation of the LuxCo Shares in exchange for PubCo Ordinary Shares in the Luxembourg Merger, (i) each issued and outstanding LuxCo Share will be cancelled, and (ii) each LuxCo shareholder will be entitled to receive its pro rata share of the Share Consideration. Also, each LuxCo shareholder will be entitled to receive its pro rata share of the Cash Payment (if any) as a compensatory payment under Luxembourg law to be payable 10 calendar days after the closing date of the Luxembourg Merger.

 

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Will I experience dilution as a result of the Business Combination?

Prior to the Business Combination, holders of the public shares owned approximately 21.4% of MMAC’s issued and outstanding common stock. After giving effect to the Business Combination and successful closing of the PIPE Financing such that PubCo has $53 million of available cash upon the consummation of the Business Combination, and giving effect to the PubCo Ordinary Shares to be issued to Akazoo in connection with the Business Combination, and assuming no MMAC stockholders exercise their redemption rights as discussed herein, the current holders of the public shares will own approximately 7.1% of PubCo.

MMAC has no specified maximum redemption threshold under the MMAC Certificate of Incorporation. It is a condition to closing under the Business Transaction Agreement, however, that MMAC has, in the aggregate, not less than $53.0 million of available cash upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although it may waive this condition.

In no event, however, will MMAC redeem more than approximately 445,850 (32%) shares of MMAC Common Stock because redeeming more than that amount would cause its net tangible assets to be less than $5,000,001 (the “Minimum Cash Scenario”). The Minimum Cash Scenario would result in approximately 476,190 public shares being issued and outstanding at the time of the Business Combination. If the Business Combination were consummated under the Minimum Cash Scenario, Akazoo equityholders would own approximately 84.8% of outstanding PubCo Ordinary Shares, MMAC public stockholders would own approximately 7.1% and MMAC founders would own approximately 6.4%.

Are Akazoo’s equityholders required to approve the Business Combination?

Yes. However, holders of a majority of Akazoo’s voting power, in connection with the Business Transaction Agreement, have agreed to vote to approve the Business Combination.

Is the consummation of the Business Combination subject to any conditions?

Yes. The obligations of each of MMAC, Akazoo, LuxCo and PubCo to consummate the Business Combination are subject to conditions, as more fully described in the section entitled “The Business Transaction Agreement” in this proxy statement/prospectus.

What happens if I sell my shares of MMAC Common Stock before the Special Meeting?

The Record Date for the Special Meeting is earlier than the date that the Business Combination is expected to be consummated. If you transfer your shares of MMAC Common Stock after the Record Date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you would retain your right to vote at the Special Meeting. However, you would not be entitled to receive any PubCo Ordinary Shares on account of those shares of MMAC Common Stock following the consummation of the Business Combination because only MMAC’s stockholders at the time of the consummation of the Business Combination will be entitled to receive PubCo Ordinary Shares in connection with the Business Combination.

Do the laws governing companies in Luxembourg differ from those governing corporations in Delaware?

Yes. For a detailed description between the corporate law of Luxembourg and that of Delaware, see the section entitled “Comparison of Stockholders’ Rights” in this proxy statement/prospectus.

What are the U.S. federal income tax consequences of the Business Combination to MMAC and PubCo?

MMAC will recognize gain (but not loss) on the transfer of its assets to PubCo, to the extent that the fair market value of such assets exceeds MMAC’s adjusted basis in such assets. MMAC does not expect the amount of such gain to be material, but there is no certainty that that would be the case.

Although PubCo will be incorporated under the laws of Luxembourg, the Internal Revenue Service (the “IRS”) may assert that PubCo should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to section 7874 (“Section 7874”) of the Internal Revenue Code of 1986, as amended (the “Code”). If PubCo were to be treated as a U.S. corporation for U.S. federal income tax purposes, PubCo could be subject to substantial additional U.S. tax liability. However, as more fully described under “Material U.S. Federal Income Tax Consequences of the Business Combination — U.S. Federal Income Tax Consequences of the Business Combination to MMAC and PubCo,” based on certain representations of the parties and factual assumptions, PubCo does not expect that Section 7874 will cause it to be treated as a U.S. corporation for U.S. federal income tax purposes.

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

A U.S. Holder (as defined below) who exercises his or her redemption rights will receive cash in exchange for the tendered shares, and either will be considered for U.S. federal income tax purposes to have made a sale or exchange of the tendered shares, or will be considered for U.S. federal income tax purposes to have received a distribution with respect to such shares that may be treated as (i) dividend income, (ii) a nontaxable recovery of basis in his investment in the tendered shares, or (iii) gain (but not loss) as if the shares with respect to which the distribution was made had been sold. See the section entitled “Material U.S. Federal Income Tax Consequences of the Business Combination — Certain U.S. Federal Income Tax Consequences of Exercising Redemption Rights.”

 

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Will holders of MMAC Common Stock, MMAC Rights or MMAC Warrants be subject to U.S. federal income tax on the PubCo Ordinary Shares or PubCo Warrants received in the Business Combination?

Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Business Combination,” the Merger should qualify as a “reorganization” within the meaning of Section 368 of the Code. As a result, a U.S. Holder should not recognize gain or loss on the automatic conversion of MMAC Rights to MMAC Common Stock immediately prior to the Merger in connection with the Business Combination, and the exchange of MMAC Common Stock or MMAC Warrants for PubCo Ordinary Shares or PubCo Warrants, as applicable, pursuant to the Merger. The discussion in “Material U.S. Federal Income Tax Consequences of the Business Combination” reflects the opinion of Jones Day as to the material U.S. federal income tax consequences of the Business Combination to U.S. Holders of MMAC securities and/or MMAC Rights, subject to the limitations, exceptions, beliefs, assumptions, and qualifications described therein and otherwise herein (including uncertainty as to whether the Business Combination will be taxable for such U.S. Holders). The rules under Section 367(a) and Section 368 of the Code are complex and there is limited guidance as to their application, particularly with regard to indirect stock transfers in cross-border reorganizations.

For a more detailed discussion of certain U.S. federal income tax consequences of the Merger and the Business Combination, see the section titled “Material U.S. Federal Income Tax Consequences of the Business Combination” in this proxy statement/prospectus. Holders should consult their own tax advisors to determine the tax consequences to them (including the application and effect of any state, local or other income and other tax laws) of the Business Combination.

What happens to the funds deposited in the trust account after completion of the Business Combination?

Upon the consummation of the Business Combination, a portion of the funds remaining in the trust account after payment of amounts, if any, to MMAC stockholders exercising their redemption rights, will be used (i) to pay expenses associated with the Business Combination and (ii) to pay deferred underwriter’s compensation from MMAC’s IPO of $7.785 million.

Who will manage PubCo?

Apostolos N. Zervos, who currently serves as Chief Executive Officer of Akazoo, and Pierre Schreuder, who currently serves as Chief Financial Officer of Akazoo, will continue in their respective roles at PubCo following the consummation of the Business Combination.

Lewis W. Dickey, Jr., who currently serves as the President, Chief Executive Officer and Chairman of MMAC, will serve as Chairman of the Board at PubCo following the consummation of the Business Combination. In addition, Apostolos N. Zervos and Panagiotis Dimitropoulos, together with four other individuals to be identified, are expected to serve as directors of PubCo following the consummation of the Business Combination. For more information on PubCo’s current and anticipated management, see the section titled “Information about PubCo” in this proxy statement/prospectus.

Are there any arrangements to help ensure that MMAC will have sufficient funds, together with the aggregate amount available in its trust account, satisfy the closing condition in the Business Transaction Agreement that MMAC have not less than $53 million available cash upon consummation of the Business Combination?

Yes. PubCo is in the process of securing binding commitments for the PIPE Financing. The parties expect the PIPE Financing to provide enough cash that, when combined with cash available in the trust account, MMAC will be deemed to have $53 million of available cash and the condition will be satisfied.

The PIPE Financing will be exempt from registration under U.S. securities laws pursuant to Section 4(a)(2) of the Securities Act.

The subscription agreements pursuant to which the PIPE Financing will be completed require PubCo, as promptly as commercially reasonable, to file and have declared effective a registration statement registering the resale of the PubCo Ordinary Shares and PubCo Warrants purchased by the PIPE Investors in the PIPE Financing.

What happens if the Business Combination is not consummated?

If the Business Combination is not consummated, MMAC expects that it will be required to liquidate. If a liquidation were to occur, MMAC estimates that interest accrued, less applicable federal, state and Delaware franchise taxes, would yield a trust balance of approximately $14.7 million or $10.35 per share. This amount, less any liabilities not indemnified by MMAC’s sponsor and not waived by MMAC’s creditors, would be distributed to the holders of shares of MMAC Common Stock not previously redeemed. As disclosed in the IPO prospectus, this estimate reflects the forfeiture of deferred underwriting compensation by Macquarie Capital (USA) Inc. (“Macquarie”) and the other underwriters in MMAC’s IPO in the amount of $7.785 million.

 

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Separately, MMAC estimates that the liquidation process would cost approximately $50,000. MMAC does not believe there would be any claims or liabilities in excess of the funds out of the trust against which MMAC’s sponsor would be required to indemnify the trust account in the event of such liquidation. In the event that such persons indemnifying MMAC are unable to satisfy their indemnification obligation or in the event that there are subsequent claims such as subsequent non-vendor claims for which such persons have no indemnification obligation, the amount ultimately distributed to stockholders may be reduced even further. However, MMAC currently has no basis to believe there will be any such liabilities or to provide an estimate of any such liabilities since to date MMAC has only entered into a limited number of agreements and has obtained valid and enforceable waivers whenever possible. The only cost of dissolution that MMAC is aware of that would not be indemnified against by MMAC’s sponsor is the cost of any associated litigation for which MMAC’s sponsor obtained a valid and enforceable waiver. Should the Business Transaction Agreement be terminated due to a breach of such agreement by any of MMAC, PubCo, Akazoo or Akazoo’s stockholders, or due to MMAC’s failure to obtain MMAC stockholder approval, then each party would be responsible for its own expenses.

When do you expect the Business Combination to be completed?

It is currently anticipated that the Business Combination will be completed as promptly as practicable following the Special Meeting.

What do I need to do now?

We urge you to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder of MMAC. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card.

Do I need to attend the Special Meeting to vote my shares?

No. You are invited to attend the Special Meeting to vote on the proposals described in this proxy statement/prospectus. However, you do not need to attend the Special Meeting to vote your shares. Instead, you may submit your proxy by signing, dating and returning the applicable enclosed proxy card(s) in the pre-addressed postage paid envelope. Your vote is important. MMAC encourages you to vote as soon as possible after carefully reading this proxy statement/prospectus.

Do I need to send in my stock certificates?

To properly exercise your redemption rights in connection with the Business Combination, you must tender your stock certificates as described under the heading “Special Meeting of MMAC Stockholders – Redemption Rights”. Otherwise, you should not tender your stock certificates at this time. If the Business Combination is consummated, MMAC will send separate instructions regarding tendering your stock certificates in connection with the Business Combination.

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

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards, if your shares are registered in more than one name or are registered in different accounts. 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. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast a vote with respect to all of your shares of MMAC Common Stock.

 

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Who can help answer my questions?

If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact MMAC’s proxy solicitor at:

Morrow Sodali LLC

470 West Avenue

Stamford, CT 06902

Tel: (800) 662-5200

Banks and brokers can call collect at: (203) 658-9400

Email: MMDM.info@morrowsodali.com

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

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary highlights selected information from this proxy statement/prospectus. It may not contain all of the information that is important to you. You are urged to read this entire proxy statement/prospectus and the other documents referred to or incorporated by reference into this proxy statement/prospectus in order to fully understand the Business Combination, the Business Transaction Agreement and other matters to be considered at the Special Meeting. See the section titled “Where You Can Find More Information” contained in this proxy statement/prospectus. Each item in this summary refers to the beginning page of this proxy statement/prospectus on which that subject is discussed in more detail.

The Parties to the Business Combination

Modern Media Acquisition Corp. (Delaware)

MMAC is a Delaware corporation formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses.

MMAC’s securities are traded on the NASDAQ Stock Market under the symbols “MMDMU,” “MMDM,” “MMDMR” and MMDMW.” Immediately prior to the consummation of the Merger, the MMAC Units will separate into their individual component parts and will cease separate trading and each outstanding MMAC Right will be automatically converted into one-tenth (1/10) of one share of MMAC Common Stock. Upon the consummation of the Merger, (i) outstanding shares of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) will be converted into PubCo Ordinary Shares, (ii) outstanding MMAC Warrants will be converted into PubCo Warrants and (iii) MMAC Common Stock, MMAC Warrants and MMAC Rights will be delisted from NASDAQ. PubCo intends to apply to list its PubCo Ordinary Shares and PubCo Warrants on the NASDAQ Stock Market under the symbols “SONG” and “SONGW,” respectively, in connection with the consummation of the Business Combination. It cannot be assured that the PubCo Ordinary Shares and PubCo Warrants will be approved for listing on NASDAQ.

The mailing address of MMAC’s principal executive office is 3414 Peachtree Road, Suite 480, Atlanta, Georgia 30326 and its telephone number is (404) 443-1182.

Modern Media Acquisition Corp. S.A. (Luxembourg)

PubCo is a newly formed public limited company (société anonyme) organized under the laws of Luxembourg, formed to serve as the publicly traded operating company of the combined businesses of MMAC and Akazoo following the Business Combination.

PubCo’s registered office is 19, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg and PubCo’s principal operational office is 3414 Peachtree Road, Suite 480, Atlanta, Georgia 30326. PubCo’s telephone number at its principal operational office is (404) 443-1182.

Akazoo Limited

Akazoo is a private company limited by shares incorporated under the laws of Scotland that provides online media streaming services to customers in developing markets.

The mailing address of Akazoo’s registered office is 101 Rose Street South Lane, Edinburgh, EH2 3JG United Kingdom and its telephone number is +44 131 516 2337.

Unlimited Music S.A.

LuxCo is a newly formed public limited company (société anonyme) organized under the laws of Luxembourg formed for the purpose of acquiring the issued share capital of Akazoo by means of a Share Exchange with Akazoo shareholders. Pursuant to the Business Transaction Agreement, LuxCo will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity.



 

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The mailing address of LuxCo’s registered office is 19, rue de Bitbourg, L-1273 Luxembourg, Grand Duchy of Luxembourg and its telephone number is +352 27 44 41.

Akazoo Business Overview

Founded in 2010, Akazoo is a UK-based, global, on-demand music streaming subscription company with a focus on emerging markets. With a presence in 25 countries and growing, Akazoo’s Premium service (the “Premium Service”) provides its premium subscribers (“Subscribers”) with unlimited online and offline high-quality streaming access to a catalog of over 45 million songs on a commercial-free basis. Akazoo’s free, ad-supported Radio Service consists of over 80,000 stations and exists as a separate application. Akazoo’s platform includes 38.2 million Registered Users, which refers to those who have registered to Akazoo’s platform at any point in time, and 4.6 million Subscribers as of December 31, 2018. Akazoo directly licenses music from thousands of labels and provides both online and offline listening platforms, social media integration, and a patented, AI-driven new music recommendation engine.

Recent Developments

Akazoo Quarterly Update

On June 10, 2019, Akazoo disclosed its Subscribers and Registered Users as of March 31, 2019 and its preliminary revenues for the quarter ended March 31, 2019. As of March 31, 2019, Akazoo’s Subscribers and Registered Users increased to 5.1 million and 41.1 million, respectively, an increase of 38% and 48%, respectively, year over year. For the quarter ended March 31, 2019, Akazoo’s revenues are expected to be €30.7 million, an increase of 41% compared to the prior year period, with the adjusted gross margin remaining in line with full year expectations. For the quarter ended March 31, 2019, Akazoo’s net income is expected to be €1.8 million. The increase in first quarter revenues and net income was driven by strong subscriber growth in Eastern Europe and Southeast Asia.

The results for Akazoo’s quarter ended March 31, 2019 are preliminary and unaudited. Akazoo’s actual results may differ from the preliminary results due to the completion of Akazoo’s financial closing procedures, final adjustments and other developments that may arise between the date of this proxy statement/prospectus supplement and the time that financial results for the quarter ended March 31, 2019 are finalized.

Letter Agreement

On July 29, 2019, the parties to the Business Transaction Agreement and Macquarie executed a Letter Agreement that amended certain provisions of the Business Transaction Agreement to provide for the PIPE Financing and agreed to the terms of the PIPE Financing. Specifically, the Letter Agreement provides that the sponsor will forfeit 2.6 million PubCo Ordinary Shares upon consummation of the Business Combination and will forfeit 7.32 million PubCo warrants upon consummation of the PIPE Financing. The Letter Agreement also provides that, upon consummation of the Business Combination, amounts owed by MMAC to certain creditors will be converted into PubCo Ordinary Shares and that the amount of expenses payable by MMAC contemplated in the Business Transaction Agreement will be modified on a sliding scale, depending on the amount of available cash that MMAC has upon consummation of the Business Combination. In addition, the Letter Agreement provides that, depending on the amount of available cash that MMAC has upon consummation of the Business Combination, certain PubCo Ordinary Shares sold in the PIPE Financing may include PubCo Ordinary Shares that would otherwise have been issued to former shareholders of Akazoo but who will instead receive cash in lieu of such PubCo Ordinary Shares at a rate of $8.00 per share. Furthermore, the Letter Agreement provides that a certain number of PubCo Warrants will be issued for no additional consideration to holders of PubCo Ordinary Shares that previously held Akazoo equity, equal to the difference between the total amount of PubCo Warrants forfeited by the sponsor and the total amount of PubCo Warrants issued to investors in the PIPE Financing as an incentive to participate in the PIPE Financing, subject to a minimum issuance of PubCo Warrants which decreases as the amount raised in the PIPE Financing increases.

The Letter Agreement further provides for an amendment, effective upon the consummation of the Business Combination, to the Amended and Restated Right of First Refusal Agreement dated as of January 24, 2019 between Macquarie, MMAC and PubCo. The amendment grants Macquarie a right of first refusal for the duration of the Lock-Up Period (as defined in the Lock-Up Agreement, discussed below) to serve as a bookrunning managing underwriter, bookrunning managing placement agent or bookrunning managing initial purchaser in connection with any offering or placement of securities or other credit transaction by PubCo and to serve as financial advisor in connection with any disposition of the business, assets or voting securities by PubCo.

The parties entered into the Letter Agreement because redemptions in connection with the Second Extension caused MMAC to have less available cash in its trust account than the $60 million minimum cash condition initially required by the Business Transaction Agreement. The parties agreed to modify the minimum cash condition in the Business Transaction Agreement so that MMAC could satisfy the condition with $53 million of available cash upon consummation of the Business Combination. The parties discussed various financing options and agreed to pursue the PIPE Financing, on terms negotiated by the parties, in order to supplement the cash available in MMAC’s trust account. The Letter Agreement memorialized that agreement and reflects arms’ length negotiations between the sponsor, MMAC and Akazoo.

The parties recognized that new investment from investors in the PIPE Financing would be dilutive to all parties to the Business Transaction Agreement. In order to limit the potential dilution to Akazoo shareholders and MMAC public stockholders when the PIPE Financing is consummated, the parties agreed that the sponsor would forfeit certain shares of MMAC Common Stock and MMAC Warrants. The total number of PubCo Ordinary Shares and PubCo Warrants outstanding after consummation of the Business Combination and the PIPE Financing will be less because of the sponsor’s forfeitures than it would have been otherwise. Therefore, MMAC public stockholders and Akazoo shareholders, whose conversion ratios are fixed by the Business Transaction Agreement, will experience relatively less dilution from the PIPE Financing due to the sponsor’s forfeitures.

All shares of MMAC Common Stock and MMAC Warrants forfeited by the sponsor pursuant to the Letter Agreement will be immediately cancelled upon forfeiture. Any PubCo Ordinary Shares or PubCo Warrants issued to (A) holders of MMAC Common Stock, MMAC Warrants or Akazoo share capital or (B) investors in the PIPE Financing will be new PubCo Ordinary Shares or PubCo Warrants, as the case may be, issued directly by PubCo to such holder in connection with the Business Combination or the PIPE Financing.

PIPE Financing

In accordance with the terms of the Letter Agreement, PubCo is in the process of securing binding commitments to purchase PubCo Ordinary Shares in the PIPE Financing, which is expected to close immediately after the consummation of the Business Combination. The parties anticipate that the PIPE Ordinary Shares will be sold in the PIPE Financing at a per share price of $8.00. The Letter Agreement also provides PubCo with the ability to offer, for no additional consideration and as an incentive to certain investors purchasing PubCo Ordinary Shares in the PIPE Financing, up to an aggregate number of PubCo Ordinary Shares and PubCo Warrants corresponding to the number of PubCo Ordinary Shares and PubCo Warrants forfeited by the sponsor as described above. The terms of the PIPE Financing are being negotiated on an arms’ length basis with accredited investors and qualified institutional buyers and consequently the exact terms or conditions applicable to each investor may vary. As such, the final terms of the PIPE Financing, including how many PubCo Ordinary Shares are sold and how many will be offered as an incentive to certain investors, are yet to be determined. Generally, however, the parties anticipate that for each PubCo Ordinary Share subscribed for in the PIPE Financing, the subscriber will receive an incentive of 0.24 PubCo Ordinary Shares. Assuming PubCo secures binding commitments such that, together with cash available in the trust account, MMAC will have $53 million upon consummation of the Business Combination, PubCo anticipates selling approximately 4,799,000 PubCo Ordinary Shares and, with incentives, issuing a total of approximately 5,926,029 PubCo Ordinary Shares in the PIPE Financing. However, if more subscriptions are secured or the terms of an individual subscription agreement vary, such estimates may change.

If gross proceeds from the PIPE Financing are such that PubCo will have an aggregate of $60 million of available cash after consummation of the Business Combination, instead of the 2.6 million PubCo Ordinary Shares originally agreed to be forfeited in the Letter Agreement, the sponsor has agreed to forfeit 2.35 million PubCo Ordinary Shares and, if PubCo will have an aggregate of $70 million of available cash after consummation of the Business Combination, instead of the 2.6 million PubCo Ordinary Shares originally agreed to be forfeited in the Letter Agreement, the sponsor has agreed to forfeit 2.1 million PubCo Ordinary Shares.

Unless otherwise noted, all discussions and presentations in this proxy statement/prospectus that contemplate the consummation of the Business Combination provide for a successful minimum PIPE Financing, which includes the transfer of certain sponsor-forfeited PubCo Ordinary Shares and PubCo Warrants to certain investors in the PIPE Financing as an incentive, leaving PubCo with an aggregate $53 million of available cash after consummation of the Business Combination and PIPE Financing, before payment of any fees and expenses. If any of the conditions to Akazoo’s obligations to consummate the Business Combination are not satisfied, then Akazoo will not be required to consummate the Business Combination.

PubCo expects that it will be able to successfully complete the PIPE Financing such that it will satisfy the condition that it has at least $53 million of available cash at consummation of the Business Combination, and does not intend to accept subscriptions in the PIPE Financing after August 16, 2019.

The Business Combination

Overview of the Business Transaction Agreement (Page 114)

Pursuant to the Business Transaction Agreement, the Business Combination will be effected in three steps: (i) MMAC will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Merger”); (ii) LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing, on a 100-for-1 basis, ordinary shares of LuxCo to the Akazoo shareholders (the “Share Exchange”) and (iii) LuxCo will then merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”). In connection with the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock).

In addition to other customary closing conditions discussed herein, consummation of the Business Combination is conditioned upon there being not less than $53 million available between the amount of cash in MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. Given the amount of cash currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing, which funds would be deemed “additional capital otherwise available” to MMAC. The PIPE Financing is described in more detail in this proxy statement/prospectus. While MMAC and PubCo expect to successfully complete the PIPE Financing and the Business Combination, there is no guarantee the PIPE Financing or the other closing conditions will be satisfied or waived before September 17, 2019, the date on which MMAC must dissolve and liquidate the MMAC Certificate of Incorporation.

Pre-Business Combination and Post-Business Combination Structure (Page 77)

The following chart illustrates the share ownership of MMAC and Akazoo prior to the Business Combination and of PubCo following the Business Combination (assuming no redemptions of MMAC Common Stock).

 

Prior to Business Combination

 

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Effect of the Business Combination on MMAC’s Outstanding Securities (Page 77)

In connection with the Business Combination, the effect on the outstanding securities of MMAC will be as follows:

 

   

Immediately prior to the consummation of the Merger, each MMAC Unit will separate into its individual components of MMAC Common Stock, MMAC Rights and MMAC Warrants, and each MMAC Unit will cease to separately exist;

 

   

Immediately prior to the consummation of the Merger, each MMAC Right will automatically convert into one-tenth (1/10) of one share of MMAC Common Stock;

 

   

Upon the consummation of the Merger, each share of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) will be exchanged for one PubCo Ordinary Share; and

 

   

Upon the consummation of the Merger, each MMAC Warrant will be exchanged for one PubCo Warrant to purchase PubCo Ordinary Shares.

As a result of the Business Combination, holders of MMAC Warrants and holders of MMAC Common Stock who did not elect for MMAC to redeem their public shares will become security holders in PubCo, a Luxembourg public limited company, that will provide disclosure to its security holders as a foreign private issuer as defined in the SEC’s rules and regulations.

Effect of the Business Combination on Akazoo’s Outstanding Securities (Page 77)

In connection with the Business Combination, the effect on the outstanding securities of Akazoo will be as follows:

 

   

Upon the consummation of the Share Exchange, each issued and outstanding Akazoo ordinary share will be exchanged for one newly issued LuxCo Share, each convertible loan note will be exchanged for the same number of convertible loan notes issued by LuxCo and each option will be exchanged for an equal number of options in LuxCo; and

 

   

Following the Share Exchange and upon the consummation of the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of Common Stock).

As a result of the Business Combination, Akazoo security holders will become security holders in PubCo, a Luxembourg public limited company, that will provide disclosure to its security holders as a foreign private issuer as defined in the SEC’s rules and regulations.

MMAC’s Reasons for the Business Combination (Page 82)

MMAC was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business combination with one or more businesses. MMAC sought to fulfil that purpose by utilizing the experience and contacts of its sponsor, its management team and its Board to identify, acquire and operate one or more businesses in the media, marketing and entertainment sector within or outside the United States.



 

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In considering, and approving, the Business Combination, the Board concluded that Akazoo met the Board’s criteria for MMAC’s initial business combination. In particular, the Board considered the following positive factors, although not weighted by, or in any order of, significance:

 

   

Streaming Music Industry Growth. Industry research reports estimate that the recorded music industry had revenues of approximately $17.9 billion, growing to approximately $40.8 billion by 2030. Such reports also estimate that digital music consumption accounts for over 54% of global music revenues, with streaming accounting for 39% and expected to grow at an approximate 14% compound annual growth rate over the next 14 years, representing as much as 84% of global recorded music revenues by 2030.

 

   

Hyper-Local Strategy. Akazoo has built a competitive advantage with its focus on local content sourced from local providers in a culturally relevant interface designed to cater to specific tastes of target audiences and drive customer acquisition and retention. Additionally, Akazoo utilizes local content and partnerships with local telecom services to seek to drive profitability and reduce costs.

 

   

Unique Technology. Akazoo utilizes proprietary technology, or music AI, to generate real-time music recommendations, sonic analysis and automatic play-listing, all fully integrated into the core platform, which is designed to improve the customer experience and lower content curation costs.

 

   

Compelling Financial Profile. Akazoo demonstrates a strong growth profile with diversified revenue. Akazoo’s 2018E-2021E revenue compound annual growth rate of approximately 40% is expected to be driven by further penetration of its target user base within current markets, with additional growth potential through market expansion. Akazoo’s business model has generated positive EBITDA each year since inception, driven by disciplined sales and marketing expenses and low content costs.

 

   

Experienced Management Team. Executive leadership team with deep industry and market knowledge that is well-positioned to oversee organic growth and expansion. Akazoo’s team would be bolstered by the public company experience, executive leadership and acquisition track record of Lew Dickey.

For more information about the Board’s decision-making process, see the sections entitled “Background of the Business Combination” and “MMAC’s Reasons for the Business Combination and Recommendation of MMAC’s Board” contained in this proxy statement/prospectus.

MMAC’s Board of Directors’ Recommendation (Pages 87 and 121)

After careful consideration of the terms and conditions of the Business Transaction Agreement, the Board has determined unanimously that the Business Transaction Agreement and the transactions contemplated thereby are fair to, and in the best interests of, MMAC and its stockholders. Accordingly, the Board has unanimously approved and declared advisable the Business Combination and unanimously recommends that MMAC stockholders vote or instruct their votes to be cast “FOR” the Business Combination Proposal.

The Board has also determined unanimously that the Adjournment Proposal is in the best interests of MMAC and its stockholders. Accordingly, the Board has unanimously approved and declared advisable the Adjournment Proposal and unanimously recommends that MMAC stockholders vote or instruct their votes to be cast “FOR” the approval of that proposal.

Interests of Certain MMAC Directors and Officers in the Business Combination (Page 85)

When MMAC stockholders consider the recommendation of the Board that they vote in favor of the Business Combination Proposal, they should keep in mind that certain of MMAC’s directors and officers have interests in the Business Combination that are different from, or in addition to, the interests of MMAC stockholders as a stockholder of MMAC. If the Business Combination is not approved, MMAC expects that it will be required to liquidate, and MMAC Warrants owned by certain of MMAC’s officers and directors and the founder shares acquired by certain of MMAC’s officers and directors prior to MMAC’s IPO will be worthless because MMAC’s executives and directors



 

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are not entitled to receive any of the net proceeds of the MMAC’s IPO that are held in trust and may be distributed upon liquidation of MMAC. Furthermore, in the event of liquidation, MMAC’s directors and officers would lose certain rights to reimbursement and indemnification, as further described below under “Proposal I – Approval of the Business Transaction Agreement and the Business Combination – Interests of MMAC Directors and Officers in the Business Combination.”

Interests of Certain Akazoo Directors and Officers in the Business Combination (Page 86)

In considering the recommendation of the Board to vote for the proposals to approve and adopt the Business Transaction Agreement and the Business Combination, MMAC stockholders should be aware that certain members of Akazoo’s Board of Directors and officers have agreements or arrangements that provide them with interests in the Business Combination that differ from, or are in addition to, those of Akazoo stockholders generally. In particular:

 

   

Apostolos Zervos, the Chief Executive Officer and a director of Akazoo, will receive a bonus of €1 million if the Business Combination closes.

 

   

Mr. Zervos and Pierre Schreuder, the Chief Financial Officer of Akazoo, will enter into employment agreements with the post-Business Combination Company. A description of the employment agreements can be found in this proxy statement/prospectus under the heading “Directors and Management of PubCo Following the Business Combination – Employment Agreements.”

 

   

An entity controlled by Mr. Schreuder and his spouse will receive a number of shares in LuxCo immediately prior to the Luxembourg Merger as a result of which they will hold shares in the post transaction company equal to approximately 0.7% of all outstanding shares at the closing of the Business Combination.

 

   

Mr. Zervos, Mr. Schreuder and other Akazoo employees hold options to purchase shares in Akazoo, such options to be transferred to LuxCo and exercised by them so that they will hold an aggregate of approximately 8.3% of PubCo at or soon after the closing of the Business Combination.

“Insider” Stockholders; Voting by MMAC Directors and Officers (Page 73)

MMAC’s initial stockholders, including all of its directors and officers, who purchased or received shares of common stock prior to MMAC’s IPO and may from time to time purchase MMAC Common Stock in the open market, together with their affiliates, owned an aggregate of approximately 78.6% of the outstanding shares of MMAC Common Stock (an aggregate of 5,175,000 shares of MMAC Common Stock) as of the Record Date. All of these persons have agreed to vote all of these shares in favor of the Business Combination Proposal.

MMAC is not aware of any current plans for the sponsor or its directors, executive officers, advisors or their affiliates to purchase MMAC Common Stock from public stockholders in anticipation of the vote on the Business Combination Proposal.

Current Board of Directors and Executive Officers of PubCo (Page 160)

PubCo is currently managed by a Board of Directors comprised of Lewis W. Dickey, Jr., Adam Kagan, William Drewry and Véronique Marty. Mr. Dickey currently serves as PubCo’s President and Chief Executive Officer.

Board of Directors and Executive Officers of PubCo Following the Business Combination (Page 78)

The Shareholders’ Agreement (as defined below) that will be entered into in connection with the consummation of the Business Combination provides that, upon the consummation of the Business Combination, PubCo’s Board of Directors (the “PubCo Board”) will be comprised of no more than seven directors. Of those directors, one individual will be designated by certain of Akazoo’s investor shareholders (such designee, initially, Panagiotis Dimitropoulos), one individual designated by certain MMAC stockholders including Modern Media LLC and MIHI LLC (such designee, initially, Lewis W. Dickey, Jr.) and one individual designated by certain management shareholders including Apostolos N. Zervos (such designee to be determined prior to the consummation of the Business Combination). The designees of such Akazoo investor shareholders and MMAC shareholders need not be independent but the designee of such management shareholders must be independent within the meaning of the rules of the NASDAQ Capital Market. Also pursuant to the Shareholders’ Agreement, Mr. Zervos will initially serve as a director upon consummation of the Business Combination.



 

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For a period of three years following entry into the Shareholders’ Agreement, following the consummation of the Business Combination, Lewis W. Dickey, Jr. will serve as the non-executive Chairman of the PubCo Board and a member of the PubCo Board. Mr. Zervos will serve as the initial Chief Executive Officer and an initial member of the PubCo Board and Mr. Pierre Schreuder will serve as the initial Chief Financial Officer. At all times during the term of the Shareholders’ Agreement, the shareholder parties have agreed to cause the majority of the PubCo Board to be comprised of independent directors.

It is anticipated that pursuant to the Shareholders’ Agreement, Lewis W. Dickey, Jr., Apostolos N. Zervos and Panagiotis Dimitropoulos will initially serve on the PubCo Board, along with four other individuals to be named pursuant to the nomination rights discussed above.

Material U.S. Federal Income Tax Consequences of the Business Combination (Page 88)

Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Business Combination,” the Merger should qualify as a “reorganization” within the meaning of Section 368 of the Code. As a result, a U.S. Holder (as defined below) should not recognize gain or loss on the automatic conversion of MMAC Rights to MMAC Common Stock immediately prior to the Merger, in connection with the Business Combination, and the exchange of MMAC Common Stock or MMAC Warrants for PubCo Ordinary Shares or PubCo Warrants, as applicable, pursuant to the Merger. The discussion in “Material U.S. Federal Income Tax Consequences of the Business Combination” reflects the opinion of Jones Day as to the material U.S. federal income tax consequences of the Business Combination to U.S. Holders of MMAC securities and/or MMAC Rights, subject to the limitations, exceptions, beliefs, assumptions, and qualifications described therein and otherwise herein (including uncertainty as to whether the Business Combination will be taxable for such U.S. Holders). The rules under Section 367(a) and Section 368 of the Code are complex and there is limited guidance as to their application, particularly with regard to indirect stock transfers in cross-border reorganizations.

For a more detailed discussion of certain U.S. federal income tax consequences of the Merger and the Business Combination, see the section titled “Material U.S. Federal Income Tax Consequences of the Business Combination” in this proxy statement/prospectus. Holders should consult their own tax advisors to determine the tax consequences to them (including the application and effect of any state, local or other income and other tax laws) of the Business Combination.

Accounting Treatment of the Business Combination (Page 86)

The Business Combination will be accounted for as a reverse merger in accordance with IFRS.

Regulatory Approvals Required for the Business Combination (Page 86)

MMAC and Akazoo do not expect that the Business Combination will be subject to any state or federal regulatory requirements other than filings under applicable securities laws and the effectiveness of the registration statement of PubCo of which this proxy statement/prospectus is part. MMAC and Akazoo intend to comply with all such requirements. MMAC does not believe that, in connection with the completion of the Business Combination, any consent, approval, authorization or permit of, or filing with or notification to, any acquisition control authority will be required in any jurisdiction.

Conditions to the Consummation of the Business Combination (Page 116)

The Business Transaction Agreement provides for conditions precedent to closing that MMAC and Akazoo believe are customary for transactions of this type. These closing conditions include, in respect of each party’s obligation to consummate the Business Combination, (i) approval by MMAC’s stockholders of (A) the adoption of the Business Transaction Agreement and the transactions contemplated thereby pursuant to Section 251 of the DGCL, and (B) any other proposals the parties deem necessary or desirable to consummate the Business Combination (collectively, the “Transaction Proposals”), in accordance with the rules and regulations of NASDAQ, MMAC’s organizational documents and the DGCL, (ii) approval of the transactions contemplated by the Business Transaction Agreement by the Akazoo shareholders in accordance with the laws of Scotland and Akazoo’s organizational documents, (iii) a registration statement on Form F-4 (or other appropriate form) pursuant to which the PubCo Ordinary Shares, PubCo Warrants and the PubCo Ordinary Shares issuable upon the exercise of such PubCo Warrants to be issued to the holders of MMAC Warrants pursuant to the Business Combination shall be registered for issuance under the Securities Act, having been declared effective by the SEC; (iv) the issuance of all necessary permits and authorizations under state securities or “blue sky” laws; (v) the funds contained in MMAC’s trust account and any additional capital otherwise available to MMAC being not less than $53,000,000; (vi) the PubCo Ordinary Shares having been approved for listing on NASDAQ and (vii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.



 

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In addition, the obligation of MMAC to consummate the Business Combination is subject to the satisfaction or waiver of several other conditions, including: (i) the accuracy of the representations and warranties of Akazoo set forth in the Business Transaction Agreement (except as would not have a material adverse effect on Akazoo); (ii) the performance by Akazoo in all material respects of its obligations and agreements in the Business Transaction Agreement; (iii) no material adverse effect, and no event or circumstance that would reasonably be expected to result in or cause a material adverse effect, with respect to Akazoo shall have occurred; and (iv) delivery by Akazoo of executed counterparts of the various transaction agreements to which it is a party.

In addition, the obligation of Akazoo to consummate the Business Combination is subject to the satisfaction or waiver of several other conditions, including: (i) the accuracy of the representations and warranties of MMAC set forth in the Business Transaction Agreement (except as would not have a material adverse effect on Akazoo); (ii) the performance by MMAC in all material respects of its obligations and agreements in the Business Transaction Agreement; (iii) no material adverse effect, and no event or circumstance that would reasonably be expected to result in or cause a material adverse effect, with respect to MMAC shall have occurred; and (iv) delivery by MMAC of executed counterparts of the various transaction agreements to which it is a party.

If Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash at the time of the Business Combination and the parties determine to consummate the Business Combination, the amount of cash available for PubCo to operate and expand its business may be less than the amount that the parties currently anticipate.

Listing of PubCo Ordinary Shares and PubCo Warrants and Delisting of MMAC Common Stock, MMAC Units, MMAC Warrants and MMAC Rights (Page 86)

In connection with the Business Combination, immediately prior to the consummation of the Merger, the MMAC Units will separate into their individual component parts and will cease separate trading and each outstanding MMAC Right will be automatically converted into one-tenth (1/10) of one share of MMAC Common Stock. Upon consummation of the Merger, (i) outstanding shares of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) will be converted into PubCo Ordinary Shares, (ii) outstanding MMAC Warrants will be converted into PubCo Warrants and (iii) MMAC Common Stock, MMAC Warrants and MMAC Rights will be delisted from NASDAQ.

PubCo intends to apply for the listing of PubCo Ordinary Shares and PubCo Warrants on the NASDAQ Stock Market under the symbols “SONG” and “SONGW,” respectively. It cannot be assured that the PubCo Ordinary Shares and PubCo Warrants will be approved for listing on NASDAQ.

Comparison of the Rights of Holders of MMAC Common Stock, Akazoo Ordinary Shares and PubCo Ordinary Shares (Page 183)

MMAC is incorporated under the laws of the State of Delaware. Akazoo is a private company limited by shares organized under the laws of Scotland and PubCo is organized under the laws of Luxembourg. Upon the consummation of the Business Combination, the stockholders of MMAC and equityholders of Akazoo will become shareholders of PubCo. PubCo’s organizational documents differ from the organizational documents governing the rights of MMAC stockholders and Akazoo equityholders. For a more complete description of the differences between the stockholder rights of MMAC, equityholder rights of Akazoo and shareholder rights of PubCo, see the section entitled “Comparison of Stockholders’ Rights” in this proxy statement/prospectus.

Redemption Rights (Page 74)

Pursuant to the MMAC Certificate of Incorporation, any holders of MMAC public shares may elect to redeem their shares of MMAC Common Stock for a per-share redemption price, payable in cash, equal to the quotient obtained by dividing (x) the aggregate amount on deposit in the trust account as of two business days prior to the consummation of the Business Combination, including interest, net of taxes payable, by (y) the total number of then outstanding public shares (the “Redemption Price”), subject to the limitations described herein.

If a redemption election is properly made and the Business Combination is consummated, those shares being redeemed, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a per-share price, payable in cash, equal to the Redemption Price. For illustrative purposes, based on funds in the trust account of approximately $14.7 million on the Record Date and estimated $185,000 in taxes payable, the estimated per share redemption price would have been approximately $10.35.

MMAC public shares may be redeemed by holders of MMAC public shares regardless of how such holder votes its shares on the Business Combination Proposal. Therefore, it is possible that the Business Combination Proposal may be approved with votes representing, in part, redeemed shares that will have no continuing interest in PubCo following the Business Combination.



 

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Appraisal or Dissenters’ Rights (Page 87)

No dissenter’s or appraisal rights are available under the DGCL for the stockholders of MMAC in connection with the proposals.

THE SPECIAL MEETING

Date, Time and Place of Special Meeting and Overview of Proposals (Page 72)

The Special Meeting will be held at                , Eastern time, on                , 2019, at                .

There are two proposals expected to be presented at the Special Meeting: the Business Combination Proposal discussed above and the Adjournment Proposal, which is discussed below.

Proposal II: Adjournment Proposal (Page 121)

If, based on the tabulated vote, there are not sufficient votes at the time of the Special Meeting authorizing MMAC to consummate the Business Combination, the Board may submit a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies. See the section entitled “The Adjournment Proposal.”

Prior to the Record Date, the officers, directors or affiliates of MMAC may purchase outstanding securities of MMAC in open market transactions and the shares so acquired would be voted in favor of the Business Combination. Currently, MMAC’s officers, directors or affiliates do not intend to enter into privately negotiated transactions with MMAC’s stockholders, either before or after the Record Date, with the purpose of increasing the number of shares of MMAC Common Stock voted in favor of the Business Combination Proposal.

In the event that the Adjournment Proposal is presented at the Special Meeting and approved by MMAC stockholders, MMAC’s officers, directors or affiliates may, during such adjournment period, make investor presentations telephonically and/or in person to investors who have indicated their intent to vote against the Business Combination Proposal. Such investor presentations would be informational only, and would be filed publicly on Current Report on Form 8-K prior to or concurrently with presentation to any third party. MMAC will not conduct any such activities in violation of applicable federal securities laws, rules or regulations.

Record Date; Outstanding Shares of MMAC; Shares Entitled to Vote (Page 72)

MMAC stockholders will be entitled to vote or direct votes to be cast at the Special Meeting if they owned shares of MMAC Common Stock at the close of business on August 9, 2019, which is the “Record Date” for the Special Meeting. MMAC stockholders will have one vote for each share of MMAC Common Stock they owned at the close of business on the Record Date. On the Record Date, there were 6,581,665 shares of MMAC Common Stock outstanding.

Quorum (Page 73)

A quorum of MMAC stockholders is necessary to hold a valid stockholders meeting. A quorum will be present at the Special Meeting if a majority of the shares of MMAC Common Stock outstanding as of the Record Date are presented in person or by proxy. Abstentions and broker non-votes will count as present for the purposes of establishing a quorum.

Required Vote (Page 73)

For purposes of the Business Combination Proposal, under the MMAC Certificate of Incorporation, approval of the Business Combination Proposal will require the affirmative vote of a majority of the shares of outstanding MMAC Common Stock.



 

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Since the Business Combination Proposal requires approval by a majority of the shares of outstanding MMAC Common Stock, abstentions or broker non-votes will count as votes “AGAINST” the Business Combination Proposal. Holders of founder shares and certain initial holders of MMAC Common Stock have agreed to vote their shares of MMAC Common Stock owned or acquired by them during or after MMAC’s IPO in favor of the Business Combination Proposal.

MMAC’s executive officers, independent directors and sponsor have agreed to vote their shares of MMAC Common Stock in favor of the Business Combination Proposal. As of the date hereof, such persons are entitled to vote 5,175,000 shares of MMAC Common Stock, representing approximately 78.6% of all outstanding shares of MMAC Common Stock. Accordingly, stockholder approval of the Business Combination Proposal is assured. See “Special Meeting of MMAC Stockholders” and “Certain Agreements Related to the Business Combination – Voting Agreement.”

MMAC Stockholders may elect to redeem their shares of MMAC Common Stock regardless of whether they vote for or against the Business Combination Proposal. It is a condition to closing under the Business Transaction Agreement, however, that MMAC has, in the aggregate, not less than $53.0 million of available cash upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although it may waive this condition. Accordingly, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash at the time of the Business Combination, then the parties may determine to consummate the Business Combination, and in that case, redemptions could reduce MMAC’s net tangible assets to as low as $5,000,001. MMAC intends to promptly notify MMAC stockholders by press release following the time that it has secured sufficient binding commitments for the PIPE Financing to satisfy the minimum cash condition under the Business Transaction Agreement or that Akazoo has otherwise waived this condition.

For purposes of the Adjournment Proposal, approval requires the affirmative vote of the holders of a majority of the shares of MMAC Common Stock represented in person or by proxy and entitled to vote at the meeting.

Abstentions and Broker Non-Votes (Page 73)

As long as a quorum is established at the Special Meeting, if MMAC stockholders return their proxy card without an indication of how they desire to vote, since it is not an affirmative vote in favor of a respective proposal, it: (i) will have the effect of a vote “AGAINST” the Business Combination Proposal and (ii) will have no effect on the Adjournment Proposal.

Furthermore, such a vote will not have the effect of exercising the right to require MMAC to redeem shares for a pro rata portion of the trust account in which a substantial portion of the net proceeds of MMAC’s IPO are held (in order for a MMAC stockholder to exercise his or her right to have his or her shares redeemed, he or she must follow the redemption procedures set forth in this proxy statement/prospectus).

Voting MMAC Shares; Proxies (Page 73)

MMAC stockholders can vote by signing and returning the enclosed proxy card. If MMAC stockholders vote by proxy card, their “proxy,” whose name is listed on the proxy card, will vote their shares as instructed on the proxy card. If a MMAC stockholder signs and returns the proxy card, but does not give instructions on how to vote its shares, its shares will be voted, as recommended by the Board, “FOR” the Business Combination Proposal; and “FOR” the Adjournment Proposal.

Proxies may be solicited by mail, telephone or in person.

Voting by MMAC Directors and Executive Officers (Page 73)

In connection with the Business Transaction Agreement, MMAC’s directors and officers have agreed to vote “FOR” the Business Combination Proposal and “FOR” the Adjournment Proposal. For information on each MMAC director or officers holdings of MMAC Common Stock, see the section entitled “Security Ownership of Certain Beneficial Owners & Management.”

Revocation; Changing Votes (Page 74)

MMAC stockholders who wish to change their votes should send a later-dated, signed proxy card to MMAC’s Assistant Secretary, Adam Kagan at MMAC’s corporate headquarters prior to the date of the Special Meeting or attend the Special Meeting and vote in person.

A proxy may be revoked by filing with the Secretary at Modern Media Acquisition Corp., 3414 Peachtree Road, Suite 480, Atlanta, Georgia 30326 either a written notice of revocation bearing a date later than the date of such proxy or a subsequent proxy relating to the same shares or by attending the Special Meeting and voting in person.



 

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Simply attending the Special Meeting will not constitute a revocation of your proxy. If your shares are held in the name of a broker or other nominee who is the record holder, you must follow the instructions of your broker or other nominee to revoke a previously given proxy.

Board Recommendation on All Proposals (Page 72)

The Board unanimously recommends that MMAC stockholders vote “FOR” the Business Combination Proposal; and “FOR” the Adjournment Proposal.

Risk Factors (Page 35)

In evaluating the proposals set forth in this proxy statement/prospectus, readers should carefully read the information herein, including the annexes, and especially consider the factors discussed in the section entitled “Risk Factors.”



 

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SELECTED HISTORICAL FINANCIAL DATA OF PUBCO

PubCo was incorporated on February 6, 2019. Accordingly, PubCo’s financial statement as of the date of this proxy statement/prospectus consists only of PubCo’s opening balance sheet. As PubCo has not conducted any material activities (other than those incident to its formation and to the matters contemplated by the Business Transaction Agreement) as of the date of this proxy statement/prospectus, PubCo has omitted the statement of operations, statement of comprehensive income (loss), statement of cash flows and statement of stockholders’ equity.

 

     February 6, 2019
(date of
incorporation)

EUR
 

Ordinary shares (nominal value of €0.01 per share, 3,000,000 shares issued and outstanding)

     30,000  

Additional paid-in capital

     0  
  

 

 

 

Total stockholders’ equity

     30,000  
  

 

 

 

 

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SELECTED HISTORICAL FINANCIAL DATA OF MMAC

The following table sets forth selected historical financial information derived from MMAC’s (i) audited financial statements included elsewhere in this proxy statement/prospectus as of and for the periods ended March 31, 2019, 2018, 2017 and 2016 and from inception on June 9, 2014 through March 31, 2015 and (ii) unaudited financial statements included elsewhere in this proxy statement/prospectus as of and for the period ended June 30, 2019. You should read the following summary financial information in conjunction with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of MMAC” and MMAC’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus. Since MMAC has not had any significant operations to date, only balance sheet data are presented.

 

     Three Months ended
June 30,
     Year Ended March 31,     June 9, 2014
(inception)
Through
March 31,
2015
 
     2019      2019      2018      2017     2016        

Operating Costs

   $ 510,846      $ 2,460,342      $ 670,812      $ 324     $ 1,187     $ 1,538  

Net income (loss)

   $ 173,176      $ 648,100      $ 452,594      $ (324   $ (1,187   $ (1,538

Weighted average shares outstanding, basic and diluted 

               

Basic

     6,411,321        6,241,016        6,208,603        5,175,000       5,175,000       5,175,000  

Diluted

     17,584,951        25,126,059        23,209,521        5,175,000       5,175,000       5,175,000  

Net income (loss) per common share

               

Basic

   $ 0.03      $ 0.10      $ 0.07      $ (0.00   $ (0.00   $ (0.00

Diluted

   $ 0.01      $ 0.03      $ 0.02      $ (0.00   $ (0.00   $ (0.00

 

Balance Sheet Data:

   As of June 30,
2019
     As of March 31,
2019
     As of March 31,
2018
     As of March 31,
2017
 

Cash

   $ 9,241      $ 115,529      $ 558,398      $ 30,005  

Marketable securities held in Trust Account

     14,525,384        152,420,927        210,502,923        —    

Total assets

   $ 14,596,267      $ 152,577,706      $ 211,103,404      $ 240,951  

Total liabilities

   $ 9,550,901      $ 10,546,697      $ 8,618,130      $ 219,000  

Common stock subject to possible redemption, $0.0001 par value; 4,433 and 13,522,841 shares at redemption value of approximately $10.23 as of June 30, 2019 and March 31, 2019, respectively

   $ 45,364      $ 137,031,005      $ 197,485,269      $ —    

Common stock, $0.0001 par value; 100,000,000 shares authorized; 6,577,232 and 6,409,478 shares issued and outstanding (excluding 4,433 and 13,522,841 shares subject to possible redemption) as of June 30, 2019 and March 31, 2019, respectively

   $ 658      $ 641      $ 632      $ 518  

Additional paid-in capital

   $ 3,728,523      $ 3,901,718      $ 4,549,828      $ 24,482  

Retained earnings (accumulated deficit)

   $ 1,270,821      $ 1,097,645      $ 449,545      $ (3,049

Total stockholders’ equity

   $ 5,000,002      $ 5,000,004      $ 5,000,005      $ 21,951  

 

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SELECTED HISTORICAL FINANCIAL DATA OF AKAZOO

We are providing the following selected historical consolidated financial information of Akazoo to assist in the analysis of the financial aspects of the Business Combination. The selected historical consolidated balance sheet data as of December 31, 2018, and 2017 and the selected historical consolidated statements of operations and cash flows data for each of the years ended December 31, 2018, 2017 and 2016 have been derived from Akazoo’s audited consolidated financial statements that are included elsewhere in this proxy statement/prospectus. Akazoo’s consolidated financial statements have been prepared in accordance with IFRS.

This information should be read in conjunction with “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation of Akazoo” and Akazoo’s consolidated financial statements and notes thereto included elsewhere in this proxy statement/prospectus. The selected historical consolidated financial information in this section is not intended to replace Akazoo’s historical consolidated financial statements and the related notes thereto included elsewhere in this proxy statement/prospectus. Akazoo’s historical results are not necessarily indicative of future results.

 

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     Year Ended December 31,  

in thousands, except for per share values

   2018     2017     2016  
                    

Statement of Operations Information:

      

Revenues

   104,837     90,015     68,448  

Cost of revenue:

      

Media Costs

     (19,138     (15,378     (10,960

Other Direct Costs

     (62,316     (53,869     (41,874
  

 

 

   

 

 

   

 

 

 

Cost of revenue

     (81,454     (69,247     (52,834
  

 

 

   

 

 

   

 

 

 

Gross profit

     23,383       20,768       15,614  

Operating expenses

     (12,687     (10,645     (7,487

Other operating income

     8       4       —    

Depreciation and amortization

     (5,464     (4,021     (2,997

Operating income

     5,240       6,106       5,129  

Finance cost

     (383     (51     (352

Finance income

     21       171       15  

Profit before income tax

     4,878       6,226       4,792  

Income tax

     (10     (9     23  
  

 

 

   

 

 

   

 

 

 

Net Income

     4,868       6,217       4,815  
  

 

 

   

 

 

   

 

 

 

Less: Net loss attributable to non-controlling interest

     (1     (1     (3
  

 

 

   

 

 

   

 

 

 

Net income attributable to common shareholders

     4,867       6,216       4,812  
  

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding

      

Basic and diluted

     4,105,706       4,105,706       4,105,706  

Net income per share available to common shareholders(1)

   1.19     1.51     1.17  

 

(1)

LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing on a 100-for-1 basis ordinary shares of LuxCo to Akazoo shareholders in the Share Exchange. The net income per LuxCo share after giving effect to the Share Exchange for 2018 would have been € 0.0119.

 

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in thousands

   Year Ended December 31,  
     2018     2017     2016  

Balance sheet data:

      

Cash and cash equivalents

   501     2,107     6,642  

Total current assets

     35,184       33,449       38,352  

Property and equipment, net

     1,266       1,638       1,265  

Total assets

     64,066       56,415       56,327  

Total current liabilities

     18,322       15,539       21,371  

Total long term liabilities

     31       31       26  
  

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     45,721       40,845       34,930  
  

 

 

   

 

 

   

 

 

 

in thousands

   Year Ended December 31,  
     2018     2017     2016  

Cash flow data:

      

Net cash provided by (used in):

      

Operating activities

   7,729     4,598       (€3,263

Investing activities

     (11,344     (9,010     (3,660

Financing activities

     2,009       —         —    

Other financial data (unaudited)(1):

      

EBITDA(2)

     10,704       10,127       8,126  

EBITDA margin(2)

     10     11     12

Free Cash Flow(2)

     (3,641     (4,584     (6,939

Gross Profit

     23,383       20,768       15,614  

Gross Margin

     22     23     23

Adjusted Gross Profit(3)

     42,521       36,146       26,574  

Adjusted Gross Margin(3)

     41     40     39

 

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(1)

The measures presented below are non-IFRS measures. They are not substitutes for IFRS measures in assessing Akazoo’s overall financial performance. Because measures are not determined in accordance with IFRS, and are susceptible to varying calculations, they may not be comparable to other similarly titled measures presented by other companies. You should not consider these non-IFRS measures in isolation from, or as a substitute for, an analysis of Akazoo’s results as reported on its consolidated financial statements appearing elsewhere in this proxy statement/prospectus.

 

(2)

Akazoo defines EBITDA as Net Income before Net finance costs, Income tax expense and Depreciation and amortization. Akazoo defines EBITDA Margin as EBITDA as a percentage of Revenue. Akazoo believes that EBITDA and EBITDA Margin are useful to its management and investors as measures of comparative operating performance from period to period and among companies as they are reflective of changes in pricing decisions, cost controls, and other factors that affect operating performance, and they remove the effect of items not directly resulting from Akazoo’s core operations. Akazoo believes that EBITDA and EBITDA Margin also are useful to investors because these metrics are frequently used by securities analysts, investors, and other interested parties in their evaluation of the operating performance of companies in the technology industry and other industries similar to Akazoo’s. Akazoo’s management also uses EBITDA and EBITDA Margin for planning purposes, including the preparation of its annual operating budget and financial projections. EBITDA and EBITDA Margin have limitations as analytical tools. Akazoo’s use of EBITDA and EBITDA Margin should not be construed as an inference that Akazoo’s future results will be unaffected by unusual or non-recurring items. Additionally, EBITDA and EBITDA Margin are not intended to be measures of discretionary cash to invest in the growth of Akazoo’s business, as they do not reflect tax payments, debt service requirements, capital expenditures, and certain other cash costs that may recur in the future. Akazoo’s management compensates for these limitations by relying on its results reported under IFRS in addition to using EBITDA and EBITDA Margin supplementally.

Akazoo defines Free Cash Flow as net cash from operating activities less capital expenditures. Akazoo believes Free Cash Flow is a useful supplemental financial measure for Akazoo and investors in assessing its ability to pursue business opportunities and investments. Free Cash Flow is not a measure of Akazoo’s liquidity under IFRS and should not be considered as an alternative to net cash from operating activities.

A reconciliation of EBITDA to net income and Free Cash Flow to net cash from operating activities appears below:

 

     Year Ended December 31,  
     2018     2017     2016  

Net Income

   4,868     6,217     4,815  

Add back:

      

Net finance costs

     362       (120     337  

Income tax expense

     10       9       (23

Depreciation and amortization

     5,464       4,021       2,997  

EBITDA

     10,704       10,127       8,126  

Revenue

     104,837       90,016       68,448  

EBITDA Margin

     10     11 %      12 % 

Net cash from operating activities

     7,729       4,598       (3,263

Capital expenditures

     (11,370     (9,182     (3,676

Free Cash Flow

     (3,641     (4,584 )      (6,939 ) 

 

(3)

Akazoo defines Adjusted Gross Profit as Gross profit plus Media Costs added back. Media Costs primarily comprise of paid and affiliate media costs, in-house marketing expenses and partnership expenses related to the acquisition of Subscribers. Akazoo defines Adjusted Gross Margin as Adjusted Gross Profit as a percentage of Revenue.

A reconciliation of Adjusted Gross Profit to Gross profit appears below:

 

     Year Ended December 31,  
     2018     2017     2016  
      

Gross profit

   23,383     20,768     15,614  

Gross Margin

     22     23 %      23 % 

Plus:

      

Media Costs

     19,138       15,378       10,960  

Adjusted Gross Profit

     42,521       36,146       26,574  

Revenue

     104,837       90,016       68,448  

Adjusted Gross Margin

     41     40 %      39 % 

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The Business Transaction Agreement provides for various steps whereby MMAC, Akazoo, LuxCo and PubCo intend to enter into a multi-step business combination transaction pursuant to which, in accordance with the DGCL and the Luxembourg law of August 10, 1915 on commercial companies, as amended (the “Luxembourg Company Law”), as applicable, (a) MMAC will merge with and into PubCo with PubCo remaining as the surviving entity (the “Merger”) pursuant to which the stockholders of MMAC will receive PubCo Ordinary Shares on a 1-for-1 basis, (b) by no later than seven calendar days prior to the effective date of the Merger, LuxCo will acquire the entire issued share capital of Akazoo in a share for share exchange by issuing on a 100-for-1 basis LuxCo ordinary shares to the Akazoo equityholders, whereas upon completion of such share exchange, the shareholdings of LuxCo will be identical to that of Akazoo (the “Share Exchange”), and (c) on the calendar day following the effective date of the Merger, LuxCo will merge with and into PubCo in accordance with the Luxembourg Company Law, with PubCo remaining as the surviving entity, and as a result of which the shareholders of LuxCo will be issued PubCo Ordinary Shares and PubCo will remain a publicly traded company (the “Luxembourg Merger”). In connection with the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock).

As discussed in more detail elsewhere in this proxy statement/prospectus, in addition to other customary closing conditions discussed herein, consummation of the Business Combination is conditioned upon there being not less than $53 million available between MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments to purchase PubCo Units in the PIPE Financing such that, together with cash available in MMAC’s trust account, PubCo will have at least an aggregate of $53 million of available cash after consummation of the Business Combination and the offering, before payment of any fees and expenses. Pursuant to the Letter Agreement discussed elsewhere in this proxy statement/prospectus, PubCo also has the ability to offer, for no additional consideration and as an incentive to certain investors purchasing PubCo Ordinary Shares in the PIPE Financing, up to an aggregate number of PubCo Ordinary Shares and PubCo Warrants corresponding to the number of PubCo Ordinary Shares and PubCo Warrants forfeited by the sponsor pursuant to the Letter Agreement. Scenario 3 in the pro forma financial statements presents the pro forma financial statements of PubCo as of December 31, 2018, assuming no MMAC public stockholders elect to exercise their redemption rights and any remaining required available cash under the Business Transaction Agreement is provided by the PIPE Financing. Scenario 3 further assumes that that the PubCo Ordinary Shares and PubCo Warrants permitted to be issued to investors in the PIPE Financing in lieu of forfeiture are issued for no additional consideration.

The unaudited pro forma condensed combined financial statements (the “pro forma financial statements”) combine the historical financial statements of MMAC and the historical consolidated financial statements of Akazoo to illustrate the effect of the Merger, the Share Exchange and the Luxembourg Merger, which are collectively referred to in the pro forma financial statements as the “Transactions” and, solely with respect to Scenario 3, the successful closing of the PIPE Financing.

After the Transactions, Akazoo expects to maintain its fiscal year end of December 31, as opposed to conforming to the fiscal year end of MMAC of March 31.

The following pro forma financial statements give effect to the Transactions under the acquisition method of accounting in accordance with IFRS 3, Business Combinations (“IFRS 3”). The Transactions will be accounted for as a “reverse acquisition” since, immediately following completion of the Transactions, the stockholders of Akazoo immediately prior to the Transactions will have effective control of PubCo through their approximately 61% ownership interest in PubCo, their selection of a majority of the PubCo Board and their designation of all of the senior executive positions of PubCo. Such percentage assumes (i) that none of MMAC’s existing public stockholders exercise their redemption rights (ii) no exercise or conversion of the PubCo Warrants and (iii) the successful closing of the PIPE Financing, providing PubCo with $38.20 million (approximately € 33.4 million) in available cash, which, when combined with available cash in the trust account, would satisfy the condition in the Business Transaction Agreement that there be not less than $53 million of available cash at the time of consummation of the Business Combination.

The historical consolidated financial information has been adjusted in these pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the Transactions and the PIPE Financing, as applicable, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on PubCo.

 

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The pro forma financial statements have been prepared using three different scenarios of redemptions of MMAC Common Stock and financing arrangements:

 

   

Scenario 1 — Assuming no redemptions for cash: This presentation assumes that no MMAC stockholders exercise redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions;

 

   

Scenario 2 — Assuming redemptions of 445,850 shares of MMAC Common Stock for cash: This presentation assumes that MMAC stockholders exercise their redemption rights with respect to 445,850 shares of common stock upon the consummation of the Transactions at a redemption price of approximately $10.24 per share (approximately € 8.94 per share). This maximum redemption amount is derived on the basis that MMAC will be required to have $5,000,001 (approximately € 4.4 million) minimum net tangible assets upon the consummation of the Transactions per the MMAC Certificate of Incorporation, after giving effect to payments to redeeming stockholders. In addition, entries 1 through 4 and 6 recorded in the pro forma combined statement of financial position under Scenario 1 also apply to Scenario 2; and

 

   

Scenario 3 — Assuming no redemptions of MMAC Common Stock for cash and a PIPE Financing sufficient to satisfy the minimum gross available cash condition under the Business Transaction Agreement: This presentation assumes that no MMAC stockholders exercise their redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions and the PIPE Financing successfully closes, providing PubCo with $38.20 million (approximately € 33.4 million) in available cash, which, when combined with available cash in the trust account, would satisfy the condition in the Business Transaction Agreement that there be not less than $53 million of available cash at the time of consummation of the Business Combination. This presentation also assumes that the PubCo Ordinary Shares and PubCo Warrants permitted to be issued to investors in the PIPE Financing in lieu of forfeiture are issued for no additional consideration. In addition, entries 1 through 4 and 6 recorded in the pro forma combined statement of financial position under Scenario 1 also apply to Scenario 3.

The pro forma financial statements are for illustrative purposes only. The financial results may have been different had MMAC and Akazoo always been combined. You should not rely on the pro forma financial statements as being indicative of the historical results that would have been achieved had MMAC and Akazoo always been combined or the future results that PubCo will experience.

The Transactions have not been consummated as of the date of the preparation of the pro forma financial statements included herein and there can be no assurances that the Transactions will be consummated. See “Risk Factors” for additional discussion of risk factors associated with the pro forma financial statements.

 

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     Scenario 1      Scenario 2      Scenario 3  

in Euro thousands, except share and per share data

   Pro Forma Combined
Assuming No Further
Redemptions of
Common Stock
     Pro Forma Combined
Assuming Maximum
Redemption of
Shares of Common
Stock Under the
MMAC Charter
     Minimum
Gross Cash
Required
Including
PIPE
Financing
 

Selected Unaudited Pro Forma Condensed Combined Statement of Operations - Year Ended December 31, 2018

        

Net sales

     104,837        104,837        104,837  

Net income

     4,330        4,330        4,330  

Earnings per share from continuing operations

     0.10        0.10        0.09  

Weighted average shares outstanding - basic and diluted

     43,118,802        42,672,952        49,044,831  

Selected Unaudited Pro Forma Condensed Combined Statement of Financial Position as of December 31, 2018

        

Total current assets

     43,548        39,559        76,921  

Total assets

     72,430        68,441        105,803  

Total current liabilities

     16,005        16,005        16,005  

Total liabilities

     16,037        16,037        16,037  

Total stockholders’ equity

     56,393        52,404        89,766  

 

 

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COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth historical comparative share information for Akazoo and MMAC as of December 31, 2018 and for the year ended December 31, 2018, 2017 and 2016 and unaudited pro forma combined share information for PubCo after giving effect to the Business Combination as of December 31, 2018 and for the year ended December 31, 2018, 2017 and 2016 assuming (i) that no MMAC stockholders exercise redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions, (ii) that MMAC stockholders exercise their redemption rights with respect to 445,850 shares of common stock upon the consummation of the Transactions at a redemption price of approximately $10.24 per share (approximately € 8.94 per share) such that MMAC is left with $5,000,0001 (approximately € 4.4. million) minimum net tangible assets upon the consummation of the Transactions and (iii) that no MMAC stockholders exercise redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions and the PIPE Financing is successfully completed, including that all PubCo Ordinary Shares and PubCo Warrants permitted to be issued to investors in the PIPE Financing in lieu of forfeiture are issued for no additional consideration such that the condition that PubCo have available cash of at least $53 million upon the consummation of the Business Combination is satisfied.

The historical information should be read in conjunction with “Selected Historical Financial Data of MMAC” and “Selected Historical Financial Data of Akazoo” included elsewhere in this proxy statement/prospectus and the historical financial statements of Akazoo, MMAC and PubCo included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined share information is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus.

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

 

     Akazoo      MMAC      Pro Forma
PubCo
(Assuming
No Further
Redemptions)
     Pro Forma
PubCo
(Assuming Max
Redemptions) 

Under The
MMAC
Charter
     Minimum Gross
Cash Required
Including PIPE
Financing
 

December 31, 2018 book value per share(a)(b)(c)(d)

    11.13       0.17       1.30       1.22       1.82  

Cash dividends declared per share:

              

2018

   —        —        —        —        —    

2017

   —        —        —        —        —    

2016

   —        —        —        —        —    

Income (loss) per share from continuing operations:(d)

              

2018

              

Basic

   1.19      0.27      0.10      0.10      0.09  

Diluted

   1.19      0.07      0.10      0.10      0.09  

2017

              

Basic

   1.51      0.02      0.13      0.13      0.12  

Diluted

   1.51      0.01      0.13      0.13      0.12  

2016

              

Basic

   1.17       (0.00)      0.11      0.11      0.10  

Diluted

   1.17       (0.00)      0.11      0.11      0.10  

 

(a)

Book value per share is calculated using the formula: Total stockholder’s equity divided by shares outstanding.

(b)

The existing Akazoo equityholders prior to the Luxembourg Merger will receive a cash distribution of up to $20 million (approximately 17.1 million Euros), in exchange for a portion of their shares, if and to the extent that cash available in MMAC’s trust account, after the payment of transaction fees and expenses and any redemptions, exceeds $110 million (approximately 94.6 million Euros). Under all three scenarios, the above described cash distribution would not be made to the Akazoo equityholders, because under all of the scenarios the cash available in MMAC’s trust account, after the payment of transaction fees and expenses and any redemptions, would not exceed $110 million (approximately 94.6 million Euros). If the above described cash distribution was made or not, there would be no net effect on Akazoo’s book value per share as the distribution (if any) would be from MMAC directly to Akazoo equityholders and not to Akazoo.

(c)

MMAC pro forma book value per share is 0.25 Euros and 0.16 Euros and 0.89 Euros under the no further redemptions, maximum redemptions and maximum redemptions with PIPE financing scenarios, respectively.

(d)

LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing on a 100 for 1 basis ordinary shares to Akazoo shareholders (the “Share Exchange”). After giving effect to the Share Exchange, the pro forma book value per share for 2018 would be €0.1113 and the pro forma income per share for 2018 would be €0.0119.

 

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RISK FACTORS

Readers should consider carefully all of the material risks described below, together with the other information contained elsewhere in this proxy statement/prospectus. The risks and uncertainties described below are not the only ones facing MMAC, Akazoo and/or PubCo. Additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect MMAC, Akazoo and/or PubCo. If any of the following risks occur, the business of MMAC, Akazoo and/or PubCo and their respective financial conditions or results of operating may be materially and adversely affected.

You should consider carefully all of the material risks described below, together with the other information contained elsewhere in this proxy statement/prospectus, before you decide whether to vote or instruct your vote to be cast to approve the Business Combination Proposal.

Risks Related to the Business Combination

MMAC’s stockholders will experience immediate dilution as a consequence of the issuance of PubCo Ordinary Shares and PubCo Warrants as consideration in the Business Combination and the PIPE Financing. Having a reduced share position may reduce the influence that current MMAC stockholders have on the management of the combined company.

It is anticipated that following the consummation of the Business Combination and the PIPE Financing the influence of MMAC’s former public stockholders over the management of PubCo, in their capacity as PubCo shareholders, will be reduced relative to such stockholders’ influence over MMAC. Following the Business Combination and PIPE Financing on its expected terms, MMAC’s current stockholders, including the sponsor, would hold an ownership interest of approximately 12.8% of the issued and outstanding PubCo Ordinary Shares, Akazoo’s current equityholders would own an ownership interest of approximately 73.8% of the issued and outstanding PubCo Ordinary Shares and the equity investors purchasing PubCo Ordinary Shares in the PIPE Financing would own an ownership interest of approximately approximately 12.1% of the issued and outstanding PubCo Ordinary Shares, each of the foregoing ownership interests assume no MMAC stockholders exercise their redemption rights in connection with the Business Combination, and assume a successful PIPE Financing leaving PubCo with an aggregate $53 million of available cash after consummation of the Business Combination and PIPE Financing, before payment of any fees and expenses.

MMAC may waive one or more conditions to the Business Combination without resoliciting stockholder approval for the Business Combination.

One or more conditions to MMAC’s obligation to complete the Business Combination may be waived in whole or in part to the extent legally allowable either unilaterally or by agreement of MMAC, PubCo and Akazoo. Specifically, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53 million of available cash at the time of the Business Combination and the parties determine to consummate the Business Combination, the amount of available cash for PubCo to operate and expand its business may be less than the amount that the parties currently anticipate.

PubCo may not be able to secure sufficient binding commitments to close the PIPE Financing in connection with the Business Combination.

PubCo may not be able to complete the PIPE Financing on terms that are acceptable to PubCo, or at all. If PubCo does not complete the PIPE Financing, Akazoo will not be required to consummate the Business Combination. The terms of the PIPE Financing have not yet been determined, and any such financing may be more onerous to the combined company and its other stockholders than currently anticipated. If PubCo does not complete the PIPE Financing such that it fails to have at least $53 million of available cash, the Business Combination may not be completed, although Akazoo may choose to consummate the Business Combination in spite of such failure. Further, if Akazoo waives the condition that MMAC have at least $53 million of available cash upon consummation of the Business Combination, the reduced amount of cash available for continued development and growth of Akazoo could have a material adverse effect on PubCo.

Consummation of the Business Combination is subject to a number of conditions.

The obligations of MMAC, PubCo and Akazoo to consummate the Business Combination are subject to the satisfaction or waiver of specified conditions set forth in the Business Transaction Agreement. Such conditions include, but are not limited to, the satisfaction or waiver of covenants contained in the Business Transaction Agreement, MMAC having, in the aggregate, not less than $53 million of available cash upon the consummation of the Business Combination, the non-existence of certain legal action against MMAC, PubCo and Akazoo, obtaining material consents, the approval of the required number of MMAC stockholders and the execution of ancillary agreements. These conditions may or may not be satisfied or waived by either MMAC, PubCo or Akazoo, as applicable, and therefore the transactions contemplated by the Business Transaction Agreement may not be consummated.

The IRS may not agree that PubCo is a foreign corporation for U.S. federal income tax purposes following the Business Combination, resulting in unexpected U.S. income tax liability.

Although PubCo will be incorporated under the laws of Luxembourg, the IRS may assert that PubCo should be treated as a U.S. corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874. For U.S. federal income tax purposes, a corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation. Because PubCo will be incorporated under the laws of Luxembourg, PubCo would generally be classified as a foreign corporation (and, therefore, a non-U.S. tax resident) for U.S. federal income tax purposes. Section 7874 provides an exception pursuant to which a foreign incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and there is limited guidance as to their application. If it were determined that PubCo should be taxed as a U.S. corporation for U.S. federal income tax purposes under Section 7874, PubCo would be liable for U.S. federal income tax on its income just like any other U.S. corporation and certain distributions made by PubCo to Non-U.S. Holders (as defined below) of PubCo Ordinary Shares could be subject to U.S. withholding tax.

As more fully described under “Material U.S. Federal Income Tax Consequences of the Business Combination — U.S. Federal Income Tax Consequences of the Business Combination to MMAC and PubCo – Tax Residence of PubCo for U.S. Federal Income Tax Purposes,” based on certain representations of the parties and factual assumptions, PubCo does not expect that Section 7874 will cause it to be treated as a U.S. corporation PubCo for U.S. federal income tax purposes. However, as noted above, the rules under Section 7874 are complex and require

 

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an analysis of all relevant facts and circumstances, and there is limited guidance as to their application. Further, holders are cautioned that the application of Section 7874 to PubCo will be determined as of the closing of the Business Combination, by which time there could be changes to the relevant facts and circumstances affecting this determination. In addition, there could be a future change in law under Section 7874, the Treasury Regulations promulgated thereunder or otherwise that could impact the manner by which Section 7874 applies to PubCo. No IRS ruling has been requested or will be obtained regarding the U.S. federal income tax consequences of the Business Combination or any other matter described in this proxy statement/prospectus. There can be no assurance that the IRS will not challenge the U.S. federal income tax treatment described above or that, if challenged, such treatment will be sustained by a court.

If PubCo were to be treated as a U.S. corporation for U.S. federal tax purposes, PubCo could be subject to substantial additional U.S. tax liability. Additionally, if PubCo were treated as a U.S. corporation for U.S. federal tax purposes, non-U.S. PubCo shareholders could be subject to U.S. withholding tax on the gross amount of any dividends paid by PubCo to such shareholders. For Luxembourg tax purposes, PubCo is expected, regardless of any application of Section 7874, to be treated as a Luxembourg tax resident. Consequently, if PubCo is treated as a U.S. corporation for U.S. federal tax purposes under Section 7874, it could be liable for both U.S. and Luxembourg taxes, which could have a material adverse effect on its financial condition and results of operations.

Please see “Material U.S. Federal Income Tax Consequences of the Business Combination — U.S. Federal Income Tax Consequences of the Business Combination to MMAC and PubCo —Tax Residence of PubCo for U.S. Federal Income Tax Purposes” for a more detailed discussion of the application of Section 7874 of the Code to the Business Combination.

Future changes to U.S. and non-U.S. tax laws could adversely affect PubCo.

The U.S. Congress, the Organization for Economic Co-operation and Development and other government agencies in jurisdictions where PubCo and its affiliates will do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting,” including situations where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the countries in which PubCo and its affiliates do business could change on a prospective or retroactive basis, and any such changes could adversely affect PubCo and its affiliates.

The Business Combination may be a taxable event for MMAC stockholders.

Subject to the limitations and qualifications described in “Material U.S. Federal Income Tax Consequences of the Business Combination,” the Merger should qualify as a “reorganization” within the meaning of Section 368 of the Code and, as a result, a U.S. Holder (as defined below) should not recognize gain or loss on the automatic conversion of MMAC Rights to MMAC Common Stock immediately prior to the Merger, and the exchange of MMAC Common Stock or MMAC Warrants for PubCo Ordinary Shares or PubCo Warrants, as applicable, pursuant to the Merger. However, U.S. Holders may recognize gain (but not loss) as a result of the Merger if Section 367(a) of the Code and the Treasury Regulations promulgated thereunder apply to the Merger. Section 367(a) of the Code may apply to the Merger if PubCo transfers the assets it acquires from MMAC pursuant to the Merger to certain subsidiary corporations in connection with the Business Combination. However, the rules under Section 367(a) and Section 368 of the Code are complex and there is limited guidance as to their application, particularly with regard to indirect stock transfers in cross-border reorganizations. The application of Section 367(a) of the Code to the Merger is discussed in more detail under the section entitled “Material U.S. Federal Income Tax Consequences of the Business Combination — Certain U.S. Federal Income Tax Consequences of the Business Combination to U.S. Holders — U.S. Federal Income Tax Consequences of the Merger.”

PubCo may be or become a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. Holders.

If PubCo or any of its subsidiaries is a PFIC for any taxable year, or portion thereof, that is included in the holding period of a beneficial owner of the PubCo Ordinary Shares or PubCo Warrants that is a U.S. Holder, such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. PubCo and its subsidiaries are not currently expected to be treated as PFICs for U.S. federal income tax purposes for the taxable year of the Business Combination or for foreseeable future taxable years. However, this conclusion is a factual determination that must be made annually at the close of each taxable year and,

 

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thus, is subject to change. Accordingly, there can be no assurance that PubCo or any of its subsidiaries will not be treated as a PFIC for any taxable year. Moreover, PubCo does not expect to provide a PFIC annual information statement for 2019 or going forward. Please see the section entitled “Material U.S. Federal Income Tax Consequences of the Business Combination — Certain U.S. Federal Income Tax Consequences to U.S. Holders and Non-U.S. Holders of the Ownership and Disposition of PubCo Securities — U.S. Federal Income Tax Consequences to U.S. Holders — Passive Foreign Investment Company Status” for a more detailed discussion with respect to PubCo’s PFIC status. U.S. Holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to holders of the PubCo Ordinary Shares and PubCo Warrants.

There may not be an active market for PubCo Ordinary Shares or PubCo Warrants, which may cause such securities to trade at a discount and make it difficult to for holders to sell.

Prior to the Business Combination, there has been no public market for PubCo Ordinary Shares or PubCo Warrants. While PubCo intends to apply to list the PubCo Ordinary Shares and PubCo Warrants on NASDAQ, there can be no assurance that the PubCo Ordinary Shares and PubCo Warrants will be approved for listing. PubCo cannot assure you that an active trading market for PubCo Ordinary Shares or PubCo Warrants will develop or be sustained after the Business Combination or that the price of PubCo Ordinary Shares or PubCo Warrants in the public market will reflect PubCo’s actual financial performance.

PubCo’s Ordinary Share price could become volatile, which could limit shareholders’ ability to sell their shares at a profit.

Volatility in the price of PubCo’s Ordinary Shares could make it difficult for shareholders to predict the value of their investment, to sell PubCo Ordinary Shares at a profit at any given time, or to plan purchases and sales in advance. A variety of factors may affect the market price of PubCo’s Ordinary Shares. These include, but are not limited to:

 

   

achievement or rejection of regulatory approvals by PubCo or its competitors;

 

   

developments concerning proprietary rights;

 

   

regulatory developments;

 

   

economic or other crises and other external factors;

 

   

period-to-period fluctuations in revenues, cash flows, and other financial metrics pertaining to the operations of the business;

 

   

changes in financial estimates by securities analysts; and

 

   

sales and short selling activity of its shares.

Additionally, because PubCo’s Ordinary Shares currently are not regularly traded in substantial volume, any information about PubCo in the media may result in significant share price fluctuations and volatility.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of PubCo’s securities following the consummation of the Business Combination may decline. Prior to the consummation of the Business Combination, there will not be a public market for PubCo’s securities. Accordingly, the valuation ascribed to PubCo Common Stock and PubCo Warrants may not be indicative of the price that will prevail in the trading market following the consummation of the Business Combination. If an active

 

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market for PubCo’s securities develops and continues, the trading price of PubCo’s securities following the consummation of the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond PubCo’s control. Any of the factors listed below could have a material adverse effect on your investment in PubCo’s securities.

PubCo realizes that it will not be able to control many of the factors listed above, and PubCo further believes that period-to-period comparisons of PubCo’s financial results and metrics may not be indicative of the future performance of its business.

In addition, the stock market in general, and the market for media services companies in particular, has experienced price and volume fluctuations that may have been unrelated or disproportionate to the operating performance of individual companies. This broad market and industry volatility may seriously and irreparably harm the market price of PubCo’s Ordinary Shares, regardless of PubCo’s operating performance and financial condition.

PubCo’s Ordinary Shares after the Business Combination could delay or prevent a change of control.

MMAC’s directors, executive officers and principal stockholders, including MMAC’s sponsor (or if such entity is dissolved, MIHI LLC and Modern Media LLC), and Akazoo’s directors, executive officers and principal stockholders will beneficially own a significant percentage of outstanding PubCo Ordinary Shares after the Business Combination. They will also have, through the exercise of PubCo Warrants, the right to acquire additional PubCo Ordinary Shares. As a result, these shareholders, if acting together, have the ability to significantly influence the outcome of corporate actions requiring shareholder approval. Additionally, this concentration of ownership may have the effect of delaying or preventing a change in control.

As of the Record Date, directors, officers and principal stockholders beneficially owned approximately 78.6% of MMAC Common Stock. Following the Business Combination, it is expected that these individuals and entities (including MIHI LLC and its affiliates) will beneficially own approximately 5.6% of outstanding PubCo Ordinary Shares, assuming no redemptions by MMAC’s public stockholders.

As of the Record Date, directors, officers and principal equityholders beneficially owned approximately 94.5% of Akazoo’s ordinary shares. Following the Business Combination, it is expected that these individuals will beneficially own approximately 69.7% of outstanding PubCo Ordinary Shares, which assumes no redemptions by MMAC’s public stockholders, and assumes a successful PIPE Financing leaving PubCo with an aggregate $53 million of available cash after consummation of the Business Combination and PIPE Financing, before payment of any fees and expenses.

Risks Related to MMAC and the Business Combination 

MMAC’s directors and executive officers either directly or beneficially own shares of MMAC Common Stock and MMAC Warrants and have obligations and interests in the Business Combination that are different from, or in addition to, MMAC’s public stockholders. If the Business Combination is not approved, the securities held by MMAC’s directors and executive officers will likely become worthless.

In light of the amount of consideration paid by MMAC’s initial stockholders for their MMAC securities, the initial stockholders, including MMAC’s directors and executive officers, will likely significantly benefit from the consummation of the Business Combination, even if the Business Combination causes the market price of MMAC’s securities to significantly decline. Furthermore, the $7,320,000 purchase price of the 7,320,000 private placement warrants will be included in the working capital that is distributed to MMAC’s public stockholders in the event of MMAC’s dissolution and liquidation if MMAC fails to consummate an initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders. These factors may influence MMAC’s directors and executive officers in promoting the Business Combination and/or soliciting proxies for the approval and adoption of the Business Combination Proposal. MMAC Common Stock and MMAC Warrants held by MMAC’s directors and executive officers (and/or their affiliated entities) had an aggregate market value (without taking into account any discount that may be attributed to such securities due to their restricted nature or any exercise limitations of the private placement warrants) of approximately $55,254,408 based on the closing sale prices of $10.48 and $0.1394, respectively, on NASDAQ on the Record Date. The initial stockholders have waived any rights to receive any liquidation proceeds that may be distributed upon MMAC’s liquidation in respect of their shares of MMAC Common Stock. Therefore, if the Business Combination Proposal is not approved by MMAC’s stockholders, and MMAC is subsequently required to commence proceedings to dissolve and liquidate, shares of MMAC Common Stock and MMAC’s Warrants held directly or beneficially by MMAC’s directors and executive officers will be worthless.

 

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In addition, in considering the recommendation of the Board elsewhere in this proxy statement/prospectus to vote “FOR” the Business Combination Proposal, you should be aware that: (i) the initial stockholders have the right to designate an individual to be nominated for election to serve as directors of PubCo upon the consummation of the Business Combination; (ii) the Board will not receive reimbursement for any out-of-pocket expenses incurred by them on MMAC’s behalf incident to identifying, investigating and consummating a business combination to the extent such expenses exceed the amount not required to be retained in the trust account, unless a business combination is consummated; and (iii) the current directors and officers of MMAC have the right to continued indemnification, and to receive the benefit of directors’ and officers’ liability insurance, after the Business Combination.

In addition, if MMAC dissolves and liquidates prior to the consummation of the Business Combination, the sponsor, which is 50% owned by Mr. Dickey, will be liable to MMAC, if and to the extent any claims by a vendor for services rendered or products sold to MMAC, or a prospective target business with which MMAC has discussed entering into a business combination, reduce the amount of funds in the trust account to below $10.10 per public share or such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes and fund working capital requirements, and subject to certain exceptions.

The personal and financial interests of the Board may have influenced their decision as members of the Board to approve and adopt the Business Transaction Agreement. In considering the recommendations of the Board to vote “FOR” the adoption of the Business Combination Proposal, you should consider these interests. Additionally, the exercise of the directors’ discretion in agreeing to changes or waivers in the terms of the Business Transaction Agreement may result in a conflict of interest when determining whether such changes or waivers are appropriate and in the stockholders’ best interest.

MMAC’s initial stockholders have agreed to vote in favor of the Business Combination, regardless of how its public stockholders vote.

Unlike many other blank check companies in which the initial stockholders agree to vote their shares of common stock in accordance with the majority of the votes cast by the public stockholders in connection with an initial business combination, MMAC’s initial stockholders have agreed to vote their shares of MMAC Common Stock, as well as any public shares purchased during or after MMAC’s IPO, in favor of its initial business combination. As of the Record Date, MMAC’s initial stockholders owned approximately 78.6% of the outstanding shares of MMAC Common Stock. Accordingly, it is more likely that the necessary stockholder approval will be received than would be the case in certain other blank check companies if the companies’ initial stockholders agreed to vote their shares in accordance with the majority of the votes cast by public stockholders.

MMAC may not be able to complete its initial business combination by September 17, 2019, in which case, unless that date is otherwise extended by MMAC’s stockholders, MMAC would be required to cease all operations except for the purpose of winding up and it would redeem its public shares and liquidate.

If MMAC has not completed its initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, the MMAC 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 ten business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, including interest income (net of taxes payable and any amounts released to MMAC to fund working capital requirements, and less up to $50,000 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 liquidation distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of MMAC’s remaining stockholders and its Board, dissolve and liquidate, subject in each case to MMAC’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of liquidation, there will be no distribution with respect to MMAC Warrants or MMAC Rights. Accordingly, the MMAC Warrants and MMAC Rights will expire worthless.

 

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If a liquidation were to occur, MMAC estimates that interest accrued, less applicable federal, state and Delaware franchise taxes, would yield a trust balance of approximately $14.7 million or $10.35 per share.

In connection with the stockholder vote to approve the Business Combination Proposal, MMAC’s sponsor, directors, executive officers, advisors and their affiliates may elect to purchase shares from public stockholders, which may influence the vote on the Business Combination Proposal and reduce the public “float” of PubCo Ordinary Shares following the consummation of the Business Combination.

In connection with the stockholder vote to approve the Business Combination Proposal, MMAC’s sponsor, directors, executive officers, advisors or their affiliates may purchase shares in privately negotiated transactions or in the open market either prior to or following the completion of the Business Combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such stockholder, although still the record holder of MMAC Common Stock, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that MMAC’s sponsor, directors, executive officers, advisors or their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination Proposal or to satisfy the closing condition in the Business Transaction Agreement that requires MMAC to have at least $53 million of available cash at the consummation of the Business Combination, where it appears that such requirement would otherwise not be met. This may result in the completion of the Business Combination in circumstances where such completion may not otherwise have been possible. In addition, if such purchases are made, the public “float” of MMAC Common Stock and the number of beneficial holders of MMAC’s securities, and thus the public “float” of PubCo Ordinary Shares and the number of beneficial holders of PubCo’s securities immediately after the consummation of the Business Combination, may be reduced, possibly making it difficult for PubCo to obtain or maintain the listing of PubCo Ordinary Shares on NASDAQ.

If a MMAC public stockholder fails to comply with the procedures for tendering its shares in connection with the Business Combination, such shares may not be redeemed.

This proxy statement/prospectus describes the various procedures that must be complied with in order for a holder of MMAC Common Stock to validly redeem public shares. In the event that a stockholder fails to comply with these procedures, its shares may not be redeemed.

MMAC’s security holders will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate their investment, therefore, MMAC’s security holders may be forced to sell their public shares or MMAC Warrants, potentially at a loss.

MMAC’s public stockholders will be entitled to receive funds from the trust account only upon the earlier to occur of the consummation of the Business Combination, and then only in connection with those shares of MMAC Common Stock that such stockholder properly elected to redeem, subject to the limitations described in this proxy statement/prospectus, and the redemption of MMAC’s public shares if MMAC is unable to complete an initial business combination by September 17, 2019, unless that date is otherwise extended by MMAC’s stockholders, subject to applicable law and as further described in this proxy statement/prospectus. In addition, if MMAC’s plan to redeem its public shares if it is unable to complete an initial business combination by the applicable deadline is not completed for any reason, unless that date is otherwise extended by MMAC’s stockholders, compliance with Delaware law may require that MMAC submit a plan of dissolution to its then-existing stockholders for approval prior to the distribution of the proceeds held in the trust account. In that case, public stockholders may be forced to wait beyond the applicable deadline or such other extended date, as applicable, before they receive funds from the trust account. In no other circumstances will a public stockholder have any right or interest of any kind in the trust account. Accordingly, to liquidate their investment, MMAC’s security holders may be forced to sell their public shares or warrants, potentially at a loss.

 

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The ability of MMAC’s public stockholders to exercise redemption rights with respect to a large number of shares of MMAC Common Stock could decrease the probability that the Business Combination will be successfully completed, in which case MMAC’s stockholders will have to wait for liquidation in order to redeem their stock.

Since it is a condition to consummating of the Business Combination that MMAC have, in the aggregate, not less than $53 million of available cash upon the consummation of the Business Combination, the probability that the Business Combination will be successfully completed has decreased due to a large number of MMAC’s public shares already electing redemption. Holders of public shares of MMAC Common Stock have elected to redeem such shares such that MMAC currently has, in the aggregate, less than $53 million of available cash. As such, MMAC is not currently able to satisfy a condition to consummation of the Business Combination and, unless the PIPE Financing is successful, Akazoo will not be required to consummate the Business Combination, although such condition to closing may be waived by Akazoo.

If the Business Combination is unsuccessful, MMAC’s public stockholders that do not elect redemption in connection with the Business Combination will not receive their pro rata portion of the trust account until the trust account is ultimately liquidated. If those MMAC public stockholders are in need of immediate liquidity, they could attempt to sell their shares in the open market; however, at such time, the MMAC Common Stock may trade at a discount to the pro rata per share amount in the trust account. In either situation, MMAC’s stockholders may suffer a material loss on their investment or lose the benefit of funds expected in connection with the redemption until MMAC is liquidated or MMAC’s stockholders are able to sell their stock in the open market.

If a MMAC public stockholder chooses to redeem its shares, it may not exercise its redemption rights to cause the redemption of its shares of MMAC Common Stock for a pro rata portion of the trust account, including any interest earned thereon, less franchise and income taxes payable, until the date that is two business days prior to the date of the Special Meeting.

Stockholders holding shares of MMAC Common Stock issued in MMAC’s IPO, whether or not they vote against the Business Combination Proposal, may elect to redeem all or a portion of their shares of MMAC Common Stock upon the completion of the Business Combination for cash equal to their pro rata share of the aggregate amount on deposit in the trust account which holds the remaining proceeds of MMAC’s IPO as of two business days prior to the consummation of the Business Combination, including interest, less taxes payable, upon the consummation of the Business Combination. Any stockholder who seeks to exercise this redemption right must, with respect to the portion of shares he or she wishes to redeem, prior to 5:00 p.m. Eastern time on                 , 2019 (two business days before the Special Meeting), satisfy all the procedures laid out under the section titled “Special Meeting of MMAC Stockholders—Redemption Rights” in this proxy statement/prospectus.

MMAC will incur significant costs associated with the Business Combination, whether or not the Business Combination is completed, and if such costs reduce MMAC’s available cash at the consummation of the Business Combination below a specified amount, Akazoo may not be obligated to consummate the Business Combination.

Whether or not the Business Combination is completed, MMAC has incurred and expects to continue to incur significant costs associated with the Business Combination, including due diligence, legal, accounting and other expenses associated with structuring, negotiating and documenting the Business Combination. If the parties do not consummate the Business Combination, and if time permits MMAC to seek an alternative business combination, then the costs MMAC will have incurred with respect to the Business Combination will reduce the amount of cash otherwise available to

 

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complete an alternative business combination. In addition, the combination of deferred underwriting fees and commissions and MMAC transaction expenses, together with redemptions of public shares in connection with the Business Combination, may cause MMAC’s available cash to decrease such that then MMAC may not be able to meet the closing condition contained in the Business Transaction Agreement that MMAC have, in the aggregate, not less than $53 million of available cash upon the consummation of the Business Combination. If that were to occur, Akazoo would not be obligated to consummate the Business Combination even if all the other conditions to consummation were satisfied.

Security holders may decide to sell the MMAC Common Stock or the MMAC Warrants prior to the consummation of the consummation of the Business Combination, or PubCo Ordinary Shares or the PubCo Warrants after the consummation of the Business Combination, which could cause a decline in their market prices.

Some holders of MMAC’s securities may be disinclined to own securities in a company that is not a U.S. company. This or other factors could result in the sale of shares of MMAC Common Stock or of MMAC Warrants prior to the parties consummating the Business Combination (in addition to exercises by MMAC’s stockholders of their redemption rights) or the sale of PubCo Ordinary Shares or PubCo Warrants after completion of the Business Combination. In addition, the market price of MMAC’s securities may be adversely affected by arbitrage activities occurring prior to completion of the Business Combination. These sales, or the prospects of such sales in the future, could adversely affect the market price for, and the ability to sell in the market, shares of MMAC’s securities before the Business Combination is completed, and PubCo’s securities after the completion of the Business Combination.

Public stockholders at the time of the Business Combination who purchased their MMAC Units in MMAC’s IPO and do not exercise their redemption rights may pursue rescission rights and related claims.

MMAC’s public stockholders may allege that some aspects of the Business Combination are inconsistent with the disclosure contained in the prospectus issued by MMAC in connection with the offer and sale in its IPO of MMAC Units. Consequently, a MMAC stockholder who purchased shares in the MMAC IPO (excluding the initial stockholders) and still holds them at the time of the Business Combination and who does not seek to exercise redemption rights might seek rescission of the purchase of the units such holder acquired in the IPO. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in the value of such holder’s shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. If stockholders bring successful rescission claims against MMAC, it may not have sufficient funds following the consummation of MMAC to pay such claims, or if claims are successfully brought against PubCo following the consummation of the Business Combination, PubCo’s results of operations could be adversely affected and, in any event, PubCo may be required in connection with the defense of such claims to incur expenses and divert employee attention from other business matters.

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

MMAC’s placing of funds in the trust account may not protect those funds from third-party claims against it. Although MMAC has sought to have all vendors, service providers, prospective target businesses or other entities with which it does business agree to waive any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of MMAC’s public stockholders, such parties may not execute such agreements, or, even if they execute such agreements, may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against MMAC’s assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, MMAC’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if MMAC’s management believes that such third party’s engagement would be significantly more beneficial to MMAC than any other alternative.

 

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Examples of possible instances where MMAC may engage a third-party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by MMAC’s management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where MMAC’s management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims that they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with MMAC and will not seek recourse against the trust account for any reason. Upon redemption of its shares, if MMAC is unable to complete the Business Combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with the Business Combination, MMAC will be required to provide for payment of claims of creditors that were not waived that may be brought against MMAC within the ten years following redemption. Accordingly, the per-share redemption amount received by public stockholders could be less than the $10.10 per share currently held in the trust account, due to claims of such creditors. The sponsor, which is 50% owned by Mr. Dickey, will be liable, if and to the extent any claims by a vendor for services rendered or products sold to MMAC, or a prospective target business with which MMAC has discussed entering into a business combination, reduce the amounts in the trust account to below the lesser of (i) $10.10 per share and (ii) the actual amount per share held in the trust account as of the date of the liquidation of the trust account, in each case less the amount of interest which may be withdrawn to pay taxes or fund MMAC’s working capital requirements and taxes payable, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under MMAC’s indemnity of the underwriters of the MMAC IPO against certain liabilities, including liabilities under the Securities Act. In the event that an executed waiver is deemed to be unenforceable against a third party, then the sponsor will not be responsible to the extent of any liability for such third-party claims. MMAC cannot assure you, however, that the sponsor would be able to satisfy those obligations. Except for any applicable indemnification of the sponsor, none of MMAC’s officers will indemnify MMAC for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

If MMAC is forced to liquidate, its stockholders may be held liable for claims by third parties against it to the extent of distributions received by them.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the trust account distributed to MMAC’s public stockholders upon the redemption of 100% of its public shares in the event it does not consummate an initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, may be considered a liquidation distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, MMAC intends to redeem its public shares as soon as reasonably possible following the applicable deadline or such other extended date, as applicable, in the event it does not consummate an initial business combination and, therefore, it does not intend to comply with those procedures.

Because MMAC will not be complying with Section 280, Section 281(b) of the DGCL requires it to adopt a plan, based on facts known to it at such time, that will provide for the payment of all existing and pending claims or claims that may be potentially brought against MMAC within the ten years following dissolution. However, because MMAC is a blank check company, rather than an operating company, and its operations have been limited to searching for prospective target businesses, the only likely claims to arise would be from vendors (such as lawyers, investment bankers, and consultants) or prospective target businesses. If MMAC’s plan of distribution complies with Section 281(b) of the DGCL, any liability of its stockholders with respect to a liquidating distribution would be limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. There can be no assurance that MMAC will properly assess all claims that may be potentially brought against it. As such, MMAC’s stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liability of its stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of the trust account distributed to MMAC’s public stockholders upon the redemption of 100% of its public shares in the event it does not consummate an initial business combination within the required timeframe is not considered a liquidation distribution under Delaware law and such redemption distribution is deemed to be unlawful, then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidation distribution.

 

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Risks Related to Investment in a Luxembourg Company and PubCo’s Status as a Foreign Private Issuer

As a foreign private issuer, PubCo will be exempt from a number of U.S. securities laws and rules promulgated thereunder and will be permitted to publicly disclose less information than U.S. public companies must. This may limit the information available to holders of the PubCo Ordinary Shares.

PubCo will qualify as a “foreign private issuer,” as defined in the SEC’s rules and regulations, and, consequently, PubCo will not be subject to all of the disclosure requirements applicable to public companies organized within the United States. For example, PubCo will be exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act. In addition, PubCo’s officers and directors are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and related rules with respect to their purchases and sales of PubCo’s securities. For example, some of PubCo’s key executives may sell a significant amount of PubCo Ordinary Shares and such sales will not be required to be disclosed as promptly as public companies organized within the United States would have to disclose. Accordingly, once such sales are eventually disclosed, PubCo’s Ordinary Share price may decline significantly. Moreover, PubCo will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies. PubCo will also not be subject to Regulation FD under the Exchange Act, which would prohibit PubCo from selectively disclosing material nonpublic information to certain persons without concurrently making a widespread public disclosure of such information. Accordingly, there may be less publicly available information concerning PubCo than there is for U.S. public companies.

As a foreign private issuer, PubCo will file an annual report on Form 20-F within four months of the close of each fiscal year ended December 31 and furnish reports on Form 6-K relating to certain material events promptly after PubCo publicly announces these events. However, because of the above exemptions for foreign private issuers, which PubCo intends to rely on, PubCo shareholders will not be afforded the same information generally available to investors holding shares in public companies that are not foreign private issuers.

PubCo may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses. This would subject PubCo to U.S. GAAP reporting requirements which may be difficult for it to comply with.

As a “foreign private issuer,” PubCo would not be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act and related rules and regulations. Under those rules, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter, and, accordingly, the next determination will be made with respect to PubCo on June 30, 2020.

In the future, PubCo would lose its foreign private issuer status if a majority of its shareholders, directors or management are U.S. citizens or residents and it fails to meet additional requirements necessary to avoid loss of foreign private issuer status. Although PubCo intends to follow certain practices that are consistent with U.S. regulatory provisions applicable to U.S. companies, PubCo’s loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to PubCo under U.S. securities laws if it is deemed a U.S. domestic issuer may be significantly higher. If PubCo is not a foreign private issuer, PubCo will be required to file periodic reports and prospectuses on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, PubCo would become subject to the Regulation FD, aimed at preventing issuers from making selective disclosures of material information. PubCo also may be required to modify certain of its policies to comply with good governance practices associated with U.S. domestic issuers. Such conversion and modifications will involve additional costs. In addition, PubCo may lose its ability to rely upon exemptions from certain corporate governance requirements of NASDAQ that are available to foreign private issuers. For example, NASDAQ’s corporate governance rules require listed companies to have, among other things, a majority of independent board members and independent director oversight of executive compensation,

 

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nomination of directors, and corporate governance matters. As a foreign private issuer, PubCo would be permitted to follow home country practice in lieu of the above requirements. As long as PubCo relies on the foreign private issuer exemption to certain of NASDAQ’s corporate governance standards, a majority of the directors on its board of directors are not required to be independent directors, its remuneration committee is not required to be comprised entirely of independent directors, and it will not be required to have a nominating and corporate governance committee. Also, PubCo would be required to change its basis of accounting from IFRS as issued by the IASB to U.S. GAAP, which may be difficult and costly for it to comply with. If PubCo loses its foreign private issuer status and fails to comply with U.S. securities laws applicable to U.S. domestic issuers, PubCo may have to de-list from NASDAQ and could be subject to investigation by the SEC, NASDAQ and other regulators, among other materially adverse consequences.

The rights of PubCo shareholders may differ from the rights they would have as shareholders of a U.S. corporation, which could adversely impact trading in PubCo’s Ordinary Shares and its ability to conduct equity financings.

PubCo’s corporate affairs are governed by its articles of association and the Luxembourg Company Law. The rights of PubCo’s shareholders and the responsibilities of its directors and officers under the Luxembourg Company Law are different from those applicable to a corporation incorporated in the United States. See “Comparison of Stockholders’ Rights” for a discussion of material differences between Delaware and Luxembourg law applicable to MMAC stockholders and PubCo shareholders.

Further, under Luxembourg law there may be less publicly available information about PubCo than is regularly published by or about U.S. issuers. In addition, Luxembourg law governing the securities of Luxembourg companies may not be as extensive as those in effect in the United States, and Luxembourg law, and regulations in respect of corporate governance matters might not be as protective of minority shareholders as state corporation laws in the United States. Therefore, PubCo shareholders may have more difficulty in protecting their interests in connection with actions taken by its directors and officers or its principal shareholders than they would as shareholders of a corporation incorporated in the United States. As a result of these differences, PubCo shareholders may have more difficulty protecting their interests than they would as shareholders of a U.S. issuer.

PubCo is organized under the laws of Luxembourg and a substantial amount of its assets are not located in the United States. It may be difficult for you to obtain or enforce judgments or bring original actions against PubCo or the members of its board of directors in the United States.

PubCo is organized under the laws of Luxembourg. In addition, a substantial amount of its assets are located outside the United States. Furthermore, some of the members of PubCo’s board of directors and officers reside outside the United States and a substantial portion of their assets are located outside the United States. Investors may not be able to effect service of process within the United States upon PubCo or these persons or enforce judgments obtained against PubCo or these persons in U.S. courts, including judgments in actions predicated upon the civil liability provisions of the U.S. federal securities laws. Likewise, it also may be difficult for an investor to enforce in U.S. courts judgments obtained against PubCo or these persons in courts located in jurisdictions outside the United States, including judgments predicated upon the civil liability provisions of the U.S. federal securities laws. Awards of punitive damages in actions brought in the United States or elsewhere are generally not enforceable in Luxembourg.

As there is no treaty in force on the reciprocal recognition and enforcement of judgments in civil and commercial matters between the United States and Luxembourg, courts in Luxembourg will not automatically recognize and enforce a final judgment rendered by a U.S. court. A valid judgment obtained from a court of competent jurisdiction in the United States may be entered and enforced through a court of competent jurisdiction in Luxembourg, subject to compliance with the enforcement procedures (exequatur). The enforceability in Luxembourg courts of judgments rendered by U.S. courts will be subject, prior to any enforcement in Luxembourg, to the procedure and the conditions set forth in the Luxembourg procedural code, which conditions may include the following as of the date of this proxy statement/prospectus (which may change):

 

   

the judgment of the U.S. court is final and enforceable (exécutoire) in the United States;

 

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the U.S. court had jurisdiction over the subject matter leading to the judgment (that is, its jurisdiction was in compliance both with Luxembourg private international law rules and with the applicable domestic U.S. federal or state jurisdictional rules);

 

   

the U.S. court applied to the dispute the substantive law that would have been applied by Luxembourg courts (based on recent case law and legal doctrine, it is not certain that this condition would still be required for an exequatur to be granted by a Luxembourg court);

 

   

the judgment was granted following proceedings where the counterparty had the opportunity to appear and, if it appeared, to present a defense, and the decision of the foreign court must not have been obtained by fraud, but in compliance with the rights of the defendant;

 

   

the U.S. court acted in accordance with its own procedural laws; and

 

   

the decisions and the considerations of the U.S. court must not be contrary to Luxembourg international public policy rules or have been given in proceedings of a tax or criminal nature or rendered subsequent to an evasion of Luxembourg law (fraude à la loi). Awards of damages made under civil liabilities provisions of the U.S. federal securities laws, or other laws, which are classified by Luxembourg courts as being of a penal or punitive nature (for example, fines or punitive damages), might not be recognized by Luxembourg courts. Ordinarily, an award of monetary damages would not be considered as a penalty, but if the monetary damages include punitive damages, such punitive damages may be considered a penalty.

In addition, actions brought in a Luxembourg court against PubCo, the members of its board of directors, its officers, or the experts named herein to enforce liabilities based on U.S. federal securities laws may be subject to certain restrictions. In particular, Luxembourg courts generally do not award punitive damages. Litigation in Luxembourg also is subject to rules of procedure that differ from the U.S. rules, including, with respect to the taking and admissibility of evidence, the conduct of the proceedings and the allocation of costs. Proceedings in Luxembourg would have to be conducted in the French or German language, and all documents submitted to the court would, in principle, have to be translated into French or German. For these reasons, it may be difficult for a U.S. investor to bring an original action in a Luxembourg court predicated upon the civil liability provisions of the U.S. federal securities laws against PubCo, the members of its board of directors, its officers, or the experts named herein. In addition, even if a judgment against PubCo, the non-U.S. members of its board of directors, its officers, or the experts named in this proxy statement/prospectus based on the civil liability provisions of the U.S. federal securities laws is obtained, a U.S. investor may not be able to enforce it in U.S. or Luxembourg courts.

The directors and officers of PubCo have entered into, or will enter into, indemnification agreements with PubCo. Under such agreements, the directors and officers will be entitled to indemnification from PubCo to the fullest extent permitted by Luxemburg law against liability and expenses reasonably incurred or paid by him or her in connection with any claim, action, suit, or proceeding in which he or she would be involved by virtue of his or her being or having been a director or officer and against amounts paid or incurred by him or her in the settlement thereof. Luxembourg law permits PubCo to keep directors indemnified against any expenses, judgments, fines and amounts paid in connection with liability of a director towards PubCo or a third party for management errors i.e., for wrongful acts committed during the execution of the mandate (mandat) granted to the director by PubCo, except in connection with criminal offenses, gross negligence or fraud. The rights to and obligations of indemnification among or between PubCo and any of its current or former directors and officers are generally governed by the laws of Luxembourg and subject to the jurisdiction of the Luxembourg courts, unless such rights or obligations do not relate to or arise out of such persons’ capacities listed above. Although there is doubt as to whether U.S. courts would enforce this indemnification provision in an action brought in the United States under U.S. federal or state securities laws, this provision could make it more difficult to obtain judgments outside Luxembourg or from non-Luxembourg jurisdictions that would apply Luxembourg law against PubCo’s assets in Luxembourg.

Luxembourg and European insolvency and bankruptcy laws are substantially different from U.S. insolvency and bankruptcy laws and may offer PubCo’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws.

As a company organized under the laws of Luxembourg and with its registered office in Luxembourg, PubCo is subject to Luxembourg insolvency and bankruptcy laws in the event any insolvency proceedings are initiated against it including, among other things, Council and European Parliament Regulation (EU) 2015/848 of 20 May 2015 on insolvency proceedings (recast). Should courts in another European country determine that the insolvency and bankruptcy laws of that country apply to PubCo in accordance with and subject to such European Union (“EU”)

 

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regulations, the courts in that country could have jurisdiction over the insolvency proceedings initiated against PubCo. Insolvency and bankruptcy laws in Luxembourg or the relevant other European country, if any, may offer PubCo’s shareholders less protection than they would have under U.S. insolvency and bankruptcy laws and make it more difficult for them to recover the amount they could expect to recover in a liquidation under U.S. insolvency and bankruptcy laws.

Risks Related to PubCo’s Business

Unless the context requires otherwise, references to “PubCo” in this section are to PubCo as directly or indirectly affected by, acting through, or having the attributes of, MMAC and/or Akazoo and their respective direct and indirect subsidiaries, in each case, by virtue of PubCo’s direct or indirect ownership and operation thereof following consummation of the Business Combination.

The future exercise of registration rights may adversely affect the market price of PubCo Ordinary Shares.

The PubCo Ordinary Shares to be issued in the PIPE Financing are expected to be subject to registration rights pursuant to one or more registration rights agreements. Pursuant to those agreements, PubCo would be obligated to register those PubCo Ordinary Shares for resale. Sales of those shares may substantially depress the market price of the PubCo Ordinary Shares.

PubCo’s business will depend on increasing and continuing acceptance of on-demand streaming as a music delivery format.

PubCo’s success and growth will depend on increasing acceptance of on-demand music streaming services by consumers, content producers and distribution partners. Consumers may prefer other methods and formats to on-demand music streaming services. If consumers migrate to the on-demand music streaming format more slowly than expected or decide to access music in other formats or through other delivery methods, it could make it more difficult for PubCo to grow or maintain its Subscriber base, license attractive content, license content at desirable rates or grow revenues. Moreover, even if on-demand music streaming achieves increasing acceptance and penetration in developing markets, there is no assurance that this will continue. New music and audio delivery formats, including formats that do not exist today, may prove to be more successful and attract more listeners than on-demand audio streaming. If PubCo fails to anticipate changes in music delivery formats it may lose Subscribers, in which case its business, financial condition, results of operations and cash flows would be adversely affected.

The market for on-demand audio streaming services is new and rapidly evolving.

The on-demand streaming music market is new and rapidly evolving, and its characteristics as it matures are uncertain. There is uncertainty regarding future developments in service pricing, subscription models, service offerings, differentiation of services, and consolidation of the streaming entertainment market. The market may move toward advertising-supported models or other formats, or combined offerings of audio and video streaming. If other models gain in prominence there can be no assurance that PubCo will be able to adapt its business model accordingly.

Moreover, certain features may emerge in the streaming market that may prove disadvantageous to PubCo. For example, if it becomes more prevalent that content rights are permanently or temporarily granted by rights holders on an exclusive basis to one or a small number of providers, the attractiveness of PubCo’s services will depend on its ability to secure such exclusive rights. Even if PubCo is able to do so, the resulting costs may impact its margins and make it more difficult for PubCo to operate profitably. Investments in marketing in the coming years may not provide the anticipated return, or may not be fully recovered, if PubCo fails to anticipate the manner in which the on-demand streaming market develops in the markets in which PubCo will operate.

PubCo’s business plan and strategy are subject to change.

PubCo’s business plan and strategy may change as a result of changes in market trends, available capital and its relationship with key distribution partners and rights holders. PubCo expects to further develop its service offering and may not have the data or experience necessary to estimate or project returns from new investments and strategies. PubCo may introduce different services in the future in addition to its existing free and premium services. These strategies may be untested in the market, and there can be no assurance that they will appeal to consumers, that PubCo will be able to obtain or retain rights under new or

 

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under existing license agreements, that PubCo will appropriately price new services or determine the features that should be included, or that competitors will not introduce a service that customers find superior. PubCo may also choose to target certain geographic markets in its growth strategy where the penetration rate of music streaming services is currently low compared to other markets. It may be unsuccessful in identifying the appropriate markets on which to focus. Creating new services and implementing new strategies often requires significant investment, and if PubCo’s business plan and strategy fail to generate the targeted financial performance, or if it is forced to adjust or abandon strategies, its business, financial condition, results of operations and cash flows may be adversely affected.

If PubCo’s efforts to attract prospective users and to retain existing users are not successful, PubCo’s growth prospects and revenue will be adversely affected.

PubCo’s ability to grow its business and generate revenue will depend on retaining and expanding its total user base, increasing advertising revenue by effectively monetizing its free radio streaming service (the “Radio Service”) base, and increasing the number of Subscribers. PubCo must convince prospective users of the benefits of its service and its existing users of the continuing value of its service. PubCo’s ability to attract new users, retain existing users and convert users to Subscribers will depend in large part on PubCo’s ability to offer leading technologies and products, compelling content, superior functionality and an engaging user experience. As consumer tastes and preferences change on the internet and with mobile devices and other internet-connected products, PubCo may need to enhance and improve its services, introduce new services and features and maintain its competitive position with additional technological advances and an adaptable platform. If PubCo fails to keep pace with technological advances or fails to offer compelling product offerings and state-of-the-art delivery platforms to meet consumer demands, PubCo’s ability to grow or sustain the reach of its service, attract and retain users, and increase its Subscribers may be adversely affected.

In addition, in order to increase PubCo’s advertising revenue, PubCo will also seek to increase the listening time that its users spend on its Radio Service. The more content PubCo streams under the Radio Service, the more advertising inventory PubCo will have to sell. Further, growth in PubCo’s Radio Service user base increases the size and scope of user pools targeted by advertisers, which will improve PubCo’s ability to deliver relevant advertising to those users in a manner that maximizes PubCo’s advertising customers’ return on investment and, ultimately, will demonstrate the effectiveness of PubCo’s advertising solutions and justifies a pricing structure that is advantageous for PubCo. If PubCo fails to grow its Radio Service user base, the amount of content streamed, and the listening time spent by its Radio Service users, PubCo may be unable to grow Radio Service revenue. Moreover, given that Subscribers will partly be sourced from the conversion of PubCo’s Radio Service users to Subscribers, any failure to grow PubCo’s Radio Service user base or convert Radio Service users to Subscribers may negatively impact PubCo’s revenue.

In order to increase PubCo’s Radio Service users and PubCo’s Subscribers, PubCo will need to address a number of challenges, including:

 

   

continuing to improve PubCo’s Radio Service by providing users with a consistently high-quality and user-friendly experience;

 

   

continuing to curate a catalog of content that consumers want to engage with on PubCo’s service;

 

   

continuing to innovate and keep pace with changes in technology and PubCo’s competitors; and

 

   

maintaining and building PubCo’s relationships with its telecommunications, messaging, brand and other partnerships.

PubCo may not be able to successfully overcome each challenge, which could have a material adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

Moreover, the provisions of certain of PubCo’s license agreements may require consent to implement improvements to, or otherwise change, its on-demand streaming or Radio Service. PubCo may not be able to obtain consent from its rights holders to add additional features and functionality to its on-demand streaming or Radio Service or its rights holders may be delayed in providing such consent, which may hinder its ability to be responsive to its user’s tastes and preferences and may make PubCo less competitive with other services.

 

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PubCo’s results of operations depend on its ability to establish and maintain relationships on favorable terms with distribution partners that promote and distribute its services.

Historically, a large number of Akazoo’s subscribers have been acquired through its various distribution partnerships with leading telecommunications companies. Such partnerships are expected to remain a key part of PubCo’s sales and distribution channels and growth strategy. Management believes that establishing partnerships in new geographical markets is essential to PubCo’s ability to penetrate those markets. Reaching and maintaining agreements with such partners involves significant investments of time, resources and work in design and integration, and PubCo may not be successful in reaching such agreements on acceptable terms, which could adversely affect its business, financial condition, results of operations and cash flows.

If PubCo fails to establish partnerships with leading telecommunications or other companies with complementary business activities (such as audio equipment, automobile manufacturers, or messaging services) or geographic reach, the value of the partnerships to PubCo may be reduced. Similarly, if PubCo’s partners lose market share or customers or consumers generally purchase less telecom products and services, PubCo’s ability to reach potential subscribers may be greatly diminished, which could have an adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

Some of PubCo’s partnership arrangements may contain exclusivity restrictions on its activities in the geographic market covered by the partnership, which may constrain PubCo from entering into agreements with the competitors of its partners. PubCo’s partnership agreements provide for the sharing of subscription fees between PubCo and its partners (in the case of standalone subscriptions) or the payment by its partners of a monthly fee per subscriber or per active subscriber (in the case of bundled subscriptions). These partnership agreements can be numerous and complex, and will require the processing of huge volumes of data to calculate the revenues shared. Bundled subscriptions will generally be sold by PubCo’s partners for a single price that covers both its subscription and the relevant partner’s product (e.g., mobile phone plan or internet service). Under this arrangement, PubCo subscribers will be automatically enrolled in PubCo’s services and typically remain PubCo subscribers for as long as they are signed up for the relevant partner’s mobile or internet plan. In contrast, standalone subscriptions will typically be sold directly by PubCo or indirectly by its partners as a separate product with its own price and subscription term. If PubCo’s share of revenue under bundled and standalone offers is insufficient to offset the costs to provide these offers, including in particular the royalty payments to rights holders, PubCo’s margins could be adversely affected, which could affect its business, financial condition, results of operations and cash flows.

While the terms and conditions of PubCo’s distribution partnerships will vary, the majority of Akazoo’s agreements are relatively short-term and can be cancelled with as little as one month’s notice in some cases. When PubCo’s partnership agreements expire, its partners will typically cease acquiring new subscribers (while continuing to provide PubCo services to existing subscribers for a further specified period). PubCo may not succeed in converting bundle subscribers to standalone subscribers before the relevant partnership agreements expire, which could result in increased subscriber churn and a decrease in PubCo’s consolidated revenue. Furthermore, there can be no assurance that PubCo will be able to renew or replace its partnership agreements as they expire, or that new partnership agreements will be on equally favorable terms. If not, the impact of the revised terms could have an adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

PubCo will depend upon third-party licenses for sound recordings and musical compositions and an adverse change to, loss of, or claim that PubCo does not hold any necessary licenses may materially adversely affect PubCo’s business, financial condition, results of operations and cash flows.

To secure the rights to stream sound recordings and the musical compositions embodied therein, PubCo has entered and will continue to enter into license agreements to obtain licenses from rights holders such as record labels, music publishers, performing rights organizations, collecting societies, and other copyright owners or their agents, and pay royalties to such parties. Though PubCo will work diligently in its efforts to obtain all necessary licenses to stream sound recordings and the musical compositions embodied therein, there is no guarantee that the licenses available to PubCo now will continue to be available in the future at rates and on terms that are favorable or commercially reasonable or at all. The terms of these licenses, including the royalty rates that PubCo is required to pay pursuant to them, may change as a result of changes in PubCo’s bargaining power, changes in the industry, changes in applicable law, or for other reasons. Increases in royalty rates or changes to other terms of these licenses may materially impact PubCo’s business, financial condition, results of operations and cash flows.

 

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PubCo has entered and will continue to enter into license agreements to obtain rights to stream sound recordings. If PubCo fails to obtain these licenses, the size and quality of its catalog may be materially adversely impacted and PubCo’s business, financial condition, results of operations and cash flows could be materially harmed.

PubCo generally obtains licenses for two types of rights with respect to musical compositions: mechanical rights and public performance rights.

Access to local content will be important to PubCo’s ability to attract Subscribers in many geographical markets, particularly in those where local artists are the most popular. In certain markets, obtaining licenses for local music content will be vital to the perceived value of PubCo’s service and Subscriber engagement. In other parts of the world, including Europe, Asia, and Latin America, PubCo will obtain mechanical and performance licenses for musical compositions either through local collecting societies representing publishers or from publishers directly, or a combination thereof. PubCo cannot guarantee that its licenses with collecting societies and its direct licenses with publishers provide full coverage for all of the musical compositions PubCo will make available to its users in such countries. In Asia and Latin America, PubCo anticipates movement away from blanket licenses from copyright collectives, which may lead to a fragmented copyright licensing landscape. Publishers, songwriters, and other rights holders choosing not to be represented by collecting societies could adversely impact PubCo’s ability to secure favorable licensing arrangements in connection with musical compositions that such rights holders own or control, including increasing the costs of licensing such musical compositions, or subjecting PubCo to significant liability for copyright infringement.

There also is no guarantee that PubCo will obtain all of the licenses it needs to stream content, as the process of obtaining such licenses involves many rights holders, some of whom are unknown, and myriad complex legal issues across many jurisdictions, including open questions of law as to when and whether particular licenses are needed. Additionally, there is a risk that aspiring rights holders, their agents, or legislative or regulatory bodies will create or attempt to create new rights that could require PubCo to enter into license agreements with, and pay royalties to, newly defined groups of rights holders, some of which may be difficult or impossible to identify.

Even when PubCo is able to enter into license agreements with rights holders, PubCo cannot guarantee that such agreements will continue to be renewed indefinitely. For example, from time to time, PubCo’s license agreements with certain rights holders and/or their agents may expire while PubCo negotiates their renewals and, per industry custom and practice, PubCo may enter into brief (for example, month-, week-, or even days-long) extensions of those agreements and/or continue to operate as if the license agreement had been extended, including by its continuing to make music available. During these periods, PubCo may not have assurance of long-term access to such rights holders’ content, which could have a material adverse effect on its business and could lead to potential copyright infringement claims.

It also is possible that such agreements will never be renewed at all. The lack of renewal, or termination, of one or more of PubCo’s license agreements, or the renewal of a license agreement on less favorable terms, also could have a material adverse effect on PubCo’s business, financial condition, results of operations and cash flows

Some of the emerging markets in which PubCo operates are highly regulated and require licenses to operate PubCo’s services. PubCo’s failure to obtain and maintain requisite licenses or permits or to respond to any changes in government policies, laws or regulations may materially and adversely impact PubCo’s business, financial condition and results of operations.

Operators in many of PubCo’s markets are required to obtain various government approvals, licenses and permits in connection with their provision of music streaming entertainment services and various related value-added telecommunications services. If PubCo fails to obtain and maintain approvals, licenses or permits required for its business, PubCo could be subject to liabilities, penalties and operational disruption and our business could be materially and adversely affected. In addition, laws and regulations are evolving, and there are uncertainties relating to the regulation of different aspects of the music streaming entertainment industry.

PubCo will have no control over the providers of the content PubCo will make available on its platforms, and PubCo’s business may be adversely affected if its access to such content is limited or delayed. The concentration of control of content by PubCo’s major providers means that even one entity, or a small number of entities working together, may unilaterally affect PubCo’s access to music and other content.

PubCo will rely on music rights holders, over whom PubCo will have no control, for the content it will make available on its service. PubCo cannot guarantee that these parties will always choose to license to it.

 

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PubCo’s business may be adversely affected if its access to music is limited or delayed because of deterioration in its relationships with a significant number of rights holders or if a significant number choose not to license to PubCo for any other reason. Rights holders also may attempt to take advantage of their market power to seek onerous financial terms from PubCo, which could have a material adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

Even if PubCo is able to secure rights to sound recordings from record labels and other copyright owners, artists and/or artist groups may object and may exert public or private pressure on third parties to discontinue licensing rights to PubCo, hold back content from PubCo or increase royalty rates. As a result, PubCo’s ability to continue to license rights to sound recordings will be subject to convincing a broad range of stakeholders of the value and quality of PubCo’s service.

To the extent that PubCo is unable to license a large amount of content or the content of certain popular artists, PubCo’s business, financial condition, results of operations and cash flows could be materially harmed.

PubCo will be a party to many license agreements which are complex and impose numerous obligations upon PubCo which may make it difficult to operate its business, and a breach of such agreements could adversely affect its business, financial condition, results of operations and cash flows.

Many of PubCo’s license agreements will be complex and will impose numerous obligations on PubCo, including obligations to, among other things:

 

   

meet certain user and conversion targets in order to secure certain licenses and royalty rates;

 

   

calculate and make payments based on complex royalty structures, which requires tracking usage of content on PubCo’s services that may have inaccurate or incomplete metadata necessary for such calculation;

 

   

provide periodic reports on the exploitation of the content in specified formats;

 

   

represent that PubCo will obtain all necessary publishing licenses and consents and pay all associated fees, royalties, and other amounts due for the licensing of musical compositions;

 

   

provide advertising inventory;

 

   

comply with certain marketing and advertising restrictions; and

 

   

comply with certain security and technical specifications.

Some of PubCo’s license agreements may grant the licensor the right to audit PubCo’s compliance with the terms and conditions of such agreements. Some of PubCo’s license agreements may also include so-called “most favored nations” provisions which require that certain terms (including potentially the material terms) of such agreements are no less favorable than those provided to any similarly situated licensor. If triggered, these most favored nations provisions could cause PubCo’s payments or other obligations under those agreements to escalate substantially. Additionally, some of PubCo’s license agreements may require consent to undertake certain business initiatives and without such consent, PubCo’s ability to undertake new business initiatives may be limited. This could hurt PubCo’s competitive position.

If PubCo materially breaches any of these obligations or any other obligations set forth in any of its license agreements, or if PubCo uses content in ways that are found to exceed the scope of such agreements, PubCo could be subject to monetary penalties and PubCo’s rights under such license agreements could be terminated, either of which could have a material adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

 

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PubCo’s royalty payment scheme will be complex, and it will be difficult to estimate the amount payable under PubCo’s license agreements.

Under PubCo’s license agreements and relevant statutes, PubCo must pay a royalty to record labels, music publishers, and other copyright owners in order to stream content. The determination of the amount and timing of such payments will be complex and subject to a number of variables, including the revenue generated, the type of content streamed and the country in which it is streamed, the service tier such content is streamed on, identification of the appropriate license holder, size of user base, ratio of Radio Service users to Subscribers, and any applicable advertising fees and discounts, among other variables. Additionally, PubCo may have certain arrangements whereby royalty costs are paid in advance or are subject to minimum guaranteed amounts. An accrual will be estimated when actual royalty costs to be incurred during a contractual period are expected to fall short of the minimum guaranteed amount. Moreover, for minimum guarantee arrangements for which PubCo cannot reliably predict the underlying expense, PubCo will expense the minimum guarantee on a straight-line basis over the term of the arrangement. Additionally, PubCo may also have license agreements that include so-called “most favored nations” provisions that require that the material terms of such agreements are the most favorable material terms provided to any music licensor, which, if triggered, could cause PubCo’s royalty payments under those agreements to escalate substantially. An accrual and expense will be recognized when it is probable that PubCo will make additional royalty payments under these terms.

Though PubCo will regularly assess the internal controls and systems it uses to determine royalties payable, and because determining royalties payable is so complex, PubCo may underpay or overpay the royalty amounts payable to record labels, music publishers, and other copyright owners. Underpayment could result in (i) litigation or other disputes with record labels, music publishers, and other copyright owners, (ii) the unexpected payment of additional royalties in material amounts, and (iii) damage to PubCo’s business relationships with record labels, music publishers, other copyright owners, and artists and/or artist groups. If PubCo overpays royalties, PubCo may be unable to reclaim such overpayments, and PubCo’s profits will suffer. Failure to accurately pay PubCo’s royalties may adversely affect its business, financial condition, results of operations and cash flows.

Minimum guarantees required under certain of PubCo’s license agreements for sound recordings and underlying musical compositions may limit PubCo’s operating flexibility and may adversely affect PubCo’s business, financial condition, results of operations and cash flows.

Certain of PubCo’s license agreements for sound recordings and musical compositions (both for mechanical rights and public performance rights) may contain minimum guarantees and/or may require that PubCo makes minimum guarantee payments. Such minimum guarantees related to PubCo’s content costs are not always tied to its number of users, active users, Subscribers, or the number of sound recordings and musical compositions used on PubCo’s services. Accordingly, PubCo’s ability to achieve and sustain profitability and operating leverage on PubCo’s services in part will depend on PubCo’s ability to increase its revenue through increased sales of premium on-demand streaming subscriptions and advertising sales on terms that maintain an adequate gross margin. The duration of PubCo’s license agreements that contain minimum guarantees will likely be between one and two years, but PubCo’s Subscribers may cancel their subscriptions at any time. If PubCo’s forecasts of Subscribers do not meet its expectations or the number of Subscribers or advertising sales decline significantly during the term of PubCo’s license agreements, PubCo’s margins may be materially and adversely affected. To the extent PubCo’s Subscriber revenue growth or advertising sales do not meet its expectations, PubCo’s business, financial condition, results of operations and cash flows also could be adversely affected as a result of such minimum guarantees. In addition, the fixed cost nature of these minimum guarantees may limit PubCo’s flexibility in planning for, or reacting to, changes in PubCo’s business and the market segments in which it operates.

PubCo will rely on estimates of the market share of licensable content controlled by each content provider, as well as its own user growth and forecasted advertising revenue, to forecast whether such minimum guarantees can be recouped against PubCo’s actual content costs incurred over the duration of the license agreement. To the extent that these revenue and/or market share estimates underperform relative to PubCo’s expectations, leading to content costs that do not exceed such minimum guarantees, PubCo’s margins may be materially and adversely affected.

 

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Difficulties in obtaining accurate and comprehensive information necessary to identify the compositions embodied in sound recordings on PubCo’s Premium Service and the ownership thereof may impact PubCo’s ability to perform its obligations under its licenses, affect the size of PubCo’s catalog, impact PubCo’s ability to control content costs and lead to potential copyright infringement claims.

Comprehensive and accurate ownership information for the musical compositions embodied in sound recordings may be unavailable to PubCo or difficult or, in some cases, impossible for PubCo to obtain, sometimes because it is withheld by the owners or administrators of such rights. PubCo will rely on the assistance of third parties to determine this information. If the information provided to PubCo or obtained by such third parties does not comprehensively or accurately identify the ownership of musical compositions, or if PubCo is unable to determine which musical compositions correspond to specific sound recordings, it may be difficult or impossible to identify the appropriate rights holders to whom to pay royalties. This may make it difficult to comply with the obligations of any agreements with those rights holders.

These challenges, and others concerning the licensing of musical compositions embodied in sound recordings on PubCo’s services, may subject PubCo to significant liability for copyright infringement, breach of contract, or other claims.

If PubCo’s security systems are breached, PubCo may face civil liability, and public perception of PubCo’s security measures could be diminished, either of which would negatively affect its ability to attract and retain Subscribers, Radio Service users, advertisers, content providers, and other business partners.

Techniques used to gain unauthorized access to data and software are constantly evolving, and PubCo may be unable to anticipate or prevent unauthorized access to data pertaining to PubCo’s users, including credit card and debit card information and other personal data about its users, business partners, and employees. Like all internet services, PubCo’s service is vulnerable to software bugs, computer viruses, internet worms, break-ins, phishing attacks, attempts to overload servers with denial-of-service, or other attacks and similar disruptions from the unauthorized use of PubCo’s and third-party computer systems, any of which could lead to system interruptions, delays, or shutdowns, causing loss of critical data or the unauthorized access to personal data. Computer malware, viruses, and computer hacking and phishing attacks have become more prevalent in PubCo’s industry, have occurred on Akazoo’s systems in the past, and may occur on PubCo’s systems in the future. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of PubCo’s services and technical infrastructure to the satisfaction of its users may harm PubCo’s reputation and its ability to retain existing users and attract new users. Although Akazoo has developed, and PubCo plans to continue to develop, systems and processes that are designed to protect PubCo’s data and user data, to prevent data loss, to disable undesirable accounts and activities on PubCo’s platform, and to prevent or detect security breaches, PubCo cannot assure you that such measures will provide absolute security, and PubCo may incur significant costs in protecting against or remediating cyber-attacks.

In addition, security breaches to PubCo’s systems or a third party’s systems may subject PubCo to regulatory or civil liability and public perception of PubCo’s security measures could be diminished, either of which would negatively affect PubCo’s ability to attract and retain users, which in turn would harm PubCo’s efforts to attract and retain advertisers, content providers, and other business partners. PubCo also would be required to expend significant resources to mitigate the breach of security and to address matters related to any such breach. PubCo also may be required to notify regulators about any actual or perceived personal data breach (including the European Data Protection Authorities) as well as the individuals who are affected by the incident within strict time periods.

Any failure, or perceived failure, by PubCo to maintain the security of data relating to its users, to comply with its posted privacy policy, laws and regulations, rules of self-regulatory organizations, industry standards, and contractual provisions to which PubCo may be bound, could result in the loss of confidence in PubCo, or result in actions against PubCo by governmental entities or others, all of which could result in litigation and financial losses, and could potentially cause PubCo to lose users, advertisers, and revenues. In Europe, European Data Protection Authorities could impose fines and penalties of up to 4% of annual global turnover or €20 million, whichever is higher, for a personal data breach resulting from neglect in security measures and where the definition of neglect is vague and subject to interpretation of the regulatory bodies or authorities.

 

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Assertions by third parties of infringement or other violation by PubCo of their intellectual property rights could harm PubCo’s business, financial condition, results of operations and cash flows.

Third parties may in the future assert, that Akazoo has infringed, misappropriated, or otherwise violated their copyrights, patents, and other intellectual property rights, and as PubCo expects to face increasing competition, the possibility of intellectual property rights claims against PubCo may increase in the future.

PubCo’s ability to provide its services will be dependent upon its ability to license intellectual property rights to sound recordings and the musical compositions embodied therein, as well as related content such as album cover art and artist images. Various laws and regulations govern the copyright and other intellectual property rights associated with sound recordings and musical compositions. Existing laws and regulations are evolving and subject to different interpretations, and various legislative or regulatory bodies may expand current or enact new laws or regulations. Although PubCo expects to expend significant resources to seek to comply with the statutory, regulatory, and judicial frameworks by, for example, entering into license agreements, PubCo cannot assure you that it will not infringe or violate any third-party intellectual property rights.

In addition, music, internet, technology, and media companies are frequently subject to litigation based on allegations of infringement, misappropriation, or other violations of intellectual property rights. Many companies in these industries, including many of PubCo’s competitors, have substantially larger patent and intellectual property portfolios than PubCo does, which could make PubCo a target for litigation as it may not be able to assert counterclaims against parties that sue it for patent or other intellectual property infringement. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to aggressively assert claims in order to extract value from technology companies. Further, from time to time PubCo may introduce new products and services, including in territories where Akazoo currently does not have an offering, which could increase PubCo’s exposure to patent and other intellectual property claims from competitors and non-practicing entities. It is difficult to predict whether assertions of third-party intellectual property rights or any infringement or misappropriation claims arising from such assertions will substantially harm PubCo’s business, financial condition, results of operations and cash flows. If PubCo is forced to defend against any infringement or misappropriation claims, whether they are with or without merit, are settled out of court, or are determined in PubCo’s favor, PubCo may be required to expend significant time and financial resources on the defense of such claims. Furthermore, an adverse outcome of a dispute may require PubCo to pay significant damages, which may be even greater if PubCo is found to have willfully infringed upon a party’s intellectual property; cease exploiting copyrighted content that PubCo has previously had the ability to exploit; cease using solutions that are alleged to infringe or misappropriate the intellectual property of others; expend additional development resources to redesign PubCo’s solutions; enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies, content, or materials; indemnify PubCo’s partners and other third parties; and/or take other actions that may have material effects on PubCo’s business, financial condition, results of operations and cash flows.

Moreover, PubCo will rely on multiple software programmers to design PubCo’s proprietary technologies, and PubCo may contribute software source code under “open source” licenses and make technology PubCo developed available under open source licenses. Although PubCo will make every effort to prevent the incorporation of licenses that would require PubCo to disclose code and/or innovations in PubCo’s products, PubCo may not exercise complete control over the development efforts of its programmers, and PubCo cannot be certain that its programmers have not used software that is subject to such licenses or that they will not do so in the future. In the event that portions of PubCo’s proprietary technology are determined to be subject to licenses that require it to publicly release the affected portions of its source code, re-engineer a portion of its technologies, or otherwise be limited in the licensing of its technologies, PubCo may be forced to do so, each of which could materially harm PubCo’s business, financial condition, results of operations and cash flows.

 

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Failure to protect PubCo’s intellectual property could substantially harm PubCo’s business, financial condition, results of operations and cash flows.

The success of PubCo’s business will depend on its ability to protect and enforce its patents, trade secrets, trademarks, copyrights, and all of PubCo’s other intellectual property rights, including its intellectual property rights underlying its services. PubCo will attempt to protect its intellectual property under patent, trade secret, trademark, and copyright law through a combination of employee, third-party assignment and nondisclosure agreements, other contractual restrictions, technological measures, and other methods. These afford only limited protection and PubCo is still early in the process of securing its intellectual property rights. Despite PubCo’s efforts to protect its intellectual property rights and trade secrets, unauthorized parties may attempt to copy aspects of PubCo’s song recommendation technology or other technology, or obtain and use PubCo’s trade secrets and other confidential information. Moreover, policing PubCo’s intellectual property rights is difficult and time consuming. PubCo cannot assure you that it would have adequate resources to protect and police its intellectual property rights, and PubCo cannot assure you that the steps it takes to do so will always be effective.

Akazoo has filed, and PubCo may in the future file, patent applications on certain of PubCo’s innovations. It is possible, however, that these innovations may not be patentable. In addition, given the cost, effort, risks, and downside of obtaining patent protection, including the requirement to ultimately disclose the invention to the public, PubCo may choose not to seek patent protection for some innovations. Furthermore, PubCo’s patent applications may not issue as granted patents, the scope of the protection gained may be insufficient or an issued patent may be deemed invalid or unenforceable. PubCo also cannot guarantee that any of PubCo’s present or future patents or other intellectual property rights will not lapse or be invalidated, circumvented, challenged, or abandoned. Neither can it be guaranteed that PubCo’s intellectual property rights will provide competitive advantages to it. PubCo’s ability to assert its intellectual property rights against potential competitors or to settle current or future disputes could be limited by PubCo’s relationships with third parties, and any of PubCo’s pending or future patent applications may not have the scope of coverage originally sought. PubCo cannot guarantee that its intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak. PubCo could lose both the ability to assert its intellectual property rights against, or to license PubCo’s technology to, others and the ability to collect royalties or other payments.

Akazoo currently owns the akazoo.com internet domain name and various other domain names. Internet regulatory bodies generally regulate domain names. If PubCo loses the ability to use a domain name in a particular country, PubCo would be forced either to incur significant additional expenses to market PubCo’s services within that country or, in extreme cases, to elect not to offer its services in that country. Either result could harm PubCo’s business, financial condition, results of operations and cash flows. The regulation of domain names in the United States and in foreign countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, PubCo may not be able to acquire or maintain the domain names that utilize Akazoo’s brand names in the United States or other countries in which it may conduct business in the future.

Litigation or proceedings before governmental authorities and administrative bodies may be necessary in the future to enforce PubCo’s intellectual property rights, to protect PubCo’s patent rights, trademarks, trade secrets, and domain names and to determine the validity and scope of the proprietary rights of others. PubCo’s efforts to enforce or protect its proprietary rights may be ineffective and could result in substantial costs and diversion of resources and management time, each of which could substantially harm its operating results. Additionally, changes in law may be implemented, or changes in interpretation of such laws may occur, that may affect PubCo’s ability to protect and enforce its patents and other intellectual property.

 

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PubCo’s metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect PubCo’s reputation and PubCo’s business, financial condition, results of operations and cash flows.

PubCo compares its internal subscriber numbers on a monthly basis with the internal numbers of its telecommunications and other billing partners. Third-party software and services are used for the collection and measurement of such metrics.

PubCo will review key metrics related to the operation of its business, including, but not limited to, its Subscribers, users and average revenue per user (“ARPU”) to evaluate growth trends, measure PubCo’s performance, and make strategic decisions. . PubCo’s internal subscriber and revenue data is compared to the subscriber and revenue data generated by its billing partners on a monthly basis. Once the subscriber and revenue numbers have been mutually agreed through a report comparison, Akazoo invoices its partners to receive the corresponding revenues.

Errors or inaccuracies in PubCo’s metrics or data could result in incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of users or Subscribers were to occur, PubCo may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy PubCo’s growth strategies.

In addition, advertisers generally rely on third-party measurement services to calculate PubCo’s metrics, and these third-party measurement services may not reflect PubCo’s true audience. Some of PubCo’s demographic data also may be incomplete or inaccurate because users self-report their names and dates of birth. Consequently, the personal data PubCo has may differ from its users’ actual names and ages. If advertisers, partners, or investors do not perceive PubCo’s user, geographic, or other demographic metrics to be accurate representations of PubCo’s user base, or if PubCo discovers material inaccuracies in its user, geographic, or other demographic metrics, PubCo’s reputation may be seriously harmed.

PubCo is at risk of attempts at unauthorized access to its services, and failure to effectively prevent and remediate such attempts could have an adverse impact on PubCo’s business, operating results, and financial condition. Unauthorized access to PubCo’s services may cause it to misstate key performance indicators, which once discovered, corrected, and disclosed, could undermine investor confidence in the integrity of PubCo’s key performance indicators.

Akazoo has in the past been, though not materially, and PubCo expects to be in the future, impacted by attempts by third parties to manipulate and exploit PubCo’s software for the purpose of gaining unauthorized access to PubCo’s service. This may impact PubCo’s results of operations, particularly with respect to margins, by increasing its cost of revenue without a corresponding increase to its revenue, and could expose PubCo to claims for damages including, but not limited to, from rights holders, any of which could seriously harm PubCo’s business. PubCo detects potential manipulation of its software and streams by means of an algorithm that alerts it to unusual streaming patterns. Fraudulent streams could affect PubCo’s cost of revenue to the extent its Radio Service becomes a significant portion of our revenues. It should be noted that since unauthorized access to PubCo’s service has in the past and may in the future happen through exploitation of software vulnerabilities, once a new method of doing so is developed by third parties, the level of unauthorized access (and attendant negative financial impact described above, if at all) may increase over time as third parties share the method until PubCo finds a way to prevent the unauthorized access, assuming PubCo is able to do so at all. Moreover, once PubCo detects and correct such unauthorized access and any key performance indicators it affects, investor confidence in the integrity of PubCo’s key performance indicators could be undermined. These could have a material adverse impact on PubCo’s business, financial condition, results of operations and cash flows.

 

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PubCo is at risk of artificial manipulation of stream counts and failure to effectively manage and remediate such fraudulent streams could have an adverse impact on PubCo’s business, operating results, and financial condition. Fraudulent streams and potentially associated fraudulent user accounts or artists may cause PubCo to overstate key performance indicators, which once discovered, corrected, and disclosed, could undermine investor confidence in the integrity of PubCo’s key performance indicators.

Akazoo has in the past been, and PubCo may in the future be, impacted by attempts by third parties to artificially manipulate stream counts. Such attempts may, for example, be designed to generate revenue for rights holders or to influence placement of content on certain playlists or industry music charts. These potentially fraudulent streams also may involve the creation of non-bona fide user accounts. For example, an individual might utilize fake users to stream specific content to increase its visibility on PubCo’s or third-party charts. PubCo uses a combination of algorithms and manual review by employees to detect fraudulent streams. However, PubCo may not be successful in detecting, removing and addressing all fraudulent streams (and any related user accounts. If in the future PubCo fails to successfully detect, remove and address fraudulent streams and associated user accounts, it may result in the manipulation of PubCo’s data, including the key performance indicators which underlie, among other things, PubCo’s contractual obligations with rights holders and advertisers (which could expose PubCo to the risk of litigation), as well as harm PubCo’s relationships with advertisers and rights holders. In addition, once PubCo detects, corrects and discloses fraudulent streams and associated user accounts and the key performance indicators they affect, investor confidence in the integrity of PubCo’s key performance indicators could be undermined. These could have a material adverse impact on PubCo’s business, financial condition, results of operations and cash flows.

PubCo’s business is subject to a variety of laws around the world. Government regulation of the internet is evolving and any changes in government regulations relating to the internet or other areas of PubCo’s business or other unfavorable developments may adversely affect its business, financial condition, results of operations and cash flows.

PubCo is an international company that is registered under the laws of Luxembourg. The Business Combination will result in Akazoo becoming a subsidiary of PubCo. Akazoo currently operates in 25 countries throughout the world and PubCo may further expand its geographies throughout its future operations. As a result of this organizational structure and the scope of PubCo’s operations, PubCo will be subject to a variety of laws in different countries. The scope and interpretation of the laws that are or may be applicable to PubCo are often uncertain and may be conflicting. It also is likely that if PubCo’s business grows and evolves and PubCo’s solutions are used more globally, PubCo will become subject to laws and regulations in additional jurisdictions. It is difficult to predict how existing laws will be applied to PubCo’s business and the new laws to which PubCo may become subject.

PubCo will be subject to general business regulations and laws, as well as regulations and laws specific to the internet. Such laws and regulations include, but are not limited to, labor, advertising and marketing, real estate, taxation, user privacy, data collection and protection, intellectual property, anti-corruption, anti-money laundering, foreign exchange controls, antitrust and competition, electronic contracts, telecommunications, sales procedures, automatic subscription renewals, credit card processing procedures, consumer protections, broadband internet access and content restrictions. It cannot be guaranteed that PubCo will be fully compliant in every jurisdiction in which it is subject to regulation, as existing laws and regulations governing issues such as intellectual property, privacy, taxation, and consumer protection, among others, are constantly changing. The adoption or modification of laws or regulations relating to the internet or other areas of PubCo’s business could limit or otherwise adversely affect the manner in which PubCo plans to conduct its business. For example, certain jurisdictions have implemented or are contemplating implementing laws which may negatively impact PubCo’s automatic renewal structure or its free or discounted trial incentives. Further, compliance with laws, regulations, and other requirements imposed upon PubCo’s business may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the cost of compliance and doing business.

 

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Moreover, as internet commerce continues to evolve, increasing regulation by U.S. federal and state agencies and other international regulators becomes more likely and may lead to more stringent consumer protection laws, which may impose additional burdens on PubCo. The adoption of any laws or regulations that adversely affect the popularity or growth in use of the internet, including laws limiting internet neutrality, could decrease user demand for PubCo’s service and increase PubCo’s cost of doing business. Future regulations, or changes in laws and regulations or their existing interpretations or applications, also could hinder PubCo’s operational flexibility, raise compliance costs, and result in additional historical or future liabilities for PubCo, resulting in material adverse impacts on PubCo’s business, financial condition, results of operations and cash flows.

PubCo may identify material weaknesses in its internal controls that may cause PubCo to fail to meet its reporting obligations or result in material misstatements of PubCo’s financial statements. If PubCo fails to remediate any material weaknesses or if PubCo otherwise fails to establish and maintain effective control over financial reporting, PubCo’s ability to accurately and timely report its financial results could be adversely affected.

As PubCo continues to grow, there are increasing demands being placed on the finance function and year end audit processes. This is an area that may need continued support to manage the planned growth for the business of PubCo.

If PubCo identifies future material weaknesses in its internal control over financial reporting or Akazoo fails to meet the demands that will be placed upon it as a subsidiary of a public company, including the requirements of the Sarbanes-Oxley Act, PubCo may be unable to accurately report its financial results, or report them within the timeframes required by law or stock exchange regulations. Under Section 404 of the Sarbanes-Oxley Act, PubCo will be required to evaluate and determine the effectiveness of PubCo’s internal control over financial reporting and provide a management report as to internal control over financial reporting. Failure to maintain effective internal control over financial reporting also could potentially subject PubCo to sanctions or investigations by the SEC or other regulatory authorities.

PubCo’s business will emphasize rapid innovation and will prioritize long-term user engagement over short-term financial condition or results of operations. That strategy may yield results that sometimes do not align with the market’s expectations. If that happens, PubCo’s share price may be negatively affected.

PubCo’s business is expected to grow and become more complex, and PubCo’s success will depend on its ability to quickly develop and launch new and innovative products. PubCo believes that its culture will foster this goal. PubCo’s focus on complexity and quick reactions could result in unintended outcomes or decisions that are poorly received by its users, advertisers or partners. PubCo’s culture also will prioritize its long-term user engagement over short-term financial condition or results of operations. PubCo may make decisions that may reduce its short-term revenue or profitability if PubCo believes that the decisions benefit the aggregate user experience and will thereby improve its financial performance over the long-term. These decisions may not produce the long-term benefits that PubCo expects, in which case, its user growth and engagement, its relationships with advertisers and partners, as well as its business, financial condition, results of operations and cash flows could be seriously harmed.

PubCo will depend on highly skilled key personnel to operate its business, and if it is unable to attract, retain, and motivate qualified personnel, PubCo’s ability to develop and successfully grow its business could be harmed.

PubCo believes that its future success is highly dependent on the talents and contributions of its senior management, including Apostolos N. Zervos, Akazoo’s Chief Executive Officer, and Pierre Schreuder, Akazoo’s Chief Financial Officer, members of its executive team, and other key employees, such as key engineering, finance, research and development, marketing, and sales personnel. PubCo’s future success will depend on its ability to attract, develop, motivate and retain highly qualified and skilled employees. All of PubCo’s employees, including its senior management, will be free to terminate their employment relationship with PubCo at any time, and their knowledge of PubCo’s business and industry may be difficult to replace. Qualified individuals are in high demand, particularly in the digital media industry, and PubCo may incur significant costs to attract them in the future.

PubCo expects to use equity awards to attract talented employees. Following the Business Combination, if the value of PubCo’s Ordinary Shares declines significantly and remains depressed, that may prevent PubCo from recruiting and retaining qualified employees. If PubCo is unable to attract and retain its senior management and key employees, PubCo may not be able to achieve its strategic objectives, and its business could be harmed. In addition, PubCo believes that its key executives have developed highly successful and effective working relationships. PubCo cannot ensure that it will be able to retain the services of any members of Akazoo’s senior management or other key employees. If one or more of these individuals leaves, PubCo’s operations could suffer.

 

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Streaming depends on effectively working with third-party platforms, operating systems, online platforms, hardware, networks, regulations, and standards PubCo does not control. Changes in PubCo’s service or those operating systems, hardware, networks, regulations, or standards, and PubCo’s limitations on its ability to access those platforms, operating systems, hardware, or networks may seriously harm its business.

PubCo’s services require high-bandwidth data capabilities. If the costs of data usage increase or access to data networks is limited, PubCo’s business may be seriously harmed. Additionally, to deliver high-quality audio, video, and other content over networks, PubCo’s services must work well with a range of technologies, systems, networks, regulations, and standards that PubCo does not control. In addition, the adoption of any laws or regulations that adversely affect the growth, popularity, or use of the internet, including laws governing internet neutrality, could decrease the demand for PubCo’s service and increase its cost of doing business. Additionally, mobile providers may be able to limit PubCo’s users’ ability to access PubCo’s services or otherwise make PubCo’s services a less attractive alternative to its competitors’ applications. If that occurs, PubCo’s business, financial condition, results of operations and cash flows would be seriously harmed.

The EU currently requires equal access to internet content. Additionally, as part of its Digital Single Market initiative, the EU may impose network security, disability access, or 911-like obligations on “over-the-top” services such as those provided by PubCo, which could increase PubCo’s costs. If the EU or the courts modify these open internet rules, mobile providers may be able to limit PubCo’s users’ ability to access PubCo’s services or otherwise make PubCo’s services a less attractive alternative to its competitors’ applications. If that occurs, PubCo’s business, financial condition, results of operations and cash flows would be seriously harmed.

PubCo will rely on a variety of operating systems, online platforms, hardware, and networks to reach its customers. These platforms range from desktop and mobile operating systems and application stores to smart televisions. The owners or operators of these platforms may not share PubCo’s interests and may restrict its access to them or place conditions on access that would materially affect PubCo’s ability to access those platforms. In particular, where the owner of a platform also is PubCo’s direct competitor, the platform may attempt to use this position to affect PubCo’s access to customers and ability to compete. For example, an online platform might arbitrarily remove PubCo’s services from its platform, deprive PubCo of access to business critical data, or engage in other harmful practices. Online platforms also may unilaterally impose certain requirements that negatively affect PubCo’s ability to convert users to Subscribers, such as conditions that limit PubCo’s freedom to communicate promotions and offers to its users. Similarly, online platforms may force PubCo to use the platform’s payment processing systems which may be inferior to and more costly than other payment processing services available in the market.

Online platforms frequently change the rules and requirements for services like PubCo’s to access the platform, and such changes may adversely affect the success or desirability of PubCo’s services. Online platforms may limit PubCo’s access to information about customers, limiting its ability to convert and retain them. Online platforms also may deny access to application programming interfaces (“API”) or documentation, limiting functionality of PubCo’s services on the platform.

 

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There can be no assurance that PubCo will be able to comply with the requirements of those operating systems, online platforms, hardware, networks, regulations, and standards on which PubCo’s services depend, and failure to do so could result in serious harm to PubCo’s business.

PubCo will face competition for Radio Service users, Subscribers, and user listening time.

PubCo will compete for the time and attention of its users with other content providers on the basis of a number of factors, including quality of experience, relevance, diversity of content, ease of use, price, accessibility, perception of advertising load, brand awareness and reputation.

PubCo will compete with providers of on-demand streaming music, which is purchased or available for free and playable on mobile devices and in the home. These forms of media may be purchased, downloaded, and owned such as iTunes audio files, MP3s, or CDs, or accessed from subscription or free online on-demand offerings by music providers or content streams from other online services. PubCo will face competition for users from a growing variety of businesses, including other subscription music services around the world, many of which offer services that seek to emulate PubCo’s services, that deliver music content over the internet, through mobile phones, and through other wireless devices. Many of PubCo’s current or future competitors are already entrenched or may have significant brand recognition in a particular region or market in which PubCo will seek to penetrate.

PubCo will also compete with providers of internet radio both online and through connected mobile devices. These internet radio providers may offer more extensive content libraries than PubCo will offer and some may be offered more broadly than PubCo’s services. In addition, internet radio providers may leverage their existing infrastructure and content libraries, as well as their brand recognition and user base, to augment their services by offering competing on-demand music features to provide users with more comprehensive music service delivery choices.

PubCo’s competitors also include terrestrial radio, satellite radio and online radio. Terrestrial radio providers often offer their content for free, are well-established and accessible to consumers, and offer media content that PubCo may not offer. In addition, many terrestrial radio stations have begun broadcasting digital signals, which provide high-quality audio transmission. Satellite radio providers may offer extensive and exclusive news, comedy, sports and talk content and national signal coverage.

PubCo’s competitors may have higher brand recognition, more established relationships with music and other content licensors and mobile device manufacturers, greater financial, technical, and other resources, more sophisticated technologies and/or more experience in the markets in which PubCo will compete. As the market for on-demand music on the internet and mobile and connected devices increases, new competitors, business models, and solutions are likely to emerge.

PubCo will also compete for users based on its presence and visibility as compared with other businesses and platforms that deliver music content through the internet and mobile devices. PubCo will face significant competition for users from companies promoting their own digital music content online or through application stores, including several large, well-funded, and seasoned participants in the digital media market. Mobile device application stores often offer users the ability to browse applications by various criteria, such as the number of downloads in a given time period, the length of time since a mobile application was released or updated, or the category in which the application is placed. The websites and mobile applications of PubCo’s competitors may rank higher than PubCo’s website and its mobile application, and PubCo’s application may be difficult to locate in mobile device application stores, which could draw potential users away from PubCo’s services and toward those of its competitors. In addition, some of PubCo’s competitors, including Apple, Amazon and Google, have developed, and are continuing to develop, devices for which their music streaming service is preloaded, creating a visibility advantage. If PubCo is unable to compete successfully for users against other digital media providers by maintaining and increasing PubCo’s presence and visibility online, on mobile devices, and in application stores, PubCo’s number of Subscribers and songs streamed on its service may fail to increase or may decline and its subscription fees and advertising sales may suffer.

PubCo will compete for a share of advertisers’ overall marketing budgets with other content providers on a variety of factors including perceived return on investment, effectiveness and relevance of PubCo’s advertising products, pricing structure and ability to deliver large volumes or precise types of advertisements to targeted user demographic pools. PubCo also will compete for advertisers with a range of internet companies, including major internet portals, search engine companies, social media sites and applications, as well as traditional advertising channels such as terrestrial radio.

 

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Large internet companies with strong brand recognition, such as Facebook, Google and Twitter, have significant numbers of direct sales personnel, substantial advertising inventory, proprietary advertising technology solutions and web and mobile traffic that provide a significant competitive advantage and have a significant impact on pricing for internet advertising and web and mobile traffic. Failure to compete successfully against PubCo’s competitors could result in loss of current or potential advertisers, a reduced share of PubCo’s advertisers’ overall marketing budget, loss of existing or potential users or diminished brand strength, which could adversely affect PubCo’s pricing and margins, lower its revenue, increase its research and development and marketing expenses and prevent PubCo from maintaining profitability.

PubCo’s services and software are highly technical and may contain undetected software bugs or vulnerabilities, which could manifest in ways that could seriously harm PubCo’s reputation and business.

PubCo’s services and software are highly technical and complex. Any products PubCo may introduce in the future may contain undetected software bugs, hardware errors and other vulnerabilities. These bugs and errors can manifest in any number of ways in PubCo’s products, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products. PubCo will attempt to rapidly update its products and some errors in PubCo’s products may be discovered only after a product has been used by users, and may in some cases be detected only under certain circumstances or after extended use. Any errors, bugs, or other vulnerabilities discovered in PubCo’s code or backend after release could damage PubCo’s reputation, drive away users, allow third parties to manipulate or exploit PubCo’s software, lower revenue and expose PubCo to claims for damages, any of which could seriously harm PubCo’s business. Additionally, errors, bugs, or other vulnerabilities may—either directly or if exploited by third parties—affect PubCo’s ability to make accurate royalty payments.

PubCo also could face claims for product liability, tort, or breach of warranty. Defending a lawsuit, regardless of its merit, is costly and may divert management’s attention and seriously harm PubCo’s reputation and its business. In addition, if PubCo’s liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, PubCo’s business could be seriously harmed.

Interruptions, delays or discontinuations in service arising from PubCo’s own systems or from third parties could impair the delivery of PubCo’s services and harm PubCo business.

PubCo relies on systems housed in its own facilities and upon third parties, including bandwidth providers and third-party “cloud” data storage services, to enable PubCo’s users to receive its content in a dependable, timely and efficient manner. PubCo may experience periodic service interruptions and delays involving its own systems and those of third parties that PubCo works with. Both PubCo’s own facilities and those of third parties are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They also are subject to break-ins, sabotage, intentional acts of vandalism, the failure of physical, administrative, technical, and cyber security measures, terrorist acts, natural disasters, human error, the financial insolvency of third parties that PubCo works with and other unanticipated problems or events. The occurrence of any of these events could result in interruptions in PubCo’s services and to unauthorized access to, or alteration of, the content and data contained on PubCo’s systems and that these third parties store and deliver on PubCo’s behalf.

Any disruption in the services provided by these third parties could materially adversely impact PubCo’s business reputation, customer relations and operating results. Upon expiration or termination of any of PubCo’s agreements with third parties, PubCo may not be able to replace the services provided to PubCo in a timely manner or on terms and conditions, including service levels and cost, that are favorable to PubCo, and a transition from one third party to another could subject PubCo to operational delays and inefficiencies until the transition is complete.

 

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If PubCo fails to accurately predict, recommend, and play music that PubCo’s users enjoy, PubCo may fail to retain existing users and attract new users in sufficient numbers to meet investor expectations for growth or to operate PubCo’s business profitably.

PubCo believes that a key differentiating factor between PubCo’s services and other music content providers will be its ability to predict music that its users will enjoy. PubCo’s system for predicting user music preferences and selecting music tailored to PubCo’s users’ individual music tastes will be based on advanced data analytics systems and PubCo’s proprietary algorithms and AI engine. Akazoo has invested, and PubCo will continue to invest, significant resources in refining these technologies; however, PubCo cannot assure you that such investments will yield an attractive return or that such refinements will be effective. The effectiveness of PubCo’s ability to predict user music preferences and select music tailored to PubCo’s users’ individual music tastes will depend in part on PubCo’s ability to gather and effectively analyze large amounts of user data. In addition, PubCo’s ability to offer users songs that they have not previously heard and impart a sense of discovery will depend on PubCo’s ability to acquire and appropriately categorize additional songs that will appeal to PubCo’s users’ diverse and changing tastes in multiple markets. While PubCo has a large catalog of songs available to stream, it must continuously identify and analyze additional songs that its users will enjoy and it may not effectively do so. PubCo’s ability to predict and select music content that its users enjoy will be critical to the perceived value of PubCo’s services among users and failure to make accurate predictions could materially adversely affect its ability to adequately attract and retain Subscribers and users, and sell advertising to meet investor expectations for growth or to operate the business profitably.

If PubCo fails to effectively manage its growth, PubCo’s business, financial condition, results of operations and cash flows may suffer.

Akazoo’s rapid growth has placed, and will continue to place, significant demands on PubCo’s management and its operational and financial infrastructure. In order to maintain profitability, PubCo will need to recruit, integrate, and retain skilled and experienced personnel who can demonstrate PubCo’s value proposition to users, advertisers, and business partners and who can increase the monetization of the music streamed on PubCo’s services, particularly on mobile devices. Continued growth also could strain PubCo’s ability to maintain reliable service levels for its users, effectively monetize the music streamed, develop and improve PubCo’s operational and financial controls, and recruit, train and retain highly skilled personnel. If PubCo’s systems do not evolve to meet the increased demands placed on PubCo by an increasing number of advertisers, PubCo also may be unable to meet its obligations under advertising agreements with respect to the delivery of advertising or other performance obligations. As PubCo’s operations grow in size, scope and complexity, PubCo will need to improve and upgrade its systems and infrastructure, which will require significant expenditures and allocation of valuable technical and management resources. If PubCo fails to maintain efficiency and allocate limited resources effectively in its organization as it grows, its business, financial condition, results of operations and cash flows may suffer.

As PubCo grows larger and increases its user base and usage, PubCo expects it will become increasingly difficult to maintain the rate of growth Akazoo has experienced in the past.

PubCo’s ability to increase the number of its users will depend in part on its ability to distribute its services, which may be affected by third-party interference beyond PubCo’s control.

The use of PubCo’s services will depend on the ability of its users to access the internet, PubCo’s website and its application. Enterprises or professional organizations, including governmental agencies, could block access to the internet, PubCo’s website and its application for a number of reasons such as security or confidentiality concerns or regulatory reasons that could adversely impact PubCo’s user base.

Additionally, PubCo will distribute its application via smartphone and tablet application download stores managed by Apple and Google, among others. Certain of these companies may be competitors of PubCo, and could stop allowing or supporting access to PubCo’s services through their products, could allow access for PubCo only at an unsustainable cost, or could make changes to the terms of access in order to make PubCo’s services less desirable or harder to access, for competitive reasons. Furthermore, because devices providing access to PubCo’s services will not be manufactured and sold by PubCo, PubCo cannot guarantee that these devices perform reliably, and any faulty connection between these devices and PubCo’s services may result in consumer dissatisfaction toward PubCo, which could damage the Akazoo brand.

 

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If PubCo is unable to increase revenue from PubCo’s services on mobile devices, such as smartphones, PubCo’s results of operations may be materially adversely affected.

PubCo’s business model with respect to monetization of its services on mobile and connected devices may change. As users migrate away from personal computers, there is increasing pressure to monetize mobile. If PubCo is unable to effectively monetize its services on mobile and connected devices, PubCo’s business, financial condition, results of operations and cash flows may suffer.

PubCo will rely on advertising revenue from its Radio Service, and any failure to convince advertisers of the benefits of PubCo’s Radio Service could harm PubCo’s business, financial condition, results of operations and cash flows.

PubCo’s ability to attract and retain advertisers, and ultimately to generate advertising revenue, will depends on a number of factors, including:

 

   

increasing the number of hours its Radio Service users spend listening to music or otherwise engaging with content on its Radio Service;

 

   

increasing the number of Radio Service users;

 

   

keeping pace with changes in technology and PubCo’s competitors;

 

   

competing effectively for advertising dollars from other online and mobile marketing and media companies;

 

   

maintaining and growing PubCo’s relationships with marketers, agencies and other demand sources who purchase advertising inventory from PubCo; and

 

   

continuing to develop and diversify PubCo’s advertisement platform, which may include delivery of advertising products through multiple delivery channels, including traditional computers, mobile and other connected devices.

PubCo may not succeed in capturing a greater share of its advertisers’ core marketing budgets, particularly if it is unable to achieve the scale, reach, products, and market penetration necessary to demonstrate the effectiveness of its advertising solutions, or if PubCo’s advertising model proves ineffective or not competitive when compared to other alternatives and platforms through which advertisers choose to invest their budgets.

Failure to grow PubCo’s Radio Service user base and to effectively demonstrate the value of its Radio Service to advertisers could result in loss of, or reduced spending by, existing or potential future advertisers, which would materially harm PubCo’s business, financial condition, results of operations and cash flows.

Selling advertisements requires that PubCo demonstrate to advertisers that its Radio Service has substantial reach and engagement by relevant demographic audiences. Some of PubCo’s demographic data may be incomplete or inaccurate. For example, because Radio Service users self-report their names and dates of birth, the personal data PubCo collects may differ from its Radio Service users’ actual names and ages. If PubCo’s Radio Service users provide incorrect or incomplete information regarding their name, age, or other attributes, then PubCo may fail to target the correct demographic with its advertising. Advertisers often rely on third parties to quantify the reach and usage of PubCo’s Radio Service. These third-party measurement services may not reflect PubCo’s true audience, and their underlying methodologies are subject to change at any time. In addition, the methodologies PubCo will apply to measure the key performance indicators that it will use to monitor and manage its business may differ from the methodologies used by third-party measurement service providers, who may not integrate effectively with PubCo’s Radio Service. Measurement technologies for mobile devices may be even less reliable in quantifying the reach and usage of PubCo’s Radio Service, and it is not clear whether such technologies will integrate with PubCo’s systems or uniformly and comprehensively reflect the reach, usage, or overall audience composition of PubCo’s Radio Service. If such third-party measurement providers report lower metrics than PubCo does, there is wide variance among reported metrics, or PubCo cannot adequately integrate with such services that advertisers require, PubCo’s ability to convince advertisers of the benefits of its Radio Service could be adversely affected.

 

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Negative media coverage could adversely affect PubCo’s business.

Unfavorable publicity regarding, for example, payments to music labels, publishers, artists, and other copyright owners, PubCo’s privacy practices, terms of service, service changes, service quality, litigation or regulatory activity, government surveillance, the actions of PubCo’s advertisers, the actions of PubCo’s developers whose services are integrated with its service, the use of PubCo’s service for illicit, objectionable or illegal ends, the actions of PubCo’s users, the quality and integrity of content shared on PubCo’s services, or the actions of other companies that provide similar services to PubCo, could materially adversely affect PubCo’s reputation. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of PubCo’s user base and result in decreased revenue, which could materially adversely affect PubCo’s business, financial condition, results of operations and cash flows.

PubCo’s business will depend on a strong brand, and any failure to maintain, protect, and enhance PubCo’s brand would hurt its ability to retain or expand its base of Radio Service users, Subscribers and advertisers.

PubCo believes that the Akazoo brand has contributed significantly to the success of Akazoo’s business. Maintaining, protecting, and enhancing the “Akazoo” brand is critical to expanding PubCo’s base of Radio Service users, Subscribers, and advertisers, and will depend largely on PubCo’s ability to continue to develop and provide an innovative and high-quality experience for PubCo’s users and to attract advertisers, content owners, mobile device manufacturers, and other consumer electronic product manufacturers to work with PubCo, which PubCo may not do successfully.

The Akazoo brand may be impaired by a number of other factors, including any failure to keep pace with technological advances on PubCo’s platform or with its services, slower load times for PubCo’s services, a decline in the quality or quantity of the content available on PubCo’s services, a failure to protect PubCo’s intellectual property rights, or any alleged violations of law, regulations, or public policy. Additionally, the actions of PubCo’s developers, advertisers and content partners may affect the Akazoo brand if users do not have a positive experience using third-party applications or websites integrated with PubCo or that make use of PubCo content. Further, if PubCo’s partners fail to maintain high standards for products that are integrated into PubCo’s service, fail to display PubCo’s trademarks on their products in breach of its agreements with them, use PubCo’s trademarks incorrectly or in an unauthorized manner or if PubCo partners with manufacturers of products that its users reject, the strength of the Akazoo brand could be adversely affected.

Akazoo has not historically spent considerable resources to establish and maintain the Akazoo brand. However, if PubCo is unable to maintain growth of PubCo’s Radio Service users and Subscribers, PubCo may be required to expend greater resources on advertising, marketing and other brand-building efforts to preserve and enhance consumer awareness of the Akazoo brand, which would adversely affect PubCo’s business, financial condition, results of operations and cash flow and may not be effective.

PubCo’s trademarks, trade dress, and other designations of origin are important elements of the Akazoo brand. PubCo has registered Akazoo and other marks as trademarks in the United States and certain other jurisdictions around the world. Nevertheless, competitors or other companies may adopt marks similar to those registered by PubCo, or use PubCo’s marks and confusingly similar terms as keywords in internet search engine advertising programs, thereby impeding PubCo’s ability to build brand identity and possibly leading to confusion among PubCo’s users. PubCo cannot assure you that its trademark applications, even for key marks, will be approved. PubCo may face opposition from third parties to PubCo’s applications to register key trademarks in foreign jurisdictions in which PubCo has expanded or may expand its presence. If PubCo is unsuccessful in defending against these oppositions, its trademark applications may be denied. Whether or not PubCo’s trademark applications are denied, third parties may claim that its trademarks infringe upon their rights. As a result, PubCo could be forced to pay significant settlement costs or cease the use of these trademarks and associated elements of the Akazoo brand in those or other jurisdictions. Doing so could harm the Akazoo brand or brand recognition and adversely affect PubCo’s business, financial condition results of operations and cash flows.

 

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Various regulations as well as self-regulation related to privacy and data security concerns pose the threat of lawsuits and other liability, may require PubCo to expend significant resources, and may harm PubCo’s business, financial condition, results of operation, and cash flows.

PubCo may collect and utilize personal and other information from and about its users as they interact with its service. Various laws and regulations govern the collection, use, retention, sharing, and security of the data PubCo would receive from and about its users. Privacy groups and government bodies have increasingly scrutinized the ways in which companies link personal identities and data associated with particular users or devices with data collected through the internet, and PubCo expects such scrutiny to continue to increase. Alleged violations of laws and regulations relating to privacy and data security, and any relevant claims, may expose PubCo to potential liability and may require it to expend significant resources in responding to and defending such allegations and claims. Claims or allegations that PubCo has violated laws and regulations relating to privacy and data security could in the future result in negative publicity and a loss of confidence in PubCo by its users and its partners. Such claims or allegations also may subject PubCo to fines, including by data protection authorities and credit card companies, and could result in the loss of PubCo’s ability to accept credit and debit card payments.

Existing privacy-related laws and regulations in the United States and other countries are evolving and are subject to potentially differing interpretations, and various U.S. federal and state or other international legislative and regulatory bodies may expand or enact laws regarding privacy and data security-related matters. For example, the EU General Data Protection Regulation (“GDPR”) came into effect on May 25, 2018, and may require PubCo to change its privacy and data security practices. The GDPR implemented more stringent operational requirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained valid consent or have another legal basis in place to justify their data processing activities. The GDPR provides that EU member states may make their own additional laws and regulations in relation to certain data processing activities, which could limit PubCo’s ability to use and share personal data or could require localized changes to its operating model. Under the GDPR, fines of up to €20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be assessed for non-compliance. These new laws may cause PubCo’s costs to increase, which would result in further administrative costs to providing its service.

PubCo also will be subject to evolving EU laws on data export, as PubCo may at times transfer personal data from the EU to other jurisdictions. For example, in 2015, the Court of Justice of the EU invalidated the U.S.-EU Safe Harbor framework regarding the transfer of personal data from the EU to the United States. EU and U.S. negotiators agreed in February 2016 to a new framework, the Privacy Shield, which would replace the Safe Harbor framework. However, there is currently litigation challenging this framework as well as litigation challenging other EU mechanisms for adequate data transfers (for example, the standard contractual clauses), and it is uncertain whether the Privacy Shield framework and/or the standard contractual clauses similarly will be invalidated by the EU courts in the future. PubCo may rely on a mixture of mechanisms to transfer data to and from its EU business to the United States and could be impacted by changes in law as a result of the current challenges to these mechanisms in the European courts.

In recent years, U.S. and European lawmakers and regulators have expressed concern over electronic marketing and the use of third-party cookies, web beacons, and similar technology for online behavioral advertising. In the EU, under the current Directive 2002/58 on Privacy and Electronic Communications (the “ePrivacy Directive”), informed and freely given consent is required for the placement of certain cookies on a user’s device. Once the GDPR comes into force, the higher standard required for valid consent under the GDPR will equally apply to consent required under the ePrivacy Directive. The ePrivacy Directive is also under reform. A draft of the new Regulation (EC) 2017/0003 concerning the respect for private life and the protection of personal data in electronic communications and repealing Directive 2002/58/EC (the “draft ePrivacy Regulation”) was announced on January 10, 2017. While it was originally intended to become applicable on May 25, 2018 (alongside the GDPR), the current draft ePrivacy Regulation is still going through the European legislative process. Unlike the current ePrivacy Directive, the draft ePrivacy Regulation will be implemented directly into the laws of each of the EU member states, without the need for further enactment. When implemented, the ePrivacy Regulation may impose a requirement for opt-in consent for the collection of information from users’ equipment as well as the use of third-party cookies, web beacons, and similar technology for tracking users for online behavioral advertising. The current provisions of the draft ePrivacy Regulation extend the strict opt-in marketing rules with limited exceptions to business to business communications and significantly increase penalties which can reach up to €20 million or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, for non-compliance.

 

 

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PubCo may find it necessary or desirable to join self-regulatory bodies or other privacy-related organizations that require compliance with their rules pertaining to privacy and data security. PubCo also may be bound by contractual obligations that limit its ability to collect, use, disclose, share, and leverage user data and to derive economic value from it. New laws, amendments to, or reinterpretations of existing laws, rules of self-regulatory bodies, industry standards, and contractual obligations, as well as changes in its users’ expectations and demands regarding privacy and data security, may limit PubCo’s ability to collect, use, and disclose, and to leverage and derive economic value from user data. Restrictions on PubCo’s ability to collect, access and harness user data, or to use or disclose user data or any profiles that it develops using such data, may require PubCo to expend significant resources to adapt to these changes and would in turn limit its ability to stream personalized music content to PubCo’s users and offer targeted advertising opportunities to its Radio Service users.

In addition, any failure or perceived failure by PubCo to comply with privacy or security laws, policies, legal obligations, industry standards, or any security incident that results in the unauthorized release or transfer of personal data may result in governmental enforcement actions and investigations, including fines and penalties, enforcement orders requiring PubCo to cease processing or operate in a certain way, litigation and/or adverse publicity, including by consumer advocacy groups, and could cause PubCo’s customers to lose trust in it, which could have an adverse effect on its reputation and business. Such failures could have a material adverse effect on PubCo’s financial condition and results of operations. If the third parties PubCo may work with (for example, cloud-based vendors) violate applicable laws or contractual obligations or suffer a security breach, such violations also may put PubCo in breach of its obligations under privacy laws and regulations and/or could in turn have a material adverse effect on PubCo’s business.

PubCo may incur expenses to comply with privacy and security standards and protocols imposed by law, regulation, self-regulatory bodies, industry standards, and contractual obligations. Increased regulation of data capture, analysis, and utilization and distribution practices, including self-regulation and industry standards, could increase PubCo’s cost of operation, limit its ability to grow its operations, or otherwise adversely affect its business, operating results, and financial condition.

Changes in regulations or user concerns regarding privacy and protection of user data, or any failure or appearance of failure to comply with such laws, could diminish the value of PubCo’s service and cause it to lose users and revenue.

The regulatory framework for privacy issues worldwide is currently in flux and is likely to remain so for the foreseeable future. Practices regarding the collection, use, storage, transmission, and security of personal information by companies operating over the internet have recently come under increased public scrutiny. The U.S. government, including the Federal Trade Commission and the Department of Commerce, may continue to review the need for greater regulation over the collection of information concerning consumer behavior on the internet, including regulation aimed at restricting certain targeted advertising practices. In addition, the EU may continue to review the need for greater regulation or reform to its existing data protection legal framework, which may result in a greater compliance burden for companies with users in Europe. Various government and consumer agencies also have called for new regulation and changes in industry practices. PubCo’s business could be adversely affected if legislation or regulations are adopted, interpreted, or implemented in a manner that is inconsistent with PubCo’s business practices and that would require changes to these practices, the design of PubCo’s website, services, features, or its privacy policy. In particular, the success of PubCo’s business will be driven by its ability to responsibly use the personal data that PubCo’s users share with PubCo. Therefore, PubCo’s business could be harmed by any significant change to applicable laws, regulations, or industry practices regarding the use of PubCo’s users’ personal data, for example regarding the manner in which disclosures are made and how the express or implied consent of users for the use of personal data is obtained. Such changes may require PubCo to modify its services and features, possibly in a material manner, and may limit its ability to develop new services and features that make use of the data that PubCo’s users voluntarily share with it. In addition, some of PubCo’s developers or other partners, such as those that will help PubCo measure the effectiveness of ads, may receive or store information provided by it or by its users through mobile or web applications integrated with PubCo’s service. PubCo may provide limited information to such third parties based on the scope of services provided to it. However, if these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, PubCo’s data or its users’ data may be improperly accessed, used, or disclosed.

 

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PubCo will be subject to a number of risks related to billing and payments it accepts.

Akazoo has accepted and PubCo will continue to accept payments through telecommunication service providers via direct carrier billing and/or mobile telecommunications billing. For direct carrier billing and credit and debit card payments, PubCo will pay interchange and other fees, which may increase over time. An increase in those fees would require PubCo to either increase the prices PubCo will charge for its Premium Service, which could cause PubCo to lose Subscribers and subscription revenue, or suffer an increase in its costs without a corresponding increase in the price it charges for PubCo’s Premium Service, either of which could harm PubCo’s business, financial condition, results of operations and cash flows.

Additionally, PubCo will rely on third-party service providers for payment processing and aggregation services, including for direct carrier billing and the processing of credit and debit cards. PubCo will rely on partners with a small number of payment processors and payment aggregators to collect a significant portion of its revenues from telecommunication service providers and other payment processing partners. PubCo’s business could be materially disrupted if these third-party aggregation service providers become unwilling or unable to provide these services.

If PubCo or its service providers for billing and payment processing services have problems with PubCo’s billing software, or the billing software malfunctions, it could have a material adverse effect on PubCo’s user satisfaction and could cause one or more of the major credit card companies to disallow PubCo’s use of their payment products. In addition, if PubCo’s billing software fails to work properly and, as a result, PubCo does not automatically charge its Subscribers’ credit cards on a timely basis or at all, PubCo’s business, financial condition, results of operations and cash flows could be materially adversely affected.

PubCo also will be subject to payment card association operating rules, certification requirements, and rules governing electronic funds transfers, which could change or be reinterpreted to make it more difficult for PubCo to comply.

If PubCo fails to adequately control fraudulent transactions, PubCo may face civil liability, diminished public perception of its security measures, and significantly higher credit card-related costs, each of which could adversely affect PubCo’s business, financial condition, results of operations and cash flows. If PubCo is unable to maintain its chargeback rate or refund rates at acceptable levels, credit card and debit card companies may increase PubCo’s transaction fees or terminate their relationships with PubCo. Any increases in PubCo’s credit card and debit card fees could adversely affect its results of operations, particularly if PubCo elects not to raise its rates for its Premium Service to offset the increase. The termination of PubCo’s ability to process payments on any major credit or debit card would significantly impair its ability to operate its business.

PubCo will be subject to a number of risks related to other payment solution providers.

PubCo will accept payments through various payment solution providers, such as telecommunications integrated billings and prepaid codes vendors. These payment solution providers will provide services to PubCo in exchange for a fee, which may be subject to change. Furthermore, PubCo will rely on their accurate and timely reports on sales and redemptions. If such accurate and timely reports are not being provided, it will affect the accuracy of PubCo’s reports to its licensors, and also affect the accuracy of PubCo’s financial reporting.

 

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PubCo operates in evolving emerging markets.

PubCo’s business and prospects primarily depend on the continuing development and growth of the music streaming industry in emerging markets, which are affected by numerous factors. For example, content quality, user experience, technological innovations, development of internet and internet-based services, the regulatory environment and the macroeconomic environment are important factors that affect PubCo’s business and prospects. PubCo’s continued growth depends, in part, on its ability to respond to constant changes in the industry, including rapid technological evolution, continued shifts in customer demands, frequent introductions of new products and services and constant emergence of new industry standards and practices. Developing and integrating new content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits PubCo expects to achieve. It cannot be assured that PubCo will succeed in any of these aspects or that these industries in emerging markets will continue to grow as rapidly as in the past. If music streaming as a form of entertainment loses its popularity due to changing social trends and user preferences, or if such industries in emerging markets fail to grow as quickly as expected, PubCo’s business, financial condition and results of operation may be materially and adversely affected.

PubCo will face many risks associated with its international expansion, including difficulties obtaining rights to stream music on favorable terms.

PubCo expects to expand its operations into additional international markets. However, offering PubCo’s service in a new geographical area involves numerous risks and challenges. For example, the licensing terms offered by rights organizations and individual copyright owners in countries around the world are currently expensive. Addressing licensing structure and royalty rate issues in any new geographic market will require PubCo to make very substantial investments of time, capital, and other resources, and PubCo’s business could fail if such investments do not succeed. There can be no assurance that PubCo will succeed or achieve any return on these investments.

In addition to the above, continued expansion around the world will expose PubCo to other risks such as:

 

   

lack of well-functioning copyright collective management organizations that are able to grant PubCo music licenses, process reports, and distribute royalties in markets;

 

   

fragmentation of rights ownership in various markets causing lack of transparency of rights coverage and overpayment or underpayment to record labels, music publishers, artists, performing rights organizations, and other copyright owners;

 

   

difficulties in obtaining license rights to local repertoire;

 

   

difficulties in achieving market acceptance of PubCo’s service in different geographic markets with different tastes and interests;

 

   

difficulties in achieving viral marketing growth in certain other countries where PubCo commits fewer sales and marketing resources;

 

   

difficulties in managing operations due to language barriers, distance, staffing, user behavior and spending capability, cultural differences, business infrastructure constraints, and laws regulating corporations that operate internationally;

 

   

application of different laws and regulations of other jurisdictions, including privacy, censorship and liability standards and regulations, as well as intellectual property laws;

 

   

potential adverse tax consequences associated with foreign operations and revenue;

 

   

complex foreign exchange fluctuation and associated issues;

 

   

increased competition from local websites and music content providers, some with financial power and resources to undercut the market or enter into exclusive deals with local content providers to decrease competition;

 

   

credit risk and higher levels of payment fraud;

 

   

political and economic instability in some countries;

 

   

restrictions on international monetary flows; and

 

   

reduced or ineffective protection of PubCo’s intellectual property rights in some countries.

As a result of these obstacles, PubCo may find it impossible or prohibitively expensive to enter additional markets, or entry into foreign markets could be delayed, which could hinder PubCo’s ability to grow its business.

Emerging industry trends in digital advertising may pose challenges for PubCo’s ability to forecast or optimize its advertising inventory, which may adversely impact PubCo’s Radio Service revenue.

The digital advertising industry is introducing new ways to measure and price advertising inventory. For example, a significant portion of advertisers are in the process of moving from purchasing advertisement impressions based on the number of advertisements served by the applicable ad server to a new “viewable” impression standard (based on number of pixels in view and duration) for select products. In the absence of a uniform industry standard, agencies and advertisers have adopted several different measurement methodologies and standards. In addition, measurement services may require technological integrations, which are still being evaluated by the advertising industry without an agreed-upon industry standard metric. As these trends in the industry continue to evolve, PubCo’s advertising revenue may be adversely affected by the availability, accuracy, and utility of the available analytics and measurement technologies as well as PubCo’s ability to successfully implement and operationalize such technologies and standards.

 

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Further, the digital advertising industry is shifting to data-driven technologies and advertising products, such as automated buying. These data-driven advertising products and automated buying technologies allow publishers and advertisers to use data to target advertising toward specific groups of users who are more likely to be interested in the advertising message delivered to them. These advertising products and programmatic technologies are currently more developed in terms of advertising technology and industry adoption on the web than they are on mobile or on other software applications, and may not integrate with PubCo’s desktop software version of the Radio Service. Because the majority of PubCo’s Radio Service user hours will occur on mobile devices, if PubCo is unable to deploy effective solutions to monetize the mobile device usage by its Radio Service user base, PubCo’s ability to attract advertising spend, and ultimately its advertising revenue, may be adversely affected by this shift. In addition, PubCo will rely on third-party advertising technology platforms to participate in automated buying, and if these platforms cease to operate or experience instability in their business models, it also may adversely affect PubCo’s ability to capture advertising spend.

PubCo may acquire other companies or technologies, which could divert management’s attention and otherwise disrupt PubCo’s operations and harm PubCo’s operating results. PubCo may fail to acquire companies whose market power or technology could be important to the future success of its business.

PubCo may seek to acquire or invest in other companies or technologies that PubCo believes could complement or expand its service, enhance its technical capabilities, or otherwise offer growth opportunities. Pursuit of future potential business combinations may divert the attention of management and cause PubCo to incur various expenses in identifying, investigating, and pursuing suitable business combinations, whether or not they are consummated. In addition, PubCo has limited experience acquiring and integrating other businesses. PubCo may be unsuccessful in integrating any additional business it may acquire in the future, and it may fail to acquire companies whose market power or technology could be important to the future success of its business.

PubCo also may not achieve the anticipated benefits from any acquired business due to a number of factors, including:

 

   

unanticipated costs or liabilities associated with the business combination, including costs or liabilities arising from the acquired companies’ failure to comply with intellectual property laws and licensing obligations they are subject to;

 

   

incurrence of business combination-related costs;

 

   

diversion of management’s attention from other business concerns;

 

   

regulatory uncertainties;

 

   

harm to existing business relationships with business partners and advertisers as a result of the business combination;

 

   

harm to brand and reputation;

 

   

the potential loss of key employees;

 

   

use of resources that are needed in other parts of the business; and

 

   

use of substantial portions of available cash to consummate the business combination.

In addition, a significant portion of the purchase price of companies acquired may be allocated to acquired goodwill, which must be assessed for impairment at least annually. In the future, if PubCo’s business combinations do not yield expected returns, PubCo may be required to take charges to its operating results based on this impairment assessment process. Business combinations also could result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect operating results. In addition, if an acquired business fails to meet expectations, PubCo’s business, financial condition, results of operations and cash flows may suffer.

PubCo’s operating results may fluctuate, which makes its results difficult to predict.

PubCo’s revenue and operating results could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which will be outside PubCo’s control. As a result, comparing PubCo’s operating results on a period-to-period basis may not be meaningful. In addition to other risk factors discussed herein, factors that may contribute to the variability of PubCo’s quarterly and annual results include:

 

   

PubCo’s ability to retain its user base, increase its number of Radio Service users and Subscribers, and increase users’ time spent streaming content on PubCo’s service;

 

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PubCo’s ability to more effectively monetize mobile users of its service, particularly as the number of PubCo’s users on mobile and other connected devices grow;

 

   

PubCo’s ability to effectively manage its growth;

 

   

PubCo’s ability to attract and retain existing advertisers and prove that its advertising products are effective enough to justify a pricing structure that is profitable for PubCo;

 

   

the effects of increased competition in PubCo’s business;

 

   

PubCo’s ability to keep pace with changes in technology and its competitors;

 

   

lack of accurate and timely reports and invoices from PubCo’s rights holders and partners;

 

   

interruptions in service, whether or not PubCo is responsible for such interruptions, and any related impact on PubCo’s reputation;

 

   

PubCo’s ability to pursue and appropriately time its entry into new geographic or content markets and, if pursued, PubCo’s management of this expansion;

 

   

costs associated with defending any litigation, including intellectual property infringement litigation;

 

   

the impact of general economic conditions on PubCo’s revenue and expenses; and

 

   

changes in regulations affecting PubCo’s business.

Seasonal variations in user and marketing behavior also may cause fluctuations in PubCo’s financial results. PubCo expects to experience some effects of seasonal trends in user behavior due to increased internet usage and sales of streaming service subscriptions and devices during holiday periods. PubCo also may experience higher advertising sales during the fourth quarter of each calendar year due to greater advertiser demand during the holiday season, but also incur greater marketing expenses as PubCo attempts to attract new users to PubCo’s service and convert its users to Subscribers. In addition, expenditures by advertisers tend to be cyclical and are often discretionary in nature, reflecting overall economic conditions, the economic prospects of specific advertisers or industries, budgeting constraints and buying patterns, and a variety of other factors, many of which will be outside PubCo’s control.

PubCo may require additional capital to support business growth and objectives, and this capital might not be available on acceptable terms, if at all.

PubCo intends to make investments to support its business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance PubCo’s existing service, expand into additional markets around the world, improve PubCo’s infrastructure, or acquire complementary businesses and technologies. Accordingly, PubCo may need to engage in equity and debt financings to secure additional funds. If additional funds are raised through future issuances of equity or convertible debt securities, existing shareholders could suffer additional significant dilution, and any new equity securities issued could have rights, preferences, and privileges superior to those of holders of PubCo Ordinary Shares. Any debt financing PubCo secures in the future also could contain restrictive covenants relating to PubCo’s capital raising activities and other financial and operational matters, which may make it more difficult for PubCo to obtain additional capital and pursue business opportunities. PubCo may not be able to obtain additional financing on terms favorable to it, if at all. If PubCo is unable to obtain adequate financing or financing on terms satisfactory to PubCo when it requires it, PubCo’s ability to support its business growth, acquire or retain users, and to respond to business challenges could be significantly impaired, and PubCo’s business may be harmed.

If currency exchange rates fluctuate substantially in the future, the results of PubCo’s operations, which are reported in Euros, could be adversely affected.

If PubCo expands its international operations, PubCo would become increasingly exposed to the effects of fluctuations in currency exchange rates if its future revenues are not agreed to be provided in Euros. PubCo will incur expenses for employee compensation, rental fees, and other operating expenses in the local currency, with an increasing percentage of PubCo’s international revenue from users who would pay in currencies other than U.S. dollars and Euros. PubCo also will incur royalty expenses primarily in Euros and U.S. dollars, but the corresponding revenues could be generated in local currencies and, as such, the multiple currency conversions would be affected by currency fluctuations, which may result in losses. Fluctuations in the exchange rates between the Euro and other currencies may impact expenses as well as revenue, and consequently have an impact on margin and the reported operating results. This could have a negative impact on PubCo’s reported operating results. PubCo may engage in limited hedging strategies related to foreign exchange risk stemming from its operations. These strategies may include instruments such as foreign exchange forward contracts and options. However, these strategies should not be expected to fully eliminate the foreign exchange rate risk to which PubCo may be exposed.

 

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The impact of worldwide economic conditions may adversely affect PubCo’s business, financial condition, results of operations and cash flows.

PubCo’s financial performance will be subject to worldwide economic conditions and their impact on levels of advertising spending. Expenditures by advertisers generally tend to reflect overall economic conditions, and to the extent that the economy continues to stagnate, reductions in spending by advertisers could have a material adverse impact on PubCo’s business. Historically, economic downturns have resulted in overall reductions in advertising spending. Economic conditions may adversely impact levels of consumer spending, which could adversely impact the number of users who purchase PubCo’s Premium Service on its website and mobile application.

Consumer purchases of discretionary items generally decline during recessionary periods and other periods in which disposable income is adversely affected. To the extent that overall economic conditions reduce spending on discretionary activities, PubCo’s ability to retain current and obtain new Subscribers could be hindered, which could reduce PubCo’s subscription revenue and negatively impact PubCo’s business. For example, on June 23, 2016, a referendum was held on the United Kingdom’s membership in the EU, the outcome of which was a vote in favor of leaving the EU. The United Kingdom’s vote to leave the EU creates an uncertain political and economic environment in the United Kingdom and potentially across other EU member states, which may last for a number of months or years.

PubCo will face complex taxation regimes in various jurisdictions. Audits, investigations, and tax proceedings could have a material adverse effect on PubCo’s business, financial condition, results of operations and cash flows.

PubCo will be subject to income and non-income taxes in numerous jurisdictions. Income tax accounting often involves complex issues, and judgment will be required in determining PubCo’s worldwide provision for income taxes and other tax liabilities. In particular, most of the jurisdictions in which PubCo will conduct business have detailed transfer pricing rules, which will require that all transactions with non-resident related parties be priced using arm’s length pricing principles within the meaning of such rules. PubCo will be subject to ongoing tax audits in several jurisdictions, and most of such audits may involve transfer pricing issues. PubCo will regularly assess the likely outcomes of these audits in order to determine the appropriateness of PubCo’s tax reserves as well as tax liabilities going forward. In addition, the application of withholding tax, value added tax, goods and services tax, sales taxes and other non-income taxes is not always clear and PubCo may be subject to tax audits relating to such withholding or non-income taxes. PubCo believes that its tax positions are reasonable and its tax reserves will be adequate to cover any potential liability. However, tax authorities in certain jurisdictions may disagree with PubCo’s position, including the propriety of PubCo’s related party arm’s length transfer pricing policies and the tax treatment of corresponding expenses and income. If any of these tax authorities were successful in challenging PubCo’s positions, PubCo may be liable for additional income tax and penalties and interest related thereto in excess of any reserves established therefor, which may have a significant impact on PubCo’s results and operations and future cash flow.

 

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SPECIAL MEETING OF MMAC STOCKHOLDERS

The Special Meeting

MMAC is furnishing this proxy statement/prospectus to MMAC stockholders as part of the solicitation of proxies by the Board for use at the Special Meeting in connection with the Business Combination Proposal and the Adjournment Proposal. This proxy statement/prospectus provides MMAC stockholders with the information needed to be able to vote or instruct their votes to be cast at the Special Meeting.

Date, Time and Location

The Special Meeting will be held at                , Eastern time, on                , 2019, at                , to vote on each of the Business Combination Proposal and the Adjournment Proposal.

Purpose of the Special Meeting; Proposals to be Considered

At the Special Meeting, MMAC stockholders will be asked to consider and vote upon the following:

 

  I.

The Business Combination Proposal—to approve the adoption of the Business Transaction Agreement, which provides for a Business Combination between MMAC and Akazoo. Pursuant to the Business Transaction Agreement, the Business Combination will be effected in three steps: (i) MMAC will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity; (ii) LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing ordinary shares of LuxCo to the Akazoo shareholders and (iii) LuxCo will then merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity;

 

  II.

The Adjournment Proposal—to consider and vote upon a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that, based upon the tabulated vote at the time of the Special Meeting, MMAC would not have been authorized to consummate the Business Combination; and

 

  III.

Such other business as may properly come before the meeting or any adjournment or postponement thereof.

Recommendation of the MMAC Board of Directors

The Board:

 

   

has unanimously determined that the Business Combination Proposal and the Adjournment Proposal are fair to, and in the best interests of, MMAC and its stockholders;

 

   

has determined that the fair market value of Akazoo is equal to or greater than 80% of the value of the net assets of MMAC;

 

   

has unanimously approved and declared it advisable to approve the Business Combination Proposal and the Adjournment Proposal; and

 

   

unanimously recommends that the holders of the MMAC Common Stock vote “FOR” the Business Combination Proposal and “FOR” the Adjournment Proposal.

Record Date; Outstanding Shares; Stockholders Entitled to Vote

The Record Date for the Special Meeting is August 9, 2019. Record holders of MMAC Common Stock at the close of business on the Record Date are entitled to vote or have their votes cast at the Special Meeting. On the Record Date, there were 6,581,665 outstanding shares of MMAC Common Stock.

Each share of issued and outstanding MMAC Common Stock at the time of the Special Meeting is entitled to one vote at the Special Meeting.

The issued and outstanding MMAC Rights and MMAC Warrants do not have voting rights and record holders of the MMAC Rights and MMAC Warrants will not be entitled to vote at the Special Meeting.

 

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Quorum

More than one-half of the total number of shares of MMAC Common Stock outstanding as of the Record Date (a “quorum”) must be represented, either in person or by proxy, in order to transact business at the Special Meeting. Abstentions and broker non-votes are counted for purposes of determining the presence of a quorum. If there is no quorum, a majority of the shares present at the Special Meeting may adjourn the Special Meeting to another date.

Vote Required

The approval of the Business Combination Proposal will require the affirmative vote of a majority of the shares of MMAC Common Stock outstanding on the Record Date. MMAC’s executive officers, independent directors and sponsor have agreed to vote their shares of MMAC Common Stock in favor of the Business Combination Proposal. As of the date hereof, such persons are entitled to vote 5,175,000 shares of MMAC Common Stock, representing approximately 78.6% of all outstanding shares of MMAC Common Stock. Accordingly, stockholder approval of the Business Combination Proposal is assured. See “Special Meeting of MMAC Stockholders” and “Certain Agreements Related to the Business Combination – Voting Agreement.”

Regardless of their vote for or against the Business Combination Proposal, holders of MMAC Common Stock may exercise their right to require MMAC to redeem their shares for their pro rata portion of the cash from the trust account. However, it is a condition to closing under the Business Transaction Agreement that MMAC has, in the aggregate, not less than $53.0 million of available cash upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although Akazoo may waive this condition. Accordingly, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash, at the time of the Business Combination then the parties may determine to consummate the Business Combination, and in that case, redemptions could reduce MMAC’s net tangible assets to as low as $5,000,001. MMAC intends to promptly notify MMAC stockholders by press release following the time that it has secured sufficient binding commitments for the PIPE Financing to satisfy the minimum cash condition under the Business Transaction Agreement or that Akazoo has otherwise waived this condition.

For purposes of the Adjournment Proposal, approval requires the affirmative vote of the holders of a majority of the shares of MMAC Common Stock represented in person or by proxy and entitled to vote at the meeting.

Abstentions and Broker Non-Votes

As long as a quorum is established at the Special Meeting, if a MMAC stockholder fails to return a signed proxy card, vote “ABSTAIN” or fails to instruct their broker how they wish their shares to be voted (such failure, a “broker non-vote”), since it is not an affirmative vote in favor of a respective proposal, it: (i) will have the effect of a vote “AGAINST” the Business Combination Proposal; and (ii) will have no effect on the Adjournment Proposal.

Share Ownership of and Voting by MMAC Directors and Executive Officers

As of July 1, 2019, MMAC’s directors and officers beneficially owned the following amounts of MMAC Common Stock. In connection with the Business Transaction Agreement, the directors and officers listed below have agreed to vote “FOR” the Business Combination Proposal and “FOR” the Adjournment Proposal. For further information about each MMAC director and officer’s beneficial ownership of MMAC Common Stock, see the section titled “Security Ownership of Certain Beneficial Owners & Management.”

 

     MMAC Common Stock      Percent of Outstanding
MMAC Common Stock
 

Lewis W. Dickey, Jr.

     5,075,000        77.1  

William Drewry

     15,000        *  

Adam Kagan

     10,000        *  

Blair Faulstich

     25,000        *  

George Brokaw

     25,000        *  

John White

     25,000        *  

 

  

 

 

    

 

 

 

Total

     5,175,000        78.6  

 

*

Represents beneficial ownership of less than 1%

Voting of Shares

Each share of MMAC Common Stock that MMAC stockholders own in their name entitles such stockholder to one vote. Each such stockholder’s proxy card shows the number of shares of MMAC Common Stock that they own.

 

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There are two ways that MMAC stockholders may vote their shares of MMAC Common Stock:

 

   

MMAC stockholders can vote by signing and returning the enclosed proxy card. If MMAC stockholders vote by proxy card, their “proxy,” whose name is listed on the proxy card, will vote their shares as they instruct on the proxy card. If a MMAC stockholder signs and returns the proxy card, but does not give instructions on how to vote its shares, such shares will be voted, as recommended by the Board: “FOR” the Business Combination Proposal; and “FOR” the Adjournment Proposal.

 

   

MMAC stockholders can attend the Special Meeting and vote in person. MMAC stockholders will receive a ballot when they arrive. However, if MMAC stockholders’ shares are held in the name of a broker, bank or another nominee, such stockholders must get a proxy from the broker, bank or other nominee. That is the only way MMAC can be sure that the broker, bank or nominee has not already voted such stockholder’s shares.

Revocation of Proxies Proxy; Changing Votes

If MMAC stockholders give a proxy, they may revoke or change it at any time before it is exercised by doing any one of the following:

 

   

Sending another proxy card with a later date;

 

   

Notifying the Assistant Secretary, addressed to MMAC, in writing before the Special Meeting that they have revoked their proxy; and

 

   

Attending the Special Meeting, revoking the previous proxy, and voting in person.

Solicitation of Proxies; Expenses of Solicitation

This proxy is being solicited on behalf of the Board. This solicitation is being made by mail but also may be made by telephone or in person. MMAC and its respective directors and officers may also solicit proxies in person, by telephone or by other electronic means, and in the event of such solicitations, the information provided will be consistent with this proxy statement/prospectus and enclosed proxy card. These persons will not be paid for doing this. MMAC has retained Morrow Sodali to assist in the solicitation of proxies for a fee of approximately $25,000, which was paid by MMAC, plus reimbursement for out-of-pocket expenses. MMAC will ask banks, brokers and other institutions, nominees and fiduciaries to forward its proxy statement/prospectus materials to their principals and to obtain their authority to execute proxies and voting instructions. MMAC will reimburse them for their reasonable expenses.

Assistance

If MMAC stockholders have any questions about how to vote or direct a vote in respect of their MMAC Common Stock, MMAC stockholders may call Morrow Sodali at (800) 662-5200 or by sending an email to MMDM.info@morrowsodali.com.

Other Business

The Special Meeting has been called only to consider the approval of the Business Combination Proposal and the Adjournment Proposal. Under MMAC’s bylaws, other than procedural matters incident to the conduct of the meeting, no other matters may be considered at the Special Meeting if they are not included in the notice of the meeting.

Redemption Rights

Pursuant to the MMAC Certificate of Incorporation, any holders of MMAC public shares may elect to redeem their shares of MMAC Common Stock for a per-share redemption price, payable in cash, equal to the Redemption Price. However, MMAC will not redeem its public shares in an amount that would cause its net tangible assets to be less than $5,000,001.

If a redemption election is properly made and the Business Combination is consummated, those MMAC public shares being redeemed, immediately prior to the Business Combination, will cease to be outstanding and will represent only the right to receive a per-share price, payable in cash, equal to the Redemption Price. For illustrative purposes, based on funds in the trust account of approximately $14.7 million on the Record Date and estimated $185,000 in taxes payable, the estimated per share redemption price would have been approximately $10.35.

MMAC public shares may be redeemed by holders of MMAC public shares regardless of how such holder votes its shares on the Business Combination Proposal. Therefore, it is possible that the Business Combination Proposal may be approved with votes representing, in part, redeemed shares that will have no continuing interest in PubCo following the Business Combination.

 

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Redemption rights are not available to holders of MMAC Units, MMAC Warrants or MMAC Rights in connection with the Business Combination.

TO DEMAND REDEMPTION, PRIOR TO 5:00 P.M., EASTERN TIME, ON                 , 2019 (TWO BUSINESS DAYS BEFORE THE SPECIAL MEETING), MMAC STOCKHOLDERS MUST EITHER PHYSICALLY TENDER THEIR STOCK CERTIFICATES TO THE TRANSFER AGENT OR DELIVER THEIR SHARES TO THE TRANSFER AGENT ELECTRONICALLY USING DTC’S DWAC SYSTEM, AS DESCRIBED HEREIN. MMAC STOCKHOLDERS SHOULD ENSURE THAT THEIR BANK OR BROKER COMPLIES WITH THE REQUIREMENTS IDENTIFIED HEREIN.

In connection with tendering MMAC Common Stock for redemption, MMAC stockholders must elect either to (x) physically tender their MMAC Common Stock certificates to Continental Stock Transfer & Trust Company, MMAC’s transfer agent, at Continental Stock Transfer & Trust Company, 1 State Street, 30th Floor, New York, New York, 10004, Attn: Mark Zimkind, mzimkind@continentalstock.com or (y) deliver their shares of MMAC Common Stock to the transfer agent electronically using DTC’s DWAC system, which election would likely be determined based on the manner in which MMAC Stockholders hold their shares. MMAC stockholders must tender their shares in the manner described above prior to 5:00 p.m., Eastern Time, on                , 2019 (two business days before the Special Meeting) in order to exercise their redemption rights in connection with the Business Combination. The requirement for physical or electronic delivery prior to the vote at the Special Meeting ensures that a redeeming holder’s election is irrevocable once the Business Combination is approved. In furtherance of such irrevocable election, MMAC stockholders making the election will not be able to tender their shares after the vote at the Special Meeting.

Through the DWAC system, this electronic delivery process can be accomplished by the stockholder, whether or not it is a record holder or its shares are held in “street name,” by contacting the transfer agent or its broker and requesting delivery of its shares through the DWAC system. Delivering shares physically may take significantly longer. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC, and MMAC’s transfer agent will need to act together to facilitate this request. There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $45 and the broker would determine whether or not to pass this cost on to the redeeming holder. It is MMAC’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. MMAC does not have any control over this process or over the brokers or DTC, and it may take longer than two weeks to obtain a physical stock certificate. Such stockholders will have less time to make their investment decision than those stockholders that deliver their shares through the DWAC system. Stockholders who request physical stock certificates and wish to redeem may be unable to meet the deadline for tendering their shares before exercising their redemption rights and thus will be unable to redeem their shares.

Shares that have not been tendered in accordance with these procedures prior to the vote on the Business Combination Proposal will not be redeemed for cash held in the trust account. In the event that a public stockholder tenders its shares and decides prior to the vote at the Special Meeting that it does not want to redeem its shares, the stockholder may withdraw the tender. If a public stockholder delivered its shares for redemption to MMAC’s transfer agent and decides prior to the vote at the Special Meeting not to redeem its shares, such stockholder may request that MMAC’s transfer agent return the shares (physically or electronically). Such a request may be made by contacting MMAC’s transfer agent at the address listed above. In the event that a public stockholder tenders shares and the Business Combination is not approved, these shares will not be redeemed and the physical certificates representing these shares will be returned to the stockholder promptly following the determination that the Business Combination will not be approved. MMAC anticipates that a public stockholder who tenders shares for redemption in connection with the vote to approve the Business Combination would receive payment of the redemption price for such shares soon after the completion of the Business Combination. The transfer agent will hold the certificates of public stockholders that make the election until such shares are redeemed for cash or returned to such stockholders.

 

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If properly demanded, and if the Business Combination is approved, MMAC will redeem each public share for a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account two business days prior to such approval, including interest earned on the trust account deposits (which interest shall be net of taxes payable), divided by the number of then outstanding public shares. As of the Record Date, this amount is expected to be approximately $10.35 per share, which amount is net of taxes payable.

If MMAC stockholders exercise their redemption rights, their shares of MMAC Common Stock will cease to be outstanding immediately prior to the Business Combination and will only represent the right to receive the per-share redemption price. Such MMAC stockholders will no longer own those shares. MMAC stockholders will be entitled to receive cash for these shares only if they properly demand redemption and tender their shares to MMAC’s transfer agent prior to 5:00 p.m. Eastern Time on                , 2019 (two business days before the Special Meeting). MMAC anticipates that a public stockholder who tenders shares for redemption in connection with the vote to approve the Business Combination Proposal would receive payment of the redemption price for such shares soon after the consummation of the Business Combination.

MMAC has no specified maximum redemption threshold under the MMAC Certificate of Incorporation. It is a condition to closing under the Business Transaction Agreement, however, that MMAC has, in the aggregate, not less than $53.0 million of available cash upon the consummation of the Business Combination. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing to satisfy this condition, without which Akazoo will not be required to consummate the Business Combination, although it may waive this condition. In the event that Akazoo waives this condition, MMAC does not intend to seek additional stockholder approval or to extend the time period in which its public stockholders can exercise their redemption rights. Holders of public shares of MMAC Common Stock have elected to redeem such shares such that MMAC currently has, in the aggregate, less than $53 million of available cash. As such, MMAC is not currently able to satisfy a condition to consummation of the Business Combination and, unless the PIPE Financing is successful, Akazoo will not be required to consummate the Business Combination, although such condition to closing may be waived by Akazoo. Accordingly, if Akazoo determines to waive the condition that MMAC has, in the aggregate, not less than $53.0 million of available cash, then the parties may determine to consummate the Business Combination even if redemptions reduce MMAC’s net tangible assets to as low as $5,000,001. MMAC intends to promptly notify MMAC stockholders by press release following the time that it has secured sufficient binding commitments for the PIPE Financing to satisfy the minimum cash condition under the Business Transaction Agreement or that Akazoo has otherwise waived this condition.

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

Holders of outstanding MMAC Units must separate the underlying public shares, MMAC Warrants and MMAC Rights prior to exercising redemption rights with respect to the public shares. If MMAC Units are registered in a holder’s own name, the holder must deliver the certificate for such units to Continental Stock Transfer & Trust Company with written instructions to separate such units into their individual component parts. This must be completed far enough in advance to permit the mailing of the public share certificates back to the holder so that the holder may then exercise his, her or its redemption rights upon the separation of the public shares from the MMAC Units.

If a broker, dealer, commercial bank, trust company or other nominee holds MMAC Units for an individual or entity (such individual or entity, the “beneficial owner”), the beneficial owner must instruct such nominee to separate the beneficial owner’s MMAC Units into their individual component parts. The beneficial owner’s nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company. Such written instructions must include the number of MMAC Units to be separated and the nominee holding such units. The beneficial owner’s nominee must also initiate electronically, using DTC’s DWAC system, a withdrawal of the relevant units and a deposit of an equal number of shares of MMAC Common Stock, MMAC Warrants and MMAC Rights. This must be completed far enough in advance to permit the nominee to exercise the beneficial owner’s redemption rights upon the separation of the public shares from the MMAC Units. While this is typically done electronically the same business day, beneficial owners should allow at least one full business day to accomplish the separation. If beneficial owners fail to cause their public shares to be separated in a timely manner, they will likely not be able to exercise their redemption rights.

If the Business Combination is not approved and MMAC does not otherwise consummate an initial business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, MMAC would be required to dissolve and liquidate, and all MMAC Warrants and MMAC Rights would expire worthless.

 

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PROPOSAL I

APPROVAL OF THE BUSINESS TRANSACTION AGREEMENT AND THE BUSINESS COMBINATION

The discussion in this proxy statement/prospectus of the Business Combination Proposal and the principal terms of the Business Transaction Agreement, dated as of January 24, 2019, by and among MMAC, Akazoo, LuxCo and PubCo and the associated agreements are subject to, and are qualified in their entirety by reference to, the Business Transaction Agreement, which is attached as “Annex A” to this proxy statement/prospectus and is incorporated in this proxy statement/prospectus by reference. The Business Transaction Agreement attached as “Annex A” reflects the Business Transaction Agreement as amended by the Letter Agreement dated as of July 29, 2019 and gives effect to the terms thereof.

General Description of the Business Combination

On January 24, 2019, MMAC, Akazoo, LuxCo and PubCo entered into the Business Transaction Agreement pursuant to which MMAC and Akazoo will combine their businesses as described below. Pursuant to the Business Transaction Agreement, the Business Combination will be effected in three steps: (i) MMAC will merge with and into PubCo, with MMAC stockholders receiving PubCo Ordinary Shares on a 1-for-1 basis and with PubCo remaining as the surviving publicly traded entity (the “Merger”); (ii) LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing on a 100-for-1 basis ordinary shares of LuxCo to the Akazoo shareholders (the “Share Exchange”) and (iii) LuxCo will then merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity (the “Luxembourg Merger”). In connection with the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock). After these transactions, stockholders of MMAC and equityholders of Akazoo will hold PubCo Ordinary Shares.

In addition to other customary closing conditions discussed herein, consummation of the Business Combination is conditioned upon there being not less than $53 million available between the amount of cash in MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. Given the amount of cash currently in MMAC’s trust account, PubCo is in the process of securing binding commitments for the PIPE Financing, which funds would be deemed “additional capital otherwise available” to MMAC. The PIPE Financing is described in more detail in this proxy statement/prospectus. While MMAC and PubCo expect to successfully complete the PIPE Financing and the Business Combination, there is no guarantee that the PIPE Financing or the other closing conditions will be satisfied or waived before September 17, 2019, the date on which MMAC must dissolve and liquidate the MMAC Certificate of Incorporation.

It is anticipated that, upon the consummation of the Business Combination and PIPE Financing on its expected terms, MMAC’s existing stockholders, including the sponsor, would hold an ownership interest of approximately 12.8% of the issued and outstanding PubCo Ordinary Shares, the Akazoo equityholders will own an ownership interest of approximately 73.8% of the issued and outstanding PubCo Ordinary Shares and the equity investors purchasing PubCo Ordinary Shares in the PIPE Financing would own an ownership interest of approximately 12.1% of the issued and outstanding PubCo Ordinary Shares. These relative percentages assume that none of MMAC’s existing public stockholders exercise their redemption rights, as discussed herein, and assume a successful PIPE Financing leaving PubCo with an aggregate $53 million of available cash after consummation of the Business Combination and PIPE Financing, before payment of any fees and expenses. These percentages also do not include any exercise or conversion of (i) MMAC Warrants or (ii) options or other convertible securities issued by Akazoo. If any of MMAC’s existing public stockholders exercise their redemption rights, the percentage ownership of MMAC’s existing stockholders will be lower. You should read “The Business Transaction Agreement — Consideration to be Received in the Business Combination” and “Unaudited Pro Forma Condensed Combined Financial Statements” for further information.

Effects of the Business Combination

Upon the consummation of the Business Combination, MMAC will cease its separate corporate existence and MMAC stockholders will become shareholders of PubCo. MMAC Common Stock, MMAC Units, MMAC Warrants and MMAC Rights will be delisted from NASDAQ and will cease public trading. PubCo intends to apply for listing of the PubCo Ordinary Shares and PubCo Warrants on the NASDAQ Stock Market, but it cannot be assured that a regular trading market will develop in the PubCo Ordinary Shares or PubCo Warrants.

Upon the consummation of the Business Combination, Akazoo will become a wholly owned subsidiary of PubCo and Akazoo equityholders will become shareholders of PubCo. Following the Business Combination, Apostolos N. Zervos will serve as the Chief Executive Officer of PubCo and Pierre Schreuder will serve as the Chief Financial Officer of PubCo. Lewis Dickey, Jr., will serve as a Director on the PubCo Board and as the non-executive Chairman of the PubCo Board. PubCo will continue to operate the business of Akazoo.

Treatment of MMAC Warrants and MMAC Rights

In connection with the consummation of the Business Combination, the holders of MMAC Warrants issued and outstanding immediately prior to effective time of the Merger will receive one PubCo Warrant, in exchange for each MMAC Warrant (or portion thereof) held by them. The PubCo Warrants will have and will be subject to substantially the same terms and conditions set forth in the MMAC Warrants.

Immediately prior to the consummation of the Merger, each MMAC Right issued and outstanding immediately prior to the effective time of the Merger will be automatically converted into one-tenth (1/10) of one share of MMAC Common Stock for each MMAC Right.

 

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Exchange of Shares in the Business Combination

In connection with the Business Combination, the Akazoo securityholders will exchange their shares of equity, convertible loan notes and options in Akazoo for ordinary shares, convertible loan notes and options in LuxCo on a 100-for-1 basis. In connection with the Luxembourg Merger, PubCo will issue 0.07283 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock).

If MMAC stockholders approve the Business Combination Proposal and the parties consummate the Business Combination, the holders of MMAC Common Stock issued and outstanding immediately prior to the effective time of the Merger (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares), will receive one PubCo Ordinary Share in exchange for each share of MMAC Common Stock held by them.

Board of Directors and Executive Officers Following the Business Combination

The Shareholders’ Agreement entered into in connection with the Business Transaction Agreement provides that, upon the consummation of the Business Combination, the PubCo Board will be comprised of no more than seven directors. Of those directors, one individual will be designated by certain of Akazoo’s investor shareholders (Tosca Penta Music Limited Partnership and InternetQ Group Limited), who need not be independent, one individual designated by certain MMAC stockholders (either Modern Media Sponsor, LLC, or if such entity is dissolved prior to the closing of the Business Combination, MIHI LLC and Modern Media LLC), who need not be independent, and one individual designated by certain management shareholders (including Mr. Zervos), who must be independent, pursuant to the rules of the NASDAQ Capital Market.

For a period of three years following entry into the Shareholders’ Agreement, Lewis W. Dickey, Jr. will serve as the non-executive Chairman of the PubCo Board and a member of the PubCo Board. Mr. Zervos will serve as the initial Chief Executive Officer and an initial member of the PubCo Board. Pierre Schreuder will serve as the initial Chief Financial Officer. At all times during the term of the Shareholders’ Agreement, the shareholder parties will cause the majority of the PubCo Board to be comprised of independent directors.

It is anticipated that pursuant to these nomination rights, Lewis W. Dickey, Jr., Apostolos N. Zervos and Panagiotis Dimitropoulos will initially serve on the PubCo Board, along with four other individuals to be named pursuant to the nomination rights discussed above.

 

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Background of the Business Combination

The terms of the Business Transaction Agreement are the result of arms’ length negotiations between representatives of MMAC and Akazoo. The following is a brief discussion of the background of these negotiations, and of the parties’ development of the Business Combination.

On May 17, 2017, MMAC consummated its IPO of 20,700,000 MMAC Units, which included the underwriters’ full exercise of their over-allotment option. IPO transaction costs amounted to $12,309,271, consisting of $3,600,000 of underwriting fees, $7,785,000 of deferred underwriting fees payable (referred to as “deferred underwriting commissions”) (which are held in the trust account) and $924,271 of IPO costs.

Following the closing of the IPO, $209,070,000 ($10.10 per unit) of the net proceeds from the sale of the MMAC Units and the private placement warrants was placed in a trust account and has been invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 180 days or less, or in an open-ended investment company that holds itself out as a money market fund selected by MMAC meeting certain conditions under Rule 2a-7 of the Investment Company Act, and will remain in the trust account until the earlier of: (i) the consummation of an initial business combination or (ii) the distribution of the trust account, as described below.

After the IPO, MMAC’s officers and directors commenced an active search for prospective businesses or assets to acquire in its initial business combination.

Representatives of MMAC and the sponsor were contacted by numerous individuals and entities who offered to present ideas for acquisition opportunities, including financial advisors and other members of the financial, entertainment, media and technology communities. MMAC’s officers and directors and their affiliates also brought to MMAC’s attention target merger candidates.

During the twelve months following the IPO, MMAC, primarily through Mr. Dickey and representatives of Macquarie, on behalf of the sponsor, reviewed more than 125 acquisition opportunities across the media, marketing and entertainment industries, and entered into 49 non-disclosure agreements. The representatives of MMAC entered into extended discussions with more than 25 potential target businesses or their representatives, including (i) a professional sports team, (ii) a talent management business, (iii) an emerging markets media platform, (iv) an independent music label, (v) an online lead generation company, (vii) a healthcare-focused marketing company, (vii) an advertising agency, (viii) an entertainment and media company and (ix) a marketing services company. MMAC ultimately determined to abandon each of its other potential acquisition opportunities either because (i) the target decided to pursue an alternative transaction or strategy or (ii) MMAC concluded that the target business would not be a suitable acquisition for MMAC.

Representatives of MMAC, primarily through Mr. Dickey and representatives of Macquarie, on behalf of the sponsor, began discussions with Akazoo regarding a potential transaction in June 2018, with a nondisclosure agreement signed on June 14, 2018.

On June 22, 2018, Mr. Dickey and representatives of Macquarie, on behalf of the sponsor, held a conference call with representatives from Akazoo – including Mr. Zervos –to engage in a financial due diligence discussion and to discuss the merits of Akazoo as a potential merger candidate for MMAC. Considerations included Akazoo’s rapid historic and projected growth, its potential attractiveness as a public company and the favorable demographic and economic trends in Akazoo’s target markets. MMAC also began to undertake a more detailed analysis, and began to conduct due diligence on Akazoo, including conducting research on emerging markets’ music industries, reviewing materials provided by Akazoo, evaluating Akazoo’s competitive positioning and assessing general economic and demographic trends. MMAC’s due diligence included consultation with independent experts as well as a review of various research reports and studies on the music streaming market.

In July 2018, MMAC and Akazoo began discussing potential transaction terms and reached a preliminary agreement on the terms and conditions of a potential transaction between the parties.

 

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Throughout July 2018, MMAC continued to conduct its ongoing due diligence on Akazoo. Several teleconferences were held between representatives of Akazoo, including Messrs. Zervos and Schreuder, and representatives of MMAC, including Mr. Dickey and Macquarie, on behalf of the sponsor, to review Akazoo’s strategic, marketing and operations plans, and management forecasts. During this time, Akazoo also shared various materials with MMAC, and MMAC and its advisors reviewed such materials, including certain material contracts of Akazoo.

On August 2 and 3, 2018, Messrs. Zervos and Schreuder met with Mr. Dickey and representatives of Macquarie, on behalf of the sponsor, at Macquarie’s offices in New York City. The meetings included a detailed review of Akazoo’s operations, business plan and financial model, the music streaming market, and a discussion about the potential structure and process for a possible transaction. The meetings also included discussions about the dynamics involved in completing a business combination with a SPAC. The discussions also included consideration of various alternative jurisdictions where the combined company would be domiciled and base its operations, which included considerations regarding currencies, tax matters, where existing competitors in the music streaming sector were domiciled, and jurisdictions that might be attractive to the capital markets generally, and to investors, or potential investors, in Akazoo, MMAC and/or PubCo in particular.

Between August 3 and October 25, 2018, MMAC and Akazoo were in frequent communication, through email and teleconferences. Topics and matters discussed were focused primarily on MMAC’s ongoing due diligence, including with respect to Akazoo’s business plan and management forecasts.

In late October 2018, MMAC and Akazoo reached a preliminary agreement on general terms and executed a non-binding Letter of Intent (the “Letter of Intent”), which set forth revised terms and conditions of the proposed transaction. The Letter of Intent set forth preliminary terms for a proposed business combination based upon an estimated valuation of Akazoo of $380 million, on a cash-and debt-free basis, in which existing shareholders of Akazoo would exchange all outstanding shares of Akazoo for 37.4 million shares of the combined company, based upon the estimated cash on deposit in MMAC’s trust account at the time. The Letter of Intent further provided that closing of the transaction would be subject to a minimum of $65 million of cash being available in MMAC’s trust account at Closing (after transaction expenses and payment for all shares redeemed in connection with shareholder approval of the Business Combination). In addition, in the event that at least $130 million in cash was available in MMAC’s trust account (after payment of such transaction expenses and redemptions), then up to $15 million in cash would be distributed to the existing shareholders of Akazoo. The proposed transaction was subject to completion of business and legal due diligence and negotiation and execution of mutually satisfactory definitive transaction agreements. MMAC, together with its advisors, began analyzing various possible transaction structures to effect the potential business combination and discussed such possibilities with Akazoo’s management.

On November 2, 2018, MMAC filed a Current Report on Form 8-K with the SEC disclosing that MMAC had entered into the Letter of Intent, which, pursuant to the provisions of the MMAC Certificate of Incorporation, resulted in MMAC having until February 17, 2019 to consummate its business combination.

From November 5 through November 7, 2018, Mr. Dickey and a representative of Macquarie, on behalf or the sponsor, travelled to Greece and London to conduct on-site due diligence and to meet with other members of Akazoo’s management team, employees and other stakeholders.

On November 9, 2018, at the end of a regularly scheduled meeting of the MMAC Board’s Audit Committee, Mr. Dickey updated the members of the Audit Committee (who constituted the remaining three members of the Board) on the status of the negotiations with Akazoo, the status of previous discussions with certain of the other potential transaction partners that had been terminated or abandoned, an assessment of Akazoo based on the business and legal due diligence conducted to date, and the proposed structure and timing for a potential transaction with Akazoo.

In November 2018, Jones Day, legal counsel for MMAC, began drafting pertinent transaction documents and distributed an initial draft of the Business Transaction Agreement to Akazoo and its advisors on November 14, 2018. During the period from November 14, 2018 through January 23, 2019, Jones Day and Loeb & Loeb LLP, U.S. legal counsel to Akazoo, as well as Phanar Legal, U.K. counsel to Akazoo, and Arendt and Medernach SA, Luxembourg counsel to Akazoo, exchanged drafts and revisions of the Business Transaction Agreement, and the related transaction agreements, and engaged in negotiations with respect to the structure, terms and conditions of the Business Combination and the corporate governance structure of PubCo after completion of the transaction.

From November 26 through December 4, 2018, Messrs. Zervos and Schreuder held various meetings with MMAC and its advisors at Macquarie’s offices in New York to finalize MMAC’s due diligence, to develop an investor presentation, and to prepare for potential meetings with potential investors.

On December 6, 7 and 10, 2018, Messrs. Dickey, Zervos and Schreuder, together with representatives of Macquarie, engaged in discussions with certain institutional investors on a confidential basis pursuant to non-disclosure agreements to discuss potential interest by prospective investors and financing sources in the potential transaction.

On December 14, 2018, the Board held a meeting by teleconference. At this meeting, Mr. Dickey and representatives of Macquarie updated the Board on the negotiations with Akazoo, on the continuing due diligence process, and on the proposed structure, valuation and timing for the potential business combination with Akazoo.

 

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From December 24, 2018 until January 24, 2019, MMAC and its counsel continued to work closely with Akazoo and its U.S. and U.K. legal counsel, including holding conference calls to update the parties on progress with respect to draft transaction documents, MMAC’s due diligence and other outstanding issues. In addition, Mr. Dickey and Mr. Zervos engaged in negotiations of the terms of a proposed shareholders agreement, including the rights of the sponsor and certain shareholders of Akazoo to designate members of the board of directors of PubCo after completion of the Business Combination. They also continued to negotiate certain economic terms of the transaction, and agreed that (i) existing Akazoo shareholders would receive an aggregate number of PubCo shares equal to an assumed enterprise value of Akazoo of $380 million (less any cash payments to them) divided by the per share redemption price applicable to any redemptions of MMAC stock by public stockholders of MMAC, and (iii) Akazoo shareholders immediately prior to the Luxembourg Merger would receive a cash distribution of up to $20 million in exchange for a portion of their shares, which would mostly represent a return of share premium as there is insufficient retained earnings to pay out the cash distribution, if, and to the extent, that cash available in MMAC’s trust account, after the payment of transaction fees and expenses and any redemptions, exceeds $110 million. During that time period there were also negotiations with certain shareholders of Akazoo and MMAC’s sponsor with respect to lockup agreements that would restrict transfers of PubCo’s shares after the Business Combination.

On January 3, 2019, the Board held a telephone board meeting, with all board members present, as well as representatives of Jones Day and Macquarie. The purpose of the meeting was to review the status of the discussions with Akazoo and the latest drafts of the documents and agreements concerning the Akazoo transaction, including the Business Transaction Agreement and related documents, to review and discuss Akazoo’s financial models and forecasts, and to discuss timing of the Business Combination relative to MMAC’s planned special meeting of stockholders to vote to extend the deadline by which MMAC must complete a business combination. The Board, having recognized that it was unlikely that a business combination would be completed by the February 17, 2019 deadline, determined that it was in the best interest of MMAC, and its public stockholders, to seek to extend the deadline by four months, to June 17, 2019. The Board recognized that, pursuant to the MMAC Certificate of Incorporation, the public stockholders would be entitled to request redemptions of their shares of MMAC common stock in connection with such a vote to extend the deadline. The Board also recognized that, while any redemptions would have a potential impact on MMAC’s ability to satisfy the proposed condition that MMAC have a minimum of $60 million in cash available from the trust account at closing of the Business Combination, they believed that having the opportunity to continue to pursue the potential business combination with Akazoo was in the best interests of MMAC and its public stockholders.

On January 7, 2019, the Board met again by teleconference, with all board members present, along with representatives of Macquarie, on behalf of the sponsor, and Jones Day. Mr. Dickey and the representatives of Macquarie reviewed the financial and business due diligence reports prepared by management and their advisors, and updated the Board on the prospective transaction, its structure (including the redomiciliation of MMAC as a Luxembourg corporation in the Business Combination), and prospects. They also reviewed estimated valuation ranges for Akazoo based upon various approaches and analyses. After considerable review and discussion, the Business Transaction Agreement and related documents and agreements were unanimously approved by all directors, subject to final negotiations and modifications of the documents, and the Board determined to recommend the approval of the Business Transaction Agreement to MMAC’s stockholders. The Board also concluded that, based upon the estimated valuation ranges, the fair market value of Akazoo was equal to at least 80% of the funds held in the trust account. Over the next two weeks, the final terms of all ancillary agreements were completed.

On January 22, 2019, the board of directors of Akazoo met by teleconference with all board members present, including Mr. Zervos and two directors representing the two major shareholders of Akazoo. Mr. Schreuder was also invited to the meeting. At that meeting, Messrs. Zervos and Schreuder reported to the whole board of directors of Akazoo that the negotiations in relation to the Business Combination and the terms of the Business Transaction Agreement and its related documents, including the Shareholders’ Agreement, had been concluded. The directors of Akazoo then proceeded to finally review the key terms of each of the documents effecting the Business Combination, resolved to approve the documents and authorized any of the directors to execute them for and on behalf of Akazoo and LuxCo (as a company in formation under Luxembourg law). The directors of Akazoo also noted that the two directors representing Akazoo’s major shareholders had approved the Business Combination and each of the Business Transaction Agreement and related agreements for and on behalf of the major shareholders of Akazoo as required under the shareholders’ agreement between Akazoo and its shareholders. Finally, the board of directors of Akazoo approved the publication of a press release jointly with MMAC in relation to the execution of the Business Transaction Agreement, and the investor presentation and authorized Mr. Zervos to finalize the documents.

Following completion of all agreements and documents to be executed or delivered in connection with signing, the Business Transaction Agreement and certain related agreements were executed by all parties on January 24, 2019. Also on January 24, 2019, MMAC issued a press release announcing the execution of the Business Transaction Agreement and a webcast was posted on Akazoo’s website containing an the investor presentation that featured Messrs. Dickey, Zervos and Schreuder.

On January 25, 2019, MMAC filed with the SEC a Current Report on Form 8-K announcing the execution of the agreement and disclosing the key terms of the Business Combination in detail.

On February 8, 2019, MMAC held a Special Meeting in Lieu of Annual Meeting and MMAC stockholders voted to extend the date by which MMAC must consummate a business combination from February 17, 2019 to June 17, 2019 (the “First Extension”). In connection with the First Extension, a total of 5,942,681 public shares were redeemed for a total amount of approximately $61 million. Following the completion of such redemptions, MMAC had approximately $152 million in cash remaining in the trust account and 14,757,319 public shares issued and outstanding.

On June 12, 2019, MMAC held a special meeting of the stockholders which as immediately adjourned and subsequently reconvened on June 14, 2019. At that reconvened special meeting of stockholders, MMAC stockholders approved to extend the date by which MMAC must consummate a business combination from June 17, 2019 to September 17, 2019 (the “Second Extension”). In connection with the approval of the Second Extension, MMAC stockholders elected to redeem an aggregate of 13,350,654 public shares common stock. Following the completion of such redemptions, MMAC had approximately $14.7 million in cash remaining in the trust account and 6,581,665 shares of common stock issued and outstanding.

On July 29, 2019, the parties to the Business Transaction Agreement executed a Letter Agreement that amended certain provisions of the Business Transaction Agreement to provide for the PIPE Financing and otherwise agreed to the terms of the PIPE Financing.

 

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MMAC’s Reasons for the Business Combination and Recommendation of MMAC’s Board

On January 7, 2019, the Board unanimously (i) approved the Business Transaction Agreement and the Business Combination contemplated thereby, (ii) determined that the Business Combination is in the best interest of MMAC and its stockholders, (iii) directed management, together with MMAC’s legal counsel, to complete ongoing confirmatory due diligence and finalize all ancillary documents and agreements, (iv) directed that the Business Transaction Agreement be submitted to MMAC’s stockholders for approval and adoption, and (v) recommended that MMAC’s stockholders approve and adopt the Business Transaction Agreement.

Before reaching its decision, the Board considered the results of management’s due diligence, which included:

 

   

Research on comparable companies including publicly-traded Spotify Technology SA (SPOT), Pandora Media Inc. (P), SiriusXM Holdings Inc. (SIRI), Tencent Music Entertainment Group (TME), as well as a number of companies in the border internet/eCommerce, online marketplace and subscription-based business totaling 40 companies, and over 19 precedent transactions involving music industry acquisitions from the past five years, ranging in transaction size from approximately $6 million to $9 billion in enterprise value. The Board compared the Revenue multiple derived from the purchase price for Akazoo (including the dilution resulting from the conversion of the founder shares) to the average forward Revenue multiple of the aforementioned publicly traded comparable companies (which generally fell in a range of 1.7x to 5.7x), as well as to the average trailing Revenue multiple of the aforementioned precedent transactions (which generally fell in a range of 2.0x to 4.0x), and found that Akazoo’s transaction multiple was in-line with both;

 

   

Extensive meetings and calls with Akazoo’s management team regarding operations and projections;

 

   

Research on the global music streaming industry, including historical growth trends, market share information and market size projections;

 

   

Review of Akazoo’s material contracts, intellectual property matters, labor matters, and financial, tax, legal, and accounting diligence;

 

   

Creation of a financial model with Akazoo’s management team; and

 

   

Reports relating to financial, accounting, tax, and legal diligence.

The Board considered a wide variety of factors in connection with its evaluation of the Business Combination. In light of the complexity of those factors, the Board, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision.

In the prospectus for MMAC’s IPO, MMAC identified the following general criteria and guidelines that it believed would be important in evaluating prospective target businesses. MMAC indicated its intention to acquire companies that meet the following criteria or guidelines:

 

   

Focus on media, entertainment and marketing services companies positioned to compete in the new modern media ecosystem

 

   

Emphasis on companies that can benefit from a public listing and greater access to capital

 

   

Businesses with a catalyst for significantly improved financial performance

 

   

Market-leading participant with experienced and motivated management teams that may benefit from enhanced leadership and governance

 

   

Middle-market businesses

 

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In considering the Business Combination, the Board concluded that Akazoo met all of the above criteria. In particular, the Board considered the following positive factors, although not weighted or in any order of significance:

 

   

Streaming Music Industry Growth. Industry research reports estimate that the recorded music industry had revenues of approximately $17.9 billion, growing to approximately $40.8 billion by 2030. Such reports also estimate that digital music consumption accounts for over 54% of global music revenues, with streaming accounting for 39% and expected to grow at an approximate 14% compound annual growth rate over the next 14 years, representing as much as 84% of global recorded music revenues by 2030.

 

   

Hyper-Local Strategy. Akazoo has built a competitive advantage with its focus on local content sourced from local providers in a culturally relevant interface designed to cater to specific tastes of target audiences and drive customer acquisition and retention. Additionally, Akazoo utilizes local content and partnerships with local telecom services to seek to drive profitability and reduce costs.

 

   

Unique Technology. Akazoo utilizes proprietary technology, or music AI, to generate real-time music recommendations, sonic analysis and automatic play-listing, all fully integrated into the core platform, which is designed to improve the customer experience and lower content curation costs.

 

   

Compelling Financial Profile. Akazoo demonstrates a strong growth profile with diversified revenue. Akazoo’s 2018E-2021E revenue compound annual growth rate of approximately 40% is expected to be driven by further penetration of its target user base within current markets, with additional growth potential through market expansion. Akazoo’s business model has generated positive EBITDA each year since inception, driven by disciplined sales and marketing expenses and low content costs.

 

   

Experienced Management Team. Executive leadership team with deep industry and market knowledge that is well-positioned to oversee organic growth and expansion. Akazoo’s team would be bolstered by the public company experience, executive leadership and acquisition track record of Lew Dickey.

 

   

Alignment of Interests of Shareholders. As a growth company operating primarily in developing markets, ensuring that the interests of the shareholders of both Akazoo and MMAC, who would hold equity in the combined company based upon the relative values of the respective companies were aligned and that each group had the opportunity to participate, through their equity ownership in PubCo after the Business Combination, in that growth, was a compelling factor considered by the Board.

The Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination, including, but not limited to, the following:

 

   

Significant Level of Competition. Akazoo’s ability to generate and grow revenue depends on retaining and expanding its Subscriber base in a crowded music streaming services landscape. To do so effectively requires providing desired content, a superior and engaging user interface, and an industry-leading AI music recommendation engine, all of which our many competitors are striving to do simultaneously.

 

   

Demand for Music Consumption in Emerging Markets. Akazoo’s revenue is derived primarily in emerging markets (including Poland, Russia, Malaysia, Thailand, Indonesia, Ecuador, Brazil and Mexico, among others). The success of the business is largely dependent on the continued demand for music streaming services in these regions

 

   

Accessibility of Growth Channels. Akazoo’s business model depends upon continued accessibility to customer acquisition channels including paid / affiliate services and telecommunications / messaging partnerships. Expansion into new markets could require more capital than expected and acquisition targets are uncertain.

 

   

Customer Acquisition Costs. Akazoo projections assume relatively flat customer acquisition costs, which is dependent upon stable rates with distribution channel providers and Akazoo’s continued effectiveness of its sales and marketing spends.

 

   

Content Costs. Contracts with content providers could materially change, which would impact related costs and potentially sustained profitability.

 

   

Foreign Exchange Rates. Akazoo collects some of its revenues in currencies other than Euros and U.S. dollars and its financial performance is dependent on the relative stability and strength of these other currencies.

 

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Jurisdictional / Regulatory Risk. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination. Because of its international operations, Akazoo faces increased potential for cross-border litigation issues to arise.

 

   

Benefits Not Achieved. The risk that the potential benefits of the Business Combination may not be fully achieved, or may not be achieved within the expected timeframe.

 

   

Liquidation of MMAC. The risks and costs to MMAC if the Business Combination is not completed, including the risk of diverting management focus and resources from other businesses combination opportunities, which could result in MMAC being unable to effect a business combination by February 17, 2019 and force MMAC to liquidate and the warrants to expire worthless.

 

   

Exclusivity. The fact that the Business Transaction Agreement includes an exclusivity provision that prohibits MMAC from soliciting other initial business combination proposals, which restricts MMAC ability to consider other potential initial business combinations until the earlier of the termination of the Business Transaction Agreement or the consummation of the Business Combination between MMAC and Akazoo.

 

   

Stockholder Vote. The risk that MMAC’s stockholders may fail to provide the respective votes necessary to effect the Business Combination.

 

   

Closing Conditions. The fact that completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within MMAC’s control.

 

   

Fees and Expenses. The fees and expenses associated with completing the Business Combination.

 

   

Other Risks. Various other risks associated with the Business Combination, the business of MMAC and the business of Akazoo, which are described under the “Risk Factors” section in this proxy statement/prospectus.

In approving the Business Combination, the Board determined not to obtain a fairness opinion. The officers and directors of MMAC have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries, and in mergers and acquisitions, and concluded that their experience and backgrounds, together with the experience and sector expertise of Macquarie’s, on behalf of the sponsor, enabled them to make the necessary evaluations and determinations regarding the Business Combination. In addition, pursuant to the MMAC Certificate of Incorporation, the public stockholders of MMAC have the right to redeem their shares of MMAC Common Stock for cash equal to a pro rate portion of the funds in the trust account.

Based upon the wide variety of factors that the Board considered, the Board concluded that the potential benefits that it expected MMAC and its stockholders to achieve as a result of the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the Board unanimously determined that the Business Transaction Agreement and the transactions contemplated thereby, including the Business Combination, were advisable, fair to, and in the best interests of, MMAC and its stockholders.

Akazoo Management Unaudited Revenue Forecast

Akazoo does not, as a matter of course, publicly disclose forecasts as to future performance, earnings or other results due to the unpredictability of the underlying assumptions and estimates. However, Akazoo has included below a revenue forecast of Akazoo that, to the extent described below, was furnished to the MMAC board, MMAC’s financial advisors and MMAC’s management in connection with the Business Combination.

This revenue forecast was not prepared with a view toward public disclosure or with a view toward complying with published guidelines of the SEC regarding forward-looking statements or IFRS. A summary of this information is presented below.

While the revenue forecast was prepared in good faith, no assurance can be made regarding future events. The revenue forecast is a projection based on historical performance trends and management outlook by region. The revenue forecast also assumed that at least $60,000,000 of cash would be available for distribution to Akazoo upon the consummation of the Business Combination, which would be used to invest in growth initiatives and pursue acquisition opportunities. The estimates and assumptions underlying this revenue forecast involve judgments with respect to, among other things, future economic, competitive, regulatory and financial market conditions, timing of the consummation of the Business Combination and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the music streaming industry, and the risk and uncertainties described under “Cautionary Information Regarding Forward-Looking Statements” contained in this proxy statement/prospectus, all of which are difficult to predict and many of which are outside the control of Akazoo and, upon the closing of the Business Combination, will be beyond the control of PubCo as the surviving corporation. There can be no assurance that the underlying assumptions will prove to be accurate or that the projected results will be realized and actual results likely will differ, and may differ materially, from those reflected in the revenue forecast, whether or not the Business Combination is completed. The inclusion in this proxy statement/prospectus of the revenue forecast below should not be regarded as an indication that MMAC, PubCo or Akazoo, their respective boards of directors or their respective financial advisors considered, or now consider, the forecast to be a reliable predictor of future results. The revenue forecast is not fact and should not be relied upon as being necessarily indicative of future results, and readers of this proxy statement/prospectus are cautioned not to place undue, if any, reliance on this information.

By including in this proxy statement/prospectus the revenue forecast below, neither MMAC, PubCo nor Akazoo nor any of their respective representatives has made or makes any representation to any person regarding the ultimate performance of PubCo compared to the information contained in the revenue forecast. Accordingly, the revenue forecast should not be construed as financial guidance, nor relied upon as such. Further, the inclusion of the revenue forecast in this proxy statement/prospectus does not constitute an admission or representation by MMAC, PubCo or Akazoo that this information is material. The revenue forecast reflected the estimates and judgments available to Akazoo’s management at the time they were prepared and have not been updated to reflect any changes since such revenue forecast was prepared. Neither MMAC or Akazoo nor, after the closing of the merger, PubCo undertakes any obligation, except as required by law, to update or otherwise revise the revenue forecast to reflect circumstances existing since their preparation or to reflect the occurrence of unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.

The summary of the revenue forecast is not included in this proxy statement/prospectus to induce any MMAC stockholder to vote in favor of the adoption of the Business Combination Proposal or any other proposals to be voted on at the Special Meeting.

 

     Fiscal Year Ending December 31,     16A -‘18E     18E - ‘21E  

(€ in millions)

   2016A      2017A     2018A     2019E     2020E     2021E     CAGR     CAGR  

Total Revenues

     68        90       105       134       203       285       24 %      40 % 

% Growth

        32 %      16 %      28 %      51 %      40 %     

 

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Interests of MMAC Directors and Officers in the Business Combination

In considering the recommendation of the Board to vote for the proposals to approve and adopt the Business Transaction Agreement and the Business Combination, MMAC stockholders should be aware that certain members of the Board have agreements or arrangements that provide them with interests in the Business Combination that differ from, or are in addition to, those of MMAC stockholders generally. In particular:

 

   

If the Business Combination Proposal is not approved and MMAC does not consummate a business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders, MMAC would be required to dissolve and liquidate as contemplated by MMAC’s IPO prospectus and in accordance with the MMAC Certificate of Incorporation. In the event of a dissolution:

 

   

the 5,175,000 founder shares held by the initial stockholders, which were acquired prior to the IPO for an aggregate purchase price of $25,000, will be worthless (as the holders have waived liquidation rights with respect to such shares), as will the 7,320,000 sponsor warrants that were acquired simultaneously with the IPO for an aggregate purchase price of $7,320,000 (as they will expire). Such MMAC Common Stock and warrants had an aggregate market value of approximately $55,254,408 based on the last sale price of $10.48 and $0.1394, respectively, on NASDAQ on the Record Date. Lewis W. Dickey, Jr., MMAC’s President, Chief Executive Officer and Chairman, wholly owns Modern Media, LLC, which is a 50% owner of the sponsor;

 

   

the sponsor has agreed that it will be liable to MMAC, if and to the extent any claims by a vendor for services rendered or products sold to MMAC, or a prospective target business with which MMAC has discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below: (i) $10.10 per public share; or (ii) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case, net of the interest which may be withdrawn to pay taxes, except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under MMAC’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act;

 

   

all rights specified in the MMAC Certificate of Incorporation relating to the right of officers and directors to be indemnified by MMAC, and of MMAC’s officers and directors to be exculpated from monetary liability with respect to prior acts or omissions, will continue after a business combination. If the business combination is not approved and MMAC liquidates, it will not be able to perform its obligations to its officers and directors under those provisions;

 

   

other than an annual retainer paid to MMAC’s Chief Financial Officer and its General Counsel, none of MMAC’s executive officers or directors has received any cash compensation for services rendered to the MMAC. All of the current members of the Board are expected to continue to serve as directors at least through the date of the Special Meeting and may continue to serve following any potential business combination and receive compensation thereafter; and

 

   

The sponsor, MMAC’s officers and directors, and their affiliates are entitled to reimbursement of out-of-pocket expenses incurred by them in connection with certain activities on MMAC’s behalf, such as identifying and investigating possible business targets and business combinations. However, if MMAC fails to consummate the a business combination, they will not have any claim against the trust account for reimbursement. Accordingly, MMAC will most likely not be able to reimburse these expenses if a business combination is not completed.

 

   

The sponsor has the right to designate a director to serve on the PubCo Board;

 

   

The current directors and officers of MMAC have the right to continued indemnification, and to receive the benefit of directors’ and officers’ liability insurance, after the Business Combination; and

 

   

Each of MMAC’s independent directors, Messrs. Blair Faulstich, George Brokaw and John White, holds founder shares and are considered initial stockholders.

 

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Interests of Certain Akazoo Directors and Officers in the Business Combination

In considering the recommendation of the Board to vote for the proposals to approve and adopt the Business Transaction Agreement and the Business Combination, MMAC stockholders should be aware that certain members of Akazoo’s Board of Directors and officers have agreements or arrangements that provide them with interests in the Business Combination that differ from, or are in addition to, those of Akazoo stockholders generally. In particular:

 

   

Apostolos Zervos, the Chief Executive Officer and a director of Akazoo, will receive a bonus of €1 million if the Business Combination closes.

 

   

Mr. Zervos and Pierre Schreuder, the Chief Financial Officer of Akazoo, will enter into employment agreements with the post-Business Combination Company. A description of the employment agreements can be found in this proxy statement/prospectus under the heading “Directors and Management of PubCo Following the Business Combination – Employment Agreements.”

 

   

An entity controlled by Mr. Schreuder and his spouse will receive a number of shares in LuxCo immediately prior to the Luxembourg Merger as a result of which they will hold shares in the post transaction company equal to approximately 0.7% of all outstanding shares at the closing of the Business Combination.

 

   

Mr. Zervos, Mr. Schreuder and other Akazoo employees hold options to purchase shares in Akazoo, such options to be transferred to LuxCo and exercised by them so that they will hold an aggregate of approximately 8.3% of PubCo at or soon after the closing of the Business Combination.

Accounting Treatment

The Business Combination will be accounted for as a reverse merger in accordance with IFRS.

Regulatory Approvals Required for the Business Combination

MMAC and Akazoo do not expect that the Business Combination will be subject to any state or federal regulatory requirements other than filings under applicable securities laws and the effectiveness of the registration statement of PubCo of which this proxy statement/prospectus is part. MMAC and Akazoo intend to comply with all such requirements. MMAC does not believe that, in connection with the completion of the Business Combination, any consent, approval, authorization or permit of, or filing with or notification to, any acquisition control authority will be required in any jurisdiction.

Listing of PubCo Ordinary Shares and Delisting and Deregistration of MMAC Common Stock

The MMAC Units, MMAC Common Stock, MMAC Rights and MMAC Warrants are currently listed on the NASDAQ Capital Market under the symbols “MMDMU,” “MMDM,” “MMDMR” and “MMDMW,” respectively.

Immediately prior to the consummation of the Merger, the MMAC Units will separate into their individual component parts and will cease separate trading and each outstanding MMAC Right will be automatically converted into one-tenth (1/10) of one share of MMAC Common Stock. Upon the consummation of the Merger, (i) outstanding shares of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) will be converted into PubCo Ordinary Shares, (ii) outstanding MMAC Warrants will be converted into PubCo Warrants and (iii) MMAC Common Stock, MMAC Warrants and MMAC Rights will be delisted from NASDAQ.

PubCo intends to apply for the listing of PubCo Ordinary Shares and PubCo Warrants on the NASDAQ Stock Market under the symbols “SONG” and “SONGW,” respectively. It cannot assured that the PubCo Ordinary Shares and PubCo Warrants will be approved for listing on NASDAQ.

 

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Required Vote

The approval of the Business Combination Proposal requires the affirmative vote of at least a majority of the shares of MMAC Common Stock outstanding as of the Record Date. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Business Combination Proposal.

Satisfaction of 80% Requirement

MMAC represented in the prospectus relating to its IPO that the business acquired in its initial business combination would have a fair market value equal to at least 80% of its net assets at the time of the transaction, including the funds held in the trust account. As of December 31, 2018, there was approximately $212 million in cash in the trust account. Based upon the estimated valuation of Akazoo that was developed by MMAC’s management and Macquarie, on behalf of the sponsor, and considered by the Board in evaluating and approving the Business Combination, the Board determined that the fair market value of Akazoo, and the Business Combination, meets this requirement.

The terms of the Business Combination were determined based upon arms-length negotiations between MMAC and Akazoo, with whom MMAC had no prior dealings. Under the circumstances, the Board believes that the total consideration for the Business Combination appropriately reflects the fair market value of Akazoo. In light of the financial background and experience of several members of MMAC’s management and Board, the Board also believes it is qualified to determine whether the Business Combination meets this requirement.

Appraisal Rights

Under Delaware law, MMAC stockholders are not entitled to appraisal rights for their shares in connection with the Business Combination.

Recommendation

The foregoing discussion of the information and factors considered by the Board is not meant to be exhaustive, but includes the material information and factors considered by the Board. After careful consideration, the Board has determined unanimously that the Business Combination Proposal is fair to, and in the best interests of, MMAC and its stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” THE BUSINESS COMBINATION PROPOSAL.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION

The following is a general discussion of the material U.S. federal income tax consequences (i) of the Business Combination to MMAC and PubCo, (ii) of the automatic conversion of MMAC Rights to MMAC Common Stock in connection with the Business Combination, (iii) of the Merger to U.S. Holders and Non-U.S. Holders (each as defined below) of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) and MMAC Warrants (collectively, the “MMAC securities”), (iv) of the subsequent ownership and disposition of PubCo Ordinary Shares and PubCo Warrants (collectively, the “PubCo securities”) received in the Merger and (v) of the exercise of the MMAC Common Stock redemption rights by U.S. Holders and Non-U.S. Holders.

This discussion is based on provisions of the Code, the Treasury Regulations promulgated thereunder (whether final, temporary, or proposed), administrative rulings of the IRS, judicial decisions, and the Luxembourg-United States Tax Treaty (the “Tax Treaty”), all as in effect on the date hereof, and all of which are subject to differing interpretations or change, possibly with retroactive effect. This discussion does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a holder as a result of the Business Combination or as a result of the ownership and disposition of PubCo securities. In addition, this discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular holders, nor does it take into account the individual facts and circumstances of any particular holder that may affect the U.S. federal income tax consequences to such holder, and accordingly, is not intended to be, and should not be construed as, tax advice. This discussion does not address the U.S. federal 3.8% Medicare tax imposed on certain net investment income or any aspects of U.S. federal taxation other than those pertaining to the income tax, nor does it address any tax consequences arising under any U.S. state and local, or non-U.S. tax laws. Holders should consult their own tax advisors regarding such tax consequences in light of their particular circumstances.

No ruling has been requested or will be obtained from the IRS regarding the U.S. federal income tax consequences of the Business Combination or any other related matter; thus, there can be no assurance that the IRS will not challenge the U.S. federal income tax treatment described below or that, if challenged, such treatment will be sustained by a court.

This summary is limited to considerations relevant to U.S. Holders and Non-U.S. Holders that hold MMAC securities and/or MMAC Rights, and, after the completion of the Merger, PubCo securities, as “capital assets” within the meaning of section 1221 of the Code (generally, property held for investment). This discussion does not address all aspects of U.S. federal income taxation that may be important to holders in light of their individual circumstances, including holders subject to special treatment under the U.S. tax laws, such as, for example:

 

   

banks or other financial institutions, underwriters, or insurance companies;

 

   

traders in securities who elect to apply a mark-to-market method of accounting;

 

   

real estate investment trusts and regulated investment companies;

 

   

controlled foreign corporations or passive foreign investment companies;

 

   

tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts;

 

   

expatriates or former long-term residents of the United States;

 

   

subchapter S corporations, partnerships or other pass-through entities or investors in such entities;

 

   

dealers or traders in securities, commodities or currencies;

 

   

grantor trusts;

 

   

persons subject to the alternative minimum tax;

 

   

U.S. persons whose “functional currency” is not the U.S. dollar;

 

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persons who received shares of MMAC Common Stock through the issuance of restricted stock under an equity incentive plan or through a tax-qualified retirement plan or otherwise as compensation;

 

   

persons who own (directly or through attribution) 5% or more (by vote or value) of the outstanding shares of MMAC Common Stock, or, after the Merger, the outstanding PubCo Ordinary Shares; or

 

   

persons holding MMAC securities and/or MMAC Rights, or, after the Business Combination (including the Merger), PubCo securities, as a position in a “straddle,” as part of a “synthetic security” or “hedge,” as part of a “conversion transaction,” or other integrated investment or risk reduction transaction.

As used in this proxy statement/prospectus, the term “U.S. Holder” means a beneficial owner MMAC securities and/or MMAC Rights, and, after the Merger, PubCo securities received in the Merger, that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity that is classified as a corporation for U.S. federal income tax purposes) that is created or organized in or under the laws of the United States or any State thereof or the District of Columbia;

 

   

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

 

   

a trust (i) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.

For purposes of this discussion, the term “Non-U.S. Holder” means a beneficial owner of MMAC securities and/or MMAC Rights, and, after the Merger, PubCo securities received in the Merger, that is neither a U.S. Holder nor a partnership (or an entity or arrangement treated as a partnership) for U.S. federal income tax purposes.

If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds MMAC securities and/or MMAC Rights, and, after the completion of the Merger, PubCo securities received in the Merger, the U.S. federal income tax treatment of a partner in such partnership will generally depend on the status of the partner and the activities of the partnership. A holder that is a partnership and the partners in such partnership should consult their own tax advisors with regard to the U.S. federal income tax consequences of the Merger and the subsequent ownership and disposition of PubCo securities received in the Merger.

Because MMAC Units can be separated into their component parts at the option of the holder, a beneficial owner of a MMAC Unit should be treated as the owner of both the underlying component MMAC securities and MMAC Rights for U.S. federal income tax purposes.

THIS SUMMARY DOES NOT PURPORT TO BE A COMPREHENSIVE ANALYSIS OR DESCRIPTION OF ALL POTENTIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION. MMAC STOCKHOLDERS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE BUSINESS COMBINATION (INCLUDING THE MERGER AND THE CONVERSION OF THE MMAC RIGHTS) AND OF THE OWNERSHIP AND DISPOSITION OF PUBCO SECURITIES AFTER THE MERGER, INCLUDING THE APPLICABILITY AND EFFECTS OF U.S. FEDERAL, STATE, LOCAL, AND OTHER TAX LAWS.

 

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U.S. Federal Income Tax Consequences of the Business Combination to MMAC and PubCo

Tax Residence of PubCo for U.S. Federal Income Tax Purposes

Under current U.S. federal income tax law, a corporation generally will be considered for U.S. federal income tax purposes to be a tax resident in its country of organization or incorporation. Accordingly, under generally applicable U.S. federal income tax rules, PubCo, which is organized under the laws of Luxembourg, would be classified as a non-U.S. corporation (and, therefore, not a U.S. tax resident) for U.S. federal income tax purposes. Section 7874 of the Code, however, contains rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and require an analysis of all relevant facts and circumstances, and there is limited guidance as to their application.

Under Section 7874, a corporation created or organized outside the United States (i.e., a non-U.S. corporation) will nevertheless be treated as a U.S. corporation for U.S. federal income tax purposes (and, therefore, a U.S. tax resident subject to U.S. federal income tax) if, pursuant to a plan or series of related transactions each of the following three conditions are met: (i) the non-U.S. corporation acquires, directly or indirectly, substantially all of the assets held, directly or indirectly, by a U.S. corporation; (ii) after the acquisition, the non-U.S. corporation’s “expanded affiliated group” does not have substantial business activities in the non-U.S. corporation’s country of organization or incorporation relative to the expanded affiliated group’s worldwide activities (as determined under the Treasury Regulations); and (iii) subject to the Third Country Rule discussed below, after the acquisition, the percentage (by vote or value) of the shares of the acquiring non-U.S. corporation held by former shareholders and security holders of the U.S. corporation by reason of holding shares and securities (including rights to acquire shares and securities) of the U.S. corporation (which includes the receipt of the non-U.S. corporation’s shares in the acquisition) (the “Section 7874 Percentage”) is at least 80%. The third requirement is referred to in this proxy statement/prospectus as the “Ownership Test.”

In addition, the Treasury Regulations promulgated under Section 7874 include a rule that generally provides that, if (i) there is an acquisition of a domestic company by a non-U.S. corporation in which the Section 7874 Percentage is at least 60%, and (ii) in a related acquisition, such non-U.S. corporation acquires another non-U.S. corporation and the acquiring non-U.S. corporation is not subject to tax as a resident in the foreign country in which the acquired non-U.S. corporation was subject to tax as a resident prior to the acquisitions, then the acquiring non-U.S. corporation will be treated as a U.S. corporation for U.S. federal income tax purposes. This rule is referred to in this proxy statement/prospectus as the “Third Country Rule.”

For purposes of Section 7874, immediately after the completion of the Business Combination, the first two general conditions described above may be met because (i) PubCo could be viewed as directly acquiring substantially all of the assets of MMAC through the Merger, and (ii) PubCo, including its expanded affiliated group, will not have substantial business activities in Luxembourg for purposes of Section 7874. Furthermore, because PubCo is expected to be a tax resident in Luxembourg and not the United Kingdom (the jurisdiction in which Akazoo is tax resident), it is expected that the Third Country Rule could apply to the Business Combination if the Section 7874 Percentage were at least 60%. As a result, the application of Section 7874 to the Business Combination depends on the Section 7874 Percentage.

Based on the rules for determining share ownership and calculating the Section 7874 Percentage under Section 7874 and the Treasury Regulations promulgated thereunder, certain representations of the parties and certain factual assumptions, immediately after the Business Combination, MMAC stockholders and security holders are expected to be treated as holding less than 60% (by both vote and value) of the PubCo Ordinary Shares by reason of their ownership of MMAC Common Stock and other securities. As a result, under current law, PubCo should be treated as a non-U.S. corporation for U.S. federal income tax purposes. However, as noted above, the rules under Section 7874 are complex and require an analysis of all relevant facts and circumstances, and there is limited guidance as to their application. Further, whether the Ownership Test has been satisfied must be finally determined after the completion of the Business Combination, by which time there could be adverse changes to the relevant facts and circumstances.

 

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The computation of the Section 7874 Percentage is subject to various complex adjustments for which there is limited guidance. For example, for purposes of determining the Section 7874 Percentage, (i) any “non-ordinary course distributions” (within the meaning of the Treasury Regulations) made by the acquired U.S. corporation during the 36 months preceding the acquisition, including certain dividends and share repurchases, (ii) shares of the acquiring non-U.S. corporation’s stock attributable to the foreign acquirer’s passive assets (as determined under applicable rules), and (iii) any shares held by shareholders of the acquiring non-U.S. corporation that were issued for cash in a public offering related to the acquisition or other passive assets, in each case, are disregarded. In addition, changes to the rules in Section 7874 or the Treasury Regulations promulgated thereunder, or other changes in law, could adversely affect PubCo’s status as a non-U.S. corporation for U.S. federal income tax purposes. Accordingly, there can be no assurance that the IRS will not take a contrary position to those described above or that a court will not agree with a contrary position of the IRS in the event of litigation.

If PubCo were to be treated as a U.S. corporation for U.S. federal income tax purposes, it could be subject to substantial U.S. tax liability, in addition to tax liability in its country of residence. The remainder of this discussion assumes that PubCo will not be treated as a U.S. corporation for U.S. federal income tax purposes.

Gain Recognized by MMAC as a Result of the Merger

As discussed below, the Merger should qualify as a “reorganization” within the meaning of Section 368 of the Code. However, as a result of Section 367(a) of the Code, MMAC will recognize gain (but not loss) on the transfer of its assets to PubCo, to the extent that the fair market value of such assets exceeds MMAC’s adjusted basis in such assets. MMAC does not expect the amount of such gain to be material, but there is no certainty this will be the case.

Certain U.S. Federal Income Tax Consequences of the Business Combination to U.S. Holders

The following discussion under this subsection, “—Certain U.S. Federal Income Tax Consequences of the Business Combination to U.S. Holders,” constitutes the opinion of Jones Day, counsel to MMAC, as to the material U.S. federal income tax consequences of the Business Combination to U.S. Holders of MMAC securities and/or MMAC Rights, subject to the limitations, exceptions, beliefs, assumptions, and qualifications described in such opinion and otherwise herein.

Qualification of the Merger as a Reorganization

The Merger should qualify as a “reorganization” within the meaning of Section 368 of the Code. However, the completion of the Merger is not conditioned on the receipt of an opinion of counsel that the Merger qualifies as a reorganization, and neither MMAC nor PubCo intends to request a ruling from the IRS regarding the qualification of the Merger as a reorganization. Accordingly, no assurance can be given that the IRS will not challenge the qualification of the Merger as a reorganization or that a court would not sustain such a challenge. The remainder of the discussion assumes that the Merger qualifies as reorganization within the meaning of Section 368 of the Code.

U.S. Federal Income Tax Consequences of the Merger

Although U.S. shareholders generally do not recognize gain or loss on the receipt of stock pursuant to a reorganization under Section 368 of the Code, Section 367(a) of the Code and Treasury Regulations promulgated thereunder require, where applicable, U.S. shareholders to recognize gain (but not loss) with respect to certain cross-border reorganizations. However, Section 367(a) should not apply to the Merger in a manner that causes gain recognition to the MMAC security holders, unless the exchange of MMAC securities for PubCo securities is considered to be an indirect stock transfer under the applicable Treasury Regulations. For this purpose, an indirect stock transfer may occur if PubCo transfers the assets it acquires from MMAC pursuant to the Merger to certain subsidiary corporations in connection with the Business Combination. Pursuant to the Business Transaction Agreement, neither PubCo nor its subsidiaries may transfer any asset previously held by MMAC to any such subsidiary (those treated as a corporation for U.S. federal income tax purposes). However, the rules under Section 367(a) and Section 368 of the Code are complex and there is limited guidance as to their application, particularly with regard to indirect stock transfers in cross-border reorganizations. Accordingly, no assurance can be given as to whether U.S. Holders will recognize gain, if any, as a result of the exchange of MMAC securities for PubCo securities.

Because the Merger should qualify as a reorganization under Section 368 of the Code, and Section 367(a) of the Code should not apply to the Merger in a manner that impacts the MMAC security holders, a U.S. Holder should not recognize gain or loss on the receipt of PubCo securities. The aggregate adjusted tax basis of a U.S. Holder in the PubCo Ordinary Shares received as a result of the Merger should equal the aggregate adjusted tax basis of the MMAC Common Stock surrendered in the exchange, and the aggregate adjusted tax basis in the PubCo Warrants received as a result of such exchange should equal the aggregate adjusted tax basis of the MMAC Warrants surrendered in the exchange. A U.S. Holder’s holding period for the PubCo securities received in the exchange should include the holding period for the MMAC securities surrendered in the exchange.

If Section 367(a) of the Code applies to the Merger, a U.S. Holder may recognize gain (but not loss) as a result of the Merger. If Section 368 of the Code does not apply to the Merger, for a reason other than the application of Section 367(a), a U.S. Holder may recognize gain (or loss, if any) as a result of the Merger. The amount of such gain (or loss, if applicable) would equal the difference between the amount realized in the exchange (generally, the fair market value of the PubCo Common Stock and PubCo Warrants received) and such U.S. Holder’s adjusted tax basis in the MMAC Common Stock and MMAC Warrants surrendered in the exchange. Any such gain or loss would generally be capital gain or loss and would be long-term capital gain or loss if the U.S. Holder’s holding period in the MMAC Common Stock or MMAC Warrants, as applicable, exceeds one year at the time of the exchange. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. Holders (including individuals). The deductibility of capital losses is subject to limitations.

 

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U.S. Holders should consult their own tax advisors as to the particular consequences to them of the exchange of MMAC securities for PubCo securities pursuant to the Merger, the qualification of the Merger as a reorganization and the potential application of Section 367(a) to the Merger.

U.S. Federal Income Tax Consequences of the Automatic Conversion of MMAC Rights to MMAC Common Stock

A U.S. Holder should not recognize gain or loss upon the automatic conversion of the MMAC Rights to MMAC Common Stock. The tax basis of MMAC Common Stock received by a U.S. Holder pursuant to the automatic conversion of MMAC Rights should be equal to the U.S. Holder’s tax basis in such MMAC Rights. The holding period of the MMAC Common Stock received should include the U.S. Holder’s holding period of the MMAC Rights.

Certain Reporting Requirements

Under applicable Treasury Regulations, “significant holders” of MMAC Common Stock generally will be required to comply with certain reporting requirements. A U.S. Holder is a “significant holder” if, immediately before the Merger, such U.S. Holder holds 5% or more, by vote or value, of the total outstanding MMAC Common Stock or owns MMAC Common Stock with a basis of $1,000,000 or more. U.S. Holders that are significant holders generally must file a statement with their U.S. federal income tax return for the taxable year that includes the Merger. The statement must set forth the U.S. Holder’s tax basis in, and the fair market value of, the MMAC Common Stock surrendered pursuant to the Merger (both as determined immediately before the surrender of shares), the date of the Merger, and the name and employer identification number of MMAC and PubCo, and the U.S. Holder will be required to retain permanent records of these facts. U.S. Holders should consult their own tax advisors as to whether they may be treated as a “significant holder” with respect to the Merger.

Certain U.S. Federal Income Tax Consequences to U.S. Holders and Non-U.S. Holders of the Ownership and Disposition of PubCo Securities

U.S. Federal Income Tax Consequences to U.S. Holders

The following discussion is a summary of certain material U.S. federal income tax consequences of the ownership and disposition of PubCo securities to U.S. Holders who receive such PubCo securities pursuant to the Merger.

Distributions on PubCo Ordinary Shares

The gross amount of any distribution on PubCo Ordinary Shares that is made out of PubCo’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes) will generally be taxable to a U.S. Holder as ordinary dividend income on the date such distribution is actually or constructively received by such U.S. Holder. Any such dividends paid to corporate U.S. Holders generally will not qualify for the dividends-received deduction that may otherwise be allowed under the Code.

Dividends received by non-corporate U.S. Holders (including individuals), subject to the discussion below under “—Passive Foreign Investment Company Status,” from a “qualified foreign corporation” may be eligible for reduced rates of taxation, provided that certain holding period requirements and other conditions are satisfied. For these purposes, a non-U.S. corporation will be treated as a qualified foreign corporation if it is eligible for the benefits of a comprehensive income tax treaty with the United States which is determined by the U.S. Treasury Department to be satisfactory for purposes of these rules and which includes an exchange of information provision. The U.S. Treasury Department has determined that the Tax Treaty meets these requirements. A non-U.S. corporation is also treated as a qualified foreign corporation with respect to dividends paid by that corporation on shares that are readily tradable on an established securities market in the United States. U.S. Treasury Department guidance indicates that shares listed on the NASDAQ (on which PubCo intends to apply to list the PubCo Ordinary Shares) will be considered readily tradable on an established securities market in the United States. Even if the PubCo Ordinary Shares are listed on NASDAQ, there can be no assurance that the PubCo Ordinary Shares will be considered readily tradable on an established securities market in future years. Non-corporate U.S. Holders that (i) do not meet a minimum holding period requirement during which they are not protected from the risk of loss or (ii)

 

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elect to treat the dividend income as “investment income” pursuant to Section 163(d)(4) of the Code (dealing with the deduction for investment interest expense), will not be eligible for the reduced rates of taxation regardless of PubCo’s status as a qualified foreign corporation. In addition, the rate reduction will not apply to dividends if the recipient of a dividend is obligated to make related payments with respect to positions in substantially similar or related property. This disallowance applies even if the minimum holding period has been met. Finally, PubCo will not constitute a qualified foreign corporation for purposes of these rules if it is a PFIC for the taxable year in which it pays a dividend or for the preceding taxable year. See the discussion below under “—Passive Foreign Investment Company Status.”

The amount of any dividend paid in foreign currency will be the U.S. dollar value of the foreign currency distributed by PubCo, calculated by reference to the exchange rate in effect on the date the dividend is includible in the U.S. Holder’s income, regardless of whether the payment is in fact converted into U.S. dollars on the date of receipt. Generally, a U.S. Holder should not recognize any foreign currency gain or loss if the foreign currency is converted into U.S. dollars on the date the payment is received. However, any gain or loss resulting from currency exchange fluctuations during the period from the date the U.S. Holder includes the dividend payment in income to the date such U.S. Holder actually converts the payment into U.S. dollars will be treated as ordinary income or loss. That currency exchange income or loss (if any) generally will be income or loss from U.S. sources for foreign tax credit limitation purposes.

To the extent that the amount of any distribution made by PubCo on the PubCo Ordinary Shares exceeds PubCo’s current and accumulated earnings and profits for a taxable year (as determined under U.S. federal income tax principles), the distribution will first be treated as a tax-free return of capital, causing a reduction in the adjusted basis of the U.S. Holder’s PubCo Ordinary Shares, and to the extent the amount of the distribution exceeds the U.S. Holder’s tax basis, the excess will be taxed as capital gain recognized on a sale or exchange as described below under “—Sale, Exchange, Redemption or Other Taxable Disposition of PubCo Securities.” Because PubCo may not account for earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should generally expect to treat distributions on PubCo Ordinary Shares as dividends.

Sale, Exchange, Redemption or Other Taxable Disposition of PubCo Securities

Subject to the discussion below under “—Passive Foreign Investment Company Status,” a U.S. Holder will generally recognize gain or loss on any sale, exchange, redemption, or other taxable disposition of PubCo Ordinary Shares or PubCo Warrants in an amount equal to the difference between the amount realized on the disposition and such U.S. Holder’s adjusted tax basis in the PubCo Ordinary Shares or PubCo Warrants. Any gain or loss recognized by a U.S. Holder on a taxable disposition of PubCo Ordinary Shares or PubCo Warrants will generally be capital gain or loss and will be long-term capital gain or loss if the holder’s holding period in the PubCo Ordinary Shares or PubCo Warrants exceeds one year at the time of the disposition. Preferential tax rates may apply to long-term capital gains of non-corporate U.S. Holders (including individuals). The deductibility of capital losses is subject to limitations. Any gain or loss recognized by a U.S. Holder on the sale or exchange of PubCo Ordinary Shares or PubCo Warrants will generally be treated as U.S. source gain or loss.

Exercise or Lapse of a PubCo Warrant

Except as discussed below with respect to the cashless exercise of a PubCo Warrant, a U.S. Holder generally will not recognize gain or loss upon the acquisition of a PubCo Ordinary Share on the exercise of a PubCo Warrant for cash. A U.S. Holder’s tax basis in a PubCo Ordinary Share received upon exercise of the PubCo Warrant generally will be an amount equal to the sum of the U.S. Holder’s tax basis in the PubCo Warrant exchanged therefor and the exercise price. The U.S. Holder’s holding period for a PubCo Ordinary Share received upon exercise of the PubCo Warrant will begin on the date following the date of exercise (or possibly the date of exercise) of the PubCo Warrants and will not include the period during which the U.S. Holder held the PubCo Warrants. If a PubCo Warrant is allowed to lapse unexercised, a U.S. Holder generally will recognize a capital loss equal to such holder’s tax basis in the PubCo Warrant.

The tax consequences of a cashless exercise of a warrant are not clear under current tax law. A cashless exercise may be tax-free, either because the exercise is not a gain realization event or because the exercise is treated as a recapitalization for U.S. federal income tax purposes. In either tax-free situation, a U.S. Holder’s basis in the PubCo Ordinary Shares received would equal the holder’s basis in the PubCo Warrant. If the cashless exercise were treated as not being a gain recognition event, a U.S. Holder’s holding period in the PubCo Ordinary Shares would be treated as commencing on the date following the date of exercise (or possibly the date of exercise) of the PubCo Warrant. If the cashless exercise were treated as a recapitalization, the holding period of the PubCo Ordinary Share would include the holding period of the PubCo Warrant.

 

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It is also possible that a cashless exercise could be treated in part as a taxable exchange in which gain or loss would be recognized. In such event, a U.S. Holder would recognize gain or loss with respect to the portion of the exercised PubCo Warrants treated as surrendered to pay the exercise price of the PubCo Warrants (the “surrendered warrants”). The U.S. Holder would recognize capital gain or loss with respect to the surrendered warrants in an amount generally equal to the difference between (i) the fair market value of the PubCo Ordinary Shares that would have been received with respect to the surrendered warrants in a regular exercise of the PubCo Warrants and (ii) the sum of the U.S. Holder’s tax basis in the surrendered warrants and the aggregate cash exercise price of such warrants (if they had been exercised in a regular exercise). In this case, a U.S. Holder’s tax basis in the PubCo Ordinary Shares received would equal the U.S. Holder’s tax basis in the PubCo Warrants exercised plus (or minus) the gain (or loss) recognized with respect to the surrendered warrants. A U.S. Holder’s holding period for the PubCo Ordinary Shares would commence on the date following the date of exercise (or possibly the date of exercise) of the PubCo Warrant.

Due to the absence of authority on the U.S. federal income tax treatment of a cashless exercise, there can be no assurance which, if any, of the alternative tax consequences and holding periods described above would be adopted by the IRS or a court of law. Accordingly, U.S. Holders should consult their tax advisors regarding the tax consequences of a cashless exercise.

Possible Constructive Distributions

The terms of PubCo Warrants provide for an adjustment to the number of PubCo Ordinary Shares for which the warrant may be exercised or to the exercise price of the warrant in certain events. An adjustment which has the effect of preventing dilution generally is not taxable. The U.S. Holders of the PubCo Warrants would, however, be treated as receiving a constructive distribution from PubCo if, for example, the adjustment increases the warrant holders’ proportionate interest in PubCo’s assets or earnings and profits (e.g., through an increase in the number of PubCo Ordinary Shares that would be obtained upon exercise) as a result of a distribution of cash to the holders of PubCo Ordinary Shares which is taxable to the U.S. Holders of such shares as described under “—Distributions on PubCo Ordinary Shares” above. Such constructive distribution would be subject to tax as described under that section in the same manner as if the U.S. Holders of the PubCo Warrants received a cash distribution from PubCo equal to the fair market value of such increased interest.

Passive Foreign Investment Company Status

Notwithstanding the foregoing, certain adverse U.S. federal income tax consequences could apply to a U.S. Holder if PubCo is treated as a PFIC for any taxable year during which such U.S. Holder holds PubCo securities. A non-U.S. corporation, such as PubCo, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in which, after the application of certain look-through rules, either (i) 75% or more of its gross income for such year is “passive income” (as defined in the relevant provisions of the Code) or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains.

PubCo is not currently expected to be treated as a PFIC for U.S. federal income tax purposes, but this conclusion is a factual determination made annually and, thus, is subject to change. With certain exceptions, the PubCo Ordinary Shares would be treated as stock in a PFIC if PubCo were a PFIC at any time during a U.S. Holder’s holding period in such U.S. Holder’s PubCo Ordinary Shares. There can be no assurance that PubCo will not be treated as a PFIC for any taxable year or at any time during a U.S. Holder’s holding period.

If PubCo were to be treated as a PFIC, unless a U.S. Holder elects to be taxed annually on a mark-to-market basis with respect to its PubCo securities, gain realized on any sale or exchange of such PubCo securities and certain distributions received with respect to PubCo Ordinary Shares could be subject to additional U.S. federal income taxes, plus an interest charge on certain taxes treated as having been deferred under the PFIC rules. In addition,

 

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dividends received with respect to PubCo Ordinary Shares would not constitute qualified dividend income eligible for preferential tax rates if PubCo is treated as a PFIC for the taxable year of the distribution or for its preceding taxable year. U.S. Holders should consult their own tax advisors regarding the application of the PFIC rules to their investment in the PubCo securities.

U.S. Federal Income Tax Consequences to Non-U.S. Holders

In general, a Non-U.S. Holder of PubCo Ordinary Shares will not be subject to U.S. federal income tax or, subject to the discussion below under “—Information Reporting and Backup Withholding,” U.S. federal withholding tax on any dividends received on PubCo Ordinary Shares (including constructive dividends) or any gain recognized on a sale or other disposition of PubCo Ordinary Shares (including any distribution to the extent it exceeds the adjusted basis in the Non-U.S. Holder’s PubCo Ordinary Shares) or PubCo Warrants unless:

 

   

the dividend or gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States, and if required by an applicable tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States; or

 

   

in the case of gain only, the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the sale or disposition, and certain other requirements are met.

A Non-U.S. Holder that is a corporation may also be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable tax treaty) on its effectively connected earnings and profits for the taxable year, as adjusted for certain items.

The U.S. federal income tax treatment of a Non-U.S. Holder’s exercise of a PubCo Warrant, or the lapse of a PubCo Warrant held by a Non-U.S. Holder, generally will correspond to the U.S. federal income tax treatment of the exercise or lapse of a warrant by a U.S. Holder, as described under “—U.S. Federal Income Tax Consequences to U.S. Holders—Exercise or Lapse of a PubCo Warrant,” above, although to the extent a cashless exercise results in a taxable exchange, the consequences would be similar to those described above for a Non-U.S. Holder’s gain on the sale or other disposition of the PubCo Ordinary Shares and PubCo Warrants.

Certain U.S. Federal Income Tax Consequences of Exercising Redemption Rights

U.S. Federal Income Tax Consequences to U.S. Holders

In the event that a U.S. Holder elects to redeem its MMAC Common Stock for cash as described in the section entitled “Special Meeting of MMAC Stockholders—Redemption Rights,” the treatment of the transaction for U.S. federal income tax purposes will depend on whether the redemption qualifies as sale or exchange of the MMAC Common Stock under Section 302 of the Code. If the redemption qualifies as a sale or exchange of the MMAC Common Stock, the U.S. Holder will be treated as recognizing capital gain or loss equal to the difference between the amount realized on the redemption and such U.S. Holder’s adjusted tax basis in the MMAC Common Stock surrendered in such redemption transaction. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. Holder’s holding period for the MMAC Common Stock redeemed exceeds one year. Long-term capital gains recognized by non-corporate U.S. Holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations.

If the redemption does not qualify as a sale or exchange of MMAC Common Stock, the U.S. Holder will be treated as receiving a corporate distribution. Such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from MMAC’s current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. Holder’s adjusted tax basis in the MMAC Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the common stock. Dividends paid to a U.S. Holder that is a taxable corporation generally will not qualify for the dividends received deduction that may otherwise be allowed under the Code. With certain exceptions (including,

 

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but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations) and provided certain holding period requirements are met, dividends paid to a non-corporate U.S. Holder generally will constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains. However, it is unclear whether the redemption rights with respect to the MMAC Common Stock may prevent a U.S. Holder from satisfying the applicable holding period requirements with respect to the dividends received deduction or the preferential tax rate on qualified dividend income, as the case may be.

Whether a redemption qualifies for sale or exchange treatment will depend largely on the total number of shares of MMAC Common Stock treated as held by the U.S. Holder (including any MMAC Common Stock constructively owned by the U.S. Holder as a result of owning MMAC Warrants or MMAC Rights) relative to all of the shares of MMAC Common Stock outstanding both before and after the redemption. The redemption of MMAC Common Stock generally will be treated as a sale or exchange of the MMAC Common Stock (rather than as a corporate distribution) if the redemption (i) is “substantially disproportionate” with respect to the U.S. Holder, (ii) results in a “complete termination” of the U.S. Holder’s interest in MMAC or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. These tests are explained more fully below.

In determining whether any of the foregoing tests are satisfied, a U.S. Holder takes into account not only MMAC Common Stock actually owned by the U.S. Holder, but also shares of MMAC Common Stock that are constructively owned by it. A U.S. Holder may constructively own, in addition to stock owned directly, stock owned by certain related individuals and entities in which the U.S. Holder has an interest or that have an interest in such U.S. Holder, as well as any stock the U.S. Holder has a right to acquire by exercise of an option, which would generally include MMAC Common Stock which could be acquired pursuant to the exercise of the MMAC Warrants or MMAC Rights. In order to meet the substantially disproportionate test, the percentage of MMAC’s outstanding voting stock actually and constructively owned by the U.S. Holder immediately following the redemption of the MMAC Common Stock must, among other requirements, be less than 80% of the percentage of MMAC’s outstanding voting stock actually and constructively owned by the U.S. Holder immediately before the redemption. There will be a complete termination of a U.S. Holder’s interest if either (i) all of the shares of the MMAC Common Stock actually and constructively owned by the U.S. Holder are redeemed or (ii) all of the shares of the MMAC Common Stock actually owned by the U.S. Holder are redeemed and the U.S. Holder is eligible to waive, and effectively waives in accordance with specific rules, the attribution of stock owned by certain family members and the U.S. Holder does not constructively own any other MMAC Common Stock. The redemption of the MMAC Common Stock will not be essentially equivalent to a dividend if a U.S. Holder’s redemption results in a “meaningful reduction” of the U.S. Holder’s proportionate interest in MMAC. Whether the redemption will result in a meaningful reduction in a U.S. Holder’s proportionate interest in MMAC will depend on the particular facts and circumstances. However, the IRS has indicated in a published ruling that even a small reduction in the proportionate interest of a small minority stockholder in a publicly held corporation who exercises no control over corporate affairs may constitute such a “meaningful reduction.” A U.S. Holder should consult with its own tax advisors as to the tax consequences of a redemption.

If none of the foregoing tests is satisfied, then the redemption will be treated as a corporate distribution. After the application of those rules regarding corporate distributions, any remaining tax basis of the U.S. Holder in the redeemed common stock will be added to the U.S. Holder’s adjusted tax basis in its remaining MMAC Common Stock, or, if it has none, to the U.S. Holder’s adjusted tax basis in its MMAC Warrants or possibly in other MMAC Common Stock constructively owned by it.

U.S. Federal Income Tax Consequences to Non-U.S. Holders

The characterization for U.S. federal income tax purposes of the redemption of a Non-U.S. Holder’s MMAC Common Stock as described in the section entitled “Special Meeting of MMAC Stockholders—Redemption Rights” generally will correspond to the U.S. federal income tax characterization of such a redemption of a U.S. Holder’s common stock, as described above.

Any redeeming Non-U.S. Holder will generally not be subject to U.S. federal income tax on any capital gain recognized as a result of the redemption unless one of the exceptions described in “—Certain U.S. Federal Income Tax Consequences to U.S. Holders and Non-U.S. Holders of the Ownership and Disposition of PubCo Securities—U.S. Federal Income Tax Consequences to Non-U.S. Holders” applies.

 

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With respect to any redemption treated as a distribution other than a sale or exchange, provided such dividends are not effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States, MMAC will be required to withhold U.S. tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. Holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an IRS Form W-8BEN or W-8BEN-E). Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. Holder’s adjusted tax basis in its shares of the MMAC Common Stock and, to the extent such distribution exceeds the Non-U.S. Holder’s adjusted tax basis, as gain realized from the sale or other disposition of the common stock, which will be treated as described above.

This withholding tax does not apply to dividends paid to a Non-U.S. Holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the Non-U.S. Holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A Non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate).

Information Reporting and Backup Withholding

In general, information reporting requirements will apply to dividends received by U.S. Holders with respect to their PubCo Ordinary Shares (including constructive dividends), and the proceeds received on the disposition of PubCo Ordinary Shares and PubCo Warrants effected within the United States (and, in certain cases, outside the United States), in each case, other than U.S. Holders that are exempt recipients (such as corporations). Information reporting requirements will also apply to redemptions from U.S. Holders of MMAC Common Stock. Backup withholding (currently at a rate of 24%) may apply to such amounts if the U.S. Holder fails to provide an accurate taxpayer identification number (generally on an IRS Form W-9 provided to the paying agent or the U.S. Holder’s broker) or is otherwise subject to backup withholding.

Certain U.S. holders holding specified foreign financial assets with an aggregate value in excess of the applicable dollar threshold are required to report information to the IRS relating to PubCo securities, subject to certain exceptions (including an exception for PubCo securities held in accounts maintained by U.S. financial institutions), by attaching a complete IRS Form 8938, Statement of Specified Foreign Financial Assets, with their tax return, for each year in which they hold PubCo securities. In addition to these requirements, U.S. Holders may be required to annually file FinCEN Report 114 (Report of Foreign Bank and Financial Accounts) with the U.S. Department of Treasury. U.S. Holders should consult their own tax advisors regarding information reporting requirements relating to their ownership of PubCo securities.

Dividends paid with respect to PubCo Ordinary Shares (including constructive dividends) and proceeds from the sale or other disposition of PubCo Ordinary Shares and PubCo Warrants received in the United States by a Non-U.S. Holder through certain U.S.-related financial intermediaries may be subject to information reporting and backup withholding unless such Non-U.S. Holder provides to the applicable withholding agent the required certification as to its non-U.S. status, such as by providing a valid IRS Form W-8BEN, IRS Form W-8BEN-E or IRS Form W-ECI, or otherwise establishes an exemption, and otherwise complies with the applicable requirements of the backup withholding rules.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or credit against a holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.

FATCA

The Foreign Account Tax Compliance Act (“FATCA”) generally imposes a U.S. federal withholding tax of 30% on dividends on MMAC Common Stock paid to a “foreign financial institution” (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders

 

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that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on MMAC Common Stock paid to a “non-financial foreign entity” (as specially defined under these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding obligations under FATCA generally apply to payments of dividends (including constructive dividends) on MMAC Common Stock. Under certain circumstances, a Non-U.S. Holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph.

Additionally, FATCA may impose a 30% withholding tax on payments of gross proceeds from the sale, exchange or redemption of property that gives rise to U.S.-source dividends or interest, including the MMAC Common Stock. The IRS recently issued Proposed Treasury Regulations that eliminate withholding on payments of gross proceeds. Pursuant to the Proposed Treasury Regulations, the issuer and any withholding agent may (but are not required to) rely on this proposed change to FATCA withholding until the final regulations are issued.

MMAC will not pay any additional amounts to holders in respect of any amounts withheld, including pursuant to FATCA. Under certain circumstances, you may be eligible for refunds or credits of such taxes. Redeeming Non-U.S. Holders are encouraged to consult with their own tax advisors regarding the possible application of FATCA to redemptions of MMAC Common Stock.

 

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MATERIAL U.K. INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION

The summary set out below is based on current United Kingdom (“UK”) tax law and HM Revenue and Customs (“HMRC”) practice (which may not be binding on HMRC) as of the date of this proxy statement/prospectus, both of which are subject to change, possibly with retrospective effect. No responsibility is accepted for any future legislation that may be introduced by the UK government, irrespective of whether such legislation has a retrospective effect on the information provided in this proxy statement/prospectus. This information should apply only to shareholders resident and, in the case of an individual, domiciled for tax purposes in the UK and to whom “split year” treatment does not apply (except insofar as express reference is made to the treatment of non-UK residents), who currently hold Akazoo ordinary shares as an investment and who are the absolute beneficial owners thereof.

This information does not address all possible tax consequences relating to the Business Combination and ongoing tax implications of holding LuxCo Shares or PubCo Ordinary Shares. Certain categories of shareholders, including those carrying on certain financial activities, those subject to specific tax regimes or benefitting from certain reliefs or exemptions, those connected with Akazoo, those that own (or are deemed to own) 5% or more of the Akazoo shares and/or voting power (either alone or together with connected persons) those connected with Akazoo, and those for whom the Akazoo ordinary shares or ultimately PubCo Ordinary Shares are employment related securities may be subject to special rules and this summary may not apply to such shareholders and any general statements made in this disclosure do not necessarily take them into account.

This summary is for general information only and is not intended to be, nor should it be considered to be, legal or tax advice to any particular investor. It does not address all of the tax considerations that may be relevant to specific investors in light of their particular circumstances or to investors subject to special treatment under UK tax law.

It should be noted that an application for advance clearance from HMRC under Section 138 Taxation of Chargeable Gains Act 1992 (“TCGA 1992”) and Section 701 Income Tax Act 2007 (“ITA 2007”) will be made by the Akazoo prior to the Business Combination.

It is understood that the transactions are being undertaken entirely for bona fide commercial reasons, and on an arm’s length basis, or with a similar effect where the parties are treated as being as being connected with each other, and there is no intention to confer a gratuitous benefit on any person.

Tax consequences for Akazoo shareholders of exchange of Akazoo ordinary shares for LuxCo Shares

UK Shareholders

Prima facie, a disposal of shares is a chargeable event under the provisions of the Capital Gains Tax (“CGT”) legislation.

Shareholders who are resident in the UK, and individual shareholders who are temporarily non-resident and subsequently resume residence in the UK within a certain time may, depending on their circumstances and the availability of exemptions or reliefs (including, for example, the annual exempt amount for individuals, which is £11,700 for the 2018/19 tax year, and Substantial Shareholding Exemption (“SSE”) or indexation allowance for corporate shareholders), be liable to UK taxation on chargeable gains in respect of gains arising from a sale or other disposal (or deemed disposal) of the Akazoo ordinary shares.

However, subject to certain conditions, the CGT legislation in Section 135 TCGA 1992 provides that Akazoo ordinary shares exchanged for LuxCo Shares may be treated as a reorganization of the original shareholding such that the LuxCo Shares may be treated as if they were the original Akazoo ordinary shares and there should be no disposal for CGT purposes as a result of such reorganization.

 

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For UK shareholders (to whom SSE does not apply) the disposal of Akazoo ordinary shares in exchange for LuxCo Shares may fall within the conditions of Section 135 TCGA 1992 where:

 

   

LuxCo will hold more than 25% of the original share capital of Akazoo; and

 

   

The exchange of securities takes place for bona fide commercial reasons and does not form part of a scheme or arrangements, of which the main purpose, or one of the main purposes is the avoidance of liability to CGT (Section 137 TCGA 1992).

It should be noted that the “bona fide commercial reasons test” referred to above should only be relevant in the case of shareholders who (together with persons connected with them) hold more than 5% of Akazoo ordinary shares.

An application for advance clearance from HMRC under Section 138 TCGA 1992 that the bona fide commercial reasons test applies will be made by the Akazoo prior to the Business Combination.

The effect of Section 135 TCGA 1992 (where it applies) is that the LuxCo Shares inherit the original base cost and acquisition date of the Akazoo ordinary shares for the purposes of a future disposal of LuxCo Shares.

Advance clearance will also be sought from HMRC under Section 701 ITA 2007 that the main purpose, or one of the main purposes, of the Business Combination is to obtain an income tax advantage for UK individual shareholders so that the transactions in securities rules should not apply to recharacterise the transaction into a taxable event from the perspective of such individuals.

Substantial Shareholding Exemption

SSE provides a complete exemption from the liability to corporation tax on the gains generated from qualifying disposals of shares and interests in shares by qualifying companies. Conversely, if losses are generated by the disposal and the SSE conditions are met, the losses are not allowable. The SSE provisions where applicable take priority over Section 135 TCGA 1992.

For SSE to apply the investing company must have held a substantial shareholding in the investee company (being Akazoo) for a continuous period of 12 months during the six years prior to disposal.

A shareholding is substantial if the investing company:

 

   

owns no less than 10% of the investee company’s ordinary share capital;

 

   

is beneficially entitled to no less than 10% of the profits available for distribution to equity holders of the company; and

 

   

would be beneficially entitled on a winding up to no less than 10% of the assets of the company available for distribution to equity holders.

The investee company (being Akazoo) must be a qualifying company throughout the 12-month period which the substantial shareholding conditions are met and immediately after the transaction.

To be a qualifying company, Akazoo must be a trading company or part of a trading group, where activities do not include non-trading activities to a ‘substantial’ extent. The term ‘substantial’ is not defined in the legislation but is generally interpreted by HMRC to be more than 20%. This is judged by any measure which is reasonable in the circumstances (i.e. turnover, asset base, management time, etc.) and must account for no more than 20% of activities as a whole.

In addition, non-trading activities exclude investments in other group companies and intra-group debt as, to the extent there are activities with members of the same trading group, these are treated as one business such that the activities are disregarded.

Where SSE applies, LuxCo Shares should be deemed to be acquired for an acquisition cost equal to their market value at the date of the exchange. However, any subsequent disposal of shares may not qualify for SSE where the 12-month holding period requirement is not met.

 

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Entrepreneurs’ relief

Where the conditions of Entrepreneurs’ Relief (“ER”) are met for individual UK shareholders, ER may apply such that the capital gain expected on the sale should be taxed at 10%, subject to the lifetime limit of £10 million per individual.

In overview, the conditions of ER require that the individual UK shareholders must be employees or officers and hold at least 5% of the nominal value of the ordinary share capital carrying entitlement to at least 5% of the votes of Akazoo throughout the 12 months preceding disposal, as well as entitling the shareholder to 5% of the Akazoo’s distributable profits and assets on a winding up. For disposals on or after April 6, 2019, the qualifying holding period has been extended to 24 months.

Non-UK Shareholders

An individual shareholder who is not a UK resident shareholder will not be liable to UK CGT on chargeable gains realized on the disposal of his or her Akazoo ordinary shares unless such shareholder carries on (whether solely or in partnership) a trade, profession or vocation in the UK through a branch or agency in the UK to which the shares are attributable. In these circumstances, such shareholder may, depending on his or her individual circumstances, be chargeable to UK CGT on chargeable gains arising from a disposal of his or her shares.

A corporate holder of shares that is not a UK resident shareholder will not be liable for UK corporation tax on chargeable gains realized on the disposal of its shares unless it carries on a trade in the UK through a permanent establishment to which the shares are attributable. In these circumstances, a disposal of shares by such shareholder may give rise to a chargeable gain or an allowable loss for the purposes of UK corporation tax.

Tax consequences for the Luxembourg Merger

UK Shareholders

The Luxembourg Merger will result in LuxCo Shares being cancelled with the LuxCo shareholders acquiring PubCo Ordinary Shares as consideration. The LuxCo shareholders may also potentially receive a compensating payment (“Soulte”) under Luxembourg Company Law.

Prima facie, a disposal of shares is a chargeable event under the provisions of the CGT legislation.

However, subject to certain conditions, Section 136 TCGA 1992 provides that, where the consideration for the merger is the issue of shares in the offeror company (being PubCo), the transaction may be treated as a scheme of reconstruction whereby the new holdings in PubCo received by the LuxCo shareholders should be treated as the same asset as their original LuxCo Shares.    

For UK shareholders the disposal of LuxCo Shares in exchange for PubCo Ordinary Shares may fall within the conditions of Section 136 TCGA 1992 where:

 

   

PubCo issues PubCo Ordinary Shares to the shareholders of LuxCo in direct proportion to their holdings in the PubCo;

 

   

The LuxCo Shares in LuxCo are either retained or cancelled, or otherwise extinguished; and

 

   

The issue of the shares and debentures is entered into for the purposes of, or in connection with, a scheme of reconstruction (considered further below).

 

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In addition, the scheme of reconstruction must be effected for bona fide commercial reasons and not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, is the avoidance of liability to capital gains tax or corporation tax (Section 137 TCGA 1992). It should be noted that the bona fide commercial reasons test above should only be relevant in the case of shareholders who (together with persons connected with them) hold more than 5% of the LuxCo Shares.

A scheme of reconstruction may be treated as occurring where:

 

   

There is an issue of ordinary share capital to the holders of ordinary share capital in LuxCo which does not involve the issue of share capital to anyone else;

 

   

The shareholders in LuxCo that hold the class (or classes) of ordinary shares involved in the scheme of reconstruction have the same entitlement to acquire ordinary shares in PubCo as any member of that class; and

 

   

The effect of the restructuring is that the whole or substantially the whole of the business or businesses of LuxCo is carried on by PubCo.

Where the investment is a holding of shares in a trading subsidiary, the legislation allows a controlling holding to be treated as a part of the parent company’s business. In this respect, it is understood that the whole or substantially the whole of the business of LuxCo should be carried on by PubCo.

An application for advance clearance from HMRC under Section 138 TCGA 1992 that the bona fide commercial reasons test applies will be made by the Akazoo prior to the business combination.

The effect of Section 136 TCGA 1992 where it applies is that the PubCo Ordinary Shares received in the Luxembourg Merger inherit the original base cost and acquisition date of the LuxCo Shares for the purposes of a future disposal of PubCo Ordinary Shares.

Advance clearance will also be sought from HMRC under Section 701 ITA 2007 that the main purpose, or one of the main purposes, of the Business Combination is to obtain an income tax advantage for UK individual shareholders so that the transactions in securities rules should not apply to recharacterise the transaction into a taxable event from the perspective of such individuals.

As the receipt of the Soulte does not appear to constitute consideration comprising shares, the Soulte may potentially be treated as taxable for UK purposes and recipients of the Soulte should seek their own tax advice on the UK tax treatment.

The Luxembourg Merger would result in LuxCo ceasing to hold certain assets such as the shares in Akazoo. Section 13 TCGA 1992 (attribution to UK residents of capital gains of non-resident close companies) may potentially be applicable in this situation, although relief from this provision is available where the relevant transaction does not form part of a scheme or arrangements of which the main purpose, or one of the main purposes, was avoidance of liability to capital gains tax or corporation tax. Alternatively, protection from a Section 13 TCGA 1992 charge may be available under the capital gains tax article of the UK/Luxembourg double tax treaty.

Non-UK Shareholders

An individual holder who is not a UK resident shareholder will not be liable to UK CGT on chargeable gains realized on the disposal of his or her LuxCo Shares unless such shareholder carries on (whether solely or in partnership) a trade, profession or vocation in the UK through a branch or agency in the UK to which the shares are attributable. In these circumstances, such shareholder may, depending on his or her individual circumstances, be chargeable to UK CGT on chargeable gains arising from a disposal of his or her LuxCo Shares.

A corporate holder of shares that is not a UK resident shareholder will not be liable for UK corporation tax on chargeable gains realized on the disposal of its LuxCo Shares unless it carries on a trade in the UK through a permanent establishment to which the shares are attributable. In these circumstances, a disposal of shares by such shareholder may give rise to a chargeable gain or an allowable loss for the purposes of UK corporation tax.

 

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Other ongoing tax matters

Taxation of PubCo Dividends

Individuals

UK resident individuals receive an annual tax free allowance in relation to dividend receipts of £2,000 (for the 2018/19 tax year). Dividend receipts in excess of this allowance will be taxed at the rates of 7.5% for basic rate income tax payers, 32.5% for higher rate income tax payers, and 38.1% for additional rate income tax payers.

Subject to detailed conditions and each shareholder’s relevant facts and circumstances, double tax relief may be available for Luxembourg dividend withholding tax suffered on PubCo dividends.

Corporate Shareholders

Although shareholders who are within the charge to corporation tax would strictly be subject to corporation tax on dividends paid by PubCo (subject to special rules for such shareholders that are “small” companies), generally such dividends may fall within an exempt class and so would not be subject to corporation tax.

Inheritance Tax

The PubCo Ordinary Shares will form part of the taxable estate for inheritance tax (“IHT”) of UK domiciled individuals who are shareholders and those that are treated as being domiciled there through long residence. A transfer of ownership by gift or settlement of such assets by, or on the death by such beneficial owners may (subject to certain exemptions or reliefs) give rise to a UK IHT liability. Transfer of assets by individuals during life or on death, or by trustees at less than full market value, may be treated as gifts and subject to IHT. If the donor reserves or retains some benefit after the transfer, certain anti-avoidance tax legislation could apply. Where shares are held by trusts established by UK domiciled or deemed UK domiciled individuals they will also fall within the ambit of the IHT rules and separate advice should be taken as to the consequences involved.

Transfer of assets abroad

The anti-avoidance rules contained within Section 714 et seq ITA 2007 seek to prevent the avoidance of UK taxation by transfer of assets abroad by UK individuals. A main condition for these rules to apply is that there must be a transfer of assets by a UK resident individual so that income deriving from those assets becomes payable to a person abroad. In addition, the individual must have the power to enjoy that income in some way as a result of a transfer of assets alone or together with associated operations or receive or be entitled to receive a capital sum in any way connected with any relevant transactions.

These rules do not apply, however, where it can be shown that the avoidance of taxation was not the purpose or one of the purposes for which the transfer or any associated operation was effected or the transfer and any associated operations were genuine commercial transactions and were not designed for the purpose of avoiding liability to taxation.

Depositary Receipt Systems and Clearance Services

Depositary Receipts (“DRs”) are used as substitute instruments indicating ownership of securities such as shares. Although DRs may be owned by anyone, they are designed primarily to enable investors to hold and deal in shares of companies located in countries other than their own. Such activities might otherwise be inhibited by difficulties in transferring original share certificates from one country to another. The investors hold or trade the DRs rather than the share certificates themselves.

 

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Following the European Court of Justice decision in C-569/07 HSBC Holdings Plc, Vidacos Nominees Limited v. The Commissioners of Her Majesty’s Revenue & Customs and the First-tier Tax Tribunal decision in HSBC Holdings Plc and The Bank of New York Mellon Corporation v. The Commissioners of Her Majesty’s Revenue & Customs, HMRC has confirmed that holding shares via depositary receipt systems may affect liability to CGT or corporation tax.

UK issued DRs

Where a DR is issued in the UK the HMRC view is that the holder of a DR is the beneficial owner of the underlying shares. The practical implications include that:

 

   

a transfer of shares by a shareholder to a depository in exchange for an issue of DRs is not a disposal of the shares for capital gains purposes because the shareholder retains beneficial ownership of the shares;

 

   

a disposal of the DRs is a disposal of both the DRs themselves and a disposal of the underlying shares. In practice the value of a DR will track the value of the underlying shares very closely and to that extent the consideration for the disposal of the DRs should be regarded as consideration for the disposal of the shares;

 

   

in a share exchange or company reconstruction in which shareholders have an option to receive DRs instead of being issued with shares HMRC accept that the shares are to be treated for the purposes of Section 135 TCGA 1992 as being issued to the shareholders; and

 

   

if the holder of DRs converts them back into the underlying shares there is no change of ownership of those shares and so no disposal of the shares. There will have been a disposal of the DRs and the usual computational rules will apply. If no consideration is received for the disposal of the DRs there will be no chargeable gain.

DRs issued outside UK

Where a DR is issued outside the UK the question of whether the holder of the DR is the beneficial owner of the underlying shares will be determined by reference to the law of the territory in which the DR is issued. Information on beneficial ownership may be provided to investors by the depository.

Beneficial ownership not conclusively determined by overseas law

Where beneficial ownership of the underlying shares cannot conclusively be determined by reference to the law governing the arrangements relating to the issue of the DRs, for tax purposes HMRC will continue to determine beneficial ownership according to its understanding of the principles of UK law. This means that HMRC would continue to apply its longstanding practice of regarding the holder of a DR as holding the beneficial interest in the underlying shares.

Stamp Duty and Stamp Duty Reserve Tax

The statements in this section entitled “Stamp Duty and Stamp Duty Reserve Tax (“SDRT”) are intended as a general guide to the current UK stamp duty and SDRT position. The discussion below relates to shareholders wherever resident, but investors should note that certain categories of person are not liable to stamp duty or SDRT and others may be liable at a higher rate or may, although not primarily liable for tax, be required to notify and account for SDRT under the Stamp Duty Reserve Tax Regulations 1986.

 

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Tax consequences for Akazoo shareholders of the Share Exchange

Subject to obtaining relief under Section 77 Finance Act 1986 (“FA 1986”) described below, a transfer of Akazoo ordinary shares by the existing shareholders to LuxCo would give rise to stamp duty at 0.5% for LuxCo and so should have no direct impact on the Akazoo shareholders.

Relief from UK stamp duty for LuxCo may be available under Section 77 FA 1986 where the acquisition involves the issue of classes of shares and loan notes in LuxCo in the same proportions as they were in Akazoo immediately before the acquisition was made.

For this relief to apply, the transaction must be effected for bona fide commercial reasons and not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is avoidance of liability to stamp duty, stamp duty reserve tax, income tax, corporation tax or capital gains tax and the appropriate technical conditions of Section 77 FA 1986 are met.

In addition, at the time of the exchange there must be no disqualifying arrangements for the purposes of Section 77A FA 1986 under which a different person or persons together could obtain control of LuxCo. It is understood that LuxCo will cease to exist upon consummation of the Luxembourg Merger and that the existing shareholders of Akazoo will continue to control LuxCo following the Share Exchange and then PubCo following the Luxembourg Merger, so on these bases there should be no disqualifying arrangement.

Adjudication will be sought from HMRC that relief is available under Section 77 FA 1986.

Tax consequences for the Luxembourg Merger

No UK stamp duty or SDRT should arise on this transaction on the basis that the shares in LuxCo and PubCo are not UK assets.

 

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MATERIAL INCOME TAX CONSEQUENCES OF THE BUSINESS COMBINATION IN THE GRAND DUCHY OF LUXEMBOURG

The following summary is based on the law and practice applicable in the Grand Duchy of Luxembourg as at the date of this proxy statement/prospectus and is subject to changes in law (or interpretation) later introduced, whether or not on a retroactive basis. It does not purport to be a complete analysis of all possible tax situations that may be relevant to an investment decision. It is included herein solely for preliminary information purposes. It is not intended to be, nor should it be construed to be, legal or tax advice. It is a description of the essential material Luxembourg tax consequences with respect to PubCo Ordinary Shares and may not include tax considerations that arise from rules of general application or that are generally assumed to be known to holders. Holders of PubCo Ordinary Shares should inform themselves of, and when appropriate, consult their professional advisors with regard to the possible tax consequences of subscription for buying, holding, exchanging, redeeming or otherwise disposing of PubCo Ordinary Shares under the laws of their country of citizenship, residence, domicile or incorporation.

It is expected that holders of PubCo Ordinary Shares will be resident for tax purposes in many different countries. Consequently, no attempt is made in this proxy statement/prospectus to summarize the taxation consequences for each investor subscribing, buying, holding, exchanging, redeeming or otherwise disposing of PubCo Ordinary Shares. These consequences will vary in accordance with the law and practice currently in force in a holder’s country of citizenship, residence, domicile or incorporation and with an holder‘s personal circumstances. Holders of PubCo Ordinary Shares should be aware that the residence concept used under the respective headings applies for Luxembourg income tax assessment purposes only. Any reference in this section to a tax, duty, levy, impost or other charge or withholding of a similar nature refers to Luxembourg tax law and/or concepts only.

Holders of PubCo Ordinary Shares should also note that a reference to Luxembourg income tax generally encompasses corporate income tax (impôt sur le revenu des collectivités), municipal business tax (impôt commercial communal), a solidarity surcharge (contribution au fonds pour l’emploi) as well as personal income tax (impôt sur le revenu des personnes physiques). Corporate taxpayers may further be subject to net wealth tax (impôt sur la fortune), as well as other duties, levies and taxes. Corporate income tax, municipal business tax and the solidarity surcharge invariably apply to most corporate taxpayers resident in Luxembourg for tax purposes. Individual taxpayers are generally subject to personal income tax and the solidarity surcharge. Under certain circumstances, where individual taxpayers act in the course of the management of a professional or business undertaking, municipal business tax may apply as well.

Taxation of PubCo

Income tax

PubCo is subject to corporate income tax (impôt sur le revenu des collectivités – “CIT”) and municipal business tax (impôt commercial communal – “MBT”) at ordinary rates in Luxembourg.

One of the key tax measures contained in the Coalition Agreement released by the new Luxembourg government on December 3, 2018 is its commitment to decrease the maximum aggregate CIT and MBT rate by 1% in 2019 (consequently from 26.01% to 25.01% for companies located in Luxembourg City). Although this solely represents a proposal at this stage, PubCo has no element indicating that the proposed CIT/MBT rate decrease should not be implemented in the Luxembourg tax legislation in the course of 2019, applying to fiscal periods closing on or after January 1, 2019. The aggregate maximum applicable rate (including the surcharge for the employment fund) should hence amount to 25.01% for companies located in Luxembourg-city in 2019.

Dividends and other payments derived from shares held by PubCo are subject to income tax, unless the conditions of the participation exemption regime, as described below, are satisfied. A tax credit is generally granted for withholding taxes levied at source within the limit of the CIT payable in Luxembourg on such income, whereby any excess withholding tax is not refundable.

 

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Under the Luxembourg participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from shares may be exempt from income tax at the level of PubCo if (i) the distributing company is a qualified subsidiary (“Qualified Subsidiary”9) and (ii) at the time the dividend is placed at the disposal of PubCo, the latter has held or commits itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in the Qualified Subsidiary of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000). Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions. If the conditions of the Luxembourg participation exemption regime are not met, fifty percent (50%) of the dividends received by PubCo from a Qualified Subsidiary may nevertheless be exempt from income tax.

Under the Luxembourg participation exemption regime, capital gains realized on shares of a Qualified Subsidiary may be exempt from income tax at the level of PubCo if, at the time the capital gain is realized, PubCo has held or commits itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in the Qualified Subsidiary of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least six million Euros (€ 6,000,000).

Shares held through a tax transparent entity are deemed to be direct participations in proportion of the net assets held in the transparent entity.

Withholding tax

Dividends paid by PubCo to holders of PubCo Ordinary Shares are as a rule subject to a 15% withholding tax in Luxembourg, unless a reduced treaty rate or the Luxembourg participation exemption regime applies.

Under the Luxembourg participation exemption regime (subject to the relevant anti-abuse rules), dividends distributed by PubCo under the PubCo Ordinary Shares may be exempt from withholding tax if (i) the holder is an Eligible Parent10 and (ii) at the time the dividend is placed at the disposal of the Eligible Parent, the latter has held or committed itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000).

PubCo Ordinary Shares held through a tax transparent entity are deemed to be direct participations in proportion of the net assets held in the transparent entity.

No withholding tax is levied on capital gains and liquidation proceeds.

Net wealth tax

PubCo is as a rule subject to Luxembourg net wealth tax on its net assets as determined for net wealth tax purposes. Net wealth tax is levied at the rate of 0.5% on net assets not exceeding € 500 million and at the rate of 0.05% on the portion of the net assets exceeding € 500 million. Net wealth is referred to as the unitary value (valeur unitaire), as determined at January 1 of each year. The unitary value is in principle calculated as the difference between (i) assets estimated at their fair market value (valeur estimée de réalisation), and (ii) liabilities vis-à-vis third parties.

 

 

9 

A Qualified Subsidiary means (a) a company covered by Article 2 of the amended EU Directive 2011/96/EU of 30 November 2011, on the common system applicable in the case of parent companies and subsidiaries of different Member States, (b) a Luxembourg resident fully-taxable capital company (société de capitaux) not listed in the appendix to Article 166(10) Income Tax Law, (c) a Luxembourg non-resident capital company (société de capitaux) fully liable to a tax corresponding to Luxembourg CIT.

10 

An Eligible Parent means (a) a company covered by Article 2 of the amended EU Directive 2011/96/EU of 30 November 2011, on the common system applicable in the case of parent companies and subsidiaries of different Member States, (b) a Luxembourg resident fully-taxable capital company (société de capitaux) not listed in the appendix to Article 166(10) Income Tax Law, (c) the Central Government, municipalities, associations of municipalities, operations of local public-law entities, (d) a Luxembourg permanent establishment of a company specified above, (e) a non-resident company fully liable to a tax corresponding to Luxembourg CIT and resident of a State with which Luxembourg has a double taxation treaty, or a Luxembourg permanent establishment thereof, (f) a Swiss resident capital company (société de capitaux) which is effectively subject to CIT in Switzerland without benefiting from an exemption, (g) a capital company (société de capitaux) or cooperative company (société cooperative) resident of a State that is a contracting party to the Agreement on the European Economic Area (“EEA”), other than an EU Member State, and which is fully liable to a tax corresponding to Luxembourg CIT, (h) a Luxembourg permanent establishment of a capital company (société de capitaux) or cooperative company (société cooperative) resident of a State that is a contracting party to the Agreement on the EEA, other than an EU Member State.

 

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Under the participation exemption regime, a shareholding representing a direct participation held by PubCo in a Qualified Subsidiary of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000) is exempt for net wealth tax purposes.

Shares held through a tax transparent entity are deemed to be direct participations in proportion of the net assets held in the transparent entity.

A minimum net wealth tax (“MNWT”) is levied on companies having their statutory seat or central administration in Luxembourg. The MNWT is set at € 4,815 in case the sum of PubCo’s fixed financial assets, receivable against related companies, transferable securities and cash at bank exceeds 90% of its total gross assets and € 350,000. In all other cases, the MNWT ranges from € 535 to € 32,100, depending on PubCo’s total gross assets.

Other taxes

No stamp duty or other tax is generally payable in Luxembourg in connection with the issue of PubCo Ordinary Shares, except a fixed registration duty of € 75 which is paid upon PubCo’s incorporation or any amendment of its articles of association.

Taxation of the holders of PubCo Ordinary Shares

Tax residency

A holder will not become resident, nor be deemed to be resident, in Luxembourg solely by virtue of holding and/or disposing of PubCo Ordinary Shares or the execution, performance, delivery and/or enforcement of his/her rights thereunder.

Income tax

For the purposes of this section, a disposal may include a sale, an exchange, a contribution, a cancellation or any other kind of alienation of PubCo Ordinary Shares. Taxable gains are determined as being the difference between the price for which the Ordinary Shares have been disposed of and the lower of their cost or book value.

Luxembourg resident holders

Luxembourg resident individuals

Any dividend and other payment derived from PubCo Ordinary Shares received by Luxembourg resident individual holders, acting in the course of the management of either their private wealth or their professional/business activity, are subject to income tax at the progressive ordinary rates. Under current Luxembourg tax laws, fifty percent (50%) of the dividends distributed by PubCo and received by a Luxembourg resident individual holder is however exempt from income tax.

Capital gains realized upon the sale, disposal or redemption of PubCo Ordinary Shares by Luxembourg resident individual holders acting in the course of the management of their private wealth are not subject to Luxembourg income tax, provided this sale, disposal or redemption takes place more than six (6) months after the PubCo Ordinary Shares were acquired and provided the PubCo Ordinary Shares do not represent a substantial shareholding. A shareholding is considered as a substantial shareholding in limited cases, in particular if (i) the holder has held, either alone or together with his/her spouse or partner and/or his/her minor children, either directly or indirectly, at any time within the five (5) years preceding the realization of the gain, more than ten percent (10%) of the share capital of PubCo or (ii) the holder acquired free of charge, within the five (5) years preceding the transfer, a participation that constituted a substantial participation in the hands of the alienator (or alienators, in case of successive transfers free of charge within the same five year period). Capital gains realized on a substantial participation more than six (6) months after the acquisition thereof are subject to income tax according to the half-global rate method (i.e. the average rate applicable to the total income is calculated according to progressive income tax rates and half of the average rate is applied to the capital gains realized on the substantial participation).

 

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Capital gains realized upon the disposal of PubCo Ordinary Shares by a Luxembourg resident individual holder acting in the course of the management of his professional/business activity are subject to income tax at ordinary rates.

Luxembourg resident corporations

Luxembourg resident corporate holders (sociétés de capitaux) must include any profits derived, as well as any gain realized on the sale, disposal or redemption of PubCo Ordinary Shares, in their taxable profits for Luxembourg income tax assessment purposes, unless the conditions of the Luxembourg participation exemption regime, as described below, are satisfied.

Under the Luxembourg participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from the Ordinary Shares may be exempt from income tax at the level of the holder if (i) the holder is a Luxembourg fully taxable company (“Eligible Lux Parent”) and (ii) at the time the dividend is placed at the disposal of the Eligible Lux Parent, the latter has held or committed itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000). Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions. If the conditions of the Luxembourg participation exemption regime are not met, fifty percent (50%) of the dividends received by a Luxembourg fully-taxable resident company may nevertheless be exempt from income tax.

Under the Luxembourg participation exemption regime, capital gains realized on the Ordinary Shares may be exempt from income tax at the level of the holder if (i) the holder is an Eligible Lux Parent and (ii) at the time the capital gain is realized, the Eligible Lux Parent has held or committed itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least six million Euros (€ 6,000,000).

PubCo Ordinary Shares held through a tax transparent entity are deemed to be direct participations in proportion of the net assets held in the transparent entity.

Luxembourg residents benefiting from a special tax regime

Luxembourg resident holders benefiting from a special tax regime, such as (i) undertaking for collective investments subject to the amended law of December 17, 2010, (ii) specialized investment funds governed by the amended law of February 13, 2007, (iii) family wealth management companies governed by the amended law of May 11, 2007 and iv) reserved alternative investment funds treated as a specialized investment fund for Luxembourg tax purposes and governed by the law of July 23, 2016, are tax exempt entities in Luxembourg and are thus not subject to any Luxembourg income tax.

Non-resident holders

Holders who are non-residents of Luxembourg and who have neither a permanent establishment nor a permanent representative in Luxembourg to which or whom PubCo Ordinary Shares are attributable, are generally not subject to any tax on income and capital gains in Luxembourg. As an exception, and subject to the provisions of a relevant double tax treaty, a Holder who is non-resident of Luxembourg and who has neither a permanent establishment nor a permanent representative in Luxembourg to which or whom PubCo Ordinary Shares are attributable is however subject to tax on capital gains in Luxembourg in case where the PubCo Ordinary Shares represent a substantial shareholding11 and either this sale, disposal or redemption takes place (i) within the first six (6) months of the acquisition of the PubCo Ordinary Shares or (ii) after six (6) months and such Holder has been a Luxembourg resident taxpayer for more than fifteen (15) years and has become a Luxembourg non-resident taxpayer less than five (5) years before the disposal takes place.

 

 

11 

A shareholding is considered as a substantial shareholding in limited cases, in particular if (i) the Holder has held, either alone or together with his/her spouse or partner and/or his/her minor children, either directly or indirectly, at any time within the five (5) years preceding the realization of the gain, more than ten percent (10%) of the share capital of PubCo or (ii) the Holder acquired free of charge, within the five (5) years preceding the transfer, a participation that constituted a substantial participation in the hands of the alienator (or alienators, in case of successive transfers free of charge within the same five year period).

 

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Holders who are non-residents of Luxembourg but who have a permanent establishment or a permanent representative in Luxembourg to which or whom PubCo Ordinary Shares are attributable must include any income received, as well as any gain realized on the sale, disposal or redemption of the PubCo Ordinary Shares in their taxable income for Luxembourg tax assessment purposes, unless the conditions of the Luxembourg participation exemption regime, as described below, are satisfied.

Under the Luxembourg participation exemption regime (subject to the relevant anti-abuse rules), dividends derived from PubCo Ordinary Shares may be exempt from income tax at the level of the Holder if (i) the Ordinary Shares are attributable to a qualified permanent establishment (“Qualified Permanent Establishment12”) and (ii) at the time the dividend is placed at the disposal of the Qualified Permanent Establishment, the latter has held or committed itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000). Liquidation proceeds are assimilated to a received dividend and may be exempt under the same conditions. If the conditions of the Luxembourg participation exemption regime are not met, fifty percent (50%) of the dividends received by a Luxembourg permanent establishment or permanent representative may nevertheless be exempt from income tax.

Under the Luxembourg participation exemption regime, capital gains realized on PubCo Ordinary Shares may be exempt from income tax at the level of the holder if (i) the PubCo Ordinary Shares are attributable to a Qualified Permanent Establishment and (ii) at the time the capital gain is realized, the Qualified Permanent Establishment has held or committed itself to hold for an uninterrupted period of at least twelve (12) months a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least six million Euros (€ 6,000,000).

PubCo Ordinary Shares held through a tax transparent entity are deemed to be direct participations in proportion of the net assets held in the transparent entity.

Net wealth tax

In general, Luxembourg non-resident holders are not subject to net wealth tax. Net wealth tax is only applicable to Luxembourg non-resident holders if their PubCo Ordinary Shares are attributable to a permanent establishment or a permanent representative in Luxembourg.

Luxembourg resident holders and non-resident holders having a permanent establishment or a permanent representative in Luxembourg to which or whom PubCo Ordinary Shares are attributable, are subject to Luxembourg net wealth tax on such PubCo Ordinary Shares, unless the holder is (i) a resident or non-resident individual taxpayer, (ii) a securitization vehicle governed by the amended law of March 22, 2004 on securitization, (iii) a company governed by the amended law of June 15, 2004 on venture capital vehicles, (iv) a professional pension institution governed by the amended law of July 13, 2005, (v) an undertaking for collective investments governed by the amended law of December 17, 2010, (vi) a specialized investment fund governed by the amended law of February 13, 2007, (vii) a family wealth management company governed by the amended law of May 11, 2007, (viii) a reserved alternative investment fund governed by the law of July 23, 2016.

 

 

12 

A Qualified Permanent Establishment means (a) a Luxembourg permanent establishment of a company covered by Article 2 of the amended EU Directive 2011/96/EU of 30 November 2011, on the common system applicable in the case of parent companies and subsidiaries of different Member States, (b) a Luxembourg permanent establishment of a capital company (société de capitaux) resident in a State with which Luxembourg has concluded a double tax treaty or (c) a Luxembourg permanent establishment of a capital company (société de capitaux) or a cooperative company (société coopérative) resident in a State that is a contracting party to the European Economic Area other than an EU Member State.

 

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Please also note that under the Luxembourg participation exemption regime, PubCo Ordinary Shares may be exempt from net wealth tax (subject to certain debt deduction restrictions) at the level of the holder if (i) the holder is an Eligible Parent or the PubCo Ordinary Shares are attributable to a Qualified Permanent Establishment and (ii) at the time the dividend is placed at the disposal of either the Eligible Parent or the Qualified Permanent Establishment, the latter has held a shareholding representing a direct participation in PubCo of at least either (a) ten percent (10%) in the share capital or (b) an acquisition price of at least one million two hundred thousand Euros (€ 1,200,000).

However, (i) a securitization company governed by the amended law of March 22, 2004 on securitization, (ii) a company governed by the amended law of June 15, 2004 on venture capital vehicles, (iii) a professional pension institution governed by the amended law of July 13, 2005, and (iv) a reserved alternative investment fund treated as a venture capital vehicle for Luxembourg tax purposes and governed by the law of July 23, 2016 remain subject to the minimum net wealth tax.

As from January 1, 2016, the MNWT is levied on companies having their statutory seat or central administration in Luxembourg. For entities whose fixed financial assets, receivable against related companies, transferable securities and cash at bank exceed 90% of their total gross assets and € 350,000, the MNWT is set at € 4,815. For all other companies having their statutory seat or central administration in Luxembourg which do not fall within the scope of the € 4,815 MNWT, the MNWT ranges from € 535 to € 32,100, depending on the company’s total gross assets.

Other taxes

Where an individual holder of PubCo Ordinary Shares is a resident of Luxembourg for inheritance tax purposes at the time of his/her death, the PubCo Ordinary Shares are included in his/her taxable basis for inheritance tax purposes. On the contrary, no estate or inheritance tax is levied on the transfer of the PubCo Ordinary Shares upon death of an individual holder in cases where the deceased was not a resident of Luxembourg for inheritance tax purposes at the time of his/her death.

Luxembourg gift tax may be levied on a gift or donation of PubCo Ordinary Shares if embodied in a Luxembourg notarial deed or otherwise registered in Luxembourg.

FATCA

Capitalized terms used in this section should have the meaning as set forth in the FATCA Law (as defined below), unless provided otherwise herein.

PubCo may be subject to the so-called FATCA legislation which generally requires reporting to the U.S. Internal Revenue Service of non-U.S. financial institutions that do not comply with FATCA and direct or indirect ownership by U.S. persons of non-U.S. entities. As part of the process of implementing FATCA, the U.S. government has negotiated intergovernmental agreements with certain foreign jurisdictions which are intended to streamline reporting and compliance requirements for entities established in such foreign jurisdictions and subject to FATCA.

Luxembourg has entered into a Model 1 Intergovernmental Agreement (“IGA”) implemented by the amended Luxembourg law of July 24, 2015 (the “FATCA Law”), which requires Financial Institutions located in Luxembourg to report, when required, information on Financial Accounts held by Specified U.S. Persons, if any, to the Luxembourg tax authorities (administration des contributions directes).

Under the terms of the FATCA Law, PubCo is likely to be treated as a Luxembourg Reporting Financial Institution.

This status imposes on PubCo the obligation to regularly obtain and verify information on all of its holders of PubCo Ordinary Shares. On the request of PubCo, each holder shall agree to provide certain information, including, in the case of a passive Non-Financial Foreign Entity (“NFFE”), information on the Controlling Persons of such NFFE, along with the required supporting documentation. Similarly, each holder shall agree to actively provide to PubCo within thirty (30) days any information that would affect its status, as for instance a new mailing address or a new residency address.

 

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The FATCA Law may require PubCo to disclose the names, addresses and taxpayer identification number (if available) of its holders as well as information such as account balances, income and gross proceeds (non-exhaustive list) to the Luxembourg tax authorities for the purposes set out in the FATCA Law. Such information will be relayed by the Luxembourg tax authorities to the U.S. Internal Revenue Service. Holders of PubCo Ordinary Shares qualifying as passive NFFEs undertake to inform their Controlling Persons, if applicable, of the processing of their information by PubCo.

Additionally, PubCo is responsible for the processing of personal data and each holder has a right to access the data communicated to the Luxembourg tax authorities and to correct such data (if necessary). Any data obtained by PubCo are to be processed in accordance with the applicable data protection legislation.

Although PubCo will attempt to satisfy any obligation imposed on it to avoid imposition of FATCA withholding tax, no assurance can be given that PubCo will be able to satisfy these obligations. If PubCo becomes subject to a withholding tax or penalties as result of the FATCA regime, the value of the PubCo Ordinary Shares held by the holders may suffer material losses. The failure for PubCo to obtain such information from each holder and to transmit it to the Luxembourg tax authorities may trigger the 30% withholding tax to be imposed on payments of U.S. source income and, subject to the proposed Treasury Regulation described above in the section titled “Material U.S. Federal Income Tax Consequences of the Business Combination – FATCA,” on proceeds from the sale of property or other assets that could give rise to U.S. source interest and dividends as well as penalties.

Any holder of PubCo Ordinary Shares that fails to comply with PubCo’s documentation requests may be charged with any taxes and/or penalties imposed on PubCo as a result of such holder’s failure to provide the information and PubCo may, in its sole discretion, redeem the PubCo Ordinary Shares of such holder.

Holders of PubCo Ordinary Shares who invest through intermediaries are reminded to check if and how their intermediaries will comply with this U.S. withholding tax and reporting regime.

Holders of PubCo Ordinary Shares should consult a U.S. tax advisor or otherwise seek professional advice regarding the above requirements.

CRS

Capitalized terms used in this section should have the meaning as set forth in the CRS Law (as defined below), unless provided otherwise herein.

PubCo may be subject to the Standard for Automatic Exchange of Financial Account Information in Tax matters (the “Standard”) and its Common Reporting Standard (the “CRS”) as set out in the amended Luxembourg law of December 18, 2015 (the “CRS Law”) implementing Directive 2014/107/EU which provides for an automatic exchange of financial account information between Member States of the European Union as well as the OECD’s multilateral competent authority agreement on automatic exchange of financial account information signed on October 29, 2014 in Berlin, with effect as of January 1, 2016.

Under the terms of the CRS Law, PubCo is likely to be treated as a Luxembourg Reporting Financial Institution.

As such, PubCo will be required to annually report to the Luxembourg tax authorities (Administration des contributions directes) personal and financial information related, inter alia, to the identification of, holdings by and payments made to (i) certain Holders of PubCo Ordinary Shares qualifying as Reportable Persons and (ii) Controlling Persons of certain passive non-financial entities (“NFEs”) which are themselves Reportable Persons. This information, as exhaustively set out in Annex I of the CRS Law (the “Information”), will include personal data related to the Reportable Persons.

PubCo’s ability to satisfy its reporting obligations under the CRS Law will depend on each holder providing PubCo with the Information, along with the required supporting documentary evidence. In this context, the holders of PubCo Ordinary Shares are hereby informed that, as data controller, PubCo will process the Information for the purposes as set out in the CRS Law. Holders qualifying as passive NFEs undertake to inform their Controlling Persons, if applicable, of the processing of their Information by PubCo.

 

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Additionally, PubCo is responsible for the processing of personal data and each holder of PubCo Ordinary Shares has a right to access the data communicated to the Luxembourg tax authorities and to correct such data (if necessary). Any data obtained by PubCo are to be processed in accordance with the applicable data protection legislation.

The holders of PubCo Ordinary Shares are further informed that the Information related to Reportable Persons will be disclosed to the Luxembourg tax authorities annually for the purposes set out in the CRS Law. The Luxembourg tax authorities will, under their own responsibility, eventually exchange the reported information to the competent authority of the Reportable Jurisdiction(s). In particular, Reportable Persons are informed that certain operations performed by them will be reported to them through the issuance of statements, and that part of this information will serve as a basis for the annual disclosure to the Luxembourg tax authorities.

Similarly, the holders of PubCo Ordinary Shares undertake to inform PubCo within thirty (30) days of receipt of these statements should any included personal data be not accurate. The holders of PubCo Ordinary Shares further undertake to immediately inform PubCo of, and provide PubCo with all supporting documentary evidence of any changes related to the Information after occurrence of such changes.

Although PubCo will attempt to satisfy any obligation imposed on it to avoid any fines or penalties imposed by the CRS Law, no assurance can be given that PubCo will be able to satisfy these obligations. If PubCo becomes subject to a fine or penalty as a result of the CRS Law, the value of the PubCo Ordinary Shares held by the holders may suffer material losses.

Any holder of PubCo Ordinary Shares that fails to comply with PubCo’s Information or documentation requests may be held liable for penalties imposed on PubCo as a result of such holder’s failure to provide the Information or subject to disclosure of the Information by PubCo to the Luxembourg tax authorities and PubCo may, in its sole discretion, redeem the PubCo Ordinary Shares of such holder.

LUXEMBOURG TAXATION UPON THE LUXEMBOURG MERGER IN THE HANDS OF AKAZOO SHAREHOLDERS

Upon the Luxembourg Merger, Akazoo shareholders will receive PubCo’s Ordinary Shares in exchange of the LuxCo Shares received upon the Share Exchange.

For Luxembourg tax purposes, based on Article 22(5) of the amended Income Tax Law (“ITL”), an exchange of shares is considered to be a sale at fair market value (valeur estimée de réalisation) of the exchanged shares (in the case at hand, LuxCo Shares) followed by the acquisition of the shares received in exchange (in the case at hand, PubCo’s Ordinary Shares).

Based on this general rule, please refer to the section “Taxation of the Holders of PubCo Ordinary Shares” for the Luxembourg tax implications upon the realization of capital gains, if any, in the hands of shareholders.

Please however note that based on Article 22bis ITL and notwithstanding Article 22(5) ITL, upon a merger of capital companies (in the case at hand, LuxCo and PubCo), the attribution to the shareholders of equity securities of the company benefiting from the transfer (in the case at hand, PubCo’s Ordinary Shares) in exchange of securities held in the transferring company (in the case at hand, LuxCo Shares) shall not result in the realization of gains for Luxembourg tax purposes, unless the shareholder waives the application of this provision. For the shareholder, the acquisition price and date of the securities received in exchange shall be equal to the acquisition price and date of the securities given in exchange.

Akazoo shareholders should consult their professional advisors with regard to the possible tax implications of the Luxembourg Merger under the laws of their country of citizenship, residence, domicile or incorporation and based on their personal circumstances.

 

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THE BUSINESS TRANSACTION AGREEMENT

The following summary describes material provisions of the Business Transaction Agreement, dated as of January 24, 2019, as amended, by and among MMAC, Akazoo, LuxCo and PubCo. This summary is qualified in its entirety by reference to the Business Transaction Agreement, which is attached as “Annex A” to this proxy statement/prospectus and is incorporated in this proxy statement/prospectus by reference. The Business Transaction Agreement is included to provide investors and security holders with information regarding the terms of the Business Transaction Agreement. In particular, the assertions embodied in representations and warranties by the parties contained in the Business Transaction Agreement are subject to important qualifications and limitations agreed to by the parties in connection with negotiating the Business Transaction Agreement. The representations, warranties and covenants in the Business Transaction Agreement are also qualified, modified in important part by the underlying disclosure schedules which are not filed publicly and which are subject to a contractual standard of materiality different from that generally applicable to stockholders and were used for the purpose of allocating risk among the parties rather than establishing matters as facts. These disclosure schedules contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the Business Transaction Agreement. MMAC, Akazoo and PubCo do not believe that these schedules contain information that is material to an investment decision.

General

On January 24, 2019, MMAC, Akazoo, LuxCo, and PubCo, entered into the Business Transaction Agreement. The parties subsequently agreed to amend the Business Transaction Agreement to, among other things, permit the PIPE Financing. Pursuant to the Business Transaction Agreement, MMAC and Akazoo agreed, subject to the terms and conditions of the Business Transaction Agreement, to effect the Business Combination.

Business Combination, the PIPE Financing and Resulting Structure

The Business Combination will be effected as follows: (i) in accordance with Luxembourg law and the DGCL, MMAC will merge with and into PubCo, with PubCo remaining as the surviving publicly traded entity pursuant to the Merger; (ii) no later than seven days prior to the effective date of the Merger, LuxCo will acquire the entire issued share capital of Akazoo in consideration for issuing LuxCo Shares to the Akazoo shareholders in the Share Exchange, such that the shareholdings of LuxCo immediately after the Share Exchange will be identical to that of Akazoo prior to the Share Exchange; and (iii) on the calendar day following the effective date of the Merger, LuxCo will merge with and into PubCo in accordance with Luxembourg law, with PubCo remaining as the surviving publicly traded entity pursuant to the Luxembourg Merger. It is expected that, immediately after consummation of the Luxembourg Merger, PubCo would close the PIPE Financing with the equity investors that will have executed binding subscription agreements in connection with the PIPE Financing. Following the consummation of the Luxembourg Merger and the PIPE Financing, Akazoo will be a direct, wholly owned subsidiary of PubCo, and the current security holders of MMAC and Akazoo, along with the equity investors purchasing PubCo Ordinary Shares in the PIPE Financing, will be shareholders of PubCo.

Listing of PubCo Ordinary Shares and Percentage Ownership of PubCo

PubCo intends to apply to list the PubCo Ordinary Shares on NASDAQ following consummation of the Business Combination. It is expected that the existing shareholders of Akazoo will own a majority of the PubCo Ordinary Shares following the consummation of the Business Combination.

Consideration to be Received in the Business Combination

Subject to the terms of the applicable rights agreement, immediately prior to the consummation of the Merger, each outstanding MMAC Right will be automatically converted into one-tenth (1/10) of one share of MMAC Common Stock. Upon the consummation of the Merger (i) outstanding shares of MMAC Common Stock (including shares that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger but excluding any redeemed shares) will be converted into PubCo Ordinary Shares and (ii) outstanding MMAC Warrants will be converted into PubCo Warrants.

Akazoo equityholders will receive an aggregate number of PubCo Ordinary Shares equal to an assumed Akazoo enterprise value of $380 million (less any cash payment to them) divided by the per share redemption price applicable to any redemptions by public stockholders of MMAC. The Business Transaction Agreement provides that the Akazoo equityholders prior to the Luxembourg Merger will would have received a cash distribution of up to $20 million, in exchange for a portion of their shares, which would mostly represent a return of share premium as there is insufficient retained earnings to pay out the cash distribution, if and to the extent that cash available in MMAC’s trust account, after the payment of transaction fees and expenses and any redemptions, exceeded $110 million.

 

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Additionally, subject to the terms of the Business Transaction Agreement, as consideration for the cancellation of their LuxCo Shares in exchange for PubCo Ordinary Shares in the Luxembourg Merger, (i) each issued and outstanding LuxCo Share will be cancelled, and (ii) each LuxCo shareholder will be entitled to receive its pro rata share of the Share Consideration. Also, each LuxCo shareholder will be entitled to receive its pro rata share of the Cash Payment(if any) as a compensatory payment under Luxembourg law to be payable 10 calendar days after the closing date of the Luxembourg Merger.

For purposes of this section, each of the following terms shall have the meaning set forth below:

“Akazoo Enterprise Value” means $380,000,000, less the Cash Payment (if any);

“Aggregate Redemption Payment” means an amount in U.S. dollars equal to the product of the Per Share Redemption Amount multiplied by the number of shares of MMAC Common Stock that are redeemed pursuant to MMAC Common Stockholder Redemption;

“Cash Payment” means an aggregate amount in U.S. dollars equal to the lesser of the Trust Amount Available for Cash Payment and $20,000,000;

“MMAC Common Stockholder Redemption” means the right held by certain stockholders of MMAC to redeem all or a portion of their shares of MMAC Common Stock upon the consummation of the Business Combination, for a per share redemption price of cash equal to (a) the aggregate amount then on deposit in MMAC’s trust account as of two business days prior to the consummation of the Business Combination, including interest earned on the funds held in the trust account and not previously released to MMAC to pay certain taxes, divided by (b) the number of then outstanding shares of MMAC Common Stock issued in connection with MMAC’s IPO.

“Per Share Redemption Amount” means an amount in U.S. dollars equal to the quotient of (A) the trust amount held in MMAC’s trust account two business days prior to the consummation of the Merger, divided by (B) the number of shares of MMAC Common Stock that are held by all MMAC stockholders other than shares held by certain MMAC sponsors (and not including any shares of MMAC Common Stock that were automatically issued to holders of MMAC Rights pursuant to the conversion of such rights immediately prior to the Merger);

“Share Consideration” means a number of PubCo Ordinary Shares equal to the quotient of (A) the sum of the Akazoo Enterprise Value, divided by (B) the Per Share Redemption Amount;

“Stamp Duty Amount” means the aggregate stamp duty (if any) payable with respect to the Share Exchange or the Luxembourg Merger; and

“Trust Amount Available for Cash Payment” means (A) the trust amount held in the MMAC’s trust account two business days prior to the consummation of the Merger (expected to be, approximately, $211,800,000); less (B) the Aggregate Redemption Payment; less (C) an amount equal to any and all transaction fees and expenses incurred by MMAC, PubCo, LuxCo and Akazoo in connection with the Business Combination, up to a maximum of $15,000,000; less (D) the Stamp Duty Amount; less (E) $110,000,000; or if such number results in a negative number, $0.

Representations and Warranties

Under the Business Transaction Agreement, Akazoo, on the one hand, and MMAC, on the other hand, made customary representations and warranties for transactions of this nature. The representations and warranties made by Akazoo and MMAC to each other in the Business Transaction Agreement will not survive the consummation of the proposed Business Combination.

 

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Akazoo makes representations and warranties to MMAC that include: Organization, Authorization, Organization of LuxCo, Capitalization, Akazoo Subsidiaries, Consents and Approvals; No Violations, Financial Statements, No Undisclosed Liabilities, Absence of Certain Changes, Real Estate, Intellectual Property, Litigation, Akazoo Material Contracts, Tax Returns; Taxes, Environmental Matters, Licenses and Permits, Akazoo Benefit Plans, Labor Relationships, International Trade & Anti-Corruption Matters, Certain Fees, Service KPIs and Subscribers, Insurance Policies, Affiliate Transactions, Customers and Suppliers, Compliance with Laws, Sufficiency of Assets and No Leakage.

MMAC makes representations and warranties to Akazoo that include: Organization, Organization of PubCo, Authorization, Capitalization, Consents and Approvals; No Violations, Financial Statements, No Undisclosed Liabilities, Litigation, Compliance with Laws, Certain Fees and Expenses, MMAC Reports, Information Supplied, Board Approval; Stockholder Vote, Trust Account, Affiliate Transactions, Material Contracts, Solvency, Benefit Plans, and No Outside Reliance.

Conduct of Business Pending Consummation of the Business Combination

Akazoo shall, and shall cause each of its subsidiaries to, conduct its business in the ordinary course of business in all material respects, timely file all required tax returns and pay all required taxes, and, to the extent consistent with the foregoing, use its commercially reasonable efforts to (i) preserve intact its present business organization, (ii) keep available the services of its officers and key employees, (iii) maintain existing relationships with its material customers and material suppliers.

Akazoo has also agreed to various negative covenants, including, but not limited to, amending its organizational documents (except with respect to conversions), issuing securities, selling, leasing, licensing or otherwise disposing of any of its properties or assets that are material to its business, effecting any stock splits, redemptions or acquiring any membership interests, shares of its capital stock or any other ownership interests, as applicable, and amending any material contracts (subject to certain limited exceptions).

Conditions to Consummation of the Business Combination

The Business Transaction Agreement provides for conditions precedent to closing that MMAC and Akazoo believe are customary for transactions of this type. These closing conditions include, in respect of each party’s obligations to consummate the Business Combination, (i) approval by MMAC’s stockholders of (A) the adoption of the Business Transaction Agreement and the transactions contemplated thereby pursuant to Section 251 of the DGCL, and (B) any other proposals the parties deem necessary or desirable to consummate the Business Combination (collectively, the “Transaction Proposals”), in accordance with the rules and regulations of NASDAQ, MMAC’s organizational documents and the DGCL, (ii) approval of the transactions by the Akazoo shareholders in accordance with the laws of Scotland and Akazoo’s organizational documents, (iii) a registration statement on Form F-4 (or other appropriate form) pursuant to which the PubCo Ordinary Shares, PubCo Warrants and the PubCo Ordinary Shares issuable upon the exercise of such PubCo Warrants to be issued to the holders of MMAC Warrants pursuant to the Merger shall be registered for issuance under the Securities Act, having been declared effective by the Securities and Exchange Commission; (iv) the issuance of all necessary permits and authorizations under state securities or “blue sky” laws; (v) the funds contained in MMAC’s trust account and any additional capital otherwise available to MMAC being not less than $53,000,000 (with any proceeds from the PIPE Financing deemed “additional capital otherwise available to MMAC”); (vi) the PubCo Ordinary Shares having been approved for listing on NASDAQ and (vii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

In addition, the obligation of MMAC to consummate the Business Combination is subject to the satisfaction or waiver of several other conditions, including: (i) the accuracy of the representations and warranties of Akazoo set forth in the Business Transaction Agreement (except as would not have a material adverse effect on Akazoo); (ii) the performance by Akazoo in all material respects of its obligations and agreements in the Business Transaction Agreement; (iii) no material adverse effect, and no event or circumstance that would reasonably be expected to result in or cause a material adverse effect, with respect to Akazoo shall have occurred; and (iv) delivery by Akazoo of executed counterparts of the various transaction agreements to which it is a party.

In addition, the obligation of Akazoo to consummate the Business Combination is subject to the satisfaction or waiver of several other conditions, including: (i) the accuracy of the representations and warranties of MMAC set forth in the Business Transaction Agreement (except as would not have a material adverse effect on MMAC); (ii) the performance by MMAC in all material respects of its obligations and agreements in the Business Transaction Agreement; (iii) no material adverse effect, and no event or circumstance that would reasonably be expected to result in or cause a material adverse effect, with respect to MMAC shall have occurred; and (iv) delivery by MMAC of executed counterparts of the various transaction agreements to which it is a party.

 

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Termination

The Business Transaction Agreement may be terminated at any time at or prior to the consummation of the Business Combination by mutual consent of MMAC and Akazoo. In addition, the Business Transaction Agreement may be terminated:

 

   

by either MMAC or Akazoo if (i) consummation of the Business Combination has not occurred on or prior to September 17, 2019 (the “Outside Date”) for any reason other than delay and/or nonperformance of the party seeking such termination; (ii) the conditions set forth in the Business Transaction Agreement cannot be satisfied prior to the Outside Date; (iii) the Business Transaction Agreement fails to receive approval from MMAC’s stockholders at the Stockholders’ Meeting; or (iv) the consummation of any of the Transactions is permanently enjoined or prohibited by the terms of a final, non-appealable order of a court, unless the terminating party’s willful breach is the primary reason for such injunction or prohibition;

 

   

by MMAC, if (i) MMAC stockholders do not approve a proposal to extend the time in which MMAC must complete its initial business combination (the “Extension”), (ii) Akazoo is in breach of the Business Transaction Agreement, and such breach is incapable of being cured or is not cured within 20 days of written notice to MMAC or (iii) there occurs disclosure of any event, fact, or circumstance that is reasonably likely to cause the failure of any condition in the Business Transaction Agreement;

 

   

by Akazoo, if (i) MMAC is in breach of the Business Transaction Agreement, and such breach is incapable of being cured or is not cured within 20 days of written notice to MMAC; (ii) MMAC ceases to be listed on NASDAQ, or PubCo’s initial listing application in connection with the Business Combination is not approved by NASDAQ by September 17, 2019; or (iii) (A) MMAC’s board of directors shall have failed to recommend to its stockholders that they vote in favor of the adoption of the Transaction Proposals or failed to include the MMAC board recommendation in the proxy statement for the stockholders’ meeting or (B) there has been a change in recommendation, as defined in the Business Transaction Agreement.

Amendment

The Business Transaction Agreement may be amended, modified or supplemented at any time only by written agreement of each of the parties to the Business Transaction Agreement.

Expenses

Following the closing of the Business Transaction Agreement, Akazoo and its subsidiaries (the “Group Companies”) shall pay all fees, costs and expenses of the Group Companies (including MMAC) incurred in connection with the Business Transaction Agreement and the Business Combination (and deferred in respect to MMAC’s IPO), including the fees, costs and expenses of its financial advisors, accountants and counsel; provided, that in the event that the Business Transaction Agreement is terminated prior to the closing of the Business Combination (in accordance with its terms), each party shall pay its own fees, costs and expenses incurred in connection herewith and the Business Combination, including the fees, costs and expenses of its financial advisors, accountants and counsel; and provided further, that the fees, costs and expenses of MMAC shall not be in excess of $12 million (and MMAC shall cause some or all of the MMAC stockholders to bear any such excess), and the fees, costs and expenses of the Group Companies shall not be in excess of $3 million (and Akazoo shall cause some or all of Akazoo’s shareholders to bear any such excess).

 

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Claims Against Trust Account

Pursuant to the Business Transaction Agreement, Akazoo and its representatives waive all rights or claims to collect from the trust account any monies that may be owed to them by MMAC, including for a breach of the Business Transaction Agreement or any agreements or understandings with Akazoo, and will not seek recourse against the trust account except as expressly contemplated by the Business Transaction Agreement. However, (i) nothing contained in the Business Transaction Agreement will limit or prohibit Akazoo’s right to pursue a claim against MMAC for legal relief against assets held outside the trust account, and (ii) nothing contained in the Business Transaction Agreement will serve to limit or prohibit any claims that Akazoo may have in the future against MMAC’s assets or funds that are not held in the trust account (including any funds that have been released from the trust account and any assets that have been purchased or acquired with any such funds).

 

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CERTAIN AGREEMENTS RELATED TO THE BUSINESS COMBINATION

This section describes the material provisions of certain additional agreements to be entered into pursuant to the Business Transaction Agreement but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the agreements referred to herein. Copies of the form of Shareholders’ Agreement, Voting Agreement, and form of Lock-Up Agreement have been filed by MMAC as exhibits to a Current Report on Form 8-K filed with the SEC on January 25, 2019. Stockholders and other interested parties are urged to read such agreements in their entirety.

Shareholders’ Agreement

In connection with the consummation of the transactions contemplated by the Business Transaction Agreement, PubCo and its majority shareholders will enter into a Shareholders’ Agreement (the “Shareholders’ Agreement”) to set forth certain agreements regarding the relationships among themselves and the governance of PubCo.

After consummation of the Business Combination, the PubCo Board will be composed of up to seven directors, with one individual designated by the certain Akazoo shareholders (Tosca Penta Music Limited Partnership and InternetQ Group Limited), who need not be independent, one individual designated by MMAC stockholders (either Modern Media Sponsor, LLC, or if such entity is dissolved prior to the closing, MIHI LLC and Modern Media LLC), and one individual designated by certain management shareholders (including Mr. Zervos), each of whom need not be independent, as described in the Shareholders’ Agreement. The rights of MIHI and Modern Media Sponsor to designate an observer to the PubCo Board will terminate upon expiration of the Lock-Up Period (as defined in the Lock-Up Agreement, discussed below). For a period of one year following entry into the Shareholders’ Agreement, Lewis W. Dickey, Jr. will be the non-executive Chairman of the PubCo Board and for a period of three years following entry into the Shareholders’ Agreement, Mr. Dickey will be a member of the PubCo Board. Mr. Dickey will receive an annual fee of $330,000 in each of the three years he serves on the PubCo Board. Mr. Zervos will be the initial Chief Executive Officer and an initial member of the PubCo Board. At all times during the term of the Shareholders’ Agreement, the shareholder parties will cause the majority of the PubCo Board to be comprised of independent directors.

Voting Agreement

Concurrent with the execution of the Business Transaction Agreement, MMAC, Akazoo and certain shareholders representing a majority of Akazoo’s existing voting shares entered into separate Voting Agreements (the “Voting Agreements”). Pursuant to the Voting Agreements, the shareholders party thereto agreed to (i) vote their shares in favor of the Business Combination, against any other transaction and against actions that would have the effect of delaying or inhibiting the timely consummation of the Business Combination, and (ii) take any other actions set forth in the transaction step plan contemplated by the Business Transaction Agreement, including exercising their drag-along rights in furtherance of the Share Exchange. Additionally, the shareholder parties made certain customary representations and warranties with respect to the shares of Akazoo and LuxCo owned by such shareholder.

Lock-Up Agreement

In connection with the consummation of the Business Combination, PubCo and certain shareholders will enter into separate Lock-Up Agreements (the “Lock-Up Agreements”) with PubCo with respect to the PubCo Ordinary Shares received by the shareholder as part of the Business Combination. Depending on the identity of the shareholder, the Lock-Up Agreements will have a term of either six months or one year.

Pursuant to the Lock-Up Agreements, the shareholders will agree that, for a period of six months or one year following the closing date of the Business Combination, as applicable, they will not (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act with respect to PubCo Ordinary Shares issued to the shareholder pursuant to the Business Transaction Agreement (the “Lock-Up Shares”), (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any of the Lock-Up Shares, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).

 

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Notwithstanding the foregoing, a shareholder may sell or otherwise transfer Lock-Up Shares during the shareholder’s lifetime or on death (or existence, if the shareholder is not a natural person) (a) to any third party by private sale or transfer or (b) by operation of law, provided that the transferee thereof agrees to be bound by the restrictions set forth in the applicable Lock-Up Agreement. A shareholder may also establish or enter into a Rule 10b5-1 plan in respect of the Lock-Up Shares during the lock-up period, provided no sales are effected thereunder during the lock-up period.

Subscription Agreements

PubCo has entered into and intends to enter into various subscription agreements in connection with the PIPE Financing with certain “accredited investors” (each, a “PIPE Investor”). Pursuant to the Subscription Agreements, immediately after consummation of the Business Combination, PubCo will issue and each PIPE Investor will purchase, such PubCo Ordinary Shares as agreed to in each respective subscription agreement, subject to certain conditions. Pursuant to the Letter Agreement discussed elsewhere in this proxy statement/prospectus, PubCo also has the ability to offer, for no additional consideration and as an incentive to certain PIPE Investors, up to an aggregate number of PubCo Ordinary Shares and PubCo Warrants corresponding to the number of PubCo Ordinary Shares and PubCo Warrants forfeited by the sponsor.

The PubCo Ordinary Shares and PubCo Warrants, if any, to be issued pursuant to the subscription agreements will be subject to registration rights granted in the subscription agreement.

 

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PROPOSAL II

THE ADJOURNMENT PROPOSAL

The Adjournment Proposal allows the Board to submit a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation of proxies in the event, based on the tabulated votes, there are not sufficient votes at the time of the Special Meeting to approve the consummation of the Business Combination.

Prior to the Record Date, the officers, directors or affiliates of MMAC may purchase outstanding securities of MMAC in open market transactions and the shares so acquired would be voted in favor of the Business Combination. The officers, directors or affiliates of MMAC have no intention to enter into privately negotiated transactions with stockholders of MMAC, either before or after the Record Date, with the purpose of increasing the number of shares of common stock voted in favor of the Business Combination Proposal.

In the event that the Adjournment Proposal is presented at the Special Meeting and approved by the stockholders, the officers, directors or affiliates of MMAC may, during such adjournment period, make investor presentations telephonically and/or in person to investors who have indicated their intent to vote against the Business Combination Proposal. Such investor presentations would be filed publicly on Current Report on Form 8-K prior to or concurrently with presentation to any third party. MMAC will not conduct any of the above activities in violation of applicable federal securities laws, rules or regulations.

Consequences if the Adjournment Proposal is not Approved

If the Adjournment Proposal is presented at the Special Meeting and is not approved by the stockholders, the Board may not be able to adjourn the Special Meeting to a later date in the event, based on the tabulated votes, there are not sufficient votes at the time of the Special Meeting to approve the consummation of the Business Combination. In such event, MMAC would be required to liquidate assuming it is not able to consummate another business combination by September 17, 2019, and that date is not otherwise extended by MMAC’s stockholders.

Required Vote

Adoption of the Adjournment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of the MMAC Common Stock voting in person or by proxy at the Special Meeting. If the Business Combination proposal is approved, the Adjournment Proposal will not be presented at the Special Meeting for a vote.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT MMAC STOCKHOLDERS VOTE “FOR” THE APPROVAL OF AN ADJOURNMENT PROPOSAL.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Introduction

The pro forma financial statements combine the historical financial statements of MMAC and the historical consolidated financial statements of Akazoo to illustrate the effect of the Transactions.

The following unaudited pro forma combined statement of financial position as of December 31, 2018 combines the audited consolidated balance sheet of Akazoo as of December 31, 2018 with the unaudited balance sheet of MMAC as of December 31, 2018.

The following unaudited pro forma combined statement of profit or loss for the year ended December 31, 2018 combines the audited consolidated statement of profit or loss of Akazoo for the year ended December 31, 2018 with the unaudited statement of operations of MMAC for the four quarterly periods ended December 31, 2018. The statement of operations of MMAC for the four quarterly periods ended December 31, 2018 was determined by adding MMAC’s unaudited condensed statement of operations for the nine months ended December 31, 2018 to MMAC’s audited statement of operations for the fiscal year ended March 31, 2018, and subtracting MMAC’s unaudited condensed statement of operations for the nine months ended December 31, 2017.

The pro forma financial statements should be read in conjunction with the accompanying notes. In addition, the pro forma financial statements were based on and should be read in conjunction with the following historical financial statements and the accompanying notes, which are included in this proxy statement/prospectus:

 

   

historical audited consolidated financial statements of Akazoo for the years ended December 31, 2018, 2017 and 2016; and

 

   

historical audited financial statements of MMAC for the years ended March 31, 2018, 2017 and 2016.

The historical financial statements of Akazoo have been prepared in accordance with IFRS as issued by the International Accounting Standards Board (“IASB”) and in its functional and presentation currency of the Euro. The historical financial statements of MMAC have been prepared in accordance with GAAP in its functional and presentation currency of United States dollars. The financial statements of MMAC have been translated into Euros for the purposes of presentation in the unaudited pro forma condensed combined financial information using the following exchange rates:

 

   

at the period end exchange rate as of December 31, 2018 of $1.1456 to € 1.0000 for the statement of financial position; and

 

   

the average exchange rate for twelve-month period ended December 31, 2018 of $1.1817 to € 1.0000 for the statement of operations.

In connection with the extension (Second Extension) of the date to consummate a business combination from June 17, 2019 to September 17, 2019, 13,350,654 shares of MMAC Common Stock were redeemed. This left 6,581,655 shares of MMAC Common Stock outstanding, which includes 5,175,000 founder shares. The remaining balance in the Trust was approximately $14.7 million. The actual share redemption of 19,293,335 shares of MMAC Common Stock was reflected in the MMAC pro forma column of the Pro Forma Combined Statement of Financial Position and in the pro forma Scenarios 1, 2 or 3.

These pro forma financial statements are for informational purposes only. They do not purport to indicate the results that would actually have been obtained had the transactions contemplated by the Business Transaction Agreement and the proposed related financing transactions been completed on the assumed date or for the periods presented, or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information.

 

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Description of the Transactions

The Business Transaction Agreement provides for various steps whereby MMAC, Akazoo, LuxCo and PubCo intend to enter into a multi-step Business Combination transaction pursuant to which, in accordance with the DGCL and the Luxembourg Company Law, as applicable, (a) MMAC will merge with and into PubCo with PubCo remaining as the surviving entity pursuant to which the stockholders of MMAC will receive PubCo Ordinary Shares on a 1-for-1 basis, (b) by no later than seven calendar days prior to the effective date of the Merger, LuxCo will acquire the entire issued share capital of Akazoo in a share for share exchange by issuing on a 100-for-1 basis LuxCo ordinary shares to the Akazoo equityholders, whereas upon completion of such share exchange, the shareholdings of LuxCo will be identical to that of Akazoo, and (c) on the calendar day following the effective date of the Merger, LuxCo will merge with and into PubCo in accordance with the Luxembourg Company Law, with PubCo remaining as the surviving entity, and as a result of which the shareholders of LuxCo will be issued PubCo Ordinary Shares and PubCo will remain a publicly traded company. In connection with the Luxembourg Merger, PubCo will issue 0.072803 PubCo Ordinary Shares for each LuxCo ordinary share then outstanding (assuming no redemptions of MMAC Common Stock).

As discussed in more detail elsewhere in this proxy statement/prospectus, in addition to other customary closing conditions discussed herein, consummation of the Business Combination is conditioned upon there being not less than $53 million available between MMAC’s trust account and any additional capital otherwise available to MMAC at the time of consummation of the Business Combination, although such condition may be waived by Akazoo. Given the amount currently in MMAC’s trust account, PubCo is in the process of securing binding commitments to purchase PubCo Units in the PIPE Financing such that, together with cash available in MMAC’s trust account, PubCo will have at least an aggregate of $53 million of available cash after consummation of the Business Combination and the offering, before payment of any fees and expenses. Scenario 3 in the pro forma financial statements present the pro forma financial statements of PubCo as of December 31, 2018, assuming no Modern Media public stockholders elect to exercise their redemption rights and any remaining required available cash under the Business Transaction Agreement is provided by the PIPE Financing. This presentation also assumes that the PubCo Ordinary Shares and PubCo Warrants permitted to be issued to investors in the PIPE Financing in lieu of forfeiture are issued for no additional consideration.

Accounting for the Transactions

The Transactions will be accounted for as a “reverse merger” in accordance with IFRS. Under this method of accounting, MMAC will be treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the expectation that the former shareholders of Akazoo will have a majority of the voting power of PubCo, that the business of Akazoo will comprise the ongoing operations of PubCo, that persons designated by Akazoo will comprise a majority of the governing body of PubCo, and that Akazoo’s senior management will comprise the senior management of PubCo. Accordingly, for accounting purposes, the Transactions will be treated as the equivalent of Akazoo issuing shares for the net assets of MMAC, accompanied by a recapitalization. The net assets of MMAC will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Transactions will be deemed to be those of Akazoo.

Basis of Pro Forma Presentation

The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Transactions and the PIPE Financing, and are factually supportable and are expected to have a continuing impact on the results of PubCo. The adjustments presented on the pro forma financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of PubCo upon the consummation of the Transactions and the PIPE Financing, as applicable.

The pro forma financial statements are presented for illustrative purposes only. The financial results may have been different had MMAC and Akazoo been combined for the referenced periods. You should not rely on the pro forma financial statements as being indicative of the historical results that would have been achieved had MMAC and Akazoo been combined for the referenced periods or the future results that PubCo will experience. Akazoo and MMAC have not had any historical relationship prior to the Transactions. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The historical financial information of MMAC has been adjusted to give effect to the differences between GAAP and IFRS as issued by the IASB for the purposes of the pro forma financial statements. No adjustments were required to convert MMAC’s financial statements from GAAP to IFRS for purposes of the combined unaudited pro forma financial information, except to classify MMAC’s common stock subject to redemption as non-current liabilities under IFRS. The adjustments presented in the pro forma financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of PubCo after giving effect to the Transactions.

 

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The pro forma financial statements have been prepared assuming three alternative scenarios of redemptions of MMAC Common Stock and financing arrangements:

 

   

Scenario 1 — Assuming no redemptions for cash: This presentation assumes that no MMAC stockholders exercise redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions;

 

   

Scenario 2 — Assuming redemptions of 445,850 shares of MMAC Common Stock for cash: This presentation assumes that MMAC stockholders exercise their redemption rights with respect to 445,850 shares of common stock upon the consummation of the Transactions at a redemption price of approximately $10.24 per share (approximately € 8.94 per share). This maximum redemption amount is derived on the basis that MMAC will be required to have $5,000,001 (approximately € 4.4 million) minimum net tangible assets upon the consummation of the Transactions per the MMAC Certificate of Incorporation, after giving effect to payments to redeeming stockholders. In addition, entries 1 through 4 and 6 recorded in the pro forma combined statement of financial position under Scenario 1 also apply to Scenario 2; and

 

   

Scenario 3 — Assuming no redemptions of MMAC Common Stock for cash and a PIPE Financing sufficient to satisfy the minimum gross available cash condition under the Business Transaction Agreement: This presentation assumes that no MMAC stockholders exercise their redemption rights with respect to their shares of MMAC Common Stock upon the consummation of the Transactions and the PIPE Financing successfully closes, providing PubCo with $38.20 million (approximately € 33.4 million) in available cash, which, when combined with available cash in the trust account, would satisfy the condition in the Business Transaction Agreement that there be not less than $53 million of available cash at the time of consummation of the Business Combination. This presentation also assumes that the PubCo Ordinary Shares and PubCo Warrants permitted to be issued to investors in the PIPE Financing in lieu of forfeiture are issued for no additional consideration. In addition, entries 1 through 4 and 6 recorded in the pro forma combined statement of financial position under Scenario 1 also apply to Scenario 3.

As a result of the Transactions and the PIPE Financing, assuming no MMAC stockholders elect to redeem their shares for cash, former shareholders of Akazoo would own approximately 73.8% of PubCo’s Ordinary Shares to be outstanding immediately after the Transactions, former MMAC stockholders, including the sponsor, would own approximately 12.8% of PubCo’s Ordinary Shares and PIPE Investors would own approximately 12.1% of PubCo’s Ordinary Shares, based on the unaudited consolidated indebtedness and cash and cash equivalents of Akazoo and its subsidiaries and the redemption price for public stockholders using the balance of the trust account as of December 31, 2018 and the number of MMAC’s shares of Common Stock outstanding as of December 31, 2018. Payment will be funded from cash on PubCo’s balance sheet upon consummation of the Transactions.

If no shares were redeemed for cash and Akazoo waived the condition in the Business Transaction Agreement that there be not less than $53 million of available cash at the time of the consummation of the Business Combination, former shareholders of Akazoo would own approximately 84.8% of PubCo’s Ordinary Shares and former stockholders of MMAC would own approximately 13.5% of PubCo’s Ordinary Shares immediately after the Transactions (in each case, not giving effect to any shares issuable upon the exercise of warrants).

If 445,850 shares were redeemed for cash, which assumes the maximum redemption of MMAC’s shares of Common Stock and providing for a minimum of $5,000,001 (excluding maximum $15.0 million in Transaction expenses) in net tangible assets upon the consummation of the Transactions after giving effect to payments to redeeming stockholders, former shareholders of Akazoo would own approximately 85% of PubCo’s Ordinary Shares and former stockholders of MMAC would own approximately 15% of PubCo’s Ordinary Shares immediately after the Transactions (in each case, not giving effect to any shares issuable upon the exercise of warrants).

 

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PRO FORMA CONDENSED COMBINED STATEMENT OF FINANCIAL POSITION AS OF DECEMBER 31, 2018

(UNAUDITED)

(in Euro thousands, except per share amounts)

 

                Scenario 1     Scenario 2     Scenario 3  
    MMAC     Akazoo     Assuming No Further
Redemptions of Common
Stock
    Assuming Maximum
Redemption of Shares of
Common Stock Under the
MMAC Charter
    Minimum Gross Cash
Required Including PIPE
Financing
 
    MMAC (A)
Historical
    Pro Forma
Adjustments
          MMAC
Pro
Forma
    Akazoo (B)
Historical
    Pro Forma
Adjustments
          Akazoo
Pro
Forma
    Pro Forma
Adjustments
          Pro
Forma
Combined
    Pro Forma
Adjustments
          Pro
Forma
Combined
    Pro Forma
Adjustments
          Pro
Forma
Combined
 

Assets

                                 

Marketable securities held in Trust Account

    185,227       (172,595     (5     12,632       —         —           —         1,716       (1     —         1,716       (1     —