As filed with the U.S. Securities and Exchange Commission on April 15, 2022

Registration No. 333-262880

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1 to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

SEACHANGE INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		3663		04-3197974
(State or Other Jurisdiction of Incorporation or Organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

177 Huntington Avenue, Suite 1703

PMB 73480

Boston, MA 02115

(978) 897-0100

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

 

 

Peter D. Aquino

President and Chief Executive Officer

177 Huntington Avenue, Suite 1703

PMB 73480

Boston, MA 02115

(978) 897-0100

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

 

 

Copies to:

 

Robert S. Matlin, Esq. David A. Bartz, Esq. K&L Gates LLP 599 Lexington Avenue New York, NY 10022 (212) 536-3900		Elaine Martel Vice President, General Counsel and Secretary SeaChange International, Inc. 177 Huntington Avenue, Suite 1703 PMB 73480 Boston, MA 02115 (978) 897-0100		David P. Elder Patrick Hurley Akin Gump Strauss Hauer & Feld LLP 1111 Louisiana Street, 44th Floor Houston, TX 77002 (713) 220-5800

 

 

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

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, as amended (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:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company and emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated		☒		Smaller reporting company		☒
				Emerging growth company		☐

If an emerging growth company, 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.  ☐

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)  ☐

 

 

 

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, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

 

 

 

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

 

PRELIMINARY PROXY STATEMENT/CONSENT SOLICITATION STATEMENT/PROSPECTUS - DATED APRIL 15, 2022

 

MERGER PROPOSED - YOUR VOTE IS VERY IMPORTANT

Dear Stockholders of SeaChange International, Inc.,

On December 22, 2021, SeaChange International, Inc. (“SeaChange”) and Triller Hold Co LLC (“Triller”) entered into an Agreement and Plan of Merger (together with any amendments thereto, the “Merger Agreement”), a copy of which is attached as Annex A to this proxy statement/prospectus. Under the terms of the Merger Agreement, Triller will be merged with and into SeaChange, and the separate existence of Triller shall cease, with SeaChange continuing as the surviving corporation. Upon the closing of the merger, the name of the combined company will be changed to “TrillerVerz Corp.”

Pursuant and subject to the terms and conditions of the Merger Agreement, in addition to other contemplated transactions, (i) SeaChange and Triller anticipate that Triller will conduct an offering of convertible notes prior to the closing of the merger in an amount in excess of $100 million (the “Triller Convertible Notes”), and (ii) the charter of the surviving company will provide for two classes of common stock, consisting of SeaChange Class A common stock and SeaChange Class B common stock (which Class B common stock is anticipated to provide for super-voting rights to provide its holders 76% or more of the total voting rights).

The stockholders of SeaChange will have the right to elect to receive either (i) their pro rata portion of $25 million cash consideration along with their pro rata portion of an aggregate $75 million in principal of notes (the “Notes Consideration”) to be issued by the surviving company to the holders of SeaChange common stock (such cash and notes consideration, the “Cash/Notes Consideration”) or (ii) a number of shares of SeaChange Class A common stock (the “Stock Consideration”), in an amount equal to that which such holder would have received if such SeaChange stockholder had purchased Triller Class B common units at the median effective conversion or issuance price of all Pre-Closing Company Financings (as defined in the Merger Agreement) based on total gross proceeds to Triller (the “Pre-Closing Triller Financing Conversion Price”) and then participated pro-rata along with the Triller holders in the proposed merger. Assuming that (i) all holders of SeaChange common stock elect the Stock Consideration and (ii) that the Pre-Closing Triller Financing Conversion Price is set by Triller issuing $250 million of Triller Convertible Notes which convert in connection with the proposed merger at an agreed discount of 20% to an assumed $5 billion Triller valuation (before the conversion of the Triller Convertible Notes), the stockholders of SeaChange (including SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units) would own approximately 2.3% of the surviving company and the holders of Triller (including Triller optionholders and warrant holders) would hold approximately 97.7% of the surviving company. If all stockholders of SeaChange elected to receive the Cash/Notes Consideration, such stockholders would have no equity interest in the surviving company, and the Triller holders (including Triller optionholders and warrant holders) would collectively own 100% of the surviving company (other than SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units). For SeaChange stockholders that elect the Cash/Notes Consideration, each would receive their pro rata portion of such Cash/Notes Consideration which would then also reduce the resulting SeaChange stockholders’ ownership percentages by taking into account the payment of the Cash/Notes Consideration and related reduction in the Stock Consideration. The notes (the “Merger Consideration Notes”) to be issued to SeaChange stockholders who elect the Cash/Notes Consideration are payable on the one-year anniversary of issuance, bear interest at a rate of 5% per annum and will be automatically converted into SeaChange Class A common stock at such time as the market capitalization of the surviving company equals or exceeds $6 billion for ten consecutive trading days. The holders of the Merger Consideration Notes will have the option to convert into SeaChange Class A common stock if the surviving

company exercises its optional redemption right, which it may do at any time, in whole or in part, on the same terms set forth above. The holders of the Merger Consideration Notes will have recourse against the surviving company and its assets only to the extent of the surviving company’s interest in certain of its subsidiaries (who will also provide guarantees of the Merger Consideration Notes). The existing subsidiaries of SeaChange prior to the proposed merger are also anticipated to provide a first lien security interest on their assets securing the Merger Consideration Notes. The Merger Consideration Notes will have limited covenants.

SeaChange cordially invites you to attend a special meeting of its stockholders (the “special meeting”) to consider matters related to the proposed merger. SeaChange and Triller cannot complete the merger unless SeaChange’s stockholders adopt the Merger Agreement and approve the transactions contemplated thereby. SeaChange is sending you this proxy statement/prospectus to ask you to vote in favor of these and the other matters described in this proxy statement/prospectus in order to obtain stockholder approvals of the proposals necessary to complete the merger, and these proposals are described in this proxy statement/prospectus.

The special meeting will be held on [                ], 2022, at [                ] local time, via a virtual meeting. In light of the novel coronavirus (referred to as “COVID-19”) pandemic and to support the well-being of SeaChange’s stockholders and partners, the special meeting will be completely virtual. You may attend the special meeting and vote your shares electronically during the special meeting via live webcast by visiting [                ]. You will need the meeting control number that is printed on your proxy card to enter the special meeting. SeaChange recommends that you log in at least 15 minutes before the special meeting to ensure you are logged in when the special meeting starts. Please note that you will not be able to attend the special meeting in person.

The obligations of SeaChange and Triller to complete the merger are subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement, including the adoption of the Merger Agreement.

Your vote is very important, regardless of the number of shares of SeaChange common stock you own. To ensure your representation at the special meeting, please take time to vote by following the instructions contained in the accompanying proxy statement/prospectus and on your proxy card. Please vote promptly whether or not you expect to attend the special meeting. Submitting a proxy now will not prevent you from being able to vote electronically at the special meeting. A failure to vote your shares, or to provide instructions to your broker, bank or nominee as to how to vote your shares, is the equivalent of a vote against the merger proposal.

We encourage you to read this entire proxy statement/prospectus carefully, including the risk factors relating to the merger, in the section entitled “Risk Factors” beginning on page [•]. You also can obtain information about SeaChange and Triller from the documents that SeaChange has filed with the Securities and Exchange Commission.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the merger described in the accompanying proxy statement/prospectus or determined if this proxy statement/prospectus is accurate or adequate. Any representation to the contrary is a criminal offense.

The accompanying proxy statement/prospectus is dated [•], 2022, and it is first being mailed to SeaChange stockholders of record on or about [•], 2022.

SEACHANGE INTERNATIONAL, INC.

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD                , 2022

To the Stockholders of SeaChange International, Inc.:

On December 22, 2021, SeaChange International, Inc. (“SeaChange”) and Triller Hold Co LLC (“Triller”) entered into an Agreement and Plan of Merger (together with any amendments thereto, the “Merger Agreement”). Under the terms of the Merger Agreement, Triller will be merged with and into SeaChange, and the separate existence of Triller shall cease, with SeaChange continuing as the surviving corporation. Upon the closing of the merger, the name of the combined company will be changed to “TrillerVerz Corp.”

Pursuant and subject to the terms and conditions of the Merger Agreement, in addition to other contemplated transactions, (i) SeaChange and Triller anticipate that Triller will conduct an offering of convertible notes prior to the closing of the merger in an amount in excess of $100 million (the “Triller Convertible Notes”), and (ii) the charter of the surviving company will provide for two classes of common stock, consisting of SeaChange Class A common stock and SeaChange Class B common stock (which Class B common stock is anticipated to provide for super-voting rights to provide its holders 76% or more of the total voting rights).

The stockholders of SeaChange will have the right to elect to receive either (i) their pro rata portion of $25 million cash consideration along with their pro rata portion of an aggregate $75 million in principal of notes (the “Notes Consideration”) to be issued by the surviving company to the holders of SeaChange common stock (such cash and notes consideration, the “Cash/Notes Consideration”) or (ii) a number of shares of SeaChange Class A common stock (the “Stock Consideration”), in an amount equal to that which such holder would have received if such SeaChange stockholder had purchased Triller Class B common units at the median effective conversion or issuance price of all Pre-Closing Company Financings (as defined in the Merger Agreement) based on total gross proceeds to Triller (the “Pre-Closing Triller Financing Conversion Price”) in an aggregate amount equal to its pro rata portion of the Cash/Notes Consideration and then participated pro-rata along with the Triller holders in the proposed merger. Assuming that (i) all holders of SeaChange common stock elect the Stock Consideration and (ii) that the Pre-Closing Triller Financing Conversion Price is set by Triller issuing $250 million of Triller Convertible Notes which convert in connection with the proposed merger at an agreed discount of 20% to an assumed $5 billion Triller valuation (before the conversion of the Triller Convertible Notes), the stockholders of SeaChange (including SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units) would own approximately 2.3% of the surviving company and the holders of Triller (including Triller optionholders and warrant holders) would hold approximately 97.7% of the surviving company. If all stockholders of SeaChange elected to receive the Cash/Notes Consideration, such stockholders would have no equity interest in the surviving company, and the Triller holders (including Triller optionholders and warrant holders) would collectively own 100% of the surviving company (other than SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units). For SeaChange stockholders that elect the Cash/Notes Consideration, each would receive their pro rata portion of such Cash/Notes Consideration which would then also reduce the resulting SeaChange stockholders’ ownership percentages by taking into account the payment of the Cash/Notes Consideration and related reduction in the Stock Consideration. The notes (the “Merger Consideration Notes”) to be issued to SeaChange stockholders who elect the Cash/Notes Consideration are payable on the one-year anniversary of issuance, bear interest at a rate of 5% per annum and will be automatically converted into SeaChange Class A common stock at such time as the market capitalization of the surviving company equals or exceeds $6 billion for ten consecutive trading days. The holders of the Merger Consideration Notes will have the option to convert into SeaChange Class A common stock if the surviving company exercises its optional redemption right, which it may do at any time, in whole or in part, on the same terms set forth above. The holders of the Merger Consideration Notes will have recourse against the surviving company and its assets only to the extent of the surviving company’s interest in certain of its subsidiaries (who will also provide guarantees of the Merger Consideration Notes). The existing subsidiaries of SeaChange prior to the proposed merger are also anticipated to provide a first lien security interest on their assets securing the Merger Consideration Notes. The Merger Consideration Notes will have limited covenants.

At the special meeting of stockholders (the “special meeting”), which will be held will be held virtually on [     ], 2022, at [                ] , Eastern Time, our stockholders will be asked to consider and vote upon the following proposals:

(1) The Merger Proposal — a proposal to adopt the Merger Agreement and approve the merger and the other transactions contemplated by the Merger Agreement (the “Merger Proposal”); for additional information, see the section in the proxy statement/prospectus entitled “SeaChange Stockholder Meeting Proposals — Proposal 1: The Merger Proposal” and a copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A;

(2) The Reverse Stock Split Proposal — a proposal to approve an amendment of the amended and restated certificate of incorporation of SeaChange to effect a reverse stock split and reclassification of SeaChange common stock into shares of Class A common stock at a specific ratio of 6 to 1 (the “Reverse Stock Split”);

(3) The Reclassification Proposal — a proposal to approve an amendment of the amended and restated certificate of incorporation of SeaChange to (i) increase the number of authorized shares of SeaChange capital stock to [    ] shares, (ii) create two new classes of SeaChange common stock designated as Class A common stock and Class B common stock (resulting in the existing shares of SeaChange common stock being reclassified as Class A common stock concurrently with, and as a result of, the Reverse Stock Split), and authorize SeaChange to issue [    ] shares of Class A common stock, [    ] shares of Class B common stock and [    ] shares of preferred stock (the “Reclassification Proposal” and, together with the Reverse Stock Split Proposal, the “Certificate of Incorporation Amendment Proposal”);

(4) The Advisory Proposal — a proposal to approve, which is a non-binding advisory vote, an amendment of the amended and restated certificate of incorporation of SeaChange to (i) effect the name change of SeaChange to “TrillerVerz Corp.”, (ii) provide for rights of Class A common stock and Class B common stock, including voting, conversion and transfer rights, and (iii) allow stockholders to act by written consent or electronic transmission and to call special meetings of stockholders until the Trigger Date (as defined in the proxy statement/prospectus) (the “Advisory Proposal”);

(5) The Incentive Plan Proposal — a proposal to approve an increase in the number of authorized shares under the SeaChange 2021 Compensation and Incentive Plan (the “Incentive Plan Proposal”);

(6) The Omnibus Incentive Plan Proposal — a proposal to adopt the TrillerVerz Corp. 2022 Omnibus Incentive Plan, a copy of which is attached as Annex B to this proxy statement/prospectus (the “Omnibus Incentive Plan Proposal”);

(7) The Nasdaq Proposal — a proposal to, by ordinary resolution, approve, for purposes of complying with Nasdaq Listing Rule 5635, the issuance of the Stock Consideration, which amount will be determined as described in more detail in the accompanying proxy statement/prospectus (the “Nasdaq Proposal”);

(8) SeaChange Compensation Proposal — a proposal to approve, on an advisory (non-binding) basis, certain compensation arrangements for SeaChange’s named executive officers in connection with the merger contemplated by the Merger Agreement (the “SeaChange Compensation Proposal”); and

(9) to approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to adopt the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, and the Nasdaq Proposal at the time of the special meeting (the “Adjournment Proposal”).

SeaChange will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement thereof.

The items of business listed above are more fully described elsewhere in the proxy statement/prospectus. Whether or not you intend to attend the special meeting, we urge you to read the attached proxy statement/prospectus in its entirety, including the annexes and accompanying financial statements, before voting. IN PARTICULAR, WE URGE YOU TO CAREFULLY READ THE SECTION IN THE PROXY STATEMENT/PROSPECTUS ENTITLED “RISK FACTORS.”

Only holders of record of shares of SeaChange common stock at the close of business on                 , 2022, the record date for the special meeting, are entitled to notice of, and a vote at, the special meeting and any adjournments or postponements of the special meeting.

The closing of the merger is conditioned on approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. The Adjournment Proposal, the SeaChange Compensation Proposal and the Advisory Proposal are not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. It is important for you to note that if the Merger Proposal is not approved by our stockholders, or if each of the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal is not approved by our stockholders and we and Triller do not waive the applicable closing condition under the Merger Agreement, then we will not consummate the merger.

After careful consideration, SeaChange’s board of directors has determined that each of the proposals listed is in the best interests of SeaChange and its stockholders and recommends that you vote or give instruction to vote “FOR” each of the proposals set forth above. When you consider the recommendations of SeaChange’s board of directors, you should keep in mind that SeaChange’s directors and officers may have interests in the merger that conflict with, or are different from, your interests as a shareholder of SeaChange. See the section entitled “The Merger — Interests of Certain SeaChange Directors and Executive Officers in the Merger.”

A complete list of SeaChange stockholders of record entitled to vote at the special meeting will be available for inspection by SeaChange stockholders (i) for ten days before the special meeting at the principal executive offices of SeaChange during ordinary business hours for any purpose germane to the special meeting and (ii) during the special meeting at [    ].

Your vote is important regardless of the number of shares you own. Whether you plan to attend the special meeting virtually or not, please complete, sign, date and return the enclosed proxy card (or cast your vote via the Internet as provided on your proxy card) as soon as possible in the envelope provided. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the shares you beneficially own are properly voted and counted.

Please do not send any share certificates at this time. If the merger is consummated, we will notify you of any necessary procedures for exchanging SeaChange share certificates.

If you have any questions regarding the accompanying proxy statement/prospectus or need assistance voting your shares, please call our proxy solicitor, Morrow Sodali LLC at (i) (800) 662-5200 if you are a stockholder or (ii) collect at (203) 658-9400 if you are a broker or bank.

Thank you for your participation. We look forward to your continued support.

 

            , 2022

IF YOU RETURN YOUR SIGNED PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TABLE OF CONTENTS

 

				Page
ABOUT THIS PROXY STATEMENT/PROSPECTUS					1
QUESTIONS AND ANSWERS ABOUT THE MEETING					2
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS					11
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS					22
LEGAL MATTERS RELATED TO THE TRANSACTIONS					24
RISK FACTORS					25
INFORMATION ABOUT THE SPECIAL MEETING OF SEACHANGE STOCKHOLDERS					87
SEACHANGE STOCKHOLDER MEETING PROPOSALS					91
THE MERGER					111
THE MERGER AGREEMENT					144
AGREEMENTS RELATED TO THE MERGER					165
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION					180
COMPARATIVE MARKET PRICE INFORMATION					180
BUSINESS OF TRILLER					181
MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF TRILLER					195
MANAGEMENT FOLLOWING THE MERGER					210
PRINCIPAL UNITHOLDERS OF TRILLER					217
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS OF TRILLER					220
BUSINESS OF SEACHANGE					225
SEACHANGE MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS					231
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND EXECUTIVE OFFICERS AND DIRECTORS OF SEACHANGE					244
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS					246
DESCRIPTION OF SEACHANGE CAPITAL STOCK					259
DESCRIPTION OF NOTES					265
COMPARISON OF RIGHTS OF TRILLER UNITHOLDERS AND SEACHANGE SHAREHOLDERS					322
LEGAL MATTERS					330
EXPERTS					330
TRANSFER AGENT AND REGISTRAR					331
STOCKHOLDER PROPOSALS					332
WHERE YOU CAN FIND MORE INFORMATION					333
INDEX TO FINANCIAL STATEMENTS					F-1
INFORMATION NOT REQUIRED IN PROSPECTUS					II-1
ANNEX A		AGREEMENT AND PLAN OF MERGER
ANNEX B		OMNIBUS INCENTIVE PLAN PROPOSAL
ANNEX C		ELECTION FORM
ANNEX D		CERTIFICATE OF AMENDMENT OF SEACHANGE CERTIFICATE OF INCORPORATION (PRE-MERGER)
ANNEX E		CERTIFICATE OF AMENDMENT OF SEACHANGE CERTIFICATE OF INCORPORATION (MERGER)
ANNEX F		SEACHANGE 2021 COMPENSATION AND INCENTIVE PLAN
ANNEX G		FAIRNESS OPINION

ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the Securities and Exchange Commission (“SEC”) by SeaChange International, Inc. (“SeaChange”) (File No. 333-262880), constitutes a prospectus of SeaChange under Section 5 of the Securities Act, as amended (the “Securities Act”), with respect to (i) the shares of SeaChange common stock to be issued to (a) SeaChange stockholders opting to receive the Stock Consideration, (b) unitholders of Triller and (c) holders of the Notes Consideration upon conversion thereof and (ii) the Notes Consideration if the merger described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with respect to the special meeting, at which SeaChange stockholders will be asked to consider and vote upon a proposal to approve the merger by the approval and adoption of the Merger Agreement (as defined herein), among other matters.

You should rely only on the information contained or incorporated by reference into this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. Statements made in this proxy statement/prospectus as to the content of any contract, agreement or other document filed or incorporated by reference as an exhibit to the registration statement are not necessarily complete. With respect to those statements, you should refer to the corresponding exhibit for a more complete description of the matter involved and read all statements in this proxy statement/prospectus in light of that exhibit. This proxy statement/prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such incorporated document.

Information contained in this proxy statement/prospectus regarding SeaChange has been provided by, and is the

responsibility of, SeaChange whereas information contained in this proxy statement/prospectus regarding Triller has been provided by, and is the responsibility of, Triller.

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 unlawful to make any such offer or solicitation in such jurisdiction.

SeaChange files reports, proxy statements/prospectuses and other information with the SEC as required by the Exchange Act. You can read SeaChange’s SEC filings, including this proxy statement/prospectus, on the Internet at the SEC’s website at http://www.sec.gov. Also, see the section entitled “Where You Can Find More Information” of the accompanying proxy statement/prospectus for further information. Information contained on our website, or any other website, is expressly not incorporated by reference into this proxy statement/prospectus.

If you would like additional copies of this proxy statement/prospectus or if you have questions about the merger or the proposals to be presented at the special meeting, you should contact us by telephone or by email:

SeaChange International, Inc.

Attn: Elaine Martel, Vice President, General Counsel and Secretary

Tel: (508) 208-9699

Email: elaine.martel@schange.com

You may also obtain these documents by requesting them in writing or by telephone from our proxy solicitor at:

Morrow Sodali LLC

470 West Avenue

Stamford, Connecticut 06902

Tel: Individuals can call toll-free at (800) 662-5200 or banks and brokers can call collect at (203) 658-9400

Email: [•]

In order for SeaChange’s stockholders to receive timely delivery of the documents in advance of the special meeting to be held on [•], 2022, you must request the information no later than [•], 2022, five business days prior to the date of the special meeting.

 

QUESTIONS AND ANSWERS ABOUT THE MEETING

Below are brief answers to questions you may have concerning the transactions described in this proxy statement/prospectus and the virtual special meeting. These questions and answers do not, and are not intended to, address all of the information that may be important to you. You should read carefully this entire proxy statement/prospectus and the other documents to which we refer you.

GENERAL

 

Q:	Why am I receiving this document?

 

A:

This is a proxy statement being used by the SeaChange board of directors to solicit proxies of SeaChange stockholders in connection with the merger and the special meeting. In addition, this document is a prospectus being delivered to SeaChange’s stockholders because the stockholders of SeaChange will have the right to elect to receive either (i) their pro rata portion of $25 million cash consideration along with their pro rata portion of an aggregate $75 million in principal of notes (the “Notes Consideration”) to be issued by the surviving company to the holders of SeaChange common stock (such cash and notes consideration, the “Cash/Notes Consideration”) or (ii) a number of shares of SeaChange Class A common stock (the “Stock Consideration”), in an amount equal to that which such holder would have received if such holder had purchased Triller Class B common units at the median effective conversion or issuance price of all PreClosing Company Financings (as defined in the Merger Agreement) based on total gross proceeds to Triller (the “Pre-Closing Triller Financing Conversion Price”) in an aggregate principal amount equal to its pro rata portion of the Cash/Notes Consideration and then participated pro-rata along with the Triller holders in the proposed merger.

 

Q:	When and where is the meeting of the stockholders?

 

A:	The special meeting will be held at [•] [a.m.], Eastern Time, on [•], 2022, virtually via the Internet at [host domain].

 

Q:	Why is the special meeting being conducted virtually?

 

A:

The special meeting is being conducted entirely online due to the public health impact of the COVID-19 pandemic and to support the health and well-being of our employees and stockholders. In addition, we believe the online meeting format will provide stockholders who would not otherwise be able to attend the special meeting the opportunity to do so. In addition to online attendance, stockholders will have an opportunity to hear all portions of the official meeting, submit written questions during the meeting, vote online during the open poll portion of the meeting and listen to live responses to stockholder questions immediately following the formal meeting.

 

Q:	What constitutes a quorum for the transaction of business at the special meeting?

 

A:

A majority of the voting power of the issued and outstanding common stock of SeaChange entitled to vote at the special meeting must be present, in person (including virtually) or represented by proxy, at the special meeting to constitute a quorum. Abstentions and broker non-votes will be counted as present for the purpose of determining a quorum.

 

Q:	If my shares of SeaChange common stock are held in “street name” by my bank, brokerage firm or other nominee, will my bank, brokerage firm or other nominee automatically vote those shares for me?

 

A:

Your bank, brokerage firm or other nominee will only be permitted to vote your shares of SeaChange common stock if you instruct your bank, brokerage firm or other nominee how to vote. You should follow the procedures provided by your bank, brokerage firm or other nominee regarding the voting of your shares

 

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of SeaChange common stock. In accordance with the rules of Nasdaq, banks, brokerage firms and other nominees who hold shares of SeaChange common stock in street name for their customers have authority to vote on “routine” proposals when they have not received voting instructions from beneficial owners. However, banks, brokerage firms and other nominees are precluded from exercising their voting discretion with respect to non-routine matters, such as the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, and the SeaChange Compensation Proposal. As a result, absent specific voting instructions from the beneficial owner of such shares, banks, brokerage firms and other nominees are not empowered to vote such shares. A so-called “broker non-vote” results when banks, brokerage firms and other nominees return a valid proxy but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. The effect of not instructing your bank, brokerage firm or other nominee how you wish your shares to be voted will be the same as a vote “AGAINST” the Merger Proposal and the Certificate of Incorporation Amendment Proposal, but will not have an effect on the other proposals, except to the extent that it results in there being insufficient shares present at the special meeting to establish a quorum.

CONCERNING THE MERGER

 

Q:	What will happen in the proposed merger?

 

A:

Pursuant to the terms of the Merger Agreement, Triller will be merged with and into SeaChange, and the separate existence of Triller shall cease, with SeaChange continuing as the surviving corporation. Following the closing of the transactions contemplated by the Merger Agreement, the name of the combined company will be changed to “TrillerVerz Corp.” (“TrillerVerz”).

 

Additional information on the merger is set forth beginning on page [•].

 

Q:	Why is SeaChange proposing the merger?

 

A:

SeaChange management and the SeaChange board of directors regularly review the performance, strategy, competitive position, opportunities and prospects of SeaChange in light of the then-current business and economic environments, as well as developments in the industries in which we operate and the opportunities and challenges facing participants in those industries. These reviews have included consideration of and discussions with other companies from time to time regarding potential strategic alternatives, including business combinations and other strategic combinations, as well as the possibility of SeaChange remaining an independent company. Following a review by the SeaChange board of directors, the SeaChange board of directors determined that the merger is fair to and in the best interests of SeaChange and its stockholders.

 

Q:	What will I receive for my shares?

 

A:

The stockholders of SeaChange will have the right to receive either (i) their pro rata portion of the Cash/Notes Consideration or (ii) the Stock Consideration in an amount equal to that which such holder would have received if such SeaChange stockholder had purchased Triller Class B common units at the Pre-Closing Triller Financing Conversion Price in an aggregate amount equal to its pro rata portion of the Cash/Notes

 

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Consideration and then participated pro-rata along with the Triller holders in the proposed merger. Please carefully review the information set forth in the section titled “The Merger—Merger Consideration, Exchange Ratios and Notes Merger Consideration” and “The Merger Agreement—Merger Consideration” beginning on pages [        ] and [        ] of this proxy statement/prospectus, respectively.

 

Q:	What are the material U.S. federal income tax consequences of the merger to U.S. holders of SeaChange common stock?

 

A:

SeaChange and Triller intend that the merger will qualify as (i) an exchange under Section 351 of the Internal Revenue Code of 1986, as amended (the “Code”), in respect of the transactions described in § 1.5(a)(i) of the Merger Agreement; (ii) a distribution in redemption of stock pursuant to Sections 302(a) and 302(b) of the Code in respect of the transactions described in § 1.5(a)(ii)(A) of the Merger Agreement; and (iii) a reorganization pursuant to Section 368(a)(1)(E) of the Code in respect of the transactions described in § 1.5(a)(ii)(B) of the Merger Agreement.

Please carefully review the information set forth in the section titled “Material U.S. Federal Income Tax Considerations” beginning on page [•] of this proxy statement/prospectus for a general discussion of the material U.S. federal income tax consequences of the merger. You are strongly urged to consult your own tax advisors as to the specific tax consequences to you of the merger.

 

Q:	What vote is required to approve the proposals subject to a stockholder vote at the special meeting?

 

A:

The approval of the Merger Proposal and the Certificate of Incorporation Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote on such proposal. Accordingly, a stockholder’s failure to vote online or by proxy, a broker non-vote or an abstention on the Merger Proposal will have the same effect as a vote “AGAINST” such proposal.

The approval of each of the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of the total votes cast on such proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote (except in the case of the Adjournment Proposal) nor an abstention will be considered a “vote cast,” and, thus, will have no effect on the outcome of the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal, or the Adjournment Proposal.

Additional information on the vote required to approve the merger is located in the section titled “SeaChange Stockholder Meeting Proposals” on page [•].

 

Q:	Are the proposals conditioned on one another?

 

A:

The Merger Proposal is conditioned on the approval of the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. In addition, (i) the Certificate of Incorporation Amendment Proposal is conditioned on the approval of the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal, (ii) the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal are conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal and the Nasdaq Proposal, and (iii) the Nasdaq Proposal is conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal. Neither the SeaChange Compensation Proposal, the Adjournment Proposal nor the Advisory Proposal is conditioned on the approval of any other proposal set forth in the proxy statement/prospectus. It is important for you to note that if the Merger Proposal is not approved by our stockholders, or if any other proposal (except the SeaChange Compensation Proposal, the Adjournment Proposal or the Advisory Proposal) is not approved by our stockholders and we and Triller do not waive the applicable closing condition under the Merger Agreement, then the merger will not be consummated.

 

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Additional information on the vote required to approve the merger is located in the section titled “SeaChange Stockholder Meeting Proposals” on page [•].

 

Q:	How does the SeaChange board of directors recommend that I vote with respect to the proposals subject to a stockholder vote at the special meeting?

 

A:

On December 21, 2021, the SeaChange board of directors unanimously determined that the Merger Agreement and the transactions contemplated thereby, including the merger, were fair to, and in the best interests of, SeaChange and its stockholders, approved and declared advisable the Merger Agreement and the transactions contemplated thereby, including the merger, and directed that the Merger Agreement and the transactions contemplated thereby, including the merger, be submitted to the SeaChange stockholders for their approval. The SeaChange board of directors unanimously recommends that the stockholders of SeaChange vote “FOR” the Merger Proposal and “FOR” other matters to be considered at the special meeting.

Additional information on the recommendation of the SeaChange board of directors is set forth in “The Merger — SeaChange Reasons for the Merger” beginning on page [•].

You should note that some SeaChange directors and executive officers, and their affiliates, have interests in the merger that are different from, or in addition to, the interests of other SeaChange stockholders. Information relating to the interests of SeaChange’s directors and executive officers, and their affiliates, in the merger is set forth in “The Merger — Interests of SeaChange Directors and Executive Officers in the Merger” beginning on page [•].

 

Q:	Will TrillerVerz’s shares be traded on an exchange following the merger?

 

A:	SeaChange and Triller have agreed to use commercially reasonable efforts to obtain approval of the listing of TrillerVerz on The Nasdaq Stock Exchange (“Nasdaq”). Shares of TrillerVerz Class A common stock are expected to be listed on Nasdaq under the symbol “ILLR.”

 

Q:	When do you expect to complete the merger?

 

A:	The merger is expected to close in the [second quarter] of 2022, although we cannot assure completion by any particular date.

 

Q:	Who will serve as the directors and executive officers of TrillerVerz after the consummation of the merger?

 

A:

The Merger Agreement provides that upon consummation of the merger, the board of directors of the TrillerVerz will be composed of seven members, with all members to be designated by Triller. Upon completion of the merger, all executive officers of the surviving company will be appointed by Triller, in each case to serve in such positions until successors are duly elected or appointed.

It is expected that Mahinda de Silva, the current chief executive officer of Triller’s wholly owned subsidiary, Triller, Inc., will serve as the chief executive officer, executive chairman of the board of directors and a director of the combined company following the merger, Paul Kahn, the current chief financial officer of Triller and Triller, Inc., will serve as the chief financial officer of the combined company following the merger, M. Darren Traub, general counsel of Triller and Triller, Inc., will become the secretary of the combined company following the merger, and Joseph Smarr, the current chief technology officer of Triller, will serve as the chief technology officer of the combined company following the merger. It is also expected that Ryan Kavanaugh, Bobby Sarnevesht, Mahinda de Silva, Mike Lu, Carl Dorvil, Frank Schilling and Adel Ghazzawi will be appointed by Triller as directors of the combined company following the merger.

 

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Additional information about the directors and executive officers of TrillerVerz following the consummation of the merger is set forth in “Management Following the Merger” beginning on page [•].

 

Q:	Will any change to the company’s governance structure occur as a result of the merger?

 

A:

Upon the completion of the merger, two of TrillerVerz’s directors, directly or through entities they control, will own or have voting control over approximately 76% of the outstanding shares of TrillerVerz’s common stock. As a result, TrillerVerz will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq and may elect not to comply with certain corporate governance requirements of Nasdaq, including:

 

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the requirement that a majority of its board of directors consist of independent directors;

 

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the requirement that director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is composed entirely of independent directors; and

 

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the requirement that it have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Following the merger, TrillerVerz will not be required to have a majority of independent directors and may not have a nominating and corporate governance or compensation committee or such committees may not consist entirely of independent directors. As a result, TrillerVerz’s board of directors and those committees may after the merger have more directors who do not meet Nasdaq independence standards than they would if those standards were to apply. The independence standards are intended to ensure that directors who meet those standards are free of any conflicting interest that could influence their actions as directors. Accordingly, if you elect the Stock Consideration you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

Additionally, TrillerVerz will be a holding company and substantially all of its operations will be conducted through subsidiaries.

 

Q:	Are there risks associated with the merger?

 

A:

Yes, there are important risks associated with the merger. We encourage you to read carefully and in their entirety the sections of this proxy statement/prospectus titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” beginning on pages [•] and [•], respectively. These risks include, among others, risks relating to the uncertainty that the merger will close and uncertainties relating to the performance of TrillerVerz after the merger.

PROCEDURES

 

Q:	What do I need to do now?

 

A:

After carefully reading and considering the information contained in this proxy statement/prospectus, please complete and sign your proxy card and return it in the enclosed postage-paid envelope as soon as possible so that your shares may be represented at the special meeting. Alternatively, you may cast your vote via the Internet by following the instructions on your proxy card. In order to ensure that your vote is recorded, please vote your proxy as instructed on your proxy card, or on the voting instruction form provided by the record holder if your shares are held in the name of your broker or other nominee, even if you currently plan to attend the virtual special meeting.

Additional information on voting procedures is located beginning on page [•].

 

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Q:	What do I need to do to attend the special meeting and how do I vote my shares electronically?

 

A:

You may attend the special meeting, vote your shares and submit questions electronically during the meeting via live webcast by logging in at: [host domain]. You will need the control number that is printed on your proxy card to join the virtual special meeting. We recommend that you log in at least fifteen minutes before the meeting to ensure you are logged in when the meeting starts.

 

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

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please follow the instructions and vote in accordance with each proxy card and voting instruction card you receive.

 

Q:	Should I send in my share certificates now?

 

A:

We will send the holders and, if the merger is completed, former holders of SeaChange common stock written instructions for delivery of their share certificates representing shares of SeaChange common stock. TrillerVerz shares will be in uncertificated, book-entry form unless a physical certificate is requested by the holder. Additional information on the procedures for exchanging certificates representing shares of SeaChange common stock is set forth in “The Merger— Procedure for Exchanging Certificates” beginning on page [•].

 

Q:	What if I do not vote on the matters relating to the merger?

 

A:

Because the approval of the Merger Proposal requires the affirmative vote of a majority of the shares of SeaChange common stock outstanding and entitled to vote as of the record date, if you abstain or fail to vote your shares in favor of this matter, this will have the same effect as voting your shares against the approval of the Merger Proposal. If you fail to respond with a vote or fail to instruct your broker or other nominee how to vote on the approval of the Merger Proposal, it will have the same effect as a vote against the merger. If you respond but do not indicate how you want to vote on the approval of the Merger Proposal, your proxy will be counted as a vote in favor of the approval of the Merger Proposal.

 

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

 

A:	If you sign and return your proxy card without indicating how to vote on any particular proposal, the common stock represented by your proxy will be voted as recommended by the SeaChange board of directors with respect to that proposal.

 

 

Q:	What if I want to change my vote?

 

A:

If you are a stockholder of record of SeaChange, you may send a later-dated, signed proxy card so that it is received prior to the special meeting, or you may attend the special meeting and vote your shares electronically. You may also revoke your proxy card by sending a notice of revocation that is received prior to the special meeting to Elaine Martel, SeaChange’s General Counsel and Secretary, by telephone at (508) 208-9699, or by email at elaine.martel@schange.com. You may also change your vote via the Internet. You may change your vote by using any one of these methods regardless of the procedure used to cast your previous vote.

If your shares are held in “street name” by a broker or other nominee, you should follow the instructions provided by your broker or other nominee to change your vote.

 

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Q:	Do I have appraisal rights?

 

A:	Holders of SeaChange common stock and Triller units are not entitled to appraisal rights in connection with the merger.

Additional information about the SeaChange stockholders’ appraisal rights is set forth in “Information about the Special Meeting of SeaChange Stockholders—Appraisal Rights” beginning on page [•].

 

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

 

A:

The board of directors of SeaChange is soliciting proxies to be voted at the special meeting. We will pay the cost of soliciting proxies for the special meeting. We have engaged Morrow Sodali LLC, to assist in the solicitation of proxies for the special meeting. We will pay Morrow Sodali LLC a fee of approximately $25,000 plus disbursements and a per call fee for any incoming or outgoing stockholder calls for such services. We will reimburse Morrow Sodali LLC for reasonable out-of-pocket expenses and will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of our common stock for their expenses in forwarding soliciting materials to beneficial owners of our common stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:	How do I make an election as to the form of merger consideration I wish to receive in the merger?

 

A:

At the time of mailing of this proxy statement/prospectus, each record holder of SeaChange common shares that will be converted is also separately being sent an election form and letter of transmittal (an “election form”). The election form contains instructions for making a selection to receive Cash/Notes Consideration and for surrendering your SeaChange common shares in exchange for the Cash/Notes Consideration. Computershare, the exchange agent for the merger (the “exchange agent”), or SeaChange, as specified in your election form, must receive your properly completed and signed election form and your stock certificates or book-entry shares, and any additional documents specified in the election form, by no later than the election deadline in order for your choice to receive Cash/Notes Consideration to be considered with those timely made by the other SeaChange stockholders (including holders of SeaChange equity awards that have been converted). Triller and SeaChange currently anticipate that the “election deadline” will be 5:00 p.m., Eastern Time, on [                    ], 2022. Triller and SeaChange will issue a joint press release announcing the anticipated date of the election deadline at least five business days prior to the election deadline. If the SeaChange stockholders’ meeting is delayed, the election deadline will be similarly delayed to a subsequent date, and Triller and SeaChange will promptly announce any such delay and, when determined, the rescheduled election deadline. SeaChange stockholders are urged to promptly submit their properly completed and signed forms of election, together with the necessary transmittal materials, and not wait until the election deadline.

You will be able to specify on the election form: the number of shares of SeaChange common stock with respect to which you elect to receive the Cash/Notes Consideration.

If you do not submit an election form prior to the election deadline, you will be deemed to have indicated that you are making an election to receive Stock Consideration. A form of the election form for SeaChange stockholders is attached as Annex C to this proxy statement/prospectus. For additional information on the election procedures, see the section entitled “The Merger—Election Procedures” beginning on page [    ].

 

Q:	What happens if I do not make a valid election to receive Cash/Notes Consideration before the election deadline?

 

A:	If you do not make a valid election to receive Cash/Notes Consideration before the election deadline, you will be deemed to have elected the Stock Consideration and will receive such merger consideration as is

 

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determined in accordance with the Merger Agreement. If the merger is completed, the exchange agent will send any SeaChange stockholder who does not make a valid election a new letter of transmittal that such stockholder can use to surrender its SeaChange common shares in exchange for the Stock Consideration.

 

Q:	Can I change my election to receive Cash/Notes Consideration?

 

A:	Yes. You can change your election to receive Cash/Notes Consideration by submitting written notice to the exchange agent prior to the election deadline or by withdrawal prior to the election deadline. See “The Merger—Election Procedures” beginning on page [        ].

 

Q:	Should SeaChange stockholders send in their stock certificates with the enclosed proxy?

 

A:

No. SeaChange stockholders should not send in any stock certificates with the enclosed proxy. At the time of mailing of this proxy statement/prospectus, each record holder of SeaChange common shares is also separately being sent an election form. The election form contains instructions for surrendering your SeaChange common shares to the exchange agent in exchange for the Cash/Notes Consideration. For information regarding delivery of your stock certificates, if any, see “The Merger—Election Procedures” beginning on page [    ].

 

Q:	If I become a SeaChange stockholder of record after the SeaChange record date and want to receive the Cash/Notes Consideration, how can I elect to do so?

 

A:

Any SeaChange stockholder who does not receive an election form, whether due to the fact that they become a stockholder of record after the SeaChange record date or otherwise, may request one from SeaChange by contacting the [exchange agent or SeaChange’s corporate secretary at [                        ],] and SeaChange will make an election form available to you.

 

Q:	I own shares of SeaChange common stock. Can I sell my shares of SeaChange common stock after I make my election to receive the Cash/Notes Consideration or if I do not make an election by the deadline?

 

A:

No. After a SeaChange stockholder has submitted a form of election to receive Cash/Notes Consideration, under the terms of the election, he or she will not be able to sell any shares of SeaChange common stock covered by his or her form of election unless he or she revokes his or her election before the deadline by written notice received by the exchange agent prior to the election deadline. In addition, once the election deadline has passed, no shares of SeaChange common stock may be sold. While the parties have agreed to establish an election deadline that is a relatively short time before the anticipated completion date of the merger, there can be no assurance that unforeseen circumstances will not cause the completion of the merger to be delayed after the deadline has been established.

 

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Q:	Who can help answer my questions?

 

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

Elaine Martel, Vice President, General Counsel and Secretary

SeaChange International, Inc.

Tel: (508) 208-9699

Email: elaine.martel@schange.com

You may also contact our proxy solicitor at:

Morrow Sodali LLC

470 West Avenue

Stamford, Connecticut 06902

Tel: Individuals can call toll-free at (800) 662-5200 or banks and brokers can call collect at (203) 658-9400 Email: [•]

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

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

 

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. You should not place undue reliance on these statements. These forward-looking statements include, without limitation, statements that reflect our current beliefs, expectations, assumptions, estimates and projections about Triller, SeaChange, the merger and our industry. These forward-looking statements speak only as of the date of this proxy statement/prospectus. We disclaim any undertaking to publicly update or revise any forward-looking statements to reflect any change in our expectations with regard thereto or any changes in events, conditions or circumstances on which such statements are based. These statements, which may be expressed in a variety of ways, including the use of forward looking terminology (although not all forward-looking statements contain these words), such as “believe,” “expect,” “seek,” “intend,” “may,” “will,” “should,” “could,” “potential,” “continue,” “estimate,” “plan,” or “anticipate,” or the negatives thereof, other variations thereon or compatible terminology. The combined business of Triller and SeaChange for periods following completion of the merger is sometimes referred to as the “combined company,” the “surviving company,” or “TrillerVerz Corp.”

Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified; therefore, our actual results may differ materially from those anticipated in these forward-looking statements as of the date of this proxy statement/prospectus. We believe that these factors include those related to:

 

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expectations related to the terms and timing of the merger and related transactions;

 

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expectations regarding Triller’s strategies and future financial performance, including Triller’s future business plans or objectives;

 

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significant investments in products and services that may not achieve expected returns;

 

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acquisitions, joint ventures, and strategic alliances that may have an adverse effect on our business;

 

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impairment of goodwill or amortizable intangible assets causing a significant charge to earnings;

 

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a disruption to our business operations caused by the COVID-19 pandemic and geopolitical developments;

 

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our strategic effort to become a software solution centric company;

 

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our ability to successfully compete in our rapidly evolving marketplace;

 

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the uncertainties of Internet regulation;

 

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changes in applicable laws or regulations;

 

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changes in our customers’ discretionary spending on video solutions and services;

 

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changes in customer demand and consumer preferences;

 

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understanding customer contract costs due to the unavailability of historical data related to our Framework product;

 

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the impact of competition and the development of innovative technologies;

 

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our ability to protect our intellectual property rights;

 

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our dependency on third-party products and services;

 

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interruptions or delays in third-party supply or distribution;

 

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our reliance on content providers to limit restrictions on licensed content for use in the multiscreen video market;

 

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fluctuations in foreign currency exchange rates;

 

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engaging in overseas outsourcing;

 

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the expectations of our restructuring program;

 

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our dependency on computer systems and information technologies; and

 

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the failure of security measures and the misuse, interruption or breach of our systems or other cyber related incidents or deficiencies.

In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than is described. You should consider the areas of risk and uncertainty described above and discussed under “Risk Factors” in this proxy statement/prospectus and the other documents SeaChange and Triller file with the SEC and incorporate by reference in connection with any written or oral forward-looking statements that may be made after the date of this proxy statement/prospectus by SeaChange and Triller or anyone acting for any or both of them. Except as may be required by law, neither SeaChange nor Triller undertakes any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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LEGAL MATTERS RELATED TO THE TRANSACTIONS

As of April 14, 2022, SeaChange has received 6 stockholder demand letters and/or complaints against SeaChange and members of SeaChange’s board of directors. The 6 stockholders allege a variety of disclosure deficiencies in this proxy statement/prospectus and seek disclosures of additional information. The alleged omissions generally relate to (i) certain financial projections, (ii) certain valuation analyses performed by Scura Partners, and (iii) potential conflicts of interest.

While SeaChange believes that the disclosures set forth in this proxy statement/prospectus comply fully with applicable law to avoid nuisance, cost and distraction and to preclude any future efforts to delay the closing of the merger, SeaChange has determined to voluntarily supplement this proxy statement/prospectus to, among other things, provide certain supplemental disclosures that are set forth below. Nothing in the supplemental disclosures shall be deemed an admission of the legal necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, SeaChange specifically denies all allegations in the demands that any additional disclosure is or was required. SeaChange believes that the allegations in the demands are without merit.

 

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RISK FACTORS

Risks Related to the Merger

SeaChange’s merger with Triller Hold Co LLC is subject to various closing conditions, including regulatory and stockholder approvals, and other uncertainties, and there can be no assurances as to its completion on a timely basis or at all.

On December 22, 2021, SeaChange announced that it entered into an Agreement and Plan of Merger (together with any amendments thereto, the “Merger Agreement”) with Triller Hold Co LLC (“Triller”) pursuant to which Triller will merge with and into SeaChange (the “merger”). Upon the closing of the merger, the name of the combined company will be changed to “TrillerVerz Corp.”

The completion of the merger is subject to customary closing conditions, including approvals by SeaChange’s stockholders and Triller’s unitholders, the absence of certain legal impediments, the expiration or termination of the required waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the effectiveness of the registration statement on Form S-4 filed with the SEC in connection with the merger, Nasdaq approval of the listing of the common stock to be issued in the merger, and SeaChange and Triller each having specified levels of working capital.

The governmental agencies from which SeaChange and Triller are seeking certain approvals related to these closing conditions have broad discretion in administering the applicable governing regulations. As a condition of their respective approvals, the agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined company’s business after the closing of the merger. Such requirements, limitations, costs or restrictions could delay or prevent the closing of the merger or have a material adverse effect on the combined company’s business and results of operations following the closing of the merger.

SeaChange and Triller can provide no assurance that all required consents and approvals will be obtained or that all closing conditions will otherwise be satisfied (or waived, if applicable), and, if all required consents and approvals are obtained and all closing conditions are satisfied (or waived, if applicable), and they can provide no assurance as to the terms, conditions and timing of such consents and approvals or the timing of the completion of the merger. Many of the closing conditions are not within SeaChange’s control or Triller’s control, and neither company can predict when or if these closing conditions will be satisfied (or waived, if applicable). Any delay in completing the merger could cause SeaChange and Triller not to realize some or all of the benefits that they expect to achieve if the merger is successfully completed within the expected timeframe.

Failure to consummate the merger could adversely affect Triller’s and SeaChange’s future prospects.

The merger is subject to the satisfaction of various closing conditions, and neither Triller nor SeaChange can guarantee that the merger will be successfully consummated. In the event that the merger is not consummated for any reason, Triller and SeaChange will be subject to many risks, including the costs related to the merger, such as legal, accounting and advisory fees, which must be paid even if the merger is not consummated, and, potentially, the payment of a termination fee under certain circumstances. If the merger is not consummated, the market price of Triller’s and SeaChange’s equity could decline. Triller and SeaChange also could be subject to litigation related to any failure to consummate the merger or related to any enforcement proceeding commenced against Triller or SeaChange to perform their respective obligations under the Merger Agreement. Finally, if the Merger Agreement is terminated, Triller or SeaChange may be unable to find another party willing to engage in a similar transaction on terms as favorable as those set forth in the Merger Agreement, or at all. This could limit each company’s ability to pursue its strategic goals in the event the merger is not consummated.

 

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Because the market price of SeaChange’s common stock has fluctuated and may continue to fluctuate, its stockholders and Triller unitholders cannot be sure of the value of the consideration they will receive as a result of the merger.

The market price of SeaChange’s common stock has fluctuated since the date of the announcement of the merger and is expected to continue to fluctuate until the date that the merger is completed, which could occur a considerable amount of time after the date of this proxy statement/prospectus. The variations in the price of its common stock may result from a variety of factors, including, among others, general market and economic conditions, changes in the respective businesses of SeaChange and/or Triller, operations and prospects, risks inherent in each respective business, changes in market assessments of the likelihood that the merger will be completed and/or the value that may be generated by the merger and changes with respect to expectations regarding the timing of the merger and regulatory considerations. Many of these factors are beyond SeaChange’s and Triller’s control.

Because the Cash/Notes Consideration and Stock Consideration will not be adjusted for stock price changes and the market price of SeaChange’s common shares will fluctuate, SeaChange stockholders cannot be sure of the value of the merger consideration they will receive.

Upon completion of the merger, the stockholders of SeaChange will have the right to elect to receive either (i) their pro rata portion of $25 million cash consideration along with their pro rata portion of an aggregate $75 million in principal of promissory notes (the “Notes Consideration”) to be issued by the surviving company to the holders of SeaChange common stock (such cash and notes consideration, the “Cash/Notes Consideration”) or (ii) a number of shares of SeaChange Class A common stock (the “Stock Consideration”), in an amount equal to that which such holder would have received if such SeaChange stockholder had purchased Triller Class B common units at the median effective conversion or issuance price of all Pre-Closing Company Financings (as defined in the Merger Agreement) based on total gross proceeds to Triller (the “Pre-Closing Triller Financing Conversion Price”) in an aggregate amount equal to its pro rata portion of the Cash/Notes Consideration and then participated pro-rata along with the Triller holders in the proposed merger.

Neither the Cash/Notes Consideration nor Stock Consideration will change to reflect changes in the market price of SeaChange’s common shares. The market price of SeaChange’s common shares at the time of completion of the merger may vary significantly from the market price of SeaChange’s common shares on the date the Merger Agreement was executed, the date of this proxy statement/prospectus and the date of SeaChange’s special meeting.

The value of the Cash/Notes Consideration and Stock Consideration may differ considerably.

Since the market value of the Stock Consideration will continuously change with the market price for SeaChange’s common stock, it is possible that, at any point in time including at the time of SeaChange’s special meeting, the election deadline and the effective time of the merger, the Cash/Notes Consideration could be worth more, less or the same amount as the Stock Consideration. Further, because the stockholders of SeaChange will not be able to change their election after the election deadline, they may receive per share merger consideration that is worth less than the other per share merger consideration they could have elected, even if the per share merger consideration they elected to receive is worth more at the election deadline than the per share merger consideration they actually receive.

Current SeaChange stockholders will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

Assuming that (i) all holders of SeaChange common stock elect the Stock Consideration and (ii) that Triller issues $250 million of Triller Convertible Notes which convert in connection with the proposed merger at an agreed discount of 20% to an assumed $5 billion Triller valuation (before the conversion of the Triller Convertible Notes), the stockholders of SeaChange (including SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units) would own approximately

 

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2.3% of the surviving company and the holders of Triller (including Triller optionholders and warrant holders) would hold approximately 97.7% of the surviving company. If all stockholders of SeaChange elected to receive the Cash/Notes Consideration, such stockholders would have no equity interest in the surviving company, and the Triller holders would collectively own 100% of the surviving company (other than SeaChange optionholders and holders of SeaChange deferred stock units, performance stock units and restricted stock units).

SeaChange stockholders currently have the right to vote for their respective directors and on other matters affecting SeaChange. When the merger occurs, the stockholders of SeaChange would own a percentage ownership of the combined company that is significantly smaller than SeaChange stockholders’ percentage ownership of SeaChange. As a result of these reduced ownership percentages, former SeaChange stockholders will have less influence on the management and policies of the combined company than they now have with respect to SeaChange.

Failure to close the merger could negatively impact the price of SeaChange’s common stock and potential future business and the financial results of each SeaChange and Triller.

If the merger is not completed for any reason, each of SeaChange’s and Triller’s ongoing business may be adversely affected and, without realizing the potential benefits of the completion of the merger, each of SeaChange and Triller would be subject to a number of risks, including the following:

 

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it may be required to pay certain costs and expenses relating to the merger;

 

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if the Merger Agreement is terminated under specified circumstances, it may be obligated to reimburse certain transaction expenses;

 

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it may experience negative reactions from the financial markets, including negative impacts on the market price of SeaChange’s common stock;

 

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the manner in which customers, vendors, business partners and other third parties perceive SeaChange and/or Triller may be negatively impacted, which in turn could affect its ability to compete for new business or to obtain renewed business;

 

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the time and resources expended by its management on matters relating to the merger could otherwise have been devoted to other opportunities that may have been beneficial to SeaChange and/or Triller; and

 

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it could be subject to litigation related to any failure to close the merger or related to any proceeding commenced against SeaChange and/or Triller to perform obligations under the Merger Agreement.

If the merger does not close, these risks may materialize and may adversely affect each of SeaChange’s and Triller’s business, financial results and price of SeaChange’s common stock.

Litigation filed against SeaChange and/or Triller could prevent or delay the completion of the merger or result in the payment of damages following completion of the merger.

SeaChange and/or Triller and members of their board of directors, among others, may in the future be parties to various claims and litigation related to the Merger Agreement and the merger. The results of complex legal proceedings are difficult to predict, and could delay or prevent the completion of the merger in a timely manner or at all, and could result in substantial costs to SeaChange and/or Triller, including, but not limited to, costs associated with the indemnification of its directors and officers. Moreover, such litigation could be time-consuming and expensive, and such litigation could divert management’s attention away from each of SeaChange’s and Triller’s business. Adverse rulings in any of these lawsuits could have a material adverse effect on each of SeaChange’s and Triller’s financial condition.

 

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Acquisitions or divestitures may adversely affect each of SeaChange’s and Triller’s financial condition.

SeaChange and Triller could acquire additional products, technologies or businesses, or enter into joint venture arrangements, to complement or expand each of its business, or engage in divestitures. Negotiation of potential acquisitions, divestitures or joint ventures and its integration or transfer of acquired or divested products, technologies or businesses, could divert management’s time and resources.

As part of its strategy for growth, each SeaChange and Triller may continue to explore acquisitions, divestitures, or strategic collaborations, which may not be completed or may not be ultimately beneficial to it.

Acquisitions or divestitures may pose risks to its operations, including:

 

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problems and increased costs in connection with the integration or divestiture of the personnel, operations, technologies or products of the acquired or divested businesses;

 

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unanticipated costs;

 

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potential disruption of its business and the diversion of management’s attention from its core business during the acquisition or divestiture process;

 

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inability to make planned divestitures of businesses on favorable terms in a timely manner or at all;

 

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acquired assets becoming impaired because of technical advancements or worse-than-expected performance by the acquired company; and

 

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entering markets in which it has no, or limited, prior experience.

Additionally, in connection with any acquisitions or investments SeaChange could:

 

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issue stock that would dilute its existing stockholders’ ownership percentages;

 

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incur debt and assume liabilities;

 

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record contingent liabilities estimated for potential earnouts based on achieving financial targets;

 

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obtain financing on unfavorable terms;

 

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incur amortization expenses related to acquired intangible assets or incur large and immediate write-offs;

 

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incur large expenditures related to office closures of the acquired companies, including costs relating to the termination of employees and facility and leasehold improvement charges resulting from it having to vacate the acquired companies’ premises; and

 

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reduce the cash that would otherwise be available to fund operations or for other purposes.

SeaChange and/or Triller may not fully realize the benefits of its completed acquisitions, including the merger if consummated, or it may take longer than it anticipates for it to achieve those benefits. Future acquisitions may be difficult to integrate, disrupt its business, dilute stockholder or unitholder value or divert management attention.

SeaChange and/or Triller has acquired and may in the future seek to acquire or invest in new businesses, products or technologies that it believes could complement or expand its business, augment its market coverage, enhance its technical capabilities or otherwise offer growth opportunities. Acquisitions could create risks for SeaChange and/or Triller, including:

 

•

difficulties in assimilation of acquired personnel, operations, technologies or products that may affect its ability to develop new products and services and compete in its rapidly changing marketplace due to a resulting decrease in the quality of work and innovation of its employees upon which SeaChange’s and/or Triller’s business is dependent;

 

•

delays in realizing, or failure to realize, the anticipated benefits of an acquisition. Even if it can integrate these businesses and operations successfully, SeaChange and/or Triller may not realize the

 

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full benefits it expects to achieve, within the anticipated timeframe, or at all. If a company SeaChange and/or Triller purchases does not perform as expected, SeaChange’s and/or Triller’s investment could become impaired or it could discontinue the operations and its financial results could be negatively impacted;

 

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adverse effects on the business relationships with pre-existing suppliers and customers of both companies; and

 

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uncertainty among current and prospective employees regarding their future roles with SeaChange and/or Triller, which might adversely affect its ability to retain, recruit and motivate key personnel.

The market price of the combined company’s common stock after the merger may be affected by factors different from those currently affecting the financial condition, results of operations and business of Triller or SeaChange.

The business of Triller differs from the SeaChange business in important respects and, accordingly, the results of operations and the market price of the combined company’s common stock following the merger may be significantly different from those currently affecting the independent results of operations of Triller or SeaChange. For a discussion of the businesses of Triller and SeaChange and of certain factors to consider in connection with those businesses, see the risks described elsewhere in “Risk Factors” and throughout this prospectus.

The termination fee and restrictions on solicitation contained in the Merger Agreement may discourage other companies from trying to acquire Triller or SeaChange.

Until the effective time of the merger, with certain exceptions, the Merger Agreement prohibits Triller and SeaChange from entering into or soliciting any acquisition proposal or offer for a merger or other business combination with any other party. The merger agreement provides Triller and SeaChange with specified termination rights. If the merger agreement is terminated by Triller or SeaChange to accept a superior acquisition proposal or under other circumstances specified in the Merger Agreement, Triller or SeaChange will be required to pay a termination fee of $4 million or reimburse certain transaction expenses, depending on the reason for such termination. These provisions could discourage other companies from trying to acquire Triller or SeaChange unless those other companies are willing to offer significantly greater value. Triller or SeaChange has no corresponding right to terminate the merger agreement with respect to a superior acquisition proposal for Triller or SeaChange.

Some of Triller’s and SeaChange’s directors and officers may have interests that are different from the combined company’s directors and officers which may influence them to support or approve the merger and the issuance of shares of SeaChange common stock in the merger.

Certain officers and directors of Triller and SeaChange participate in arrangements that provide them with interests in the merger that are different from those of other shareholders, including in some cases, their continued service as a director of the combined company, severance benefits under the terms of their existing employment agreements, acceleration of vesting or preferential treatment with respect to equity awards held by executive officers and continued indemnification of directors and officers. These interests, among others, may influence the officers and directors of Triller and SeaChange to support or approve the merger and the issuance of shares of SeaChange common stock in the merger.

Triller unitholders and SeaChange stockholders may not realize a benefit from the merger commensurate with the ownership dilution they will experience in connection with the merger.

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the merger, Triller unitholders and SeaChange stockholders will have experienced substantial dilution of their

 

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ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the merger. Significant management attention and resources will be required to integrate the two companies. Delays in this process could adversely affect the combined company’s business, financial results, financial condition and stock price following the merger. Even if the combined company were able to integrate the business operations successfully, there can be no assurance that this integration will result in the realization of the full benefits of synergies, innovation and operational efficiencies that may be possible from this integration and that these benefits will be achieved within a reasonable period of time.

The combined company will be a “smaller reporting company” and the reduced disclosure requirements applicable to smaller reporting companies may make its common stock less attractive to investors.

The combined company will be considered a “smaller reporting company.” It is therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial data and executive compensation information. It is also exempt from the requirement to obtain an external audit on the effectiveness of internal control over financial reporting provided in Section 404(b) of the Sarbanes-Oxley Act. These exemptions and reduced disclosures in its SEC filings due to its status as a smaller reporting company mean combined company’s auditors do not review its internal control over financial reporting and may make it harder for investors to analyze its results of operations and financial prospects. The combined company cannot predict if investors will find it common stock less attractive because it may rely on these exemptions. If some investors find its common stock less attractive as a result, there may be a less active trading market for its common stock and its stock prices may be more volatile.

The historical audited and unaudited pro forma condensed combined financial information may not be representative of results after the merger.

The historical audited and unaudited pro forma condensed combined financial information included elsewhere in this prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the merger been completed as of the date indicated, nor is it indicative of future operating results or financial position.

If Triller fails to maintain an effective system of disclosure controls and internal control over financial reporting, its ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

The Sarbanes-Oxley Act requires, among other things, that Triller maintain effective disclosure controls and procedures and internal control over financial reporting. Triller is continuing to develop and refine its disclosure controls and other procedures that are designed to ensure that information required to be disclosed by it in the reports that Triller will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is accumulated and communicated to its principal executive and financial officers. Triller is also continuing to improve its internal control over financial reporting. For example, as Triller has prepared to become a public company, it has worked to improve the controls around its key accounting processes and its quarterly close process, Triller has implemented a number of new systems to supplement its systems as part of its control environment, and Triller has hired additional accounting and finance personnel to help it implement these processes and controls. In order to maintain and improve the effectiveness of its disclosure controls and procedures and internal control over financial reporting, Triller has expended, and anticipate that it will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, Triller may experience material weaknesses in its controls. In addition to its results determined in accordance with GAAP, Triller believes certain non-GAAP measures and key metrics may be

 

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useful in evaluating its operating performance. Triller presents certain non-GAAP financial measures and key metrics in this prospectus and intend to continue to present certain non-GAAP financial measures and key metrics in future filings with the SEC and other public statements. Any failure to accurately report and present its non-GAAP financial measures and key metrics could cause investors to lose confidence in its reported financial and other information, which would likely have a negative effect on the trading price of its common stock.

Its current controls and any new controls that Triller develops may become inadequate because of changes in conditions in its business. Further, weaknesses in its disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm its results of operations or cause it to fail to meet its reporting obligations and may result in a restatement of its consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of its internal control over financial reporting that Triller will eventually be required to include in its periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in its reported financial and other information, which would likely have a negative effect on the trading price of its common stock. In addition, if it is unable to continue to meet these requirements, Triller may not be able to remain listed on the Nasdaq. Triller is not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of its internal control over financial reporting for that purpose. As a public company, Triller will be required to provide an annual management report on the effectiveness of its internal control over financial reporting commencing with its second annual report on Form 10-K.

Its independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which its internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could harm its business, results of operations, and financial condition and could cause a decline in the price of its common stock.

Two shareholders will have majority control over all stockholder decisions because they will control a substantial majority of its voting stock.

As a result of the Class B common stock that they or their affiliates will hold, following the merger, two directors will be able to exercise voting rights that will represent approximately 76% of the voting power of the combined company’s outstanding capital stock. The Class A common stock issued in the merger will have one vote per share, and shares of Class B common stock will lose voting rights when such shares convert into Class A common stock as such shares are sold. As a result, these two directors, and potentially either one of them alone, will have the ability to control the outcome of all matters submitted to its stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of its assets. This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, or sale of all or substantially all of its assets that its other stockholders support. Conversely, this concentrated control could allow these two directors to cause the combined company to consummate a transaction that the combined company’s other stockholders do not support. In addition, these two directors may make long-term strategic investment decisions and take risks that may not be successful and may seriously harm the combined company’s business. If either directorship with it is terminated, they will continue to have the ability to exercise the same significant voting power and potentially control the outcome of all matters submitted to its stockholders for approval.

As board members, both individuals will owe fiduciary duties to the combined company’s stockholders and must act in good faith in a manner they reasonably believe to be in the best interests of the combined company’s stockholders. As stockholders, even if they are controlling stockholders, they are entitled to vote their shares, and

 

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shares over which they have voting control, in their own interests, which may not always be in the interests of its stockholders generally. For a description of the rights of Class A common stock and Class B common stock, see “Description of Capital Stock.”

TrillerVerz will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq and the Securities and Exchange Commission.

Upon the completion of the merger, two of its directors, directly or through entities they control, will own or have voting control over a majority of the outstanding shares of its common stock. As a result, TrillerVerz will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq and may elect not to comply with certain corporate governance requirements of Nasdaq, including:

 

•

the requirement that a majority of its board of directors consist of independent directors;

 

•

the requirement that director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is composed entirely of independent directors; and

 

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the requirement that it have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

Following the merger, TrillerVerz will not be required to have a majority of independent directors and may not have a nominating and corporate governance or compensation committee or such committees may not consist entirely of independent directors. As a result, TrillerVerz’s board of directors and those committees may after the merger have more directors who do not meet Nasdaq independence standards than they would if those standards were to apply. The independence standards are intended to ensure that directors who meet those standards are free of any conflicting interest that could influence their actions as directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

If completed, the merger may not achieve its intended results, and Triller and SeaChange may be unable to successfully integrate their operations.

Triller and SeaChange entered into the Merger Agreement with the expectation that the merger will result in various benefits. Achieving the anticipated benefits of the merger is subject to a number of uncertainties, including whether the businesses of Triller and SeaChange can be integrated in an efficient and effective manner.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the merger. The combined company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the closing of the merger. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the combined company’s future business, financial condition, operating results and prospects.

The proposed Reverse Stock Split may not increase the combined company’s stock price over the long-term.

One of the purposes of the proposed Reverse Stock Split is to increase the per-share market price of SeaChange common stock in order to comply with the continued listing requirements of Nasdaq. It cannot be assured,

 

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however, that the proposed Reverse Stock Split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of SeaChange common stock will proportionally increase the market price of SeaChange common stock, it cannot be assured that the proposed Reverse Stock Split will result in any permanent or sustained increase in the market price of SeaChange common stock, which is dependent upon many factors, including the combined company’s business and financial performance, general market conditions and prospects for future success. Thus, while the stock price of the combined company might meet the continued listing requirements of Nasdaq, it cannot be assured that it will continue to do so.

Risks Related to SeaChange

Risks Related to SeaChange Business and Operations

SeaChange’s business is dependent on customers’ continued spending on video solutions and services. A reduction in spending by customers would adversely affect its business, financial condition and operating results.

SeaChange’s performance is dependent on customers’ continued spending for video solutions and services. Spending for these systems and services is cyclical and can be curtailed or deferred on short notice. A variety of factors affect the amount of spending, and, therefore, SeaChange’s sales and profits, including:

 

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general economic conditions; customer specific financial or stock market conditions;

 

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availability and cost of capital;

 

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governmental regulation;

 

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demand for services;

 

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competition from other providers of video solutions and services;

 

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acceptance by its customers; and

 

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real or perceived trends or uncertainties in these factors.

Any reduction in spending by SeaChange’s customers would adversely affect its business, financial condition and operating results. SeaChange continues to have limited visibility into the capital spending plans of its current and prospective customers. Fluctuations in SeaChange’s revenue can lead to even greater fluctuations in its operating results. SeaChange’s planned expense levels depend, in part, on its expectations of future revenue. Its planned expenses include significant investments, particularly within its research and development organization, which SeaChange believes are necessary to continue to provide innovative solutions to meet its current and prospective customers’ needs. As a result, it is difficult to forecast revenue and operating results. If its revenue and operating results are below the expectations of SeaChange’s investors and market analysts, it could cause a decline in the price of its common stock.

SeaChange’s efforts to introduce SaaS-based multiscreen service offerings may either not succeed or impair the sale of its on-site licensed offerings, the occurrence of either of which may adversely affect its financial condition and operating results.

SeaChange has devoted, and will continue to devote, considerable resources, including the allocation of capital expenditures to growing its SaaS service offering revenue over the next several years. There can be no assurance that SeaChange will meet its revenue targets for this service and if SeaChange fails to achieve its revenue goals, its growth and operating results will be materially adversely affected. Additionally, new or existing customers may choose to purchase SeaChange’s SaaS services rather than its on-premise solutions. If its customers’ purchases trend away from perpetual licenses toward its SaaS services, or to the extent customers defer orders, then SeaChange’s product revenue, and its timing of revenue, generally, may be adversely affected, which could adversely affect SeaChange’s results of operations and financial condition.

 

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SeaChange may be unsuccessful in its efforts to become a company that primarily provides software solutions.

SeaChange’s efforts to become a company that primarily provides software solutions may result in a reduction in the range of products and services it offers and in the number of current and potential future customers. Each of these factors may increase the level of execution risk in its strategy, in that there may be increased variability in SeaChange’s revenue. If it is unsuccessful in this transition, SeaChange’s business, financial condition and results of operations may be adversely affected, and the market price of its common stock may decrease.

If SeaChange is unable to successfully compete in its marketplace, its financial condition and operating results may be adversely affected.

SeaChange currently competes against companies offering video software solutions and has increasingly seen competition from integrated end-to-end solutions and a large number of OTT players. To the extent the products developed are competitive with and not complementary to SeaChange’s products, they may be more cost-effective than SeaChange’s solutions, which could result in cable television system operators and telecommunications companies discontinuing their purchases of SeaChange’s on-demand products. Due to the rapidly evolving markets in which SeaChange competes, new competitors with greater market presence and financial resources than it has may further intensify competition. Increased competition could result in price reductions, cancellations of purchase orders, loss of business with current customers to competitors, and loss of market share which would adversely affect SeaChange’s business, financial condition and results of operations. Many of SeaChange’s current and potential competitors have greater financial, selling and marketing, technical and other resources than it does. They may be in better position to withstand any significant reduction in capital spending by customers in its markets and may not be as susceptible to downturns in a particular market. Moreover, SeaChange’s competitors may also foresee the course of market developments more accurately and sooner than it does. Although SeaChange believes that it has certain technological and other advantages over its competitors, realizing and maintaining these advantages will require a continued high level of investment by SeaChange in research and product development, marketing and customer service and support. In the future, SeaChange may not have sufficient resources to continue to make these investments or to make the technological advances necessary to compete successfully with its existing competitors or with new competitors. If SeaChange is unable to compete effectively, its business, prospects, financial condition and operating results would be materially adversely affected.

If SeaChange fails to respond to rapidly changing technologies related to multiscreen video, its business, financial condition and results of operations would be materially adversely affected because the competitive advantage of its products and services relative to those of its competitors would decrease.

The markets for SeaChange’s products are characterized by rapidly changing technology, evolving industry standards and frequent new product introductions and enhancements. Future technological advances in the television and video industries may result in the availability of new products or services that could compete with the solutions provided by SeaChange or reduce the cost of existing products or services, any of which could enable its existing or potential customers to fulfill their video needs better and more cost efficiently than with SeaChange’s products. Its future success will depend on SeaChange’s ability to enhance its existing video products, including the development of new applications for its technology, and to develop and introduce new products to meet and adapt to changing customer requirements and emerging technologies such as the OTT market. In the future, SeaChange may not be successful in enhancing its video products or developing and marketing new products which satisfy customer needs or achieve market acceptance. In addition, there may be services, products or technologies developed by others that render its products or technologies uncompetitive, unmarketable or obsolete, or announcements of currently planned or other new product offerings either by SeaChange or its competitors that cause customers to defer or fail to purchase its existing solutions.

 

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SeaChange has taken and continues to take measures to address the variability in the market for its products and services, which could have long-term negative effects on its business or impact its ability to adequately address a rapid increase in customer demand.

SeaChange has taken and continues to take measures to address the variability in the market for its products and services, including due to the impact of worldwide economic cycles, to increase average revenue per unit of its sales and to reduce its operating expenses, rationalize capital expenditure and minimize customer turnover. These measures include shifting more of SeaChange’s operations to lower cost regions by outsourcing and off-shoring, implementing cost reduction programs and reducing and rationalizing planned capital expenditures and expense budgets. SeaChange cannot ensure that the measures it has taken will not impair its ability to effectively develop and market products and services, to remain competitive in the industries in which it competes, to operate effectively, to operate profitably during slowdowns or to effectively meet a rapid increase in customer demand. These measures may have long-term negative effects on SeaChange’s business by reducing its pool of technical talent, decreasing or slowing improvements in its products and services, making it more difficult to hire and retain talented individuals and to quickly respond to customers or competitors in an upward cycle.

Because its customer base has been highly concentrated among a limited number of large customers, the loss because of reduced demand by, or the return of product by one or more of these customers or the failure of revenue acceptance criteria to have been satisfied in a given fiscal quarter, could have a material adverse effect on SeaChange’s business, financial condition and results of operations.

SeaChange’s customer base is highly concentrated among a limited number of large customers, and, therefore, a limited number of customers account for a significant percentage of its revenue in any fiscal period. Historically, a significant portion of our revenue in any given fiscal period has been derived from substantial orders placed by these large organizations. For the fiscal year ended January 31, 2022, one customer accounted for more than 10% of our total revenue. SeaChange’s sales to specific customers tend to vary significantly from year to year and from quarter to quarter depending upon these customers’ budgets for capital expenditures and its new product introductions. SeaChange believes that a significant amount of its revenue will continue to be derived from a limited number of large customers in the future. The loss of, reduced demand for products or related services by, or return of a product previously purchased by any of its major customers or the failure of revenue acceptance criteria to have been satisfied in a given fiscal quarter, could materially and adversely affect, either in a particular quarter or on a more long-term basis, SeaChange’s business, financial condition and results of operations.

If SeaChange is unable to retain its existing customers, SeaChange’s revenue and results of operations will be adversely affected.

A portion of SeaChange’s business is subscription-based and as it seeks to accelerate its penetration in OTT and serving new market segments with a SaaS revenue model, SeaChange will expand its subscription-based model. SeaChange’s customers have no obligation to renew their subscriptions after their subscription period expires, and SeaChange will experience losses of customers that elect not to renew, in some cases, for reasons beyond its control. Even if subscriptions are renewed, they may not be renewed on the same or on more profitable terms. As a result, its ability to retain its existing customers and grow depends, in part, on subscription renewals. SeaChange may not be able to accurately predict future trends in customer renewals, and its customers’ renewal rates have and may continue to fluctuate because of several factors, including their satisfaction or dissatisfaction with SeaChange’s services, the cost of its services and the cost of services offered by its competitors, reductions in the spending levels of SeaChange’s customers and their end users, or the introduction by competitors of attractive features and functionality. If SeaChange’s customer retention rate decreases, it may need to increase the rate at which it adds new customers in order to maintain and grow its revenue, which may require SeaChange to incur significantly higher sales and marketing expenses than it currently anticipates, or its revenue may decline. If SeaChange’s customers do not renew their subscriptions for its services, renew on less favorable terms, or do not purchase additional functionality or subscriptions, SeaChange’s revenue may grow more slowly than expected or decline, and its profitability and gross margins may be harmed or affected. SeaChange’s

 

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Framework subscription model was introduced in fiscal 2020 and, as such, it does not have historical renewal data to rely on to help it predict its future renewal rates, and SeaChange will not have relevant renewal data for a number of years.

Cancellation or deferral of purchases of SeaChange’s products or final customer acceptance could cause a substantial variation in its operating results, resulting in a decrease in the market price of SeaChange’s common stock and making period-to-period comparisons of its operating results less meaningful.

SeaChange has historically derived a substantial portion of its revenue from purchase orders that have exceeded one million dollars in value. A significant cancellation or deferral of purchases of its products or receiving final customer acceptance could result in a substantial variation in SeaChange’s operating results in any particular quarter due to the resulting decrease in revenue and gross margin. In addition, to the extent significant sales occur earlier than expected, operating results for subsequent quarters may be adversely affected because its operating costs and expenses are based, in part, on SeaChange’s expectations of future revenue, and it may be unable to adjust spending in a timely manner to compensate for any revenue shortfall. Because of these factors, in some future quarter its operating results may be below guidance that SeaChange may issue or the expectations of public market analysts and investors, either of which may adversely affect the market price of its common stock. In addition, these factors may make period-to-period comparisons of SeaChange’s operating results less meaningful.

Adoption of SeaChange’s value based selling approach for its products and services may adversely impact its revenues and operating results.

In February 2019, SeaChange began providing its products and services to customers on the basis of its value based selling approach, under which customers would license its products and services. If SeaChange does not correctly understand the magnitude of expenses it will incur in connection with these new agreements, its operating results would be materially affected. In addition, its revenues may be adversely affected if the new approach results in a delay in its ability to recognize revenue, in which case SeaChange’s revenues and operating results would be materially affected.

Due to the lengthy sales cycle involved in the sale of its products, SeaChange’s quarterly results may vary and should not be relied on as an indication of future performance.

SeaChange’s software products and related services are relatively complex and their purchase generally involves a significant commitment of capital, with attendant delays frequently associated with large capital expenditures and implementation procedures within an organization. Moreover, the purchase of these products typically requires coordination and agreement among a potential customer’s corporate headquarters and its regional and local operations. For these and other reasons, the sales cycle associated with the purchase of SeaChange’s software products and services is typically lengthy and subject to a number of significant risks, including customers’ budgetary constraints and internal acceptance reviews, over which SeaChange has little or no control. Based upon all of the foregoing, SeaChange believes that its quarterly revenue and operating results are likely to vary significantly in the future, that period-to-period comparisons of its results of operations are not necessarily meaningful and that these comparisons should not be relied upon as indications of future performance.

If there were a decline in demand or average selling prices for its products and services, SeaChange’s revenue and operating results would be materially affected.

A decline in demand or average selling prices for SeaChange’s products or services in the foreseeable future, whether as a result of new product introductions by others, price competition, technological change, inability to enhance the products in a timely fashion, or otherwise, could have a material adverse effect on its business, financial condition and results of operations. Increasingly, SeaChange is seeing competition from integrated end-to-end solutions and a large number of OTT players, each of which may reduce the demand for or average selling prices of its products and services and adversely affect its business, financial condition and results of operations.

 

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SeaChange enters into fixed-price contracts, which could subject it to losses if it has cost overruns.

While firm fixed-price contracts enable SeaChange to benefit from performance improvements, cost reductions and efficiencies, they also subject SeaChange to the risk of reduced margins or incurring losses if it is unable to achieve estimated costs and revenue. If its estimated costs exceed its estimated price, SeaChange will recognize a loss, which can significantly affect its reported results. The long-term nature of many of SeaChange’s contracts makes the process of estimating costs and revenue on fixed-price contracts inherently risky. Fixed-price development contracts are generally subject to more uncertainty than fixed-price production contracts. Many of these development programs have highly complex designs. If SeaChange fails to meet the terms specified in those contracts, its related margin could be reduced. In addition, technical or quality issues that arise during development could lead to schedule delays and higher costs to complete, which could result in a material charge or otherwise adversely affect its financial condition.

SeaChange’s products are subject to warranty claims and any significant warranty expense in excess of estimates could have a materially adverse effect on its operating results, financial condition and cash flow.

SeaChange sells its products with warranties as to the products’ performance in accordance with standard published specifications in effect at the time of delivery. There can be no assurance that the provision in its financial statements for estimated product warranty expense will be sufficient. SeaChange cannot ensure you that its efforts to reduce its risk through warranty disclaimers will effectively limit its liability. Any significant occurrence of warranty expense in excess of estimates could have a material adverse effect on its operating results, financial condition and cash flow. Further, SeaChange provides maintenance support to its customers and allocate a portion of the product purchase price to the initial warranty period and recognize revenue on a straight-line basis over that warranty period related to both the warranty obligation and the maintenance support agreement. SeaChange cannot be sure that the cost of such maintenance support will be adequately provided for in its financial statements and any additional maintenance expenses could likewise have a material adverse effect on its operating results, financial condition and cash flow.

If its software products contain serious errors or defects, then SeaChange may lose revenue and market acceptance and may incur costs to defend or settle claims.

Complex software applications, such as SeaChange’s products, often contain errors or defects, particularly when first introduced or when new versions or enhancements are released. Despite internal testing and testing by its customers, SeaChange’s current and future products may contain serious defects, which could result in lost revenue, lost customers, slower growth or a delay in market acceptance.

SeaChange’s customers use its products for critical business applications and, therefore, errors, defects or other performance problems could result in damage to its customers’ businesses. These errors and defects could result in product liability, services level agreement claims or warranty claims. Although SeaChange’s customer agreements typically contain provisions designed to limit its exposure to claims, including warranty disclaimers, existing or future laws or unfavorable judicial decisions could negate these limitations. Even if not successful, a claim brought against SeaChange would likely be time-consuming and costly and could seriously damage its reputation in the marketplace, making it harder for SeaChange to sell its products and/or collect payment from its customers.

SeaChange has experienced turnover in its senior management, which could result in operational and administrative inefficiencies and could hinder the execution of its growth strategy.

SeaChange has recently experienced turnover in its senior management. Mr. Yossi Aloni resigned as Chief Executive Officer (“CEO”) in January 2021, at which time Mr. Robert Pons was appointed Executive Chairman and Principal Executive Officer of SeaChange. Mr. Aloni was appointed as CEO and President in August of 2019. Mr. Chad Hassler, the Chief Commercial Officer of SeaChange, also resigned in January 2021. Mr. Peter Aquino was appointed President and CEO effective September 2021, at which time Mr. Pons resigned as

 

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Executive Chairman and Principal Executive Officer but remained Chairman of the Board. Further, the longest serving member of SeaChange’s Board was elected in 2019. The composition of SeaChange’s Board of Directors and executive management team is expected to change as a result of the merger. Lack of management continuity could harm SeaChange’s customer relationships, delay product development processes, adversely affect its ability to successfully execute its growth strategy, result in operational and administrative inefficiencies and added costs, and could impede SeaChange’s ability to recruit new talented individuals to senior management positions, which could adversely impact its results of operations, stock price and customer relationships. SeaChange’s success largely depends on its ability to integrate any new senior management within its organization in order to achieve its operating objectives, and changes in other key positions may affect its financial performance and results of operations as new members of management become familiar with SeaChange’s business.

Restructuring programs could have a material negative impact on SeaChange’s business.

To increase strategic focus and operational efficiency, SeaChange has implemented restructuring programs. In fiscal 2020, SeaChange streamlined its operations and closed its service organizations in Ireland and the Netherlands for which SeaChange realized annualized costs savings of $6.0 million. In fiscal 2021, SeaChange reduced its headcount across all departments in response to the COVID-19 pandemic for which SeaChange realized additional annualized cost savings of $7.6 million. SeaChange also transferred its technical support services to its Poland location in fiscal 2021 in an effort to further reduce cost. As a result of these restructuring efforts, the total number of employees significantly decreased. SeaChange may incur additional restructuring costs or not realize the expected benefits of these new initiatives. Further, SeaChange could experience delays, business disruptions, decreased productivity, unanticipated employee turnover and increased litigation-related costs in connection with past and future restructuring and other efficiency improvement activities, and there can be no assurance that its estimates of the savings achievable by restructuring will be realized. As a result, SeaChange’s restructuring and its related cost reduction activities could have an adverse impact on its financial condition or results of operations.

Actions that may be taken by significant stockholders may divert the time and attention of SeaChange’s Board of Directors and management from its business operations.

Campaigns by significant investors to effect changes at publicly-traded companies continue to be prevalent. There can be no assurance that one or more current or future stockholders will not pursue actions to effect changes in SeaChange’s management and strategic direction, including through the solicitation of proxies from its stockholders. If a proxy contest were to be pursued by a stockholder, it could result in substantial expense to SeaChange, consume significant attention of its management and Board of Directors, and disrupt its business. On February 28, 2019, SeaChange entered into the Cooperation Agreement, pursuant to which it appointed both Mr. Robert Pons and Mr. Jeffrey Tuder to the Board. Mr. Tuder resigned from the Board on May 14, 2021. Certain of SeaChange’s significant stockholders expressed disagreement with the Cooperation Agreement and it is possible that some of SeaChange’s stockholders may conduct a “vote no” campaign against the election of all or certain of its board members standing for election at SeaChange’s upcoming annual meeting of stockholders and cause the Board to consider the resignation of any candidate who does not achieve the support of a majority of votes cast in an uncontested election. Similar to a proxy contest, this could result in substantial expense to SeaChange, consume significant attention of its management and Board of Directors, and disrupt its business.

If SeaChange’s indefinite-lived or other long-lived assets become impaired, SeaChange may be required to record a significant charge to earnings.

SeaChange’s valuation methodology for assessing impairment requires management to make judgments and assumptions based on projections of future operating performance. SeaChange operates in highly competitive environments and projections of future operating results and cash flows may vary materially from actual results. SeaChange may be required to record a significant noncash charge to its consolidated statements of operations

 

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and comprehensive loss as a result of its impairment testing of SeaChange’s goodwill and other long-lived assets during the period in which any impairment of its indefinite-lived assets or other long-lived assets is determined.

SeaChange may fail to achieve its financial forecasts due to inaccurate sales forecasts or other factors.

SeaChange’s revenue is difficult to forecast, and as a result, its quarterly operating results can fluctuate substantially. SeaChange uses a “pipeline” system, a common industry practice, to forecast sales and trends in its business. Sales personnel monitor the status of all proposals and estimate when a customer will make a purchase decision and the dollar amount of the sale. These estimates are aggregated periodically to generate a sales pipeline. SeaChange’s pipeline estimates can prove to be unreliable both in a particular quarter and over a longer period of time, in part, because the “conversion rate” or “closure rate” of the pipeline into contracts can be very difficult to estimate. A reduction in the conversion rate, or in the pipeline itself, could cause SeaChange to plan or budget incorrectly and adversely affect its business or results of operations. In particular, a slowdown in capital spending or economic conditions generally can unexpectedly reduce the conversion rate in particular periods as purchasing decisions are delayed, reduced in amounts or cancelled. The conversion rate can also be affected by the tendency of some of SeaChange’s customers to wait until the end of a fiscal period in the hope of obtaining more favorable terms, which can also impede its ability to negotiate, execute and deliver upon these contracts in a timely manner.

In addition to the other risks described in this “Risk Factors” section, the following risks could cause fluctuations in SeaChange’s quarterly operating results:

 

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its ability to retain existing customers and attract new customers;

 

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the rates at which its customers renew;

 

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the amount of revenue generated from its customers’ use of SeaChange’s products or services in excess of their committed contractual entitlements;

 

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the timing and amount of costs of new and existing sales and marketing efforts;

 

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the timing and amount of operating costs and capital expenditures relating to expansion of SeaChange’s business, operations and infrastructure; and

 

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the cost and timing of the development and introduction of new product and service offerings by SeaChange or its competitors.

Because a significant portion of SeaChange’s cost structure is largely fixed in the short-term, revenue shortfalls tend to have a disproportionately negative impact on its profitability. The number of large new software licenses transactions increases the risk of fluctuations in its quarterly results because a delay in even a small number of these transactions could cause quarterly revenue and profitability to fall significantly short of SeaChange’s predictions.

The effects of the ongoing COVID-19 pandemic could adversely affect SeaChange’s business, results of operations and financial condition.

The public health crisis caused by COVID-19 is ongoing, particularly due to new strains of the coronavirus that causes COVID-19, which may continue to emerge. Governments in affected regions have implemented and may continue to implement safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings and other measures. Organizations, businesses and individuals are taking additional steps to avoid or reduce the chances of infection, including limiting travel and working from home.

These measures have impacted, and may continue to impact, SeaChange’s normal business operations. Due to the ongoing pandemic, it has modified numerous aspects of its operations, including employee travel, employee work locations, virtualization or cancellation of customer and employee events, remote sales, implementation, and support activities. Although well intended, these modifications may delay or reduce sales and harm productivity and collaboration. The cancellation of major industry events in the region further reduces SeaChange’s ability to meet with existing and potential new customers.

 

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SeaChange’s customers’ businesses could also continue to be impacted by the ongoing pandemic, potentially causing them to reduce or cease expenditures, either of which could foreclose future business opportunities for it, could negatively impact the willingness of SeaChange’s customers to enter into or renew contracts with it, and ultimately could adversely affect its revenues. During a period of reduced revenue, SeaChange may need to increase borrowing, which would increase its indebtedness.

The pandemic has impacted SeaChange’s ability to complete certain implementations, negatively impacting its ability to recognize revenue, and could also negatively impact the payment of accounts receivable and collections. Although SeaChange is unable to predict the precise impact of COVID-19 on its business, its mobile communications business, in particular, depends to a large extent on travel and the willingness of customers to enter into or renew contracts with SeaChange. SeaChange anticipates that governmental, individual, business and other organizational measures to limit the spread of the virus will adversely affect its revenues, results of operations and financial condition, perhaps materially. This or any other outbreak and any additional preventative or protective actions that may be taken in response to this or any other global health threat or pandemic may result in additional business and/or operational disruption.

COVID-19 could also negatively impact SeaChange’s supply chain and cause delays in the delivery of raw materials, components and other supplies that it needs to conduct its operations. SeaChange may be unable to locate replacement materials, components or other supplies, and ongoing delays could reduce sales and adversely affect its revenues and results of operations.

The extent to which COVID-19 will impact SeaChange’s business will depend on many factors beyond its control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors. In addition, fiscal and policy interventions by national governments in response to certain economic conditions, including general inflation or currency volatility, in the locations where SeaChange does business could have knock-on effects such as increasing interest rates, which could have a negative impact on its business by increasing its operating costs and its borrowing costs as well as decreasing the capital available for its customers to purchase its products and services.

Risks Related to SeaChange’s Dependence on Third Parties

If SeaChange is not able to obtain necessary licenses, services or distribution rights for third-party technology at acceptable prices, or at all, its products could become obsolete or SeaChange may not be able to deliver certain product offerings.

SeaChange has incorporated third-party licensed technology into its current products and its product lines. From time to time, SeaChange may be required to license additional technology or obtain services from third parties to develop new products or product enhancements or to provide specific solutions. Third-party providers may not be available or continue to be available to SeaChange on commercially reasonable terms. The inability to maintain or re-license any third-party products required in its current products or to obtain any new third-party licenses and services necessary to develop new products and product enhancements or provide specific solutions could require SeaChange to obtain substitute technology of lower quality or performance standards or at greater cost. Such inabilities could delay or prevent SeaChange from making these products or services, which could seriously harm the competitiveness of its solutions.

A portion of the technology licensed by SeaChange incorporates “open source” software, and it may incorporate open source software in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. Although SeaChange monitors its use of open source closely, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on its ability to commercialize its products. In addition, if SeaChange fails to comply with these licenses, it may be subject to certain conditions,

 

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including requirements that it offer its services that incorporate the open source software for no cost, that it make available source code for modifications or derivative works that SeaChange creates based upon, incorporating or using the open source software and that it license such modifications or alterations under the terms of the particular open source license. If an author or other third party that distributes such open source software were to allege that it had not complied with the conditions of one or more of these licenses, SeaChange could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of its services that contain the open source software and required to comply with the foregoing conditions, which could disrupt the distribution and sale of some of its services. SeaChange could also be required to seek licenses from third parties to continue offering its products, to re-engineer its products or to discontinue the sale of its products in the event re-engineering cannot be accomplished on a timely or successful basis, any of which could adversely affect SeaChange’s business, operating results and financial condition.

Interruptions or delays in service from SeaChange’s third-party data center hosting facilities or its enterprise cloud computing providers could impair the delivery of its service, adversely affect its financial results and otherwise harm SeaChange’s business.

SeaChange uses third-party data center hosting facilities for customers buying its SaaS product offering, and SeaChange uses enterprise cloud computing providers in connection with certain other aspects of its business, including cloud-based data processing, storage and other services. In the case of data center hosting facilities, while SeaChange controls the actual computer and storage systems upon which its software runs, and deploy them to the data center hosting facilities, SeaChange does not control the operation or availability of these facilities. SeaChange similarly does not have control over the operation or availability of enterprise cloud computing providers that it uses. Any changes in third-party service levels at these facilities or any errors, defects, disruptions or other performance problems at or related to these facilities that affect its services could harm SeaChange’s reputation and may damage its customers’ businesses. Interruptions in SeaChange’s service may reduce its revenue, cause it to issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect its attrition rates and its ability to attract new customers. SeaChange’s business will also be harmed if its customers and potential customers believe its service is unreliable. SeaChange does not control the operation of any of these facilities, and they are vulnerable to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and similar events. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct. Despite precautions taken at these facilities, the occurrence of a natural disaster or an act of terrorism, a decision to close the facilities without adequate notice or other unanticipated problems at these facilities could result in lengthy interruptions in SeaChange’s service. Even with the disaster recovery arrangements, its service could be interrupted.

SeaChange’s products are often integrated with other third-party products. Third-party delays could adversely affect its future financial operating results.

SeaChange sells its products in accordance with its standard product specifications. There can be instances where its products are integrated into a larger solution with other third-party products, the delivery of which is controlled by third-party providers. SeaChange has little, if any, control over the timing of delivery of third-party products, and a delay from the time of its product delivery to the production launch of the larger solution can materially impact SeaChange’s financial operating results.

SeaChange’s ability to deliver products and services that satisfy customer requirements is dependent on the performance of its third-party vendors.

SeaChange relies on other companies to provide products and to perform some of the services that it provides to its customers. If one or more of SeaChange’s third-party vendors experience delivery delays or other performance problems, SeaChange may be unable to meet commitments to its customers. In addition, if one or more of the products on which SeaChange depends on becomes unavailable or is available only at very high

 

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prices, SeaChange may be unable to deliver one or more of its products in a timely fashion or at budgeted costs. In some instances, SeaChange depends upon a single source of supply. Any service disruption from one of these third-party vendors, either due to circumstances beyond the supplier’s control or because of performance problems or financial difficulties, could have a material adverse effect on SeaChange’s ability to meet commitments to its customers or increase its operating costs.

A disruption to its information technology systems could significantly impact SeaChange’s operations and impact its revenue and profitability.

SeaChange’s data processing and financial reporting systems are cloud-based and hosted by a third party. An interruption to the third-party systems or in the infrastructure that allows it to connect to the third-party systems for an extended period may impact SeaChange’s ability to operate the business and process transactions which could result in a decline in sales and affect its ability to achieve or maintain profitability. It may also result in its inability to comply with SEC regulations in a timely manner. For example, in the first quarter of fiscal 2021, SeaChange experienced a ransomware attack on its information technology system. Although the attack did not have a material adverse effect on its business operations, it caused a temporary disruption and interfered with SeaChange’s operations.

Risks Related to SeaChange’s Industry

SeaChange operates in a relatively new and rapidly developing market, which makes it difficult to evaluate its business and future prospects.

The market for its products and services is relatively new and rapidly developing, which makes it difficult to evaluate SeaChange’s business and future prospects. SeaChange has encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:

 

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market acceptance of its current and future products and services;

 

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customer renewal rates;

 

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its ability to compete with other companies that are currently in, or may in the future enter, the market for its products;

 

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its ability to successfully expand its business, especially internationally;

 

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its ability to control costs, including operating expenses;

 

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the amount and timing of operating expenses, particularly sales and marketing expenses, related to the maintenance and expansion of its business, operations and infrastructure;

 

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network outages or security breaches and any associated expenses;

 

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foreign currency exchange rate fluctuations;

 

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write-downs, impairment charges or unforeseen liabilities in connection with acquisitions;

 

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its ability to successfully manage acquisitions; and

 

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general economic and political conditions in its domestic and international markets.

If SeaChange does not manage these risks successfully, its business will be harmed.

If SeaChange fails to develop and consistently deliver innovative technologies and services in response to changes in the technology and entertainment industries, its business could decline.

The markets for SeaChange’s products, services and technologies are characterized by rapid change and technological evolution. SeaChange will need to continue to expend considerable resources on research and

 

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development in the future in order to continue to design and deliver enduring, innovative entertainment products, services and technologies. Despite its efforts, SeaChange may not be able to consistently develop and effectively market new products, technologies and services that adequately or competitively address the needs of the changing marketplace. In addition, it may not correctly identify new or changing market trends at an early enough stage to capitalize on market opportunities. SeaChange’s future success depends to a great extent on its ability to develop and consistently deliver innovative technologies that are widely adopted in response to changes in the technology and entertainment industries and that are compatible with the technologies, services or products introduced by other entertainment industry participants.

Despite SeaChange’s efforts and investments in developing new products, services and technologies:

 

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it may not receive significant revenue from its current research and development efforts for several years, if at all;

 

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it cannot assure you that the level of funding and significant resources it is committing for investments in new products, services and technologies will be sufficient or result in successful new products, services or technologies;

 

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it cannot assure you that its newly developed products, services or technologies can be successfully protected as proprietary intellectual property rights or will not infringe the intellectual property of others;

 

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it cannot assure you that any new products or services that it develops will achieve market acceptance;

 

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its products, services and technologies may become obsolete due to rapid advancements in technology and changes in consumer preferences;

 

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it cannot assure you that revenue from new products, services or technologies will offset any decline in revenue from its products, services and technologies which may become obsolete; and

 

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its competitors and/or potential customers may develop products, services or technologies similar to those developed by SeaChange, resulting in a reduction in the potential demand for its newly developed products, services or technologies.

SeaChange’s failure to successfully develop new and improved products, services and technologies, including as a result of any of the risks described above, may reduce its future growth and profitability and may adversely affect its business, results and financial condition.

SeaChange’s future success is dependent on the manner in which the multiscreen video and OTT markets develop, and if these markets develop in a manner that does not facilitate inclusion of its products and services, SeaChange’s business may not continue to grow.

A large portion of SeaChange’s anticipated revenue growth is expected to come from sales and services related to its multiscreen video and OTT products. These markets continue to develop as commercial markets, both within and outside North America. In addition to the potential size of these markets and the timing of their development being uncertain, so too is the technological manner in which they will develop. The success of these markets will require that video service providers continue to upgrade their cable networks to service and successfully market multiscreen video, OTT and similar services to their cable television subscribers in a manner that permits inclusion of SeaChange’s products and services. If cable system operators and telecommunications companies fail to make the capital expenditures necessary to upgrade their networks or determine that broad deployment of multiscreen video and OTT services is not viable as a business proposition or if its products cannot support a substantial number of subscribers while maintaining a high level of performance, SeaChange’s revenue will not grow as it has planned.

 

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If content providers limit the scope of content licensed for use in the digital VOD and OTT market, SeaChange’s business, financial condition and results of operations could be negatively affected because the potential market for its products would be more limited than SeaChange currently believes and has communicated to the financial markets.

The success of the multiscreen video market is contingent on content providers permitting their content to be licensed for use in this market. Content providers may, due to concerns regarding either or both marketing and illegal duplication of the content, limit the extent to which they provide content to their subscribers. A limitation of content for the VOD and OTT market would indirectly limit the market for SeaChange’s products that are used in connection with that market.

Consolidations in the markets SeaChange serves could result in delays or reductions in purchases of products, which would have a material adverse effect on its business.

The markets SeaChange serves have historically experienced, and continue to experience, the consolidation of many industry participants. For example, AT&T acquired Direct TV, Charter Communications acquired Time Warner Cable, Altice NV acquired HOT, Suddenlink Communications and Cablevision Systems Corp., and Frontier Communications Corporation bought select assets from Verizon Communications Inc. When consolidations occur, it is possible that the acquirer will not continue using the same suppliers, possibly resulting in an immediate or future elimination of sales opportunities for SeaChange or its competitors. Even if sales are not reduced, consolidation can also result in pressure from customers for lower prices or better terms, reflecting the increase in the total volume of products purchased or the elimination of a price differential between the acquiring customer and the company acquired. Consolidations also could result in delays in purchasing decisions by the affected companies prior to completion of the transaction and by the merged businesses. The purchasing decisions of the merged companies could have a material adverse effect on SeaChange’s business.

There is no assurance that the current cost of Internet connectivity and network access will not rise with the increasing popularity of online media services.

SeaChange relies on third-party service providers for its principal connections to the Internet and network access, and to deliver media to consumers. As demand for online media increases, there can be no assurance that Internet and network service providers will continue to price their network access services on reasonable terms. The distribution of online media requires delivery of digital content files and providers of network access and distribution may change their business models and increase their prices significantly, which could slow the widespread adoption of such services. In order for SeaChange’s services to be successful, there must be a reasonable price model in place to allow for the continuous distribution of digital media files. SeaChange has limited or no control over the extent to which any of these circumstances may occur, and if network access or distribution prices rise, SeaChange’s business, financial condition and results of operations would likely be adversely affected.

SeaChange has been and, in the future, could become subject to litigation regarding intellectual property rights, which could seriously harm its business and require SeaChange to incur significant legal costs to defend its intellectual property rights.

The industry in which SeaChange operates is characterized by vigorous protection and pursuit of intellectual property rights or positions, which on occasion, have resulted in significant and often protracted litigation. SeaChange has from time to time received, and may in the future receive, communications from third parties asserting infringements on patent or other intellectual property rights covering its products or processes. SeaChange may be a party to litigation in the future to enforce its intellectual property rights or because of an allegation that it infringes others’ intellectual property rights. Any parties asserting that SeaChange’s products infringe upon their proprietary rights would force it to defend itself and possibly its customers or manufacturers against the alleged infringement, as many of SeaChange’s commercial agreements require it to defend and/or indemnify the other party against intellectual property infringement claims brought by a third party with respect

 

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to its products. SeaChange has received certain claims for indemnification from customers but has not been made party to any litigation involving intellectual property infringement claims as a result. These claims and any resulting lawsuit, if successful, could subject SeaChange to significant liability for damages and invalidation of its proprietary rights. This possibility of multiple damages serves to increase the incentive for plaintiffs to bring such litigation. In addition, these lawsuits, regardless of their success, would likely be time-consuming and expensive to resolve and would divert management time and attention away from SeaChange’s operations. Although SeaChange carries general liability and intellectual property liability insurance, its insurance may not cover potential claims of this type or may not be adequate to indemnify it for all liability that may be imposed. In addition, any potential intellectual property litigation also could force SeaChange to stop selling, incorporating or using the products that use the infringed intellectual property or obtain from the owner of the infringed intellectual property right a license to sell or use the relevant technology, although this license may not be available on reasonable terms, or at all, or redesign those products that use the infringed intellectual property. If SeaChange is forced to take any of the foregoing actions, its business may be seriously harmed.

Risks Related to Regulatory Matters

The success of SeaChange’s business model could be influenced by changes in the regulatory environment, such as changes that either would limit capital expenditures by television, cable or telecommunications operators or reverse the trend towards deregulation in the industries in which it competes.

The telecommunications and media industries are subject to extensive regulation which may limit the growth of its business, both in the U.S. and other countries. The growth of SeaChange’s business internationally is dependent in part on deregulation of the telecommunications industry abroad, like that which has occurred in the U.S., and the timing and magnitude of this growth, which is uncertain. Video service providers are subject to extensive government regulation by the Federal Communications Commission and other federal, state and international regulatory agencies. These regulations could have the effect of limiting capital expenditures by video service providers and thus could have a material adverse effect on SeaChange’s business, financial condition and results of operations. The enactment by federal, state or international governments of new laws or regulations, changes in the interpretation of existing regulations or a reversal of the trend toward deregulation in these industries could adversely affect its customers, and thereby materially adversely affect SeaChange’s business, financial condition and results of operations.

Uncertainties of regulation of the Internet and data traveling over the Internet could have a material and adverse impact on SeaChange’s financial condition and results of operations.

Currently, few laws or regulations apply directly to access to or commerce on the Internet. With more business being conducted over the Internet, there have been calls for more stringent copyright protection, tax, consumer protection, cybersecurity, data localization and content restriction laws, both in the U.S. and abroad. SeaChange could be materially, adversely affected by regulation of the Internet and Internet commerce in any country where it operates. Such regulations could include matters such as net neutrality. Further, governments may regulate or restrict the sales, licensing, distribution, and export or import of certain technologies to certain countries. The adoption of regulation of Internet and Internet commerce could decrease demand for SeaChange’s products and, at the same time, increase the cost of selling its products and services, which could have a material and adverse effect on its financial condition and results of operations. In addition, the enactment of new federal, state, or foreign data privacy laws and regulations could cause customers not to be able to take advantage of all the features or capabilities of SeaChange’s products and services, which in turn could reduce demand for certain of its products and services.

Evolving data privacy regulations, including the EU’s GDPR and the CCPA, may subject SeaChange to significant penalties.

In May 2018, the GDPR came into effect in the EU, and changed how businesses can collect, use and process the personal data of EU residents. The GDPR has extraterritorial effect and imposes a mandatory duty on businesses

 

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to self-report personal data breaches to authorities, and, under certain circumstances, to affected individuals. The GDPR also grants individuals the right to erasure (commonly referred to as the right to be forgotten), which may put a burden on SeaChange to erase records upon request. Compliance with the GDPR’s new requirements may increase its legal, compliance, and operational costs. Non-compliance with the GDPR’s requirements can result in significant penalties, which may have a material adverse effect on SeaChange’s business, expose it to legal and regulatory costs, and impair its reputation.

Other jurisdictions, including certain U.S. states and non-U.S. jurisdictions where SeaChange conducts business, have also enacted or are considering enacting their own versions of “GDPR-like” data privacy legislation, which could create additional compliance challenges, heightened regulatory scrutiny, administrative burden and potentially expose SeaChange to significant penalties. For example, in June 2018, California’s legislature passed the CCPA, which went into effect on January 1, 2020. Any failure or perceived failure by SeaChange, its business partners, or third-party service providers to comply with GDPR, CCPA, other privacy-related or data protection laws and regulations, or the privacy commitments in contracts could result in proceedings against it by governmental entities or others and significant fines, which could have a material adverse effect on its business and operating results and harm SeaChange’s reputation.

In addition, some countries have or are considering legislation requiring local storage and processing of data that, if enacted, could increase the cost and complexity of offering its products, software and services or maintaining its business operations in those jurisdictions.

SeaChange is subject to the FCPA, and its failure to comply could result in penalties that could harm its reputation, business, and financial condition.

SeaChange is subject to the FCPA, which generally prohibits companies and their intermediaries from making improper payments to foreign officials to obtain or keep business. The FCPA also requires companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of a company. Under the FCPA, U.S. companies may be held liable for actions taken by their strategic or local partners or representatives. The FCPA and similar laws in other countries can impose civil and criminal penalties for violations.

If SeaChange does not properly implement practices and controls with respect to compliance with the FCPA and similar laws, or if SeaChange fails to enforce those practices and controls properly, it may be subject to regulatory sanctions, including administrative costs related to governmental and internal investigations, civil and criminal penalties, injunctions and restrictions on its business activities, all of which could harm its reputation, business and financial condition.

SeaChange may have additional tax liabilities, which could have a material and adverse impact on its financial condition and results of operations.

SeaChange is subject to income taxes in both the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining its worldwide provision for income taxes. In the ordinary course of its business, there are many transactions and calculations where the ultimate tax determination is uncertain. SeaChange is regularly under audit by various tax jurisdictions. Although SeaChange believes its tax estimates are reasonable, the final determination of tax audits and any related litigation could be materially different from its historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on SeaChange’s income tax provision, net income, or cash flows in the period or periods for which that determination is made. In addition, SeaChange is subject to sales, use and similar taxes in many countries, jurisdictions and provinces, including those states in the U.S. where it maintains a physical presence or has a substantial nexus. These taxing regimes are complex. For example, in the U.S., each state and local taxing authority has its own interpretation of what constitutes a sufficient physical presence or nexus to require the collection and remittance of these taxes. Similarly, each state and local taxing authority has its own rules regarding the applicability of sales tax by customer or product type.

 

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SeaChange’s ability to use its net operating losses to offset future taxable income is expected to be subject to certain limitations.

As of January 31, 2022, SeaChange had net operating loss carryforwards (“NOLs”) for federal, state and foreign income tax purposes of approximately $137.6 million and $98.4 million, respectively, which may be available to offset tax income in the future. In general, under Section 382 of the Internal Revenue Code of 1986, as amended (“Code”), a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. Generally, a change of more than 50% in the ownership of a corporation’s stock, by value, over a three-year period constitutes an ownership change for U.S. federal income tax purposes. The number of shares of common stock that SeaChange will issue in connection with the merger is expected to be sufficient, taking into account prior or future shifts in our ownership over a three-year period, to cause SeaChange to undergo an ownership change. As a result, if SeaChange earns net taxable income, its ability to use its pre-change net operating loss carryforwards to offset U.S. federal taxable income may become subject to limitations, which could potentially result in increased future tax liability to us. In addition, the carrying value of any tax asset related to SeaChange’s net operating loss carryforwards could be significantly reduced.

The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017 and significantly reforms the Code. The Tax Act, among other things, includes changes to U.S. federal tax rates and the rules governing net operating loss carryforwards. For NOLs arising in tax years beginning after December 31, 2017, the Tax Act limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income (as calculated before taking the NOL carryforwards into account). In addition, NOLs arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. As SeaChange maintains a full valuation allowance against its U.S. NOLs, these changes will not impact its balance sheet as of December 31, 2017. However, in future years, at the time a deferred tax asset is recognized related to our NOLs, the changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated after December 31, 2017.

Risks Related to SeaChange’s International Operations

SeaChange faces significant risks to its business when it engages in the outsourcing of engineering work, including outsourcing of software work overseas, which, if not properly managed, could result in the loss of valuable intellectual property and increased costs due to inefficient and poor work product, which could harm its business, including its financial results, reputation, and brand.

SeaChange may, from time-to-time, outsource engineering work related to the design and development of its products, typically to save money and gain access to additional engineering resources. SeaChange has worked, and expects to work in the future, with companies located in jurisdictions outside of the U.S., including, but not limited to Poland and the Netherlands. SeaChange has limited experience in the outsourcing of engineering and other work to third parties located internationally that operate under different laws and regulations than those in the U.S. If SeaChange are unable to properly manage and oversee the outsourcing of this engineering and other work related to its products, SeaChange could suffer the loss of valuable intellectual property, or the loss of the ability to claim such intellectual property, including patents and trade names. Additionally, instead of saving money, SeaChange could, in fact, incur significant additional costs because of inefficient engineering services and poor work product. As a result, SeaChange’s business would be harmed, including its financial results, reputation, and brand.

Because SeaChange’s business is susceptible to risks associated with international operations, it may not be able to maintain or increase international sales of its products and services.

Approximately 69% of SeaChange’s total revenue was generated from sales outside the U.S. during the most recent fiscal year. SeaChange’s international operations are expected to continue to account for a significant

 

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portion of its business in the foreseeable future. However, in the future, SeaChange may be unable to maintain or increase international sales of its products and services. SeaChange’s international operations are subject to a variety of risks, including:

 

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difficulties in establishing and managing international distribution channels;

 

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difficulty in staffing and managing foreign operations;

 

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inability to collect accounts receivable;

 

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difficulties in selling, servicing and supporting overseas products and services and in translating products and services into foreign languages;

 

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the uncertainty of laws and enforcement in certain countries relating to the protection of intellectual property;

 

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fluctuations in currency exchange rates;

 

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multiple and possibly overlapping tax structures;

 

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negative tax consequences such as withholding taxes and employer payroll taxes;

 

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differences in labor laws and regulations affecting its ability to hire and retain employees and engage in restructuring activities;

 

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business and operational disruptions or delays caused by political, social and economic instability and unrest, including risks related to terrorist activity;

 

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changes in economic policies by foreign governments, including the imposition and potential continued expansion of economic sanctions by the U.S. and the EU or the Russian Federation, especially in relation to the conflict in Ukraine;

 

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the burden of complying with a wide variety of foreign laws, treaties and technical standards;

 

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cultural differences in the conduct of business;

 

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natural disasters and pandemics; and

 

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growth and stability of the economy or political changes in international markets.

The impact of one or more of these international risks could have a material and adverse effect on SeaChange’s business, financial condition, operating results and cash flow.

Adverse global economic conditions, geopolitical issues and other conditions that impact our increasingly global operations could have a negative effect on our business, results of operations and financial condition and liquidity.

As a global company, our performance is affected by global economic conditions as well as geopolitical issues and other conditions with global reach. Macroeconomic weakness and uncertainty make it more difficult for us to manage our operations and accurately forecast financial results. As a result of the recent movement of Russian military units into provinces in Ukraine, the U.S., the EU, the United Kingdom and other jurisdictions have imposed sanctions on certain Russian and Ukrainian persons and entities, including certain Russian banks, energy companies and defense companies, and have imposed restrictions on exports of various items to Russian and certain regions of Ukraine (including the self-proclaimed Donetsk People’s Republic and Luhansk People’s Republic and Crimea). Moreover, on February 22, 2022, the Office of Foreign Assets Control of the U.S. issued sanctions aimed at limiting Russia’s ability to raise funds through sovereign debt. Such ongoing events between Ukraine and Russia could also increase China/Taiwan political tensions and U.S./China trade and other relations. These geopolitical issues have resulted in increasing global tensions and create uncertainty for global commerce.

Any or all of these factors could negatively affect demand for our products and our business, financial condition and result of operations.

 

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SeaChange is exposed to fluctuations in currency exchange rates that could negatively impact its financial results and cash flows.

Because a significant portion of SeaChange’s business is conducted outside the U.S., it faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve, and they could have a material adverse impact on SeaChange’s financial results and cash flows. An increase in the value of the U.S. dollar could increase the real cost of its products to its customers in those markets outside the U.S. where SeaChange often sells in dollars, and a weakened dollar could increase local currency operating costs. In preparing its consolidated financial statements, certain financial information is required to be translated from foreign currencies to the U.S. dollar using either the spot rate or the weighted average exchange rate. If the U.S. dollar weakens or strengthens relative to applicable local currencies, there is a risk its reported sales, operating expenses and net income could significantly fluctuate. SeaChange is not able to predict the degree of exchange rate fluctuations; nor can SeaChange estimate the effect any future fluctuations may have upon its future operations.

General Risk Factors

SeaChange’s ability to compete could be jeopardized if it is unable to protect its intellectual property rights from third-party challenges.

SeaChange’s success and ability to compete depends upon its ability to protect its proprietary technology that is incorporated into its products. SeaChange relies on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect its intellectual property rights. Although SeaChange has issued patents, it cannot assure that any additional patents will be issued or that the issued patents will not be invalidated. SeaChange also enters into confidentiality or license agreements with its employees, consultants and corporate partners, and controls access to and distribution of its software, documentation and other proprietary information. Despite these precautions, it may be possible for a third party to copy or otherwise misappropriate and use SeaChange’s products or technology without authorization, particularly in foreign countries where the laws may not protect its proprietary rights as fully as in the U.S. SeaChange may need to resort to litigation in the future to enforce its intellectual property rights, to protect its trade secrets or to determine the validity and scope of the proprietary rights of others. If competitors are able to use its technology, SeaChange’s ability to compete effectively could be harmed.

SeaChange faces the risk that capital needed for its business will not be available when it needs it or that it would result in substantial dilution to its stockholders.

To the extent that SeaChange’s existing cash and investments are insufficient to fund its future activities, SeaChange may need to raise additional funds through public or private equity or debt financings. If unfavorable capital market conditions exist and SeaChange were to seek additional funding, it may not be able to raise sufficient capital on favorable terms and on a timely basis, if at all. Failure to obtain capital when required by its business circumstances would have a material adverse effect on its business, financial condition and results of operations. In addition, SeaChange’s stockholders may incur substantial dilution from any financing that it undertakes given its current stock price.

If SeaChange’s cybersecurity measures are breached and unauthorized access is obtained to a customer’s data or SeaChange’s data on its systems, SeaChange’s service may be perceived as not being secure, customers may curtail or stop using its service and SeaChange may incur significant legal and financial exposure and liabilities.

Cyber criminals and hackers may attempt to penetrate SeaChange’s network security, misappropriate its proprietary information or cause business interruptions. SeaChange’s service involves the transmission of customers’ proprietary information and security breaches could expose it to a risk of loss of this information or a network disruption, which may result in litigation and possible liability. These security measures may be

 

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breached as a result of third-party action, including intentional misconduct by computer hackers, employee error, malfeasance or otherwise and result in unauthorized publication of its confidential business or proprietary information, cause an interruption in its operations, result in the unauthorized release of customer or employee data, result in a violation of privacy or other laws, expose SeaChange to a risk of litigation or damage its reputation, which could harm its business and operating results. Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information to gain access to its customers’ data or SeaChange’s data or IT systems. Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently and generally are not recognized until launched against a target, SeaChange may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, SeaChange’s customers may authorize third-party technology providers to access their customer data. Because SeaChange does not control its customers and third-party technology providers, or the processing of such data by third-party technology providers, it cannot ensure the integrity or security of such transmissions or processing.

In addition, in the past few years, widespread ransomware attacks in the U.S. and elsewhere have affected many companies, the government and commercial computer systems, and SeaChange also experienced a ransomware attack on its information technology system during the first quarter of fiscal 2021, which temporarily denied customers access to its services. Although the attack did not have a material adverse effect on its business operations, it caused a temporary disruption and interfered with its operations. While SeaChange intends to implement additional measures to enhance its security protocol to protect its system, there is no guarantee that future attacks or other breakdowns or breaches in its system can be thwarted or prevented, and failure to do so may increase SeaChange’s cost of operations and adversely affect its business operations and results of operations. Any costs that SeaChange incur as a result of the ransomware attack or any future data security incident or breach, including costs to update its security protocols to mitigate such an incident or breach could be significant. Any future ransomware attacks, breaches or failures in its operational security systems can result in loss of data or an unauthorized disclosure of or access to confidential information and could result in a loss of confidence in the security of its service, damage its reputation, negatively impact its future sales, disrupt its business operations and lead to legal liability from customers, third parties and governmental authorities, any of which could adversely impact SeaChange’s financial condition and results of operations materially.

A cyber-attack, information or security breach, or technology failure, on SeaChange’s part or that of a third party, could adversely affect its ability to conduct its business, result in the disclosure or misuse of confidential or proprietary information, or adversely impact its business, financial condition, and results of operations, as well as cause SeaChange reputational harm.

SeaChange’s business is highly dependent on the security and integrity of its computer and information technology systems and networks, as well as those of third parties with whom it interacts or on whom it relies. SeaChange’s business is dependent on the secure processing, transmission, storage, and retrieval of confidential, proprietary, and other information in its computer and information technology systems and networks, and in the computer and information technology systems and networks of third parties. In addition, to access SeaChange’s networks, products, and services, its customers and other third parties may use personal mobile or computing devices that are outside of its network environment and are subject to their own unique cybersecurity risks.

SeaChange and its third-party service providers and customers have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denials of service or information, or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, or destruction of confidential, proprietary, or other information of SeaChange or of its employees or customers or third parties, as well as damages to SeaChange’s and third-party computer and information technology systems and networks and the disruption of SeaChange’s or its customers’ or other third parties’ systems, networks, or business. As cyber threats continue to evolve, SeaChange may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to protect the

 

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integrity of its systems and networks and implement controls, processes, policies, and other protective measures, cyber threats are rapidly evolving, and SeaChange may not be able to anticipate or prevent cyber-attacks or security breaches.

Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks are becoming more sophisticated and are extremely difficult to prevent. The techniques used by bad actors change frequently, may not be recognized until launched, and may not be recognized until well after a breach has occurred. Additionally, the occurrence of cyber-attacks or security breaches involving third parties with access to SeaChange’s data, such as vendors, may not be disclosed to it in a timely manner.

Any third-party technology failure, cyber-attack, or other information or security breach could, among other things, adversely affect its ability to effect transactions, service its customers, manage its exposure to risk, or operate or expand its business.

Cyber-attacks or other information or security breaches, whether directed at SeaChange or third parties, may result in it experiencing material losses or have other material adverse consequences on it. Furthermore, the public perception that a cyber-attack on its systems has been successful, whether or not this perception is correct, could damage SeaChange’s reputation with its customers and third parties with whom it does business. A successful penetration or circumvention of the security of its computer or information technology systems or networks could cause SeaChange negative consequences, including loss of customers and business opportunities, disruption to its operations and business, misappropriation or destruction of its confidential information or that of its customers, or damage to its customers’ or other third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in its security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, all of which could materially and adversely affect SeaChange’s business, financial condition, and results of operations.

SeaChange uses estimates in accounting for its contracts. Changes in its estimates could adversely affect its future financial results.

Contract accounting requires judgment relative to assessing risks, estimating revenue and costs and making assumptions including, in the case of SeaChange’s professional services contracts, the total amount of labor required to complete a project and the complexity of the development and other technical work to be completed. Due to the size and nature of many of its contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables. Assumptions must be made regarding the length of time to complete the contract because costs also include estimated third-party vendor and contract labor costs. Penalties related to performance on contracts are considered in estimating sales and profit and are recorded when there is sufficient information for SeaChange to assess anticipated performance. Third-party vendors’ assertions are also assessed and considered in estimating costs and margin.

Because of the significance of the judgments and estimation processes described above, it is likely that materially different sales and profit amounts could be recorded if SeaChange used different assumptions or if the underlying circumstances were to change. Changes in underlying assumptions, circumstances or estimates may adversely affect future period financial performance.

Risks Related to the Common Stock of SeaChange

Delaware law and SeaChange’s certificate of incorporation and bylaws contain anti-takeover provisions, and its board of directors has adopted a Tax Benefits Preservation Plan in the form of a stockholder rights agreement, any of which could delay or discourage a merger, tender offer, or assumption of control of SeaChange not approved by its Board that some stockholders may consider favorable.

Delaware law and SeaChange’s certificate of incorporation and bylaws contain certain provisions, and its board of directors adopted Tax Benefits Preservation Plan in the form of a stockholder rights agreement with an

 

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ownership trigger threshold of 4.9%, any of which could render more difficult, or discourage a merger, tender offer, or assumption of control of SeaChange that is not approved by its board of directors. The Tax Benefits Preservation Plan, however, should not interfere with any merger, tender or exchange offer or other business combination approved by its board of directors. Nor does the rights agreement prevent SeaChange’s board of directors from considering any offer that it considers to be in the best interest of SeaChange’s stockholders. The Tax Benefits Preservation Plan was amended in connection with the merger to expressly permit the merger and to terminate in connection with the merger.

SeaChange’s stock price may be volatile and an investment in its stock may decline. If SeaChange fails to comply with the continuing listing standards of The Nasdaq Global Select Market, its securities could be delisted.

Historically, the market for technology stocks has been extremely volatile. SeaChange’s common stock has experienced, and may continue to experience, substantial price volatility. The trading price of Class A common stock may fluctuate significantly in response to a number of factors, many of which are beyond our control. For instance, if our financial results are below the expectations of securities analysts and investors, the market price of Class A common stock could decrease, perhaps significantly. The market price of Class A common stock could also be affected by investors’ anticipation of the potential resale in the market of a substantial number of additional shares of Class A common stock received upon conversion of the notes discussed below, possible sales of Class A common stock by investors who view the notes as a more attractive means of equity participation in us than owning shares of Class A common stock, and hedging or arbitrage trading activity that may develop involving Class A common stock (which trading activity could, in turn, affect the trading prices of the notes). Other factors that may affect the market price of Class A common stock, including the impact of COVID-19 on business and industry, announcements relating to significant corporate transactions, fluctuations in quarterly and annual financial results, operating and stock price performance of companies that investors deem comparable to SeaChange and changes in government regulation or related proposals. In addition, the U.S. securities markets have experienced significant price and volume fluctuations, and these fluctuations often have been unrelated to the operating performance of companies in these markets. Any volatility of or a significant decrease in the market price of Class A common stock could also negatively affect the ability to make acquisitions using Class A common stock. Further, if SeaChange were to be the object of securities class action litigation as a result of volatility in Class A common stock price or for other reasons, it could result in substantial costs and diversion of it management’s attention and resources, which could negatively affect its financial results.

The occurrence of any one or more of the factors noted in these risk factors could cause the market price of its common stock to fluctuate or decline below the $1.00 Nasdaq minimum price requirement such that it becomes subject to delisting proceedings. Any delisting of its securities could have an adverse effect on the market price of, and the efficiency of the trading market for its securities, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of SeaChange by securities analysts, if any. Also, if in the future SeaChange were to determine that it needs to seek additional equity capital, having been delisted or being subject to delisting proceedings could have an adverse effect on its ability to raise capital in the public or private markets. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such companies.

SeaChange may issue preferred stock whose terms could adversely affect the voting power or value of Class A common stock.

SeaChange’s certificate of incorporation authorizes it to issue, without the approval of its stockholders, one or more classes or series of preferred stock having such designations, preferences, limitations and relative rights, including preferences over Class A common stock respecting dividends and distributions, as its board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of Class A common stock. For example, SeaChange might grant holders of preferred stock the

 

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right to elect some number of its directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences it might assign to holders of preferred stock could affect the residual value of Class A common stock.

The terms of any future preferred equity or debt financing may give holders of any preferred securities or debt securities rights that are senior to rights of holders of Class A common stock or impose more stringent operating restrictions on our Company.

Debt or equity financing may not be available to SeaChange on acceptable terms. If SeaChange incurs additional debt or raise equity through the issuance of preferred stock or convertible securities, the terms of the debt or the preferred stock issued may give the holders rights, preferences and privileges senior to those of holders of Class A common stock, including any shares of Class A common stock issuable upon conversion of the notes, particularly in the event of liquidation. The terms of the debt may also impose additional and more stringent restrictions on its operations. If SeaChange raises funds through the issuance of additional equity, the ownership percentage of its existing stockholders would be diluted.

Risks Related to the Notes

TrillerVerz will be a holding company and its ability to repay its debt, including the notes, depends on the amount of cash flow generated by its subsidiaries, and the ability of its subsidiaries to generate cash flow depends on many factors beyond its control, including the effects of COVID-19.

TrillerVerz will be a holding company and substantially all of its operations are conducted through its subsidiaries. Accordingly, repayment of its indebtedness, including the notes, will be dependent on the generation of cash flow by its subsidiaries and their ability to make such cash available to TrillerVerz by dividend, debt repayment or otherwise. The ability of TrillerVerz and its subsidiaries to generate cash flow will be subject to general economic, financial, competitive, regulatory and other factors, including factors that are beyond the control of TrillerVerz and its subsidiaries (such as the effects of COVID-19). Payments to TrillerVerz by its subsidiaries will be contingent upon its subsidiaries’ earnings. In addition, the ability of TrillerVerz’s subsidiaries to pay dividends and make other payments to TrillerVerz will be restricted by, among other things, applicable corporate and other laws and regulations as well as agreements to which TrillerVerz’s subsidiaries are currently or may in the future become a party or otherwise bound. In the event that TrillerVerz is unable to receive distributions or other payments from subsidiaries, it may be unable to make required principal and interest payments on its indebtedness, including the notes.

TrillerVerz and its subsidiaries may still be able to incur substantially more indebtedness, which could further exacerbate the risks associated with its leverage and the ownership of the notes.

As of December 31, 2021, after giving effect to this offering, TrillerVerz and its subsidiaries would have had total consolidated indebtedness of approximately $85.1 million, of which $75 million would have been senior secured indebtedness (including the notes).

Additionally, TrillerVerz may incur substantial additional debt in the future, including secured debt, subject to the restrictions contained in its debt instruments. In addition, the indenture that will govern the notes offered hereby will not restrict TrillerVerz or its subsidiaries from incurring additional debt, and such debt incurred in the future may be substantial.

Although the indenture that will govern the notes offered hereby will contain restrictions on the incurrence of additional indebtedness, these restrictions will be subject to a number of qualifications and exceptions, and the indebtedness that may be incurred in compliance with these restrictions could be substantial. Furthermore, these restrictions will not prevent TrillerVerz from incurring obligations, such as trade payables, that do not constitute indebtedness as will be defined in such indenture. The indenture that will govern the notes will permit

 

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TrillerVerz and the guarantors to obtain up to $[•] million in aggregate commitments under Working Capital Facilities and up to $[●] million in aggregate commitments under Promotional Credit Lines. If TrillerVerz incurs additional indebtedness above the levels that will be in effect at the closing of the merger, the risks associated with its leverage and the ownership of the notes, including those described above, would increase.

Recourse to TrillerVerz will be limited.

Holders of notes will have no recourse to any assets of TrillerVerz, other than any such assets constituting Collateral (as defined in “Description of Notes—Security”), for the payment of principal of or interest on the notes. Following an event of default and an acceleration of the notes, noteholders will have recourse to TrillerVerz only to the extent of the Collateral owned by TrillerVerz.

The notes and each guarantee will be structurally subordinated to the liabilities and any preferred stock of the non-guarantors.

Generally, claims of creditors of a non-guarantor, including trade creditors, and claims of preference shareholders (if any) of the non-guarantor, will have priority with respect to the assets and earnings of the non-guarantor over the claims of creditors of its parent entity, including claims by holders of the notes under the guarantees. In the event of any foreclosure, dissolution, winding-up, liquidation, reorganization, administration or other bankruptcy or insolvency proceeding of any of TrillerVerz’s subsidiaries that do not guarantee the notes, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to its parent entity. As such, the notes and each guarantee will each be structurally subordinated to the creditors (including trade creditors) and preference shareholders (if any) of its non-guarantor subsidiaries.

As of [•], 2022, after giving effect to the offering, TrillerVerz’s non-guarantor subsidiaries would have held approximately [•]% of its consolidated liabilities, which includes its consolidated indebtedness and trade and other payables but excludes intercompany liabilities. The provisions of the indenture that will govern the notes will permit its non-guarantor subsidiaries to incur additional indebtedness or issue preferred equity and will not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by such subsidiaries. During the six months ended [•], 2022, TrillerVerz’s non-guarantor subsidiaries represented approximately [•]% of total revenues, after excluding intercompany transactions and balances. As of [•], 2022, TrillerVerz’s non-guarantor subsidiaries held approximately [•]% of its consolidated assets, excluding intangible assets, and [•]% of its consolidated liabilities.

The indenture that will govern the notes offered hereby will impose significant operating and financial restrictions on TrillerVerz and its restricted subsidiaries, which may prevent it from capitalizing on business opportunities.

The indenture that will govern the notes offered hereby will impose significant operating and financial restrictions on us. These restrictions limit its ability and the ability of its restricted subsidiaries to, among other things:

 

•

incur or guarantee additional indebtedness or issue disqualified stock or preferred stock;

 

•

pay dividends and make other distributions on, or redeem or repurchase, capital stock, prepay, redeem or repurchase certain debt or make certain loans or investments (including acquisitions);

 

•

incur certain liens;

 

•

consolidate, merge, sell or otherwise dispose of all or substantially all of its assets (including by division);

 

•

transfer, sell or otherwise dispose of assets;

 

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•

enter into certain transactions with its affiliates;

 

•

enter into agreements that restrict the ability of restricted subsidiaries to make dividends or other payments to TrillerVerz or the guarantors; and

 

•

designate restricted subsidiaries as unrestricted subsidiaries or designate unrestricted subsidiaries as restricted subsidiaries.

As a result of these restrictions, TrillerVerz will be limited as to how it conducts its business and it may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness it may incur could include more restrictive covenants. These covenants and other restrictions may limit its ability to effectively operate its business, and to execute its growth strategy or take advantage of new business opportunities. These covenants and restrictions may include minimum liquidity covenants, certain financial ratios, which may apply in certain circumstances, and other restrictions. TrillerVerz’s ability to meet the liquidity thresholds and those financial ratios can be affected by events beyond its control. TrillerVerz may not be able to maintain compliance with these covenants in the future and, if it fails to do so, it may not be able to obtain waivers from the lenders and/or amend these covenants and restrictions.

Its failure to comply with the restrictive covenants described above as well as the terms of any other future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in its being required to repay any such indebtedness before the applicable due date. If TrillerVerz is forced to refinance these borrowings as a result of the foregoing or otherwise, on less favorable terms, or if it cannot refinance such indebtedness, its results of operations and financial condition could be adversely affected.

The security interests in the Collateral will not be directly granted to the holders of the notes.

The security interests in the Collateral that will secure, among other obligations, the obligations of TrillerVerz under the notes and the guarantors under the guarantees will not be granted directly to the holders of the notes, but will be granted only in favor of the collateral agent on behalf of the trustee and the holders of the notes in accordance with the indenture that will govern the notes. The holders of the notes will not have direct security interests and will not be entitled to take enforcement action in respect of the Collateral securing the notes, except through the trustee, who will (subject to the provisions of the indenture) provide instructions to the collateral agent in respect of the Collateral.

It may be difficult to realize the value of the Collateral securing the notes, and the ability of the collateral agent to enforce certain of the Collateral may be restricted.

The Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the indenture that will govern the notes, whether on or after the date the notes are first issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral as well as the ability of the collateral agent to realize or foreclose on such Collateral. Furthermore, the ranking of security interests can be affected by a variety of factors, including the timely satisfaction of perfection requirements, statutory liens, certain statutory preferences or recharacterization under the laws of certain jurisdictions.

The security interests of the collateral agent are subject to practical problems generally associated with the realization of security interests in the Collateral securing the notes. For example, the collateral agent may need to obtain the consent or approval of a third party to enforce a security interest in a contract or to transfer or sell certain assets. TrillerVerz cannot assure holders of notes that the collateral agent will be able to obtain any such consents or approvals. TrillerVerz also cannot assure holders of notes that the consents or approvals of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the collateral agent may not have the ability to foreclose upon those assets and the value of the Collateral securing the notes may significantly decrease.

 

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The Collateral may not be sufficient to secure the obligations under the notes.

The Collateral may secure additional debt to the extent permitted by the terms of the indenture that will govern the notes and there may not be sufficient value in the Collateral to repay the amounts due under the notes. The rights of holders of notes to the Collateral would be further diluted by any increase in the debt secured by the relevant Collateral or a reduction of the Collateral securing the notes. All Collateral shall be subject to the permitted security interests as described in “Description of Notes—Security” and certain of its assets are not part of the Collateral.

The value of the Collateral and the amount to be received upon a sale of such Collateral will depend upon many factors, including, among others, the ability to sell the Collateral in an orderly sale, whether or not the business is sold as a going concern, the condition of the economies in which operations are located and the availability of buyers. The book value of the Collateral should not be relied on as a measure of realizable value for such assets. No appraisals of any of the Collateral have been prepared by TrillerVerz or on its behalf in connection with the offering. The fair market value of the Collateral is subject to fluctuations based on factors that include, among others, its ability to implement its business strategy, whether or not the business is sold as a going concern, the ability to sell the Collateral in an orderly sale, general economic conditions, the availability of buyers, whether any approvals required to purchase the business would be available to a potential buyer and other factors. Hence, the amount to be received upon a sale of any Collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the Collateral at such time, general market and economic conditions and the timing and the manner of the sale. All or a portion of the Collateral may be illiquid and may have no readily ascertainable market value. Likewise, TrillerVerz cannot assure holders of notes that there will be a market for the sale of the Collateral, or, if such a market exists, that there will not be a substantial delay in its liquidation. In addition, the share pledges of an entity may be of no value if that entity is subject to an insolvency or bankruptcy proceeding.

The Collateral may be released in connection with an enforcement sale and certain disposals pursuant to the indenture that will govern the notes.

There also can be no assurance that the Collateral will be sellable and, even if sellable, the timing of any liquidation or foreclosure is uncertain. To the extent that liens, rights or easements granted to third parties encumber assets owned by TrillerVerz, such as liens resulting from consignment agreements with its suppliers and retention rights, such third parties have or may exercise rights and remedies with respect to the property subject to such liens that could materially adversely affect the value of the Collateral and the ability of the collateral agent to realize or foreclose on the Collateral. By the nature of its business, some or all of the Collateral may be illiquid and may have no readily ascertainable market value.

In the event that a bankruptcy case is commenced by or against TrillerVerz, if the value of the Collateral is less than the amount of principal and accrued and unpaid interest on the notes and other senior secured obligations, interest may cease to accrue on the notes from and after the date the bankruptcy petition is filed. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, TrillerVerz cannot assure holders of notes that the proceeds from any sale or liquidation of the Collateral will be sufficient to pay the obligations due under the notes. If the proceeds of any enforcement (including, where applicable, a sale) of Collateral are not sufficient to repay all amounts due on the notes (to the extent not repaid from the proceeds of the sale of the Collateral), holders of notes would only have a senior unsecured claim against TrillerVerz’s and the guarantors’ remaining assets.

The indenture that will govern the notes will also permit the existence or the granting of certain liens other than those in favor of the holders of the notes on the Collateral, such as certain preexisting or statutory liens. Holders of such other secured indebtedness may have rights and remedies which, if exercised, could reduce the proceeds available to satisfy its obligations under the notes.

 

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The notes will be secured only to the extent of the value of the assets that have been granted as Collateral.

The notes will be secured only by the Collateral described in this proxy statement/prospectus. See “Description of Notes—Security.” To the extent that the claims of the holders of the notes and any other indebtedness secured on a pari passu basis with the notes on the Collateral exceed the value of the Collateral, such holders will not have recourse to TrillerVerz and, as a result, the claims of the holders of the notes may not be satisfied in full before the claims of certain unsecured creditors are paid.

The grant of Collateral to secure the notes might be challenged or voidable in an insolvency proceeding, and the delivery of security interests in Collateral or any guarantees after the closing of the merger increases the risk that the security interests of such guarantees could be avoidable in bankruptcy.

The grant of Collateral in favor of the collateral agent may be voidable by the grantor or by an insolvency liquidator, receiver or administrator or by other creditors, or may be otherwise set aside by a court, or be unenforceable if certain events or circumstances exist or occur, including, among others, if the grantor is deemed to be insolvent at the time of the grant, or if the grant permits the secured parties to receive a greater recovery than if the grant had not been given and an insolvency proceeding in respect of the grantor is commenced within a legally specified “clawback” period following the grant.

A significant portion of TrillerVerz’s assets, and the assets of its subsidiaries that have granted a lien to secure the notes, are located outside the U.S. Because of its international corporate structure, it may be difficult or impossible for holders of notes to enforce their rights or the note guarantees in non-U.S. jurisdictions.

A significant portion of TrillerVerz’s assets, and the assets of its subsidiaries that have granted a lien to secure the notes, are located outside the U.S. In addition, some of its and such subsidiaries’ respective directors and officers may reside outside of the United States, and may have all or a substantial portion of their assets located outside of the United States. As such, it may be difficult to effect service of process in the United States on TrillerVerz, such subsidiaries or its and their respective directors and officers not resident in the United States or to enforce in non-U.S. jurisdictions judgments obtained against TrillerVerz, such subsidiaries or its and their respective directors and officers in a U.S. court.

In addition, there may be similar or additional limitations on the enforceability of judgments of U.S. courts in the other non-U.S. jurisdictions where its subsidiary guarantors or their assets are located or its subsidiary guarantors’ directors and officers reside.

The claims of the holders of the notes are effectively subordinated to the rights of its future secured creditors to the extent of the value of the assets securing such indebtedness which do not constitute Collateral.

The notes will only be secured by the Collateral. In the event of any foreclosure, dissolution, winding-up, liquidation, administration, reorganization, or other insolvency or bankruptcy proceeding, the proceeds from the sale of non-Collateral assets securing any indebtedness will be available to pay obligations on the notes only after all such secured indebtedness (including claims preferred by operation of law) has been paid in full. As a result, holders of notes may receive less, ratably, than holders of indebtedness secured by assets that do not constitute Collateral.

There will be circumstances other than repayment or discharge of the notes under which the Collateral securing the notes and the guarantees will be released automatically and under which the guarantees will be released automatically, without the consent of holders of notes or the consent of the trustee.

Under various circumstances, the guarantees and the Collateral securing the notes will be automatically and unconditionally released. The ability of holders of notes to recover on the notes could be materially impaired in such circumstances. See “Description of Notes—Security—Release of Collateral.”

 

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TrillerVerz and the guarantors will have control over the Collateral and the sale of particular assets could reduce the pool of assets securing the notes.

The security documents will, subject to the terms of the indenture that will govern the notes and other secured indebtedness incurred from time to time, allow TrillerVerz and the guarantors to remain in possession of, retain exclusive control over, freely operate, and collect, invest and dispose of any income from the Collateral to the extent it relates to their assets. So long as no enforcement event has occurred or would result therefrom, TrillerVerz and the guarantors may, among other things, without any release or consent by the collateral agent, conduct ordinary course activities with respect to the Collateral, such as selling, modifying or otherwise disposing of Collateral and making ordinary course cash payments, including repayments of indebtedness. Any of these activities could reduce the value of the Collateral, which could reduce the amounts payable to holders of notes from the proceeds of any sale of the Collateral in the case of an enforcement of the liens on the Collateral.

The rights of holders of notes in the Collateral may be adversely affected by the failure to perfect security interests in the Collateral.

Under applicable law, a security interest in certain tangible and intangible assets will only be properly perfected, and its priority retained, through certain actions undertaken by the secured party or the grantor, as applicable, of the security. The liens on the Collateral securing the notes may not be perfected with respect to the claims of the notes if TrillerVerz or the collateral agent fail or are unable to take the actions TrillerVerz is or it is required, as the case may be, to take to perfect any of these liens. In addition, applicable law requires that certain property and rights acquired after the grant of a general security interest, such as real property, equipment subject to a certificate and certain proceeds, can only be perfected at, or promptly following, the time such property and rights are acquired and identified.

The trustee and the collateral agent for the notes will not monitor, or TrillerVerz may not comply with its obligations to inform the trustee or collateral agent of, any future acquisition of property and rights by it, and the necessary action may not be taken to properly perfect the security interest in such after-acquired property or rights. Such failure may result in the invalidity of the security interest in the Collateral or adversely affect the priority of the security interest in favor of the notes against third parties. Neither the trustee nor the collateral agent will have any obligation to monitor the acquisition of additional property or rights by it and neither has any obligation to monitor the perfection of, or make any filings to perfect or maintain the perfection of, any security interest.

Federal and state fraudulent conveyance or fraudulent transfer laws permit a court, under certain circumstances, to avoid the notes and the guarantees and the related security interests, subordinate claims in respect of the notes and the guarantees and/or require holders of the notes to return payments received from it in respect of the guarantees and, if that occurs, holders of notes may not receive any payments on the notes.

The issuance of the notes and the guarantees may be subject to review under federal and state fraudulent conveyance and fraudulent transfer statutes (including federal bankruptcy laws) if an action (either in connection with a bankruptcy, liquidation or reorganization case or under a lawsuit in which a bankruptcy is not involved) were commenced at some future date by TrillerVerz, by the guarantors or on behalf of its unpaid creditors or the unpaid creditors of a guarantor. While the relevant laws may vary from jurisdiction to jurisdiction, the incurrence of the obligations in respect of the notes and the guarantees will generally be a fraudulent conveyance or a fraudulent transfer if (i) the transactions relating to the issuance of the notes or guarantees were undertaken with the intent of hindering, delaying or defrauding other creditors or (ii) TrillerVerz or any of the guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for issuing either the notes or a guarantee and, in the case of (ii) only, any one of the following is also true:

 

•

TrillerVerz or any of the guarantors was insolvent or rendered insolvent by reason of issuing the notes or the guarantees;

 

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•

the issuance of the notes or guarantees left TrillerVerz or any of the guarantors with an unreasonably small amount of capital to carry on the business in which such TrillerVerz or such guarantor was engaged or about to engage; or

 

•

any of TrillerVerz or the guarantors intended to, or believed that TrillerVerz or it would, incur indebtedness beyond its or their ability to pay as they become due.

If a court were to find that the issuance of the notes or a guarantee was a fraudulent conveyance or fraudulent transfer, the court could avoid the payment obligations under the notes or such guarantee and the related security interests in total or in part or further subordinate the notes or such guarantee to presently existing and future indebtedness of TrillerVerz or such guarantor, or require the holders of the notes to repay any amounts received with respect to the notes or such guarantee. In the event of a finding that a fraudulent conveyance or a fraudulent transfer occurred, holders of notes may not receive any repayment on the notes. Further, the avoidance of the notes could result in an event of default with respect to its future indebtedness and that of the guarantors that could result in the acceleration of such indebtedness.

The measures of insolvency for purposes of fraudulent conveyance or fraudulent transfer laws vary depending upon the law of the jurisdiction that is being applied, such that TrillerVerz cannot be certain as to: the standards a court would use to determine whether or not TrillerVerz or the guarantors were solvent at the relevant time, or, regardless of the standard that a court uses, that it would not determine that TrillerVerz or a guarantor was indeed insolvent on that date; that any payments to the holders of the notes (including under the guarantees) did not constitute preferences, fraudulent conveyances or fraudulent transfers on other grounds; or that the issuance of the notes and the guarantees would not be subordinated to TrillerVerz’s or any guarantor’s other indebtedness.

Generally, an entity would be considered insolvent if, at the time it incurred indebtedness:

 

•

the sum of its indebtedness, including contingent liabilities, was greater than the fair value of all its assets;

 

•

the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing indebtedness and liabilities, including contingent liabilities, as they become absolute and mature; or

 

•

it could not pay its debts as they become due.

As a general matter, value is given for a transfer or an obligation if, in exchange for the transfer or obligation, property is transferred or a valid antecedent indebtedness is satisfied. A court would likely find that TrillerVerz or a guarantor did not receive reasonably equivalent value or fair consideration for the notes or such guarantee or the related security interest if such TrillerVerz or such guarantor did not substantially benefit directly or indirectly from the issuance of the notes or the applicable guarantee or the grant of the security interests. Thus, if the guarantees were legally challenged, any guarantee could be subject to the claim that, since the guarantee was incurred for TrillerVerz’s benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than reasonably equivalent value or fair consideration. Therefore, a court could avoid the obligations under the guarantees, subordinate them to the applicable guarantor’s other indebtedness or take other action detrimental to the holders of the notes, including avoiding the related security interests.

To the extent a court avoids any of the guarantees as fraudulent conveyances or fraudulent transfers or holds any of the guarantees unenforceable for any other reason, the holders of notes would cease to have any direct claim against the applicable guarantor. If a court were to hold a guarantee unenforceable, the applicable guarantor’s assets would be applied first to satisfy the applicable guarantor’s other liabilities, if any, and might not be applied to the payment of the guarantee of the notes. Sufficient funds to repay the notes may not be available from other sources, including the remaining guarantors, if any. In addition, the court might direct holders of notes to repay any amounts that they already received from TrillerVerz or the applicable guarantor.

 

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Although each guarantee entered into in connection with the notes will contain a provision intended to limit that guarantor’s liability to the maximum amount that it could incur without causing the incurrence of obligations under its guarantee to be a fraudulent conveyance or fraudulent transfer, this provision may not be effective as a legal matter to protect those guarantees from being avoided under fraudulent conveyance or fraudulent transfer law or otherwise, or may reduce that guarantor’s obligation to an amount that effectively makes its guarantee worthless.

In addition, as noted above, any payment by TrillerVerz pursuant to the notes or by a guarantor under a guarantee made at a time such TrillerVerz or such guarantor was found to be insolvent could be avoided and required to be returned to TrillerVerz or such guarantor or to a fund for the benefit of TrillerVerz’s or such guarantor’s creditors if such payment is made to an insider within a one-year period prior to a bankruptcy filing or within 90 days for any non-insider party and such payment would give such insider or non-insider party (as the case may be) more than such creditor would have received in a distribution under the United States Bankruptcy Code in a hypothetical case under Chapter 7 of Title 11 of the United States Bankruptcy Code.

Finally, as a court of equity, the bankruptcy court may otherwise subordinate the claims in respect of the notes or the guarantees or the related security interests to other claims against TrillerVerz or the guarantors under the principle of “equitable subordination,” if the court determines that: (i) the holder of the notes engaged in some type of inequitable conduct; (ii) such inequitable conduct resulted in injury to its other creditors or conferred an unfair advantage upon the holder of the notes; and (iii) equitable subordination is not inconsistent with the provisions of the United States Bankruptcy Code.

If TrillerVerz becomes the subject of a bankruptcy proceeding, bankruptcy laws may limit the ability of holders of notes to realize value from the Collateral.

The right of the collateral agent to foreclose upon, repossess, and dispose of the Collateral upon the occurrence of an event of default under the indenture that will govern the notes is likely to be significantly impaired by applicable bankruptcy law if a bankruptcy case were to be commenced by or against it before the collateral agent repossessed and disposed of the Collateral (and sometimes even after). Upon the commencement of a case under the United States Bankruptcy Code, a secured creditor such as the collateral agent is prohibited from repossessing its security from a debtor in a bankruptcy case, or from disposing of security previously repossessed from such debtor, without prior bankruptcy court approval, which may not be given or could be materially delayed. Moreover, the United States Bankruptcy Code permits the debtor to continue to retain and use collateral even though the debtor is in default under the applicable debt instruments, provided that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to circumstances, but it is intended in general to protect the value of the secured creditor’s interest in the collateral as of the commencement of the bankruptcy case and may include cash payments or the granting of additional or replacement security or superpriority administrative expense claims if and at such times as the bankruptcy court in its discretion determines that the value of the secured creditor’s interest in the collateral is declining during the pendency of the bankruptcy case. A bankruptcy court may determine that a secured creditor may not require compensation for any such diminution in the value of its collateral if the value of the collateral exceeds the debt it secures.

In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary power of a bankruptcy court, it is impossible to predict:

 

•

whether or when payments under the notes could be made following the commencement of a bankruptcy case, or the length of any delay in making such payments;

 

•

whether or when the collateral agent could repossess or dispose of the Collateral;

 

•

the value of the Collateral at the time of the bankruptcy petition or any other relevant time; or

 

•

whether or to what extent holders of the notes would be compensated for any delay in payment or loss of value of the Collateral through the requirement of “adequate protection.”

 

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Any disposition of the Collateral during a bankruptcy case would also require permission from the bankruptcy court (which may not be given or could be materially delayed). Furthermore, in the event a bankruptcy court determines the value of the Collateral is not sufficient to repay all amounts due on debt which is to be paid first out of the proceeds of the Collateral, the holders of the notes would hold a secured claim only to the extent of the value of the Collateral to which the holders of the notes are entitled and unsecured “deficiency” claims with respect to any shortfall or under-collateralization. The United States Bankruptcy Code only permits the payment and accrual of post- petition interest, costs and attorneys’ fees to a secured creditor during a debtor’s bankruptcy case to the extent the value of its collateral is determined by the bankruptcy court to exceed the aggregate outstanding principal amount of the obligations secured by the collateral.

Because each guarantor’s liability under its guarantees may be reduced to zero, avoided or released under certain circumstances, the holders of the notes may not receive any payments from some or all of the guarantors.

Holders of the notes have the benefit of the guarantees of the guarantors. However, the guarantees by the guarantors are limited to the maximum amount that the guarantors are permitted to guarantee under applicable law. As a result, a guarantor’s liability under its guarantee could be reduced to zero, depending upon (among other things) the amount of other obligations of such guarantor. Further, under the circumstances discussed more fully above, a court under federal or state fraudulent conveyance and fraudulent transfer statutes could avoid the obligations under a guarantee (and any related security interest) or further subordinate it to all other obligations of the guarantor. See “—Federal and state fraudulent conveyance or fraudulent transfer laws permit a court, under certain circumstances, to avoid the notes and the guarantees, subordinate claims in respect of the notes and the guarantees and/or require holders of the notes to return payments received from it in respect of the guarantees and, if that occurs, holders of notes may not receive any payments on the notes.” In addition, holders of notes will lose the benefit of a particular guarantee if it is released under certain circumstances described under “Description of Notes—Subsidiary Guarantees.”

TrillerVerz is able to enter into transactions such as recapitalizations, reorganizations and other highly leveraged transactions that could adversely affect the holders of the notes.

Certain important corporate events, such as leveraged recapitalizations, could increase the level of its indebtedness or otherwise adversely affect its capital structure, credit ratings or the value of the notes. TrillerVerz could, in the future, enter into certain transactions, including acquisitions, reorganizations, refinancings or other recapitalizations, that could increase the amount of indebtedness outstanding at such time or otherwise affect its capital structure or credit ratings.

TrillerVerz may be unable to repay or repurchase the notes at maturity.

At maturity, the entire outstanding principal amount of the notes, together with accrued and unpaid interest, if any, will become due and payable. TrillerVerz may not have the funds to fulfill these obligations or the ability to renegotiate these obligations. If, upon the maturity date, other arrangements prohibit it from repaying the notes, TrillerVerz could try to obtain waivers of such prohibitions from the lenders and holders under those arrangements, or it could attempt to refinance the borrowings that contain the restrictions. In these circumstances, if TrillerVerz were not able to obtain such waivers or refinance these borrowings, TrillerVerz would be unable to repay the notes.

An active trading market may not develop for the notes.

An active trading market may not develop for the notes. TrillerVerz does not intend to apply for listing of the notes on any securities exchange or on any automated dealer quotation system.

The liquidity of, and trading market for, the notes may also be adversely affected by, among other things:

 

•

changes in the overall market for securities similar to the notes;

 

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•

changes in its financial performance or prospects;

 

•

the prospects for companies in its industry generally;

 

•

the number of holders of the notes;

 

•

the interest of securities dealers in making a market for the notes;

 

•

the conditions of the financial markets; and

 

•

prevailing interest rates.

The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the notes.

Volatile trading prices may require holders of notes to hold the notes for an indefinite period of time.

If a market develops for the notes, the notes may trade at prices higher or lower than their face amount. The trading price would depend on many factors, such as prevailing interest rates, the market for similar securities, general economic conditions and its financial condition, performance and prospects. The market, if any, for any of the notes may not be free from disruptions that have caused substantial volatility in the prices of securities that are similar to the notes, and any such disruptions may adversely affect the prices at which holders of notes may sell their notes. In addition, subsequent to their initial issuance, the notes may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar notes, its performance, and other factors. Disruptions of this type could have an adverse effect on the price of the notes. Holders of notes should be aware that they may be required to bear the financial risk of an investment in the notes for an indefinite period of time.

A lowering or withdrawal of any ratings that may be assigned to its debt securities by rating agencies may adversely affect the market price or liquidity of the notes.

Credit rating agencies continually revise their ratings for the companies that they follow, which could include us. Credit rating agencies also evaluate its industry as a whole and may change their credit ratings for TrillerVerz based on their overall view of its industry. Consequently, any real or anticipated changes in its credit ratings will generally affect the market value of the notes. Such rating may not remain for any given period of time or be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Credit ratings are not recommendations to purchase, hold or sell the notes, and may be revised or withdrawn at any time. Additionally, credit ratings may not reflect the potential effect of risks relating to the structure or marketing of the notes. If a credit rating is assigned to the notes and if the credit rating of the notes is subsequently lowered or withdrawn for any reason, holders of notes may not be able to resell their notes without a substantial discount.

Any credit rating or future lowering of its ratings likely would make it more difficult or more expensive for it to obtain additional debt financing. If any credit rating initially assigned to the notes is subsequently lowered or withdrawn for any reason, holders of notes may not be able to resell their notes at a favorable price or at all.

The notes will initially be held in book-entry form, and therefore holders must rely on the procedures of the relevant clearing systems to exercise their rights and remedies.

Unless and until certificated notes are issued in exchange for book-entry interests in the notes, owners of the book-entry interests will not be considered owners or holders of notes. Instead, The Depository Trust Company, or DTC, or its nominee, will be the sole holder of the notes. Payments of principal, interest and other amounts owing on or in respect of the notes in global form will be made to the paying agent, which will make payments to DTC. Thereafter, such payments will be credited to DTC participants’ accounts that hold book-entry interests in

 

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the notes in global form and credited by such participants to indirect participants. Unlike holders of the notes themselves, owners of book-entry interests will not have the direct right to act upon its solicitations for consents or requests for waivers or other actions from holders of the notes. Instead, if a holder owns a book-entry interest, such holder will be permitted to act only to the extent such holder has received appropriate proxies to do so from DTC or, if applicable, a participant. TrillerVerz cannot assure holders that the procedures implemented for the granting of such proxies will be sufficient to enable holders to vote on any requested actions on a timely basis.

TrillerVerz will have the right to redeem notes, subject to holders’ ability to convert such notes, at a redemption price equal to 100% of the principal amount of the notes.

Subject to the right of holders of notes to convert their notes into shares of Class A common stock (as defined in “Description of Notes—Certain Definitions”), upon not less than 10 days nor more than 60 days prior notice, TrillerVerz will have the right to redeem all or any part of the notes at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest, if any, to (but excluding) the redemption date, subject to the rights of the holders of the notes on the relevant record date to receive interest on the relevant interest payment date. As a result of this redemption right, in the future TrillerVerz may redeem some of the notes held by holders at a price that is less than the then present fair market value of such notes and less than the price otherwise applicable to an optional redemption of such notes.

The limited and automatic conversion features of the notes could result in holders of notes receiving less than the value of Class A common stock into which the notes would otherwise be convertible.

The notes will automatically convert upon TrillerVerz achieving a certain implied value based on its market capitalization, which may be affected by events for which the conversion rate of the notes will not be adjusted. As a result, holders of notes may not be able to receive the value of the shares of Class A common stock into which the notes would otherwise be convertible or may receive Class A common stock having a value of less than the face amount of the notes being converted. Therefore, holders of notes may not be able to realize the appreciation, if any, in the value of Class A common stock after the issuance of the notes in the offering and prior to such date. In addition, the inability to freely convert and the automatic conversion may also adversely affect the trading price of the notes and the ability of holders of notes to sell the notes.

Holders of notes will bear the risk of a decline in the market price of Class A common stock between the date they exercise their conversion rights and the date that TrillerVerz settles its conversion obligations.

Under the notes, a converting holder will be exposed to fluctuations in the value of Class A common stock during the period from the date such holder surrenders notes for conversion until the date TrillerVerz settles its conversion obligation. The number of shares of Class A common stock that holders of notes would receive upon conversion of the notes is not fixed, but instead will be determined by the Conversion Rate, as adjusted from time to time following certain occurrences as set forth in the indenture that will govern the notes. See “Description of Notes—Conversion—General.”

In lieu of fractional shares of Class A common stock issuable upon conversion, TrillerVerz will deliver, based on the Daily VWAP (as defined in “Description of Notes—Certain Definitions”) for the relevant trading period, on the third business day immediately following the relevant conversion date, the consideration due in respect of conversion. See “Description of Notes—Conversion Rights—Settlement upon Conversion.”

The adjustment to the conversion rates for notes converted in connection with a Share Exchange Event may not adequately compensate holders of notes for any lost option value of their notes as a result of such transaction.

If a Share Exchange Event occurs prior to the maturity date, under certain circumstances, TrillerVerz may adjust the conversion rate by a number of additional shares of Class A common stock for notes converted in connection with such Share Exchange Event. The adjustment in the conversion rate will be determined based on the type of

 

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the specified Share Exchange Event, the date on which the specified Share Exchange Event becomes effective, and other factors as described under “Description of Notes—Conversion—Conversion Rate Adjustments” and “Description of Notes—Conversion—Share Exchange Event.”

The adjustment to the conversion rate for notes converted in connection with a make-whole fundamental change may not adequately compensate holders of notes for any lost option value of their notes as a result of such event.

Furthermore, the definition of Share Exchange Event is limited to certain specific transactions. Accordingly, the provisions of the indenture will not protect holders from other transactions that could significantly reduce the option value of the notes. For example, a spin-off or sale of a subsidiary or business division with volatile

earnings, or a change in its line of business, could significantly affect the trading characteristics of Class A common stock and reduce the option value of the notes without constituting a Share Exchange Event that results in a temporary adjustment to the conversion rate.

Its obligation to adjust the conversion rates in connection with a Share Exchange Event could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness and equitable remedies.

The conversion rates of the notes may not be adjusted for all dilutive events that may adversely affect the market price of the notes or the Class A common stock issuable upon conversion of the notes.

The conversion rate of the notes is subject to adjustment only for issuances of stock dividends on Class A common stock, issuances of certain rights, options or warrants to holders of Class A common stock, certain distributions of capital stock, indebtedness, or assets to holders of Class A common stock, cash dividends, and certain issuer tender or exchange offers as described under “Description of Notes—Conversion—Conversion Rate Adjustments.” However, other events, such as issuances of equity for value, employee stock option grants or third-party tender or exchange offers, which may adversely affect the market price of Class A common stock, may not result in any adjustment. In addition, the terms of the notes do not restrict its ability to offer Class A common stock or securities convertible into Class A common stock in the future or to engage in other transactions that could dilute Class A common stock. TrillerVerz has no obligation to consider the specific interests of the holders of the notes in engaging in any such offering or transaction.

Recent and future regulatory actions and other events regarding short selling activity may adversely affect the trading price and liquidity of the notes.

TrillerVerz expects that many investors in, and potential purchasers of, the notes will employ, or seek to employ, a convertible arbitrage strategy with respect to the notes. Investors would typically implement such a strategy by selling short the Class A common stock underlying the notes and dynamically adjusting their short position while continuing to hold the notes. Investors may also implement this type of strategy by entering into swaps on Class A common stock in lieu of or in addition to short selling the Class A common stock. As a result, any specific rules regulating equity swaps or short selling of securities or other governmental action that interferes with the ability of market participants to effect short sales or equity swaps with respect to Class A common stock could adversely affect the ability of investors in, or potential purchasers of, the notes to conduct a convertible arbitrage strategy with respect to the notes. This could, in turn, adversely affect the trading price and liquidity of the notes.

The SEC and other regulatory and self-regulatory authorities have implemented various rules and taken certain actions, and may in the future adopt additional rules and take other actions, that may impact those engaging in short selling activity involving equity securities (including Class A common stock). Such rules and actions include Rule 201 of Commission Regulation SHO, which generally restricts short selling when the price of a “covered security” triggers a “circuit breaker” by falling 10% or more from the security’s closing price as of the end of regular trading hours on the prior day, the adoption by the Financial Industry Regulatory Authority, Inc.

 

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and the national securities exchanges of a “Limit Up-Limit Down” mechanism, which prevents trades in individual listed equity securities from occurring outside of specific price bands during regular trading hours, the imposition of market-wide circuit breakers that halt trading of securities for certain periods following specific market declines, and the implementation of certain regulatory reforms required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Any governmental or regulatory action that restricts the ability of investors in, or potential purchasers of, the notes, to effect short sales of Class A common stock, borrow Class A common stock, or enter into swaps on Class A common stock could adversely affect the trading price and liquidity of the notes.

Holders of notes will have no rights with respect to Class A common stock until they convert their notes, but they may be adversely affected by certain changes made with respect to Class A common stock.

Holders of notes will have no rights with respect to Class A common stock, including voting rights, rights to respond to Class A common stock tender offers, if any, and rights to receive dividends or other distributions on Class A common stock, if any, prior to the conversion date relating to such notes, but their investment in the notes may be negatively affected by these events. Upon conversion, holders of notes will be entitled to exercise the rights of a holder of Class A common stock only as to matters for which the record date occurs on or after the conversion date.

For example, in the event that an amendment is proposed to our certificate of incorporation or our bylaws requiring stockholder approval and the record date for determining the stockholders of record entitled to vote on the amendment occurs prior to the conversion date related to a holder’s conversion of the notes, holders of notes will not be entitled to vote on the amendment, although they will nevertheless be subject to any changes in the powers, preferences or special rights of Class A common stock.

Holders of notes may be subject to tax if TrillerVerz makes or fails to make certain adjustments to the conversion rate of the notes even though they do not receive a corresponding cash distribution.

The conversion rate of the notes is subject to adjustment in certain circumstances, including in the event that TrillerVerz pays cash dividends on Class A common stock. See “Description of Notes—Conversion—Conversion Rate Adjustments.” If, as a result of an adjustment, the proportionate interest of holders of notes in its assets or earnings and profits is increased, holders of notes may be deemed for U.S. federal income tax purposes to have received a distribution taxable as a dividend even though they would not have received any cash or property in connection with such adjustment. Similarly, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases the proportionate interest of holders of notes in it could be treated as a deemed taxable dividend to holders of notes for U.S. federal income tax purposes. In addition, if a Share Exchange Event occurs on or prior to the maturity date, under some circumstances, TrillerVerz will adjust the conversion rate for notes converted in connection with the Share Exchange Event, which may also be treated as a deemed taxable dividend to holders of notes for U.S. federal income tax purposes. For any holder of notes that is a non-U.S. holder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Considerations”), any deemed dividend generally will be subject to U.S. federal withholding tax (currently at a 30% rate, or such lower rate as may be specified by an applicable treaty), which may be withheld from subsequent payments on the notes or any Class A common stock received upon conversion thereof. See the section entitled “Certain Material U.S. Federal Income Tax Considerations” for a further discussion of U.S. federal income tax implications for investors in the notes.

Holders of notes may be subject to tax if we make or fail to make certain adjustments to the conversion rate of the notes even though they do not receive a corresponding cash distribution.

The conversion rate of the notes is subject to adjustment in certain circumstances, including in the event that we pay cash dividends on Class A common stock. See “Description of Notes—Conversion—Conversion Rate Adjustments.” If, as a result of an adjustment, the proportionate interest of holders of notes in its assets or

 

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earnings and profits is increased, holders of notes may be deemed for U.S. federal income tax purposes to have received a distribution taxable as a dividend even though they would not have received any cash or property in connection with such adjustment. Similarly, a failure to adjust (or to adjust adequately) the conversion rate after an event that increases the proportionate interest of holders of notes in TrillerVerz could be treated as a deemed taxable dividend to holders of notes for U.S. federal income tax purposes. In addition, if a Share Exchange Event occurs on or prior to the maturity date, under some circumstances, we will adjust the conversion rate for notes converted in connection with the Share Exchange Event, which may also be treated as a deemed taxable dividend to holders of notes for U.S. federal income tax purposes. For any holder of notes that is a non-U.S. holder (as defined in the section entitled “Certain Material U.S. Federal Income Tax Considerations”), any deemed dividend generally will be subject to U.S. federal withholding tax (currently at a 30% rate, or such lower rate as may be specified by an applicable treaty), which may be withheld from subsequent payments on the notes or any Class A common stock received upon conversion thereof. See the section entitled “Certain Material U.S. Federal Income Tax Considerations” for a further discussion of U.S. federal income tax implications for investors in the notes.

Sales of substantial amounts of Class A common stock in the public markets, or the perception that such sales could occur, could reduce the market price of Class A common stock.

Sales of a substantial number of shares of Class A common stock in the public market, or the perception that such sales could occur, could adversely affect the market price of Class A common stock. TrillerVerz is unable to predict the effect that such sales may have on the prevailing market price of Class A common stock. Sales of a substantial number of such shares, or the perception that such sales may occur, could cause its stock price to fall or make it more difficult for holders of notes to sell Class A common stock they receive upon conversion of the notes at a time and price that they deem appropriate.

TrillerVerz may issue Class A common stock or equity securities senior to Class A common stock in the future for a number of reasons, including to finance its operations and growth plans or to adjust its ratio of debt-to-equity. Future sales or issuances of shares of Class A common stock or other equity securities, or the availability of shares of Class A common stock or such other equity securities for future sale or issuance may negatively affect the trading price of Class A common stock. No prediction can be made as to the effect, if any, that future sales or issuance of shares of Class A common stock or other equity or equity-linked securities will have on the trading price of Class A common stock and, in turn, the notes.

Conversion of the notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their notes, or may otherwise depress the price of Class A common stock.

The conversion of some or all of the notes will dilute the ownership interests of existing stockholders to the extent TrillerVerz delivers shares of Class A common stock upon conversion of any of the notes. The notes may from time to time in the future be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the Class A common stock issuable upon such conversion could adversely affect prevailing market prices of Class A common stock. In addition, the existence of the notes may encourage short selling by market participants because the conversion of the notes could be used to satisfy short positions, or anticipated conversion of the notes into shares of Class A common stock could depress the price of Class A common stock.

Risks Related to Triller

Risks related to Triller Platform

If Triller’s efforts to attract users are not successful, its revenues will be affected adversely.

To succeed, Triller must continue to attract and retain users who have traditionally engaged cable channels, such as ESPN, HBO and Showtime, and pay-per-view and video-on-demand, or VOD, as well as internet media such

 

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as YouTube, TikTok and Netflix, for entertainment. Triller’s ability to attract and retain users will depend in part on its ability to consistently provide its users a high quality experience. Triller must also continue to attract and retain users who desire to leverage Triller’s platform to disseminate their content and interact with their followers and customers. If users in either category do not perceive Triller’s products to be of high quality, or if Triller introduces new products that are not favorably received by them, Triller may not be able to attract or retain users. Additionally, many of Triller’s users originate from word-of-mouth and referrals from existing users. If Triller’s efforts to satisfy its existing users are not successful, Triller may not be able to attract new users, and as a result, its revenue will be affected adversely.

If its users do not continue to view and/or contribute content or their contributions and/or the content they view are not perceived as valuable to other Triller users, Triller may experience a decline in user growth, retention, and engagement which could result in the loss of revenue.

Triller’s success depends on its ability to provide users with engaging content, which in part depends on user contributed content. If users, including influential users such as celebrities, athletes, journalists, sports teams, media outlets, and brands, do not continue to contribute engaging content to the Triller app and its other channels, its user growth, retention, and engagement may decline. That, in turn, may impair its ability to maintain good relationships with its advertisers or attract new advertisers, which may seriously harm its business and financial performance.

Triller must increase the scale and efficiency of its technology infrastructure to support its growth.

Triller’s technology must scale to process the increased usage of its platform. Triller must continue to increase the capacity of its platform to support its high-volume strategy, to cope with increased data volumes and parties and an increasing variety of advertising formats and platforms, and to maintain a stable service infrastructure and reliable service delivery. To the extent Triller is unable, for cost or other reasons, to effectively increase the capacity of its platform or support emerging advertising formats or services preferred by buyers, its revenue will suffer. Triller expects to continue to invest in its platform to meet increasing demand. Such investment may negatively affect its profitability and results of operations.

Triller may not be successful in its efforts to further monetize its platform, which may harm its business.

Triller generates platform revenue from content publishers, brand advertising campaigns and on a transactional basis from subscription and PPV purchases, and content transactions. As such, Triller is seeking to expand its user base and increase the number of hours that are streamed and the volume of content that is published across and from its platform in an effort to create additional revenue opportunities.

Triller’s ability to deliver more relevant content to its users and to increase its platform’s value to business users such as brands depends on the collection of user engagement data, which may be restricted or prevented by a number of factors. Users may decide to opt out or restrict some of its ability to collect personal data or to provide them with more relevant and sponsored content. Content publishers could refuse to allow Triller to collect data regarding user engagement or refuse to implement mechanisms it requests to ensure compliance with its legal obligations or technical requirements in some instances. If these possible scenarios occur to a large enough extent, it may not be able to achieve its expected growth in platform revenue or gross profit. If it is unable to further monetize its platform, its business may be harmed.

Changes in public and consumer tastes and preferences and industry trends and technology could reduce demand for Triller’s services and content offerings and adversely affect its business.

Triller’s ability to generate revenues is highly sensitive to rapidly changing consumer preferences and industry trends, as well as the popularity of the talent and brands it partners with and the assets it owns. Its success depends in part on its ability to generate commerce and offer premium content through popular channels of

 

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distribution that meet the changing preferences of the broad consumer market and respond to competition from an expanding array of choices facilitated by technological developments in the delivery of content. Its operations and revenues are affected by consumer tastes and entertainment trends, including consumer use of applications like the Triller app and FITE, and the market demand for live sports and music events, user-generated content generally, and internet-based brand engagement, each of which are unpredictable and may be affected by changes in the social and political climate or global issues such as the COVID-19 pandemic. Changes in consumers’ tastes or a change in the perceptions of Triller’s platform, content and business partners, whether as a result of the social, cultural or political climate or otherwise, could adversely affect its operating results. Triller’s failure to avoid a negative perception among consumers or anticipate and respond to changes in consumer preferences, including in the form of content creation or distribution, could result in reduced demand for its services and content offerings or those of its partners and owned assets across its platform, which could have an adverse effect on its business, financial condition and results of operations.

Consumer tastes change frequently and it is a challenge to anticipate what offerings will be successful at any point in time. Triller may invest in its content and owned assets, including in the creation of features for its platform and the production and distribution of original content, before learning the extent to which the platform and such content will achieve popularity with consumers. A lack of popularity of its platform, services, content offerings, or owned assets could have an adverse effect on its business, financial condition and results of operations.

Triller also must successfully adapt to and manage technological trends and advances in its industry. If Triller is unable to adopt or is late in adopting technological changes and innovations that other entertainment platforms offer, it may lead to a loss of consumers viewing its content, a reduction in revenues from brand partnerships, sponsorships, advertising, ticket sales, and merchandise sales. Triller must keep up with changing consumer behavior driven by advances that allow for time shifting and on-demand viewing, such as digital video recorders and video-on-demand, as well as internet-based and broadband content delivery and mobile devices. If Triller fails to adapt its distribution methods and content to emerging technologies and new distribution platforms, its ability to generate revenue from its targeted audiences may decline and could result in an adverse effect on its business, financial condition, and results of operations.

Failure to convince brands of the benefits of Triller’s platform in the future could harm its business.

Triller’s ability to attract and retain brands, and ultimately to generate advertising, sponsorship, and brand partnership revenue, depends on a number of factors, including: attracting and retaining the number of users; keeping current with changes in technology and competitors; delivering desirable content; competing effectively for advertising and sponsorship dollars from other online platforms as well as media companies; and continuing to develop and diversify its platform, which currently includes delivery in-app, live event sponsorships, and conversational AI technology.

Advertisers may view advertising, sponsorship, or partnership with Triller as experimental and unproven and may utilize competing alternatives at any time. Triller may never succeed in capturing a significant share of its advertisers’ core advertising spending, particularly if Triller is unable to achieve the scale and market penetration necessary to demonstrate the effectiveness of its platform, services and content offerings, or if its model proves ineffective or not competitive when compared to alternatives. Failure to demonstrate the value of its service would result in reduced spending by, or loss of, existing or potential future advertisers, which would materially harm its revenue and business.

 

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If there are interruptions or performance problems associated with the technology or infrastructure of Triller, including as a result of security breaches and other malicious attacks, users may experience service outages, new users may be reluctant to adopt Triller’s product offerings, users may leave its platforms, and its reputation could be harmed.

Triller’s business and continued growth rely, in part, on the ability of existing and potential users to access the Triller platform without interruption or degradation of performance. Triller has in the past and may in the future experience disruptions, outages, and other performance problems with its technology due to factors such as infrastructure changes, introductions of new functionalities, human or software errors, capacity constraints, or attacks by malicious third parties.

In some instances, Triller may not be able to identify the cause or causes of these performance problems immediately or in short order. Triller may not be able to maintain the level of service uptime and performance required by customers, especially during peak usage times and as its user traffic and number of integrations increase. If Triller’s platforms are unavailable or if users are unable to access these platforms within a reasonable amount of time (especially during live events), or at all, its business would be harmed. Since users on Triller rely on the Triller app to create and share social media content (including videos) and experience live event programming, any outage on Triller would negatively impact its brand, reputation, and customer satisfaction, and could give rise to legal liability under its service level agreements with paid customers.

Moreover, Triller depends on services from various third parties to maintain its infrastructure, including cloud-based infrastructure services. If a service provider fails to provide sufficient capacity to support Triller or otherwise experiences service outages, such failure could interrupt access to Triller by users and organizations, which could adversely affect their perception of Triller’s reliability and its revenue. Any disruptions in these services, including as a result of actions outside of its control, would significantly impact the continued performance of Triller. In the future, these services may not be available to it on commercially reasonable terms, or at all. Any loss of the right to use any of these services could result in decreased functionality of Triller until equivalent technology is either developed by it or, if available from another provider, is identified, obtained, and integrated into its infrastructure. Triller may also be unable to effectively address capacity constraints, upgrade its systems as needed, and continually develop its technology and network architecture to accommodate actual and anticipated changes in technology.

All of the foregoing platforms, services and technologies are vulnerable to malicious attacks and security breaches. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, and others. The techniques used to breach security safeguards evolve rapidly, and they may be difficult to detect for an extended period of time, and the measures Triller takes to safeguard its technology may not adequately prevent such incidents.

While Triller has taken steps to protect its confidential and personal information and that of its clients and other business relationships and has invested in information technology, there can be no assurance that its efforts will prevent service interruptions or security breaches in its systems or the unauthorized or inadvertent wrongful use or disclosure of such confidential information. Such incidents could adversely affect its business operations, reputation, and client relationships. Any such breach would require Triller to expend significant resources to mitigate the breach of security and to address matters related to any such breach, including the payment of fines. Although Triller maintains an insurance policy that covers data security, privacy liability, and cyber-attacks, its insurance may not be adequate to cover losses arising from breaches or attacks on its systems. Triller also may be required to notify regulators about any actual or perceived personal data breach as well as the individuals who are affected by the incident within strict time periods.

Triller is also in the process of integrating the technology of its acquired companies. The resulting size and diversity of its technology systems, as well as the systems of third-party vendors with whom Triller contracts, increase the vulnerability of such systems to breakdowns and security breaches. In addition, Triller relies on

 

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technology at live events, the failure or unavailability of which, for any significant period of time, could affect its business, its reputation and the success of its live events. Triller also relies on technology to provide its digital offerings, live streaming and virtual events, which may be vulnerable to hacking, denial of service attacks, human error and other unanticipated problems or events that could result in interruptions in its service and unauthorized access to, or alteration of, the content and data contained on its systems and those of its third-party vendors. Any significant interruption or failure of the technology upon which Triller relies, or any significant breach of security, could result in decreased performance and increased operating costs, adversely affecting its business, financial condition, and results of operations.

In addition, its use of social media via the Triller app and its websites presents the potential for further vulnerabilities. For instance, Triller may be subject to boycotts, spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, DDOS attacks, password attacks, man-in-the-middle attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. While Triller has internal policies in place to protect against these vulnerabilities, it can make no assurances that it will not be adversely affected should one of these events occur. Additionally, there is an increased risk that Triller may experience cybersecurity-related events, such as COVID-19-themed phishing attacks and other security challenges, as a result of most of its employees and its service providers working remotely from non-corporate-managed networks during the ongoing COVID-19 pandemic and potentially beyond.

Any of the above circumstances or events may adversely impact the user experience, harm Triller’s reputation, cause organizations to terminate their agreements, impair Triller’s ability to obtain license renewals from organizations, impair Triller’s ability to grow its user base, subject Triller to financial penalties, and otherwise harm Triller’s business, results of operations and financial condition.

Triller’s ability to introduce new features, capabilities, and enhancements is dependent on adequate research and development resources. If Triller does not adequately fund its research and development efforts, or if its research and development investments do not translate into material enhancements to Triller, it may not be able to compete effectively and its business, results of operations, and financial condition may be harmed.

To remain competitive, Triller must continue to develop new features, capabilities, and enhancements to the Triller platform, including all of its services and technology offerings. This is particularly true as Triller further expands and diversifies its capabilities to address additional markets. Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. If Triller is unable to develop features and capabilities internally due to certain constraints, such as employee turnover, lack of management ability, or a lack of other research and development resources, its business may be harmed. Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause it to experience delays between the time Triller incurs expenses associated with research and development and the time it is able to offer compelling features, capabilities, and enhancements and generate revenue, if any, from such investment. Additionally, anticipated demand for a feature, integration, capability or enhancement Triller is developing could decrease after the development cycle has commenced, and Triller would nonetheless be unable to avoid substantial costs associated with the development of any such feature, integration, capability or enhancement. If Triller expends a significant amount of resources on research and development and its efforts do not lead to the successful introduction or improvement of features, integrations, and capabilities that are competitive, it would harm its business, results of operations, and financial condition.

Further, many of its competitors expend a considerably greater amount of funds on their respective research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to its competitors’ research and development programs. Its failure to maintain adequate research and development resources or to compete effectively with the research and development programs of its competitors would give an advantage to such competitors and may harm its business, results of operations, and financial condition.

 

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In 2021, Triller launched subscription packages to bring its collection of virtual and live events and other content in its library to paid subscribers. While it determined these prices and packages based on prior experience and market competition, its assessments may not be accurate and Triller could be underpricing or overpricing its services, which may require it to continue to adjust its pricing packages. Furthermore, subscriber price sensitivity may vary by location, and as it expands into different countries, its pricing packages may not enable it to compete effectively in these countries. In addition, if its platform or services change, then it may need to, or choose to revise its pricing. Such changes to its pricing model or its ability to efficiently price its brand services offerings, digital and in-person event tickets, or content library could harm its business.

The failure to maintain or renew its agreements with producers or distributors of free, freemium and pay-per-view content could adversely impact Triller’s business.

As Triller’s revenues are partly generated, directly and indirectly, from the distribution of its free, freemium, and pay-per-view programming, any failure to maintain or renew its arrangements with the producers or distributors of its programs could cause a significant loss of viewers, venues, distribution channels or performers and have a material adverse effect on its business, operating results and financial condition and the price of its common stock.

If Triller is unable to ensure that the Triller app interoperates with a variety of software applications that are developed by others, including its partners, Triller may become less competitive and its results of operations may be harmed.

The Triller platform must integrate with a variety of network, hardware, and software platforms, and Triller needs to continuously modify and enhance the platform to adapt to changes in hardware, software, networking, browser, and database technologies. In particular, Triller has developed its platform to be able to easily integrate with third-party applications, including the applications of software providers that compete with it as well as its partners, through the interaction of APIs. In general, Triller relies on the providers of such software systems to allow it access to their APIs to enable these user integrations. Triller is typically subject to standard terms and conditions for application developers of such providers, which govern the distribution, operation, and fees of such software systems, and which are subject to change by such providers from time to time. Its business may be harmed if any provider of such software systems:

 

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discontinues or limits Triller’s access to its software or APIs;

 

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modifies its terms of service or other policies, including fees charged to, or other restrictions on Triller or other application developers;

 

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changes how information is accessed by Triller or its users;

 

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establishes more favorable relationships with one or more of Triller’s competitors; or

 

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develops or otherwise favors its own competitive offerings over Triller’s.

Third-party services and products are constantly evolving, and Triller may not be able to modify the Triller app to assure its compatibility with that of other third parties following development changes. In addition, some of its competitors may be able to disrupt the operations or compatibility of the Triller app with their products or services, or exert strong business influence on its ability to, and terms on which Triller operates. Should any of its competitors modify their products or standards in a manner that degrades the functionality of the Triller app or gives preferential treatment to competitive products or services, whether to enhance their competitive position or for any other reason, the interoperability of the Triller app with these products could decrease and its business, results of operations, and financial condition could be harmed. If Triller is not permitted or able to integrate with these and other third-party applications in the future, demand for the Triller app would be harmed and its business, results of operations, and financial condition would be harmed.

Triller has created websites and mobile versions of the various offerings that comprise the platform to respond to the increasing number of people who access the Internet through mobile devices and access cloud-based software applications through mobile devices, including smartphones and handheld tablets or laptop computers. If these

 

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websites and mobile applications do not perform well, its business may suffer. Triller is also dependent on third-party application stores that may prevent it from timely updating the Triller app; building new features, integrations, and capabilities; or charging for access. Triller distributes the mobile Triller application via smartphone and tablet application stores managed by Apple and Google, among others. Certain of these companies are now, and others may in the future become, competitors of Triller, and could stop allowing or supporting access to the platform or the apps that comprise the platform through their products, could allow access to the platform or such apps only at an unsustainable cost, or could make changes to the terms of access in order to make Triller’s platform and applications less desirable or harder to access, for competitive reasons. In addition, Triller’s platform and applications interoperate with servers, mobile devices, and software applications predominantly through the use of protocols, many of which are created and maintained by third parties. Triller, therefore, depends on the interoperability of the its applications with such third-party services, mobile devices, and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies, and protocols that Triller does not control. Any changes in such technologies that degrade the functionality of Triller’s apps or give preferential treatment to competitive services could adversely affect adoption and usage of Triller’s apps. Also, Triller may not be successful in developing or maintaining relationships with key participants in the mobile industry or in ensuring that Triller’s apps operate effectively with a range of operating systems, networks, devices, browsers, protocols, and standards. If Triller is unable to effectively anticipate and manage these risks, or if it is difficult for users to access and use Triller’s apps, its business, results of operations, and financial condition may be harmed.

Triller relies on software and services from other parties. Defects in, or the loss of access to, software or services from third parties could increase its costs and adversely affect the quality of Triller.

Triller relies on technologies from third parties to operate critical functions of its business, including cloud infrastructure services and customer relationship management services. Triller’s business would be disrupted if any of the third-party software or services Triller utilizes, or functional equivalents thereof, were unavailable due to extended outages or interruptions, or because they are no longer available on commercially reasonable terms or prices. In each case, Triller would be required to either seek licenses to software or services from other parties and redesign the Triller app or certain aspects of Triller to function with such software or services or develop these components itself, which would result in increased costs and could result in delays in launches and releases of new features, integrations, capabilities or enhancements until equivalent technology can be identified, licensed, or developed, and integrated into the Triller app. Furthermore, Triller might be forced to limit the features available in Triller. These delays and feature limitations, if they occur, could harm its business, results of operations, and financial condition.

Triller depends on effectively operating with Internet Service Providers (ISPs), regulations, and standards that it does not control. Changes in its products or to those ISPs, regulations, or standards may seriously harm its user growth, retention, and engagement.

Triller’s products require high-bandwidth data capabilities. If the costs of data usage increase or access to cellular networks is limited, its user growth, retention, and engagement may be seriously harmed. Additionally, 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 its products and increase its cost of doing business. Current Federal Communications Commission, or FCC, “open internet rules” prohibit mobile providers in the United States from impeding access to most content, or otherwise unfairly discriminating against content providers such as us. These rules also prohibit mobile providers from entering into arrangements with specific content providers for faster or better access over their data networks. The European Union similarly requires equal access to internet content. Additionally, as part of its Digital Single Market initiative, the European Union may impose network security, disability access, or 911-like obligations on OTT services such as those provided by it, which could increase its costs. If the FCC, Congress, the European Union, or the courts modify these open internet rules, mobile providers may be able to limit its users’ ability to access Triller or make Triller a less attractive alternative to its competitors’ applications. Were that to happen, its business would be seriously harmed.

 

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Triller’s business may be adversely affected if its access to music rights is limited or delayed. The concentration of control of music related content by its major providers means that even one entity, or a small number of entities working together, may unilaterally affect its access to music and other content.

Triller relies on music rights holders, over whom it has no control, for the music related content Triller makes available on its platforms. Triller cannot guarantee that these parties will always choose to license to it.

The music industry has a high level of concentration, which means that one or a small number of entities may, on their own, take actions that adversely affect Triller’s business. For example, the music licensed to it under its agreements with entertainment and media companies, makes up the majority of music consumed on its platform.

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

Even if Triller is able to secure music rights 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 it, hold back content from it, or increase royalty rates. As a result, its ability to continue to license rights to music and sound recordings is subject to convincing a broad range of stakeholders of the value and quality of its service.

To the extent that Triller is unable to license a large amount of content or the content of certain popular artists, its business, operating results, and financial condition could be materially harmed.

If Triller becomes subject to liability for the Internet content that it publishes or uploads from its users, the results of its operations would be affected adversely.

As a publisher of online content, Triller faces potential liability for negligence, copyright, patent or trademark infringement or other claims based on the nature and content of materials that it publishes or distributes.

Triller also may face potential liability for content uploaded from its users in connection with its community-related content or third party or partner event reviews. Litigation to defend these claims could be costly and harm the results of its operations. Triller cannot guarantee that it is adequately insured to indemnify it for all liability that may be imposed on it.

Risks Related to Triller’s Live Events

Triller’s ability to generate revenue from discretionary consumer and corporate spending on entertainment and sports events, such as ticket sales, corporate sponsorships and advertising, is subject to many factors, including many that are beyond its control, such as general macroeconomic conditions and catastrophic events.

Triller’s business depends on discretionary consumer and corporate spending. Many factors related to discretionary consumer and corporate spending, including economic conditions affecting disposable consumer income such as unemployment levels, fuel prices, interest rates, changes in tax rates, tax laws that impact companies or individuals, and inflation can significantly impact its operating results. Declines in advertising, sponsorship and other brand partnership revenue can also be caused by the economic prospects of specific advertisers or industries, by increased competition for the leisure time of audiences and audience fragmentation, by the growing use of new technologies causing advertisers to alter their spending priorities based on these or other factors. In addition, brands’ willingness to purchase advertising or to sponsor Triller’s live events may be adversely affected by lower audience ratings for its programming content. While consumer and corporate spending may decline at any time for reasons beyond Triller’s control, such as natural disasters, severe weather, wars, acts of terrorism, power loss, telecommunications failure, or other catastrophic events, the risks associated

 

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with its businesses become more acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising and decreases in attendance at live entertainment and sports events, among other things. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any future deterioration in economic conditions, thereby possibly impacting its operating results and growth. A prolonged period of reduced consumer or corporate spending, such as those during the COVID-19 pandemic, could have an adverse effect on its business, financial condition, and results of operations.

Owning and managing certain events for which Triller sells media and sponsorship rights and ticketing exposes it to greater financial risk. If the live events that Triller owns and manages are not financially successful, its business could be adversely affected.

Triller acts as a principal by owning and managing certain live events for which it sells media and sponsorship rights and ticketing, such as Triller Fight Club and Triad Combat events and Verzuz battles. Organizing and operating a live event involves significant financial risks as Triller bears all or most event costs, including a significant amount of up-front costs. In addition, Triller typically books its live events many months in advance of holding the event and often agrees to pay various third parties fixed guaranteed amounts prior to receiving any related revenue. Accordingly, if a planned event fails to occur or there is any disruption in its ability to live stream or otherwise distribute an event, whether as a result of technical difficulties or otherwise, Triller could lose a substantial amount of these up-front costs, fail to generate the anticipated revenue, and be forced to issue refunds for media and sponsorship rights, advertising fees, and ticket sales. If Triller is forced to postpone a planned event, it would incur substantial additional costs in order to stage the event on a new date, may have reduced attendance and revenue, and may have to refund fees. Triller could be compelled to cancel or postpone all or part of an event for many reasons, including poor weather, issues with obtaining permits or government regulation, performers failing to participate, as well as operational challenges caused by extraordinary incidents, such as terrorist or other security incidents, mass-casualty incidents, natural disasters, public health concerns including pandemics, or similar events. Such incidents have been shown to cause a nationwide disruption of commercial and leisure activities. Triller often has cancellation insurance policies in place to cover a portion of its losses if it is compelled to cancel an event, but its coverage may not be sufficient and is subject to deductibles. If the live events that Triller owns and manages are not financially successful, it could suffer an adverse effect on its business, financial condition and results of operations.

Participants and spectators in connection with Triller’s live entertainment and sports events are subject to potential injuries and accidents, which could subject it to personal injury or other claims and increase its expenses, as well as reduce attendance at its live entertainment and sports events, causing a decrease in its revenue.

There are inherent risks to participants and spectators involved with producing, attending, or participating in live entertainment and sports events. Injuries and accidents may occur from time to time in the future, which could subject Triller to substantial claims and liabilities for injuries. Incidents in connection with its entertainment and sports events at any of its venues or venues that Triller rents could also result in claims, reducing operating income or reducing attendance at its events, causing a decrease in its revenues. There can be no assurance that the insurance Triller maintains will be adequate to cover any potential losses. The physical nature of many of its live sports events exposes the athletes that participate to the risk of serious injury or death. These injuries could include concussions, and many sports leagues and organizations have been sued by athletes over alleged long-term neurocognitive impairment arising from concussions. Although the participants in certain of its live sports events, as independent contractors, are responsible for maintaining their own health, disability and life insurance, Triller may seek coverage under its accident insurance policies, if available, or its general liability insurance policies, for injuries that athletes incur while competing. To the extent such injuries are not covered by its policies, Triller may self-insure medical costs for athletes for such injuries. Liability to it resulting from any death or serious injury, including concussions, sustained by athletes while competing, to the extent not covered by its insurance, could adversely affect its business, financial condition, and operating results.

 

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The failure to continue to create popular live events and PPV programming could adversely impact Triller’s business.

The creation, marketing and distribution of its media entertainment programming, including its pay-per-view and digital live events, is critical to Triller’s business and to its ability to generate revenues. A failure to continue to develop creative and entertaining programs and events would likely lead to a decline in the popularity of its brand of entertainment and would adversely affect its ability to generate revenues and could have a material adverse effect on its business, operating results and financial condition.

Triller may pay upfront expenses when planning live events, entering into exclusive agreements for video series, or gaining music licenses, and if these arrangements do not perform as it expects, its business, results of operations and financial condition may be harmed.

Triller may pay one-time, upfront non-recoupable or recoupable signing fees or advances to certain entertainers (e.g. musicians, athletes, and influencers), or event venues in order to produce high-quality live and virtual entertainment, or gain exclusive ticketing or streaming video rights. Triller may also pay upfront fees for access to song catalogs by music labels. These payments are common practice in certain segments of the entertainment industry and are typically made upon entering into an exclusive service contract with it. If the party does not comply with the terms of the contract or perform an event, such fees are refundable to Triller. Triller pays these upfront fees based on the expectations to generate revenue on ticket sales, sponsorships, advertising and on-demand payments by users. Triller makes the decision to make these payments based on its assessment of the past success of the entertainers, past event data, and other financial information. Triller includes commercial and legal protections in its contracts that include upfront fees, such as requiring certain performance obligations, to mitigate the financial risk of making these payments. However, live and virtual events may vary greatly from year-to-year and from event to event. If its assumptions and expectations prove wrong, or a counterparty defaults, resulting in an unsuccessful event, its return on these signing fees will not be realized and its business and results of operations will be harmed.

Triller may be prohibited from promoting and conducting its live events if it does not comply with applicable regulations.

In various states in the United States, athletic commissions and other applicable regulatory agencies require Triller to comply with their regulations, which may include obtaining promoters licenses, performers licenses, medical licenses and/or event permits in order for it to promote and conduct its live events. In the event that Triller fails to comply with the regulations of a particular jurisdiction, it may be prohibited from promoting and conducting live events in that jurisdiction. The inability to present its live events over an extended period of time or in a number of jurisdictions could have a material adverse effect on its business, operating results and financial condition and the price of its common stock.

Triller’s insurance may not be adequate.

Triller plans to hold approximately twenty live events each year primarily in the United States. This schedule exposes its performers and its employees who are involved in the production of those events to the risk of travel and performance-related accidents, the consequences of which may not be fully covered by insurance. The physical nature of its events exposes its performers to the risk of serious injury or death. Although Triller has general liability insurance and umbrella insurance policies, and although its performers are responsible for obtaining their own health, disability and life insurance, Triller cannot assure you that the consequences of any accident or injury will be fully covered by insurance. Its liability resulting from any accident or injury not covered by its insurance could have a material adverse effect on its business, operating results and financial condition and the price of its common stock.

 

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Labor disputes, whether involving Triller’s own employees or sports leagues, or creative talent, or broadcast partners may disrupt its operations and adversely affect its results of operations.

Some of the performers and vendors Triller uses for its live events and content production, including music and athletic talent and production crews, may be covered by collective bargaining agreements or works councils. If the parties Triller has contracts with are unable to reach agreements with labor unions before the expiration of their collective bargaining agreements, the individuals who were covered by those agreements may have a right to strike or take other actions that could adversely affect it. Moreover, many collective bargaining agreements are industry-wide agreements, and Triller may lack practical control over the negotiations and terms of the agreements. A labor dispute involving its contracted parties may result in work stoppages or disrupt its operations and reduce its revenue, and resolution of disputes may increase its costs.

Labor disputes in sports leagues or associations could have an adverse impact on its business, financial condition and results of operations. In addition, any labor disputes that occur in any sports league or association for which Triller has the rights to broadcast live games or events may preclude it from airing or otherwise distributing scheduled games or events, which could have a negative effect on its business, financial condition and results of operations.

The sales cycle for live events programming varies and may negatively affect Triller’s ability to prepare accurate financial forecasts.

The sales cycle related to its live events programming and the related revenue streams, which typically ranges from a single week to multiple months, may also cause Triller to experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. Accordingly, Triller may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that it does not receive as a result of delays arising from these factors, and its results of operations in future reporting periods may be below the expectations of investors. If Triller does not address these risks successfully, its results of operations could differ materially from its estimates and forecasts or the expectations of investors, causing its business to suffer and its common stock price to decline.

Risks Related to Triller Business and Operations

Triller has a limited operating history, which makes it difficult to forecast its revenue and evaluate its business and future prospects.

Triller was launched in 2019 and much of its growth has occurred in recent periods. As a result of its limited operating history, Triller’s ability to forecast its future results of operations and plan for and model future growth is limited and subject to a number of uncertainties. Triller has encountered and expects to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein.

Triller has incurred losses each year since its inception, Triller expects its operating expenses to increase, and it may not become profitable in the future.

Triller has incurred losses each year since its inception, including net losses of $27.5 million and $191.6 million, excluding stock and warrant based compensation and other non-recurring extraordinary expenses, for the fiscal years ended December 31, 2020 and 2021, respectively, and Triller may never achieve or maintain profitability. In addition, its operating expenses have increased over time. As Triller continues to expand its business, industry verticals, and the breadth of its operations, upgrade its infrastructure, hire additional employees, expand into new markets, invest in sales and marketing, including expanding its sales organization, lease more real estate to accommodate its anticipated future growth, and incur costs associated with general administration, including expenses related to being a public company, Triller expects that its costs of revenue and operating expenses will continue to increase. To the extent Triller is successful in increasing its customer base, Triller may also incur

 

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increased losses because the costs associated with acquiring and growing its customers and with research and development are generally incurred upfront, while its revenue from customer contracts is generally recognized over the contract term. Triller may not be able to increase its revenue at a rate sufficient to offset increases in its costs of revenue and operating expenses in the near term or at all, which would prevent it from achieving or maintaining profitability in the future. Any failure by Triller to achieve, and then sustain or increase, profitability on a consistent basis could adversely affect its business, financial condition, and results of operations.

The impact of the COVID-19 global pandemic could continue to materially and adversely affect Triller’s business, financial condition and results of operations.

Triller’s business and operations have been and could continue to be adversely affected by the global COVID-19 pandemic. The COVID-19 pandemic and efforts to control its spread have curtailed the movement of people, goods and services worldwide, including numerous state and local jurisdictions and markets where Triller operates. The COVID-19 pandemic began to have a significant adverse impact on Triller’s business and operations beginning in March 2020, including limitations on live events; stoppages of entertainment productions; and reduced corporate spending on marketing and sales.

While activity has resumed in certain of its businesses and restrictions have been lessened or lifted, restrictions impacting certain of Triller’s businesses remain in effect. As a result of this and numerous other uncertainties, including the duration of the pandemic, potential for a resurgence of cases, impact of variants, enduring and additional actions that may be taken by governmental authorities to control the spread of COVID-19, Triller is unable to accurately predict the full impact of COVID-19 on its business, results of operations, financial position and cash flows; however, its impact may be significant. The ongoing pandemic has had a significant impact on its cash flows from operations. Triller expects that any recovery will continue to be gradual and that the wider impact on revenue and cash flows will vary, but will generally depend on the factors listed above and the general uncertainty surrounding COVID-19. Additionally, any extreme market and economic conditions caused by COVID-19 may cause a material impact on Triller’s ability to raise capital, if needed, on a timely basis and on acceptable terms, or at all.

To the extent the COVID-19 pandemic adversely affects Triller’s business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to its liquidity.

Triller depends on the continued service of the members of its executive management and other key employees, the loss or diminished performance of whom could adversely affect its business.

Triller’s performance is substantially dependent on the performance of the members of its executive management and other key employees. Although Triller has entered into employment agreements with certain members of its senior management team and it typically seeks to sign employment agreements with the management of acquired businesses, Triller cannot be sure that any member of its senior management will remain with it or that they will not compete with it in the future. The loss of any member of its senior management team could impair its ability to execute its business plan and growth strategy, have a negative impact on its revenues and the effective working relationships that its executive management have developed, and cause employee morale problems and the loss of additional key employees, managers, and clients.

Triller’s recent acquisitions have caused it to grow rapidly, and Triller will need to continue to make changes to operate at its current size and scale. Triller may face difficulty in further integrating the operations of the businesses acquired in its recent transactions, and it may never realize the anticipated benefits and cost synergies from all of these transactions. If Triller is unable to manage its current operations or any future growth effectively, its business could be adversely affected.

Triller’s recent acquisitions have caused it to grow rapidly, and Triller may need to continue to make changes to operate at its current size and scale. If Triller fails to realize the anticipated benefits and cost synergies from its

 

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recent acquisitions, or if it experiences any unanticipated or unidentified effects in connection with these transactions, including write-offs of goodwill, accelerated amortization expenses of other intangible assets, or any unanticipated disruptions with important third-party relationships, its business, financial condition, and results of operations could be adversely affected. Moreover, its recent acquisitions involve risks and uncertainties including those associated with the integration of operations, financial reporting, technologies and personnel, and the potential loss of key employees, customers, or strategic partners. Because the integration of the businesses acquired in its recent transactions have and will require significant time and resources, and it may not be able to manage the process successfully, these acquisitions may not be accretive to its earnings, and they may negatively impact its results of operations. If its operations continue to grow, Triller will be required, among other things, to upgrade its information systems and other processes and to obtain more space for its expanding administrative support and other personnel. Its continued growth could strain its resources, and Triller could experience operating difficulties, including difficulties in hiring, training, and managing an increasing number of employees. These difficulties could result in the erosion of its brand image and reputation and could have an adverse effect on its business, financial condition, and operating results.

Triller may be unsuccessful in its strategic acquisitions and investments, and it may pursue acquisitions and investments for their strategic value in spite of the risk of lack of profitability.

Triller faces significant uncertainty in connection with acquisitions and investments. To the extent it chooses to pursue certain investment or acquisition strategies, Triller may be unable to identify suitable targets for these deals, or to make these deals on favorable terms. If Triller identifies suitable acquisition candidates, investments, or strategic partners, its ability to realize a return on the resources expended pursuing such deals, and to successfully implement or enter into them will depend on a variety of factors, including its ability to obtain financing on acceptable terms, requisite government approvals, as well as the factors discussed below. Additionally, Triller may decide to make or enter into acquisitions or investments with the understanding that such acquisitions or investments will not be profitable, but may be of strategic value to it. Its current and future acquisitions, investments, including existing investments accounted for under the equity method may also require that Triller make additional capital investments in the future, which would divert resources from other areas of its business. Triller cannot provide assurances that the anticipated strategic benefits of these deals will be realized in the long-term or at all.

Triller may fail to identify or assess the magnitude of certain liabilities, shortcomings, or other circumstances prior to acquiring a company, making an investment or entering into a strategic business agreement and, as such, may not obtain sufficient warranties, indemnities, insurance, or other protections. This could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, unexpected increases in taxes, a loss of anticipated tax benefits, or other adverse effects on its business, operating results, or financial condition. Additionally, some warranties and indemnities may give rise to unexpected and significant liabilities. Future acquisitions and strategic business arrangements that Triller may pursue could result in dilutive issuances of equity securities and the incurrence of future debt.

Unauthorized disclosure of sensitive or confidential information could harm Triller’s business and standing with its business partners and customers.

The protection of its customer, employee, client and other company data is critical to Triller. It collects, stores, transmits, and uses personal information relating to, among others, its employees, consumers, and event participants. Triller also collects certain data through its marketing ventures and content offerings, which may include a range of talent and production information and data provided to Triller by its business partners and customers. During the COVID-19 pandemic, it also has been collecting certain COVID-related health and wellness information about its employees and others. Triller relies on commercially available systems, software, tools, and monitoring to provide security for processing, transmission, and storage of confidential information. Its facilities and systems, and those of its third-party service providers, may be vulnerable to security breaches, acts of vandalism, payment card terminal tampering, computer viruses, misplaced, lost or stolen data, programming

 

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or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of customer information, whether by Triller or its third-party service providers, could damage its reputation, result in the loss of clients and customers, expose it to risk of litigation and liability or regulatory investigations or actions, disrupt its operations, and harm its business. In addition, as a result of recent security breaches, the media and public scrutiny of information security and privacy has become more intense. As a result, Triller may incur significant costs to change its business practices or modify its service offerings in connection with the protection of personally identifiable information.

Triller may be unable to protect its trademarks and other intellectual property rights, and others may allege that it infringes upon their intellectual property rights.

Triller has invested significant resources in brands associated with its business such as “Triller,” “Triller Fight Club,” “TrillerFest,” “Verzuz” and “TrillerTV” in an attempt to obtain and protect its public recognition. These brands are essential to its success and competitive position. Triller has also invested significant resources in the premium content that it produces.

Its trademarks and other intellectual property rights are critical to its success and its competitive position. Its intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. If Triller fails to maintain its intellectual property, its competitors might be able to enter the market, which would harm its business. Further, policing unauthorized use and other violations of its intellectual property is difficult, particularly given its global scope, so Triller is susceptible to others infringing, diluting or misappropriating its intellectual property rights. If Triller is unable to maintain and protect its intellectual property rights adequately, it may lose an important advantage in the markets in which it competes. In particular, the laws of certain foreign countries do not protect intellectual property rights in the same manner as do the laws of the United States and, accordingly, its intellectual property is at greater risk in those countries even where it takes steps to protect such intellectual property. While Triller believes it has taken, and takes in the ordinary course of business, appropriate available legal steps to reasonably protect its intellectual property, Triller cannot predict whether these steps will be adequate to prevent infringement or misappropriation of these rights. Any such infringement of its intellectual property rights would also likely result in its commitment of time and resources to protect these rights. Triller has engaged, and continues to engage, in litigation with parties that claim or misuse some of its intellectual property. Triller is involved in certain pending lawsuits relating primarily to the ownership of certain intellectual property rights. Similarly, Triller may infringe on others’ intellectual property rights. One or more adverse judgments with respect to these intellectual property rights could have a material adverse effect on its business, operating results and financial condition.

From time to time, in the ordinary course of its business, Triller may become involved in opposition and cancellation proceedings with respect to some of its intellectual property or third-party intellectual property. Any opposition and cancellation proceedings or other litigation or dispute involving the scope or enforceability of its intellectual property rights or any allegation that it infringes, misappropriates or dilutes upon the intellectual property rights of others, regardless of the merit of these claims, could be costly and time-consuming. If any infringement or other intellectual property claim made against it by any third party is successful, if Triller is required to indemnify a third party with respect to a claim, or if it is required to, or decides to, cease use of a brand, rebrand or obtain on-infringing intellectual property (such as through a license), it could result in harm to its competitive position and could adversely affect its business and financial condition.

Through new and existing legal and illegal distribution channels, consumers have increasing options to access entertainment video. Piracy, in particular, threatens to damage its business. Furthermore, in light of the compelling consumer proposition, piracy services are subject to rapid global growth. Its streaming video solutions (e.g. Triller Pass) are directly threatened by the availability and use of pirated alternatives. The value that streaming services are willing to pay for content that Triller develops may be reduced if piracy prevents these services from realizing adequate revenues on these acquisitions.

 

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Lastly, in the event of a bankruptcy, its intellectual property licenses could be affected in numerous ways. There is a concern that a bankruptcy can result in Triller losing intellectual property rights. Although some protections are granted via the United States Bankruptcy Code, the United States Bankruptcy Code definition of intellectual property only includes trade secrets, patents and patent applications, copyrights, and mask works and does not include trademarks. Because Triller relies heavily on the licensing of trademarks, it is at risk of losing rights in the event of a bankruptcy.

As a result of its operations in international markets, Triller is subject to risks associated with the legislative, judicial, accounting, regulatory, political and economic risks and conditions specific to such markets.

Triller provides services in certain jurisdictions abroad through brands and businesses that Triller owns and operates, and it expects to continue to expand its international presence. Triller faces, and expects to continue to face, additional risks in the case of its existing and future international operations, including:

 

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political instability, adverse changes in diplomatic relations and unfavorable economic conditions in the markets in which Triller has international operations or into which it may expand;

 

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more restrictive or otherwise unfavorable government regulation of the entertainment and sports industry, which could result in increased compliance costs or otherwise restrict the manner in which Triller provides services and the amount of related fees charged for such services;

 

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limitations on the enforcement of intellectual property rights;

 

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enhanced difficulties of integrating any foreign acquisitions;

 

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limitations on the ability of foreign subsidiaries to repatriate profits or otherwise remit earnings;

 

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adverse tax consequences;

 

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less sophisticated legal systems in some foreign countries, which could impair its ability to enforce its contractual rights in those countries;

 

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limitations on technology infrastructure;

 

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variability in venue security standards and accepted practices; and

 

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difficulties in managing operations due to distance, language and cultural differences, including issues associated with (i) business practices and customs that are common in certain foreign countries but might be prohibited by U.S. law and its internal policies and procedures and (ii) management and operational systems and infrastructures, including internal financial control and reporting systems and functions, staffing and managing of foreign operations, which Triller might not be able to do effectively or on a cost-efficient basis.

Evolving data privacy regulations, including the EU’s General Data Protection Regulation (“GDPR”), and the California Consumer Privacy Act (“CCPA”), may subject Triller to significant penalties.

In May 2018, the EU’s GDPR came into effect, and changed how businesses can collect, use and process the personal data of EU residents. The GDPR has extraterritorial effect and imposes a mandatory duty on businesses to self-report personal data breaches to authorities, and, under certain circumstances, to affected individuals. The GDPR also grants individuals the right to erasure (commonly referred to as the right to be forgotten), which may put a burden on Triller to erase records upon request. Compliance with the GDPR’s new requirements may increase its legal, compliance, and operational costs. Non-compliance with the GDPR’s requirements can result in significant penalties, which may have a material adverse effect on Triller’s business, expose it to legal and regulatory costs, and impair its reputation.

Other jurisdictions, including certain U.S. states and non-U.S. jurisdictions where Triller conducts business, have also enacted or are considering enacting their own versions of “GDPR-like” data privacy legislation, which could

 

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create additional compliance challenges, heightened regulatory scrutiny, administrative burden and potentially expose it to significant penalties. For example, in June 2018, California’s legislature passed the CCPA, which went into effect on January 1, 2020. Any failure or perceived failure by Triller, its business partners, or third party service providers to comply with GDPR, CCPA, other privacy-related or data protection laws and regulations, or the privacy commitments in contracts could result in proceedings against it by governmental entities or others and significant fines, which could have a material adverse effect on its business and operating results and harm its reputation.

In addition, some countries have or are considering legislation requiring local storage and processing of data that, if enacted, could increase the cost and complexity of offering its products, software and services or maintaining its business operations in those jurisdictions.

Triller is subject to extensive U.S. and foreign government regulations, and its failure to comply with these regulations could adversely affect its business.

Triller’s operations are subject to federal, state and local laws, statutes, rules, regulations, policies, and procedures in the United States and around the world, which are subject to change at any time, governing matters such as:

 

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licensing, permitting and zoning requirements for operation of its offices, locations, venues and other facilities;

 

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health, safety and sanitation requirements;

 

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the service of food and alcoholic beverages;

 

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working conditions, labor, minimum wage and hour, harassment and discrimination, and other labor and employment laws and regulations;

 

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compliance with the U.S. Americans with Disabilities Act of 1990;

 

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compliance with applicable antitrust and fair competition laws;

 

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compliance with international trade controls, including applicable import/export regulations, and sanctions and international embargoes that may limit or restrict its ability to do business with specific individuals or entities or in specific countries or territories;

 

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compliance with anti-money laundering and countering terrorist financing rules, currency control regulations, and statutes prohibiting tax evasion and the aiding or abetting of tax evasion;

 

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marketing activities;

 

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licensing laws for athlete agents;

 

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licensing laws for the promotion and operation of boxing events;

 

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environmental protection regulations;

 

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compliance with current and future privacy and data protection laws imposing requirements for the processing and protection of personal or sensitive information, including the GDPR and the E.U. e-Privacy Regulation;

 

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compliance with cybersecurity laws imposing country-specific requirements relating to information systems and network design, security, operations, and use;

 

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tax laws; and

 

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imposition by foreign countries of trade restrictions, restrictions on the manner in which content is currently licensed and distributed, ownership restrictions, or currency exchange controls.

 

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Noncompliance with these laws could subject Triller to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, reputational harm, adverse media coverage, and other collateral consequences. Multiple or repeated failures by it to comply with these laws and regulations could result in increased fines or proceedings against it. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if Triller does not prevail in any possible civil or criminal litigation, its business, results of operations, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm its business, results of operations, and financial condition. While Triller attempts to conduct its business and operations in a manner that it believes to be in compliance with such laws and regulations, there can be no assurance that a law or regulation will not be interpreted or enforced in a manner contrary to its current understanding. In addition, the promulgation of new laws, rules, and regulations could restrict or unfavorably impact its business, which could decrease demand for its services, reduce revenue, increase costs, or subject it to additional liabilities. For example, some legislatures have proposed laws in the past that would impose potential liability on it and other promoters and producers of live events for incidents that occur at its events, particularly relating to drugs and alcohol or the spread of the COVID-19 virus.

In the United States and certain foreign jurisdictions, Triller may have direct and indirect interactions with government agencies and state-affiliated entities in the ordinary course of its business. In particular, athletic commissions and other applicable regulatory agencies require it to obtain licenses for promoters, medical clearances, licenses for athletes, or permits for events in order for it to promote and conduct its live events and productions. In the event that Triller fails to comply with the regulations of a particular jurisdiction, whether through its acts or omissions or those of third parties, Triller may be prohibited from promoting and conducting its live events and productions in that jurisdiction. The inability to present its live events and productions in jurisdictions could lead to a decline in revenue streams in such jurisdictions, which could have an adverse effect on its business, financial condition, and results of operations.

Triller is required to comply with economic sanctions laws imposed by the United States or by other jurisdictions where it does business, which may restrict its transactions in certain markets, and with certain customers, business partners, and other persons and entities. As a result, Triller is not permitted to, directly or indirectly (including through a third-party intermediary), procure goods, services, or technology from, or engage in transactions with, individuals and entities subject to sanctions. While Triller believes it has been in compliance with sanctions requirements, there can be no guarantee that it will remain in compliance. Any violation of anti-corruption or sanctions laws could result in fines, civil and criminal sanctions against Triller or its employees, prohibitions on the conduct of its business (e.g., debarment from doing business with International Development Banks and similar organizations), and damage to its reputation, which could have an adverse effect on its business, financial condition, and results of operations.

If its goodwill or intangible assets become impaired, Triller may be required to record an additional significant charge to earnings.

Triller reviews its goodwill for impairment annually as of December 1 and at any time upon the occurrence of certain events or substantive changes in circumstances that indicate the carrying amount of goodwill may not be recoverable. If such goodwill or intangible assets are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. Any impacts to its business, including as a result of COVID-19, could result in impairments and significant charges to earnings.

Unfavorable outcomes in legal proceedings may adversely affect Triller’s business and operating results.

Triller’s results may be affected by the outcome of pending and future litigation. Unfavorable rulings in its legal proceedings could result in material liability to it or have a negative impact on its business, results of operations,

 

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financial condition, reputation, or relations with its employees or third parties. The outcome of litigation, including class action lawsuits, is difficult to assess or quantify. Plaintiffs in class action lawsuits may seek recovery of very large or indeterminate amounts and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. If Triller is unable to resolve any such matters favorably, its business, operating results, and financial condition may be adversely affected.

In addition, Triller is currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal), or lawsuits by governmental agencies or private parties. If the results of these investigations, proceedings, or suits are unfavorable to it or if Triller is unable to successfully defend against third-party lawsuits, it may be required to pay monetary damages or may be subject to fines, penalties, injunctions, or other censure that could have an adverse effect on its business, financial condition, and results of operations. Even if Triller adequately addresses the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counter claim, it may have to devote significant financial and management resources to address these issues, which could have an adverse effect on its business, results of operations, and financial condition.

Triller may be subject to liability claims if Triller breaches its contracts.

Triller is subject to numerous obligations in its contracts with its business partners. Despite the procedures, systems and internal controls Triller has implemented to comply with its contracts, Triller may breach these commitments, whether through a weakness in these procedures, systems, and internal controls, negligence, or the willful act of an employee or contractor. Its insurance policies, including its errors and omissions insurance, may be inadequate to compensate it for the potentially significant losses that may result from claims arising from breaches of its contracts, disruptions in its services, failures or disruptions to its infrastructure, catastrophic events, and disasters or otherwise.

In addition, such insurance may not be available to it in the future on economically reasonable terms, or at all. Further, its insurance may not cover all claims made against it and defending a suit, regardless of its merit, could be costly and divert management’s attention.

The market and categories in which Triller participates are competitive and rapidly evolving, and if Triller does not compete effectively with established companies as well as new market entrants its business, results of operations, and financial condition could be harmed.

Triller’s business model is a new category of integrating entertainment and social media with technology in a rapidly evolving market that is intensely competitive, fragmented, and subject to rapidly changing technology, shifting customer needs, new market entrants, and frequent introductions of new products and services. Moreover, Triller expects competition to increase in the future from established competitors and new market entrants, including established technology and major media companies who have not previously entered the market. Its other competitors fall into the following categories: live sports events and pay-per-view programming, such as WWE and UFC; web content programming platforms, such as Netflix, Inc.; and social media companies with social video features, such as Instagram (and Facebook Inc.) and TikTok. With the introduction of new technologies, the evolution of Triller, and new market entrants, Triller expects competition to intensify in the future. Established companies may not only develop their own live events programming platforms and social video sharing technology, but also acquire or establish product integration, distribution, or other cooperative relationships with its current competitors. For example, while Triller currently partners with entertainment and media companies, they may develop and introduce products that directly or indirectly compete with Triller. New competitors or alliances among competitors may emerge and rapidly acquire significant market share due to factors such as greater brand name recognition, a larger existing user and/or customer base, superior product offerings, a larger or more effective sales organization, and significantly greater financial, technical, marketing, and other resources and experience. In addition, with the recent increase in large merger and acquisition transactions in the entertainment, social media and technology industry, there is a greater likelihood

 

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that Triller will compete with other large entertainment and media companies in the future. Triller expects this trend to continue as companies attempt to strengthen or maintain their market positions in an evolving industry. Companies resulting from these possible consolidations may create more compelling product offerings and be able to offer more attractive pricing options, making it more difficult for Triller to compete effectively.

Many of its existing competitors have, and some of its potential competitors could have, substantial competitive advantages such as greater brand name recognition and longer operating histories, larger sales and marketing budgets and resources, broader distribution, and established relationships with vendors, partners, and customers, greater customer experience resources, greater resources to make acquisitions, lower labor, and development costs, larger and more mature intellectual property portfolios, and substantially greater financial, technical and other resources. Such competitors with greater financial and operating resources may be able to respond more quickly and effectively than Triller can to new or changing opportunities, technologies, standards, or customer requirements.

In addition, some of its larger competitors have substantially broader product offerings and leverage their relationships based on other products or incorporate functionality into existing products to gain business in a manner that discourages users from using Triller.

Conditions in its market could also change rapidly and significantly as a result of technological advancements, partnering by its competitors or continuing market consolidation, and it is uncertain how its market will evolve. New start-up companies that innovate and large competitors that are making significant investments in research and development may develop similar or superior products and technologies that compete with Triller. These competitive pressures in its market or its failure to compete effectively may result in price reductions, fewer customers, reduced revenue, gross profit, and gross margins, increased net losses, and loss of market share. Any failure to meet and address these factors could harm its business, results of operations, and financial condition.

Certain estimates of market opportunity included in this prospectus may prove to be inaccurate.

This prospectus includes Triller’s internal estimates of the addressable market for Triller. Market opportunity estimates, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts in this prospectus relating to the size of its target market, market demand and adoption, capacity to address this demand, and pricing may prove to be inaccurate. The addressable market Triller estimates may not materialize for many years, if ever, and even if the markets in which it competes meet the size estimates in this prospectus, its business could fail to grow at similar rates, if at all.

Triller’s growth depends, in part, on the success of its strategic relationships with third parties.

To grow its business and build out its application ecosystem, Triller anticipates that it will continue to depend on relationships with third parties. Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. Further, its competitors may be effective in providing incentives to third parties to favor their products or services over Triller. If Triller is unsuccessful in establishing or maintaining its relationships with third parties, if any existing or future partners fail to successfully implement or support Triller, or if they partner with its competitors and devote greater resources to implement and support the products and solutions of competitors, its ability to compete in the marketplace, or to grow its revenue, could be impaired, and its results of operations may suffer. Even if Triller is successful, it cannot assure you that these relationships will result in increased usage of Triller or increased revenue.

Triller is subject to anti-corruption, anti-bribery, and similar laws, and non-compliance with such laws can subject it to criminal penalties or significant fines and harm its business and reputation.

Triller is subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S.

 

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Travel Act, the USA PATRIOT Act, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which Triller conducts activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and their employees and agents from promising, authorizing, making, or offering improper payments or other benefits to government officials and others in the private sector. As Triller increases its international sales and business, its risks under these laws may increase. Noncompliance with these laws could subject it to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any investigations, actions or sanctions could harm its business, results of operations, and financial condition.

In addition, in the future Triller may use third parties to sell access to Triller and conduct business on its behalf abroad. Triller or such future third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities, and Triller can be held liable for the corrupt or other illegal activities of such future third-party intermediaries, and its employees, representatives, contractors, partners, and agents, even if Triller does not explicitly authorize such activities. Triller has implemented an anti-corruption compliance program but cannot assure you that all its employees and agents, as well as those companies to which Triller outsources certain of its business operations, will not take actions in violation of its policies and applicable law, for which it may be ultimately held responsible. Any violation of the FCPA, other applicable anti-corruption laws, or anti-money laundering laws could result in whistleblower complaints, adverse media coverage, investigations, loss of export privileges, severe criminal or civil sanctions and, in the case of the FCPA, suspension or debarment from U.S. government contracts, any of which could have a materially adverse effect on its reputation, business, results of operations, and prospects.

Triller may face exposure to foreign currency exchange rate fluctuations.

Today, Triller’s contracts with paid customers outside of the United States are sometimes denominated in local currencies. In addition, the majority of its foreign costs are denominated in local currencies. Over time, an increasing portion of its contracts with paid customers outside of the United States may be denominated in local currencies. Therefore, fluctuations in the value of the U.S. dollar and foreign currencies may affect its results of operations when translated into U.S. dollars. Triller does not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations. However, in the future, Triller may use derivative instruments, such as foreign currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are in place. Moreover, the use of hedging instruments may introduce additional risks if Triller is unable to structure effective hedges with such instruments.

Changes in existing financial accounting standards or practices may harm its results of operations.

Changes in existing accounting rules or practices, new accounting pronouncements rules, or varying interpretations of current accounting pronouncements practice could harm its results of operations or the manner in which Triller conducts its business. Further, such changes could potentially affect its reporting of transactions completed before such changes are effective.

GAAP is subject to interpretation by the Financial Accounting Standards Board, or FASB, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on Triller’s reported financial results, and could affect the reporting of transactions completed before the announcement of a change.

If Triller’s estimates or judgments relating to its critical accounting policies prove to be incorrect, its results of operations could be adversely affected.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in its consolidated financial statement sand related notes. Triller

 

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bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Triller.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing its consolidated financial statements include those related to revenue recognition, stock-based compensation including the estimation of fair value of common stock, valuation of strategic investments, period of benefit for deferred costs, and uncertain tax positions. Its results of operations may be adversely affected if its assumptions change or if actual circumstances differ from those in its assumptions, which could cause its results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of its common stock.

Triller’s ability to use its net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2021, certain corporate subsidiaries of Triller collectively had net operating loss carryforwards (“NOLs”) for federal and California income tax purposes of approximately $207.3 million and $207.3 million, respectively, which may be available to offset tax income in the future. In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. Triller has undergone ownership changes in the past and have made numerous recent acquisitions, which may result in minor limitations on its ability to utilize its NOLs. Future changes in its stock ownership, some of which are outside of its control, could result in an ownership change under Section 382 of the Code. The existing NOLs of some of its subsidiaries may be subject to limitations arising from ownership changes prior to, or in connection with, their acquisition by Triller. Furthermore, its ability to utilize NOLs of companies that it may acquire in the future may be subject to limitations. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, its existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities, including for state tax purposes. For these reasons, Triller may not be able to utilize some portion of its NOLs, none of which are currently reflected on its balance sheet, even if it attains profitability.

The Tax Act was enacted on December 22, 2017 and significantly reforms the Code. The Tax Act, among other things, includes changes to U.S. federal tax rates and the rules governing net operating loss carryforwards. For NOLs arising in tax years beginning after December 31, 2017, the Tax Act limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income (as calculated before taking the NOL carryforwards into account). In addition, NOLs arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. As Triller maintains a full valuation allowance against its U.S. NOLs, these changes will not impact its balance sheet as of December 31, 2017. However, in future years, at the time a deferred tax asset is recognized related to its NOLs, the changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact its valuation allowance assessments for NOLs generated after December 31, 2017.

 

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INFORMATION ABOUT THE SPECIAL MEETING OF SEACHANGE STOCKHOLDERS

General

SeaChange is furnishing this proxy statement/prospectus to SeaChange stockholders as part of the solicitation of proxies by the SeaChange board of directors for use at the special meeting of SeaChange stockholders to be held on [                ], 2022, and at any adjournment or postponement thereof. This proxy statement/prospectus is first being furnished to SeaChange stockholders on or about [                ], 2022.

Date and Time of Special Meeting

The special meeting will be held on [                ], 2022 at [                ] local time, or such other date and time to which such meeting may be adjourned or postponed, for the purposes set forth in the accompanying notice.

The special meeting will be a completely virtual meeting of SeaChange stockholders, which will be conducted via live webcast. You will be able to attend the special meeting and vote your shares electronically during the special meeting via live webcast by visiting [                ]. The virtual meeting format allows attendance from any location in the world.

Matters to be Considered

At the special meeting, holders of SeaChange common stock will be asked to consider and vote upon the following proposals: (1) the Merger Proposal; (2) the Reverse Stock Split Proposal; (3) the Reclassification Proposal; (4) the Advisory Proposal; (5) the Incentive Plan Proposal; (6) the Omnibus Incentive Plan Proposal; (7) the Nasdaq Proposal; (8) the SeaChange Compensation Proposal; and (9) the Adjournment Proposal.

Voting Power; Record Date

You will be entitled to vote or direct votes to be cast by proxy at the special meeting if you owned shares of SeaChange common stock at the close of business on [                ], 2022, which is the record date for the special meeting. You are entitled to one vote for each share of SeaChange common stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that shares held beneficially by you are voted in accordance with your instructions. On the record date, there were [•] shares of SeaChange common stock outstanding.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum will be present at the special meeting if a majority of the voting power of the issued and outstanding common stock of SeaChange entitled to vote at the special meeting must be present, in person (including virtually) or represented by proxy, at the special meeting to constitute a quorum. An abstention from voting, shares represented at the special meeting online or by proxy (but not voted on one or more proposals) or a broker non-vote will each count as present for the purposes of establishing a quorum. In the absence of a quorum, the chairman of the special meeting may adjourn the special meeting. As of the record date for the special meeting, the presence online or by proxy of [•] shares of SeaChange common stock would be required to achieve a quorum.

The approval of the Merger Proposal and the Certificate of Incorporation Amendment Proposal requires the affirmative vote of the holders of a majority of the outstanding shares of SeaChange common stock entitled to vote on such proposal. Accordingly, a stockholder’s failure to vote online or by proxy, a broker non-vote or an abstention on the Merger Proposal and the Certificate of Incorporation Amendment Proposal will have the same effect as a vote “AGAINST” the Merger Proposal.

The approval of each of the Certificate of Incorporation Amendment Proposal, the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal and the Adjournment Proposal requires the affirmative vote of holders of a majority of

 

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the total votes cast on such proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and, thus, will have no effect on the outcome of the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal, or the Adjournment Proposal.

The Merger Proposal is conditioned on the approval of the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. In addition, (i) the Certificate of Incorporation Amendment Proposal is conditioned on the approval of the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal, (ii) the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal are conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal and the Nasdaq Proposal, and (iii) the Nasdaq Proposal is conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal. Neither the SeaChange Compensation Proposal, the Adjournment Proposal nor the Advisory Proposal is conditioned on the approval of any other proposal set forth in the proxy statement/prospectus. It is important for you to note that if the Merger Proposal is not approved by SeaChange stockholders, or if any other proposal (except the SeaChange Compensation Proposal, the Adjournment Proposal or the Advisory Proposal) is not approved by SeaChange stockholders and SeaChange and Triller do not waive the applicable closing condition under the Merger Agreement, then the merger will not be consummated.

Recommendation to SeaChange Stockholders

The SeaChange board of directors believes that each of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal, and the Adjournment Proposal to be presented at the special meeting is fair to and in the best interests of SeaChange and its stockholders and unanimously recommends that SeaChange stockholders vote “FOR” each of the proposals.

When you consider the recommendation of the SeaChange board of directors in favor of approval of the Merger Proposal, you should keep in mind that SeaChange’s directors and officers, and their affiliates, have interests in the Merger that are different from, or in addition to (or which may conflict with) your interests as a SeaChange stockholder. See the section entitled “The Merger — Interests of Certain SeaChange Directors and Executive Officers in the Merger” for additional information.

Broker Non-Votes and Abstentions

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

An abstention from voting, shares represented at the special meeting online or by proxy (but not voted on one or more proposals), or a broker non-vote will each count as present for the purposes of establishing a quorum. A SeaChange stockholder’s failure to vote by proxy or to vote online at the special meeting, an abstention from voting or a broker non-vote will each have the same effect as a vote “AGAINST” the Merger Proposal and the Certificate of Incorporation Amendment Proposal and will have no effect on the outcome of each of the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal, or the Adjournment Proposal.

 

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Solicitation of Proxies

SeaChange is soliciting your proxy in conjunction with the merger. SeaChange will bear the cost of soliciting proxies from you. SeaChange has engaged Morrow Sodali LLC to assist in the solicitation of proxies for the special meeting. SeaChange expects to pay Morrow Sodali LLC a fee of $25,000 plus disbursements and a per call fee for any incoming or outgoing stockholder calls for such services. SeaChange will reimburse Morrow Sodali LLC for reasonable out-of-pocket expenses and will indemnify Morrow Sodali LLC and its affiliates against certain claims, liabilities, losses, damages and expenses. SeaChange will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of SeaChange common stock for their expenses in forwarding soliciting materials to beneficial owners of SeaChange common stock and in obtaining voting instructions from those owners. SeaChange’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Voting Your Shares

Each share of SeaChange common stock that you own in your name entitles you to one vote on each of the proposals for the special meeting. Your proxy card or cards show the number of shares of SeaChange common stock that you own. There are several ways to vote your shares of SeaChange common stock:

 

•

You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. If you hold your shares in “street name,” which means your shares are held of record by a broker or other nominee, you should follow the instructions provided to you by your broker or nominee to ensure that votes related to the shares you beneficially own are properly represented and voted at the meeting. If you vote by proxy card, your “proxy,” whose name is listed on the proxy card, will vote your shares as you instruct on the proxy card. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of SeaChange common stock will be voted as recommended by the SeaChange board of directors. The SeaChange board of directors recommends voting “FOR” the Merger Proposal, “FOR” the Certificate of Incorporation Amendment Proposal, “FOR” the Incentive Plan Proposal, “FOR” the Advisory Proposal, “FOR” the Omnibus Incentive Plan Proposal, “FOR” the Nasdaq Proposal, “FOR” the SeaChange Compensation Proposal, and “FOR” the Adjournment Proposal.

 

•

You can attend the special meeting and vote online even if you have previously voted by submitting a proxy as described above. You will be able to virtually attend and vote your shares at the special meeting via a live webcast by visiting [                ]. You will need the meeting control number that is printed on your proxy card to enter the special meeting. If you do not have your control number, contact Morrow Sodali LLC at the phone number or e-mail address below. However, if your shares of SeaChange common stock are held in the name of your broker, bank or other nominee, you must get a legal proxy from the broker, bank or other nominee. That is the only way SeaChange can be sure that the broker, bank or nominee has not already voted your shares of SeaChange common stock. Once you have your legal proxy, contact Morrow Sodali LLC to have a control number generated. Morrow Sodali LLC’s contact information is as follows: (800) 662-5200 (toll free) for individuals, banks and brokers may call collect at (203) 658-9400, or email [•].

Revoking Your Proxy

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

 

•

you may send another signed proxy card with a later date, received prior to the special meeting;

 

•

you may notify Elaine Martel, SeaChange’s General Counsel and Secretary, by telephone at (508) 208-9699, or by email at elaine.martel@schange.com, before the special meeting that you have revoked your proxy; or

 

•

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

 

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No Additional Matters May Be Presented at the Special Meeting

The special meeting has been called only to consider the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Advisory Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, the Nasdaq Proposal, the SeaChange Compensation Proposal, and the Adjournment Proposal. Under SeaChange’s bylaws, other than procedural matters incident to the conduct of the special meeting, no other matters may be considered at the special meeting if they are not included in this proxy statement/prospectus, which serves as the notice of the special meeting.

Delivery of Proxy Materials to Shareholders Sharing an Address

As permitted by the Securities Exchange Act of 1934, as amended, only one copy of this proxy statement/prospectus is being delivered to multiple SeaChange shareholders sharing an address unless SeaChange has previously received contrary instructions from one or more such shareholders. This is referred to as “householding.” SeaChange shareholders who hold their shares in “street name” can request further information on householding through their banks, brokers, or other holders of record. On written or oral request to SeaChange’s proxy solicitor, Morrow Sodali LLC, by writing to 470 West Avenue Stamford, Connecticut 06902 or calling (800) 662-5200 (toll free) for individuals and banks and brokers may call collect at (203) 658-9400, SeaChange will promptly deliver a separate copy of this document to a shareholder at a shared address to which a single copy of the document was delivered.

Who Can Answer Your Questions About Voting

If you have any questions about how to vote or direct a vote in respect of your shares of SeaChange common stock, you may call Morrow Sodali LLC, SeaChange’s proxy solicitor, at (800) 662-5200 (toll free) for individuals. Banks and brokers may call collect at (203) 658-9400.

No Preemptive or Similar Rights

Holders of shares of SeaChange common stock do not have preemptive, subscription or redemption rights.

Appraisal Rights

Holders of SeaChange common stock and Triller units are not entitled to appraisal rights in connection with the merger.

 

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SEACHANGE STOCKHOLDER MEETING PROPOSALS

Proposal 1: Merger Proposal

It is a condition to the completion of the merger that the SeaChange stockholders adopt the Merger Agreement and approve the merger and the other transactions contemplated by the Merger Agreement (the “Merger Proposal”). SeaChange is asking SeaChange stockholders to approve the Merger Proposal. SeaChange stockholders should carefully read this proxy statement/prospectus in its entirety, including the exhibits, for more detailed information concerning the Merger Agreement and the merger. In particular, SeaChange stockholders are directed to the Merger Agreement, a copy of which is attached as Annex A to this proxy statement/prospectus.

After careful consideration, the SeaChange board of directors determined that the merger and the other transactions contemplated by the Merger Agreement are fair to, advisable and in the best interests of SeaChange and its stockholders and authorized, approved and declared advisable the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. Accordingly, the SeaChange board of directors determined to recommend that its stockholders vote to approve the Merger Agreement, the merger and the other transactions contemplated by the Merger Agreement. See “The Merger—SeaChange Reasons for the Merger” beginning on page [•] of this proxy statement/prospectus for a more detailed discussion of the SeaChange board’s recommendation.

Required Vote

Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of SeaChange common stock outstanding entitled to vote on such proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Merger Proposal. Failure to vote on the Merger Proposal will have the same effect as a vote “AGAINST” the Merger Proposal.

The Merger Proposal is conditioned on the approval of the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. If any of the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal or the Nasdaq Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Merger Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Merger Proposal.

Proposal 2: The Reverse Stock Split Proposal

In connection with the merger, SeaChange is asking SeaChange stockholders to approve an amendment of the amended and restated certificate of incorporation of SeaChange to effect a reverse stock split and reclassification of SeaChange common stock into shares of Class A common stock at a specific ratio of 6 to 1 (the “Reverse Stock Split”), to be effected immediately prior to the effective time (the “Reverse Stock Split Proposal”). Under this proposed amendment, each six outstanding shares of SeaChange common stock would be combined into one share of Class A common stock, as a result of the simultaneous creation of two new classes of common stock, Class A common stock and Class B common stock pursuant to the Reclassification Proposal (as defined below), and the Reverse Stock Split of all outstanding shares of SeaChange common stock prior to the effective time of the Reverse Stock Split into shares of Class A common stock. Under the Merger Agreement, the form of the amendment must be in form and substance reasonably acceptable to Triller.

The actual timing for implementation of the Reverse Stock Split would be determined by the SeaChange board based upon its evaluation as to when such action would be most advantageous to SeaChange and its stockholders,

 

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with the consent of Triller. However, SeaChange’s current intention is to effect the Reverse Stock Split immediately prior to the effective time concurrently with the amendments contemplated by the Reclassification Proposal. Furthermore, notwithstanding the SeaChange stockholder approval, the SeaChange board also would have the discretion not to implement the Reverse Stock Split with the consent of Triller.

A copy of the certificate of amendment for the Certificate of Incorporation Amendment Proposal is attached as Exhibit F-2 to the Merger Agreement, a copy of which is attached as Annex D to this proxy statement/prospectus. SeaChange stockholders should carefully read the certificate of amendment in its entirety.

The SeaChange board authorized, approved and declared advisable the Reverse Stock Split Proposal for the following reasons:

 

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the SeaChange board believes the Reverse Stock Split is the most effective means of increasing the per-share market price of SeaChange common stock in order to maintain its listing on Nasdaq;

 

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the SeaChange board believes that a higher per-share market price of SeaChange common stock could encourage investor interest in SeaChange and promote greater liquidity for its stockholders; and

 

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if the Reverse Stock Split successfully increases the per-share market price of SeaChange common stock, the SeaChange board believes this increase may increase trading volume in SeaChange common stock and facilitate future financings by the combined company.

SeaChange common stock is currently listed on Nasdaq under the symbol “SEAC.” SeaChange and Triller have agreed, among other things, to use commercially reasonable efforts to obtain approval of the listing of the combined company on Nasdaq, file an initial listing application for SeaChange Class A common stock on Nasdaq and cause such Nasdaq listing application to be conditionally approved prior to the effective time under the ticker symbol “ILLR”.

According to Nasdaq Listing Rule 5110, an issuer must apply for initial inclusion following a transaction whereby the issuer combines with a non-Nasdaq entity, resulting in a change of control of the issuer and potentially allowing the non-Nasdaq entity to obtain a Nasdaq listing. Accordingly, the listing standards of Nasdaq will require the combined company to have, among other things, a $[4.00] per share minimum bid price upon the effective time. As of December 31, 2021, the closing price of SeaChange common stock was $1.60.

Required Vote

Approval of the Reverse Stock Split Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of SeaChange common stock outstanding entitled to vote on such proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” the Reverse Stock Split Proposal. Failure to vote will have the same effect as a vote “AGAINST” the Reverse Stock Split Proposal.

The Reverse Stock Split Proposal is conditioned on the approval of the Reclassification Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. If any of the Reclassification Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal or the Nasdaq Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Reverse Stock Split Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Reverse Stock Split Proposal.

 

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Proposal 3: The Reclassification Proposal

In connection with the merger, in addition to the Reverse Stock Split, SeaChange is asking SeaChange stockholders to approve an amendment of the amended and restated certificate of incorporation of SeaChange to (i) increase the number of authorized shares of SeaChange capital stock to [            ] shares, (ii) create two new classes of SeaChange common stock designated as Class A common stock and Class B common stock (resulting in the existing shares of SeaChange common stock being reclassified as Class A common stock concurrently with, and as a result of, the Reverse Stock Split), and authorize SeaChange to issue [            ] shares of Class A common stock, [            ] shares of Class B common stock and [            ] shares of preferred stock (the “Reclassification Proposal” and, together with the Reverse Stock Split Proposal, the “Certificate of Incorporation Amendment Proposal”).

A copy of the certificate of amendment for the Certificate of Incorporation Amendment Proposal is attached as Exhibit F-2 to the Merger Agreement, a copy of which is attached as Annex D to this proxy statement/prospectus. SeaChange stockholders should carefully read the certificate of amendment in its entirety.

The SeaChange board authorized, approved and declared advisable the proposed amendment because it will enable SeaChange to complete the merger and provide greater flexibility in the capital structure of the combined company following the merger by allowing it to raise capital that may be necessary to further develop its business, fund potential acquisitions, have shares available for use in connection with stock plans and pursue other corporate purposes that may be identified by the board of directors of the combined company in the future.

The Reclassification Proposal is conditioned on the separate approval of the Reverse Stock Split Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. Accordingly, SeaChange intends that such amendments will be subject to and effective only if the Reverse Stock Split Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal are also approved.

Required Vote

Approval of the Reclassification Proposal requires the affirmative vote of the holders of a majority of the voting power of the shares of SeaChange common stock outstanding entitled to vote on such proposal. Abstentions and broker non-votes will have the same effect as a vote “AGAINST” such proposal. Failure to vote will have the same effect as a vote “AGAINST” such proposal.

The Reclassification Proposal is conditioned on the approval of the Reverse Stock Split Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. If any of the Reverse Stock Split Proposal, the Merger Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal or the Nasdaq Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Reclassification Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Reclassification Proposal.

Proposal 4: Advisory Proposal

In addition, in connection with the merger, the amended and restated certificate of incorporation of SeaChange will be amended to, among other things, (i) effect the name change of SeaChange to “TrillerVerz Corp.”, (ii) provide for rights of Class A common stock and Class B common stock, including voting, conversion and transfer rights and (iii) allow stockholders to act by written consent or electronic transmission and to call

 

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special meetings of stockholders until the Trigger Date (the “Advisory Proposal”), as further described in the section entitled “The Merger Agreement—Amendments to SeaChange’s Certificate of Incorporation” beginning on page [•] of this proxy solicitation statement/prospectus.

The SEC has issued interpretive guidance with respect to the “unbundling” of proposals under Rule 14(a)-4(a)(3) of the Exchange Act that requires SeaChange stockholders to also separately vote on the Advisory Proposal. This separate vote is not otherwise required by Delaware law separate and apart from the approval of the Certificate of Incorporation Amendment Proposal. Accordingly, SeaChange is asking SeaChange stockholders to approve, on an advisory, non-binding basis, the Advisory Proposal.

A copy of the certificate of amendment is attached as Exhibit F-1 to the Merger Agreement, a copy of which is attached as Annex E to this proxy statement/prospectus. SeaChange stockholders should carefully read the certificate of amendment in its entirety.

The votes received by SeaChange stockholders with respect to the Advisory Proposal are advisory and will not be binding on SeaChange or Triller (or the combined company that results from the merger) separate and apart from the approval of the Certificate of Incorporation Amendment Proposal. In addition, the merger is not conditioned on the separate approval of the Advisory Proposal (separate and apart from approval of the Certificate of Incorporation Amendment Proposal). Accordingly, regardless of the outcome of the non-binding advisory vote on this proposal, SeaChange intends that such amendments will be subject to and effective only upon completion of the merger and effective as of the effective time (assuming approval of the Certificate of Incorporation Amendment Proposal).

Required Vote

Approval of the Advisory Proposal, which is a non-binding advisory vote, requires the affirmative vote of a majority of the votes cast by the SeaChange stockholders present at the special meeting and entitled to vote on the Incentive Plan Proposal is required to approve the Advisory Proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The SeaChange board recommends that you vote “FOR” the Advisory Proposal.

Proposal 5: The Incentive Plan Proposal

The SeaChange board of directors unanimously recommends that you vote “FOR” the Incentive Plan Proposal to approve an increase in the number of authorized shares under the SeaChange 2021 Compensation and Incentive Plan.

At the special meeting, SeaChange’s stockholders will be asked to approve an amendment to the SeaChange 2021 Compensation and Incentive Plan (the “2021 Incentive Plan Amendment,” and such compensation and incentive plan, as amended, the “2021 Incentive Plan”) to (i) reflect the Reverse Stock Split and the Reclassification Proposal and (ii) increase the number of shares available for issuance under the 2021 Incentive Plan by [•] shares of SeaChange Class A common stock.

As discussed in the section titled “The Merger Agreement—Treatment of SeaChange and Triller Stock, Options, Other Awards and Warrants,” the merger will result in outstanding Triller options being converted into options to purchase SeaChange Class A common stock under the 2021 Incentive Plan. Based on the number of Triller Class B common units underlying the outstanding Triller options and the anticipated Company Class A/B Exchange Ratio, immediately following the effective time of the merger, the number of shares of SeaChange Class A common stock that will be issuable on exercise of the converted options is expected to range between 60,000,000 and 65,000,000 shares of SeaChange Class A common stock (prior to giving effect to the Reverse Stock Split).

 

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As of [•], 2022, [•] shares remained available for issuance under the 2021 Incentive Plan. As of [•], 2022, [•] shares of SeaChange common stock were issuable upon the exercise of outstanding options, and those options had a weighted average exercise price of $[•] per share and a weighted average remaining contractual life of [•] years, and [•] restricted shares were subject to vesting. The number of shares currently available under the 2021 Incentive Plan will be insufficient to cover the converted options in addition to the currently outstanding awards. Approval of the 2021 Incentive Plan Amendment will reflect the reclassification of existing shares of SeaChange common stock as SeaChange Class A common stock, and increase the number of shares available for issuance under the 2021 Incentive Plan by [•] shares. If the proposed amendment is approved by SeaChange’s stockholders, SeaChange currently expects such increase to be sufficient to meet the combined company’s needs for all previously outstanding awards and the converted options.

The increase in shares reserved for issuance under the 2021 Incentive Plan pursuant to the 2021 Incentive Plan Amendment is necessary to allow SeaChange to (i) provide customary levels of equity incentives to employees, including without limitation the long-term equity incentive awards that the compensation committee of the SeaChange board of directors has historically granted to certain essential employees and non-employee directors on an annual basis, and (ii) issue potential shares to sufficiently cover certain Triller options granted prior to the merger. The SeaChange board of directors believes that the increase in the share reserve is necessary to assure that a sufficient reserve of SeaChange Class A common stock remains available for issuance under all outstanding and converted equity awards to retain the services of individuals essential to its long-term growth and financial success. SeaChange relies significantly on equity incentives in order to attract and retain employees, consultants, and non-employee directors, and believe that such equity incentives are necessary for it to remain competitive in the marketplace for executive talent and for other key individuals.

On [•], 2022, the SeaChange board of directors approved the 2021 Incentive Plan Amendment, subject to stockholder approval at the special meeting. The principal provisions of the 2021 Incentive Plan, as amended by the 2021 Incentive Plan Amendment, are summarized below. This summary is not complete and is qualified in its entirety by the terms of the 2021 Incentive Plan, as amended by the 2021 Incentive Plan Amendment. A copy of the 2021 Incentive Plan Amendment is attached as Annex F to this proxy statement/prospectus, and a copy of the 2021 Incentive Plan can be found as Appendix B to SeaChange’s definitive proxy statement on Schedule DEFA 14A filed by SeaChange with the SEC on May 28, 2021.

Description of the 2021 Incentive Plan, as amended

Purpose

The purpose of the 2021 Incentive Plan is to provide equity ownership and compensation opportunities in SeaChange (each, an “Award”) to employees, officers, directors, consultants and advisors of SeaChange and its subsidiaries, all of whom are eligible to receive Awards under the 2021 Incentive Plan. Any person to whom an Award is granted is called a “Participant.”

Administration

The 2021 Incentive Plan is administered by a committee (the “Committee”) composed solely of members of SeaChange’s board of directors that are “independent” under applicable rules and regulations. The Committee has the authority to grant and amend Awards, to establish performance goals with respect to such Awards, to adopt, amend and repeal rules relating to the 2021 Incentive Plan, to interpret and correct the provisions of the 2021 Incentive Plan and any Award, and to subject Awards to forfeiture, setoff, recoupment or other recovery if the Committee determines in good faith that such action is required by applicable law or SeaChange company policy. The 2021 Incentive Plan also provides that, subject to certain limits provided for in the 2021 Incentive Plan, authority to grant Awards to employees may be delegated to one or more officers of SeaChange.

 

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Authorized Shares

The number of shares (the “Authorized Shares”) of SeaChange Class A common stock that may be delivered in satisfaction of Awards granted under the 2021 Incentive Plan is (i) [2,500,000] shares of SeaChange Class A common stock plus (ii) the number of shares that would have become available for issuance under SeaChange’s Second Amended and Restated 2011 Compensation and Incentive Plan (the “2011 Plan”) following the adoption of the 2021 Incentive Plan on July 8, 2021 due to the expiration, termination, surrender or forfeiture of an award under the 2011 Plan plus (iii) [•] shares of SeaChange Class A common stock available for issuance under the 2021 Incentive Plan Amendment. If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued shares covered by such Award will again be available for the grant of Awards under the 2021 Incentive Plan, provided that in no event shall the following shares of SeaChange Class A common stock be added to the foregoing plan limit: (i) shares of SeaChange Class A common stock tendered in payment of an option, granted pursuant to the 2011 Plan; (ii) shares of SeaChange Class A common stock withheld by SeaChange to satisfy any tax withholding obligation pursuant to the 2011 Plan; or (iii) shares of SeaChange Class A common stock that are repurchased by SeaChange with proceeds of options, granted pursuant to the 2011 Plan. As of January 31, 2022, there were [•] shares of SeaChange common stock available for issuance under the 2021 Incentive Plan (as adjusted to reflect the Reverse Stock Split), which does not include [•] shares of SeaChange Class A common stock available for issuance under the 2021 Incentive Plan Amendment, if approved.

Eligibility

Employees, officers, directors, consultants and advisors of SeaChange and its subsidiaries are eligible to be granted Awards under the 2021 Incentive Plan. Under present law, however, incentive stock options within the meaning of Section 422 of the Code may only be granted to employees of SeaChange and parent or subsidiaries of SeaChange.

Types of Awards

Awards under the 2021 Incentive Plan may be in the form of incentive stock options, non-qualified stock options, restricted stock, restricted stock units, any other equity-based interests as the Committee shall determine, cash awards, or any combination thereof. Awards may be granted subject to time-based vesting schedules and/or performance-based vesting measured by performance goals.

Stock Options

Stock options represent the right to purchase shares of SeaChange Class A common stock within a specified period of time at a specified price. The exercise price for options will be not less than 100% (110% for an incentive stock option granted to a 10% or more stockholder) of the fair market value of SeaChange Class A common stock on the date of grant. The aggregate fair market value, determined on the date the option is granted, of the stock for which any person may be granted incentive stock options which become exercisable for the first time by such person in any calendar year cannot exceed the sum of $100,000 (determined on the date such option is granted). No incentive stock option will be granted to a person who is not an “employee” as defined in the applicable provisions of the Code. Options will expire no later than ten years (five years in the case of an incentive stock option granted to a 10% or more stockholder) after the date of grant. No stock options can be granted under the 2021 Incentive Plan after [•], 2032, but options granted before that date may be exercised thereafter.

Payment for the exercise of options under the 2021 Incentive Plan may be made by one or any combination of the following forms of payment:

 

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by cash or by check payable to the order of SeaChange;

 

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at the discretion of the Committee through delivery of shares of SeaChange Class A common stock having fair market value equal as of the date of exercise to the cash exercise price of the option; or

 

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at the discretion of the Committee, by delivery of a sufficient amount of the proceeds from the sale of the SeaChange Class A common stock acquired upon exercise of the option by the optionee’s broker or selling agent.

Each option or installment may be exercised at any time or from time to time, in whole or in part, for up to the total number of shares with respect to which it is then exercisable.

Restricted Stock, Restricted Stock Units and Other Equity Awards

The 2021 Incentive Plan provides the flexibility to grant other forms of Awards based upon the SeaChange Class A common stock, having the terms and conditions established at the time of grant by the Committee. Restricted stock is SeaChange Class A common stock that is subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. Restricted stock units represent the right to receive shares of SeaChange Class A common stock in the future, with the right to future delivery of the shares subject to a risk of forfeiture or other restrictions that will lapse upon satisfaction of specified conditions. All of the shares being approved for issuance under the 2021 Incentive Plan may be granted as Awards of restricted stock, restricted stock units or other non-stock option Awards.

Generally, restricted stock awards granted under the 2021 Incentive Plan have a minimum vesting period of no less than one year. No more than 10% of the maximum aggregate shares authorized for issuance under the 2021 Incentive Plan may be granted in the form of restricted stock awards that do not comply with these minimum vesting periods.

Subject to any restrictions applicable to the Award, a Participant holding restricted stock, whether vested or unvested, is entitled to enjoy all rights of a stockholder with respect to such restricted stock, including the right to receive dividends and to vote the shares. A Participant holding restricted stock units may not vote the shares represented by a restricted stock unit and is not entitled to receive any dividends with respect to shares represented by a restricted stock unit.

Cash Awards

The 2021 Incentive Plan provides the flexibility to grant cash Awards either alone, in addition to, or in tandem with other Awards granted under the 2021 Incentive Plan. The Committee shall determine the terms and conditions of any such cash Award. From time to time, the Committee shall establish administrative rules and procedures governing the administration of cash Awards.

Transferability

Except as the Committee may otherwise determine or provide in an Award, Awards may be transferred only by will or by the laws of descent and distribution; provided, however, that nonstatutory stock options may be transferred pursuant to a qualified domestic relations order or to a grantor-retained annuity trust or a similar estate-planning vehicle under which the trust is bound by all provisions of the option which are applicable to the holder thereof.

Adjustment

In the event of any stock split, stock dividend, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off, split-up, or other similar change in capitalization or event, the following shall be equitably adjusted:

 

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the number and class of securities available for stock-based Awards under the 2021 Incentive Plan;

 

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the number and class of securities, vesting schedule and exercise price per share subject to each outstanding option;

 

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the repurchase price per security subject to repurchase; and

 

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the terms of each other outstanding stock-based Award shall be adjusted by SeaChange (or substituted Awards may be made) to the extent the Committee shall determine, in good faith, that such an adjustment (or substitution) is appropriate.

Treatment upon Acquisition

Unless otherwise expressly provided in the applicable Award, upon the occurrence of an acquisition of SeaChange, appropriate provision is to be made for the continuation or the assumption by the surviving or acquiring entity of all Awards. In addition to or in lieu of the foregoing, the Committee may provide that one or more Awards granted under the 2021 Incentive Plan must be exercised by a certain date or shall be terminated, that any such Awards shall be terminated in exchange for a cash payment, or that any out of the money stock-based Awards be terminated.

Effect of Termination, Disability or Death

The Committee determines the effect on an Award of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant, or the Participant’s legal representative, conservator, guardian or designated beneficiary, may exercise rights under the Award, subject to applicable law and the provisions of the Code related to incentive stock options.

Amendment of Awards

The Committee may, without stockholder approval, amend, modify or terminate any outstanding Award, provided that, the Participant’s consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. In addition, other than in the case of equitable adjustments to outstanding Awards, without the prior approval of SeaChange’s stockholders, (i) no option or other stock-based Award that is not a full value Award may be amended to reduce the price at which such option or Award is exercisable, (ii) no option or other stock-based Award that is not a full value Award may be canceled in exchange for an option or other stock-based Award that is not a full value Award with an exercise price that is less than the exercise price of the original option or stock-based Award that is not a full value Award, (iii) no option or other stock-based Award that is not a full value Award with an exercise price above the then current Fair Market Value may be canceled in exchange for cash or other securities, and (iv) no option or other stock-based Award that is not a full value Award may be amended to extend the period of time for which such previously-issued Award shall be exercisable beyond the expiration date of such Award.

Termination of the 2021 Incentive Plan; Amendments

Awards may be granted under the 2021 Incentive Plan at any time prior to July 8, 2031. The Committee may amend, suspend or terminate the 2021 Incentive Plan or any portion thereof at any time, provided, however, that any “material amendment” as defined by the 2021 Incentive Plan will not be effective unless approved by SeaChange’s stockholders. If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued shares covered by such Award shall again be available for the grant of Awards under the 2021 Incentive Plan. Notwithstanding the foregoing, as discussed in the section titled “Proposal 6 – Omnibus Incentive Plan Proposal,” if our stockholders approve the Omnibus Incentive Plan Proposal, the 2021 Incentive Plan will be replaced by the Omnibus Incentive Plan and no further awards will be granted under the 2021 Incentive Plan.

 

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Federal Income Tax Consequences

Incentive Stock Options

The following general rules are applicable under current United States federal income tax law to incentive stock options (“ISOs”) granted under the 2021 Incentive Plan.

 

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In general, no taxable income results to the optionee upon the grant of an ISO or upon the exercise of the ISO, and no corresponding federal tax deduction is allowed to SeaChange upon either the grant or exercise of an ISO.

 

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If shares acquired upon exercise of an ISO are not disposed of within (i) two years following the date the option was granted or (ii) one year following the date the shares are issued to the optionee pursuant to the ISO exercise (the “Holding Periods”), the difference between the amount realized on any subsequent disposition of the shares and the exercise price will generally be treated as long-term capital gain or loss to the optionee.

 

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If shares acquired upon exercise of an ISO are disposed of before the Holding Periods are met (a “Disqualifying Disposition”), then in most cases the lesser of (i) any excess of the fair market value of the shares at the time of exercise of the ISO over the exercise price or (ii) the actual gain on disposition will be treated as compensation to the optionee and will be taxed as ordinary income in the year of such disposition.

 

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In any year that an optionee recognizes ordinary income as the result of a Disqualifying Disposition, SeaChange generally should be entitled to a corresponding deduction for federal income tax purposes.

 

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Any excess of the amount realized by the optionee as the result of a Disqualifying Disposition over the sum of (i) the exercise price and (ii) the amount of ordinary income recognized under the above rules will be treated as capital gain to the optionee.

 

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Capital gain or loss recognized by an optionee upon a disposition of shares will be long-term capital gain or loss if the optionee’s holding period for the shares exceeds one year.

 

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An optionee may be entitled to exercise an ISO by delivering shares of SeaChange Class A common stock to SeaChange in payment of the exercise price, if so provided by the Committee. If an optionee exercises an ISO in such fashion, special rules will apply.

 

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In addition to the tax consequences described above, the exercise of an ISO may result in additional tax liability to the optionee under the alternative minimum tax rules. The Code provides that an alternative minimum tax (at a maximum rate of 28%) will be applied against a taxable base which is equal to “alternative minimum taxable income” reduced by a statutory exemption. In general, the amount by which the value of the SeaChange Class A common stock received upon exercise of the ISO exceeds the exercise price is included in the optionee’s alternative minimum taxable income. A taxpayer is required to pay the higher of his or her regular tax liability or the alternative minimum tax. A taxpayer that pays alternative minimum tax attributable to the exercise of an ISO may be entitled to a tax credit against his or her regular tax liability in later years.

Nonstatutory Stock Options

The following general rules are applicable under current federal income tax law to options that do not qualify as ISOs (“NSOs”) granted under the 2021 Incentive Plan:

 

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The optionee generally does not realize any taxable income upon the grant of a NSO, and SeaChange is not allowed a federal income tax deduction by reason of such grant.

 

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The optionee generally will recognize ordinary income at the time of exercise of a NSO in an amount equal to the excess, if any, of the fair market value of the shares on the date of exercise over the exercise price.

 

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When the optionee sells the shares acquired pursuant to a NSO, he or she generally will recognize a capital gain or loss in an amount equal to the difference between the amount realized upon the sale of the shares and his or her basis in the shares (generally, the exercise price plus the amount taxed to the optionee as ordinary income). If the optionee’s holding period for the shares exceeds one year, such gain or loss will be a long-term capital gain or loss.

 

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SeaChange generally should be entitled to a corresponding tax deduction for federal income tax purposes when the optionee recognizes ordinary income.

 

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An optionee may be entitled to exercise a NSO by delivering shares of SeaChange Class A common stock to SeaChange in payment of the exercise price, if so provided by the Committee. If an optionee exercises a NSO in such fashion, special rules will apply.

Restricted Stock and Restricted Stock Unit Awards

The following general rules are applicable under current federal income tax law to Awards of restricted stock and restricted stock units under the 2021 Incentive Plan:

 

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The recipient of restricted stock units will not recognize taxable income at the time of a grant of a restricted stock unit, and SeaChange will not be entitled to a tax deduction at that time. The recipient will recognize compensation taxable as ordinary income, however, at the time of the settlement of the Award, equal to the fair market value of any shares delivered and the amount of cash paid.

 

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The recipient of restricted stock will not recognize taxable income at the time of a grant of a restricted stock Award, and SeaChange will not be entitled to a tax deduction at such time, unless the Participant makes an election under Section 83(b) of the Code to be taxed at that time. If that election is made, the Participant will recognize compensation taxable as ordinary income at the time of the grant, equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. If such election is not made, the Participant will recognize compensation taxable as ordinary income at the time the restrictions lapse, in an amount equal to the excess of the fair market value of the shares at such time over the amount, if any, paid for such shares. SeaChange will generally be entitled to a corresponding deduction at the time the ordinary income is recognized by the recipient.

In addition, a Participant receiving dividends with respect to restricted shares for which the above-described election has not been made, and prior to the time the restrictions lapse, will recognize compensation taxable as ordinary income rather than dividend income. SeaChange will generally be entitled to a corresponding deduction.

Cash Awards.

The following general rules are applicable under current federal income tax law to cash Awards under the 2021 Incentive Plan:

 

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Participants granted a cash Award generally will recognize ordinary income at the time of payment of the cash Award equal to the amount paid.

 

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SeaChange will generally be entitled to a corresponding deduction.

Other Tax Considerations.

A Participant who receives accelerated vesting, exercise or payment of Awards contingent upon or in connection with a change of control may be deemed to have received an “excess parachute payment” under Section 280G of the Code. In such event, the Participant may be subject to a 20% excise tax and SeaChange may be denied a tax deduction for such payments.

 

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It is the intention of SeaChange that Awards comply with Section 409A of the Code regarding nonqualified deferred compensation arrangements or will satisfy the conditions of applicable exemptions. However, if an Award is subject to and fails to comply with the requirements of Section 409A, the Participant may recognize ordinary income on the amounts deferred under the Award, to the extent vested, prior to the time when the compensation is received. In addition, Section 409A imposes a 20% penalty tax, as well as interest, on the Participant with respect to such amounts.

Required Vote

Assuming that a quorum is present at the special meeting, the affirmative vote of a majority of the votes cast by the SeaChange stockholders present in person (including virtually) or represented by proxy at the special meeting and entitled to vote on the Incentive Plan Proposal is required to approve the Incentive Plan Proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The Incentive Plan Proposal is conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Omnibus Incentive Plan Proposal and the Nasdaq Proposal. If any of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Omnibus Incentive Plan Proposal or the Nasdaq Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Incentive Plan Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Incentive Plan Proposal.

Proposal 6: Omnibus Incentive Plan Proposal

In connection with the merger, our board of directors has adopted the TrillerVerz Corp. 2022 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) to become effective in connection with the consummation of the merger, subject to stockholder approval. If approved by our stockholders, the Omnibus Incentive Plan will replace the SeaChange International, Inc. 2021 Compensation and Incentive Plan (the “Prior Plan”), and no further awards will be granted under the Prior Plan. If we do not receive stockholder approval, the Omnibus Incentive Plan will not go into effect and the Prior Plan will remain in effect.

SeaChange is asking SeaChange stockholders to approve the Omnibus Incentive Plan proposal (the “Omnibus Incentive Plan Proposal”). SeaChange stockholders should carefully read this proxy statement/prospectus in its entirety, including the exhibits, for more detailed information concerning the Omnibus Incentive Plan.

The SeaChange board authorized, approved and declared advisable the Omnibus Incentive Plan. The Company believes that equity-based compensation is a critical part of its compensation program. Stockholder approval of the Omnibus Incentive Plan will allow us to attract and retain key personnel by providing them the opportunity to acquire an equity interest in the Company, and to align the interests of key personnel with those of the Company’s stockholders.

The Omnibus Incentive Plan includes features designed to protect stockholder interests and reflects compensation and governance best practices, as described below.

 

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No Dividends on Unvested Awards. Dividends and dividend equivalents are not payable with respect to awards before the award becoming vested and are subject to forfeiture to the same extent as the underlying award.

 

 

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Director Compensation Limit. Awards under the Omnibus Incentive Plan and all other compensation payable to each non-employee director is subject to an aggregate limit of $[750,000] per year.

 

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No Liberal Share Counting. Shares tendered or withheld to cover taxes or pay the exercise of an option or stock appreciation right are not again available for grant under the Omnibus Incentive Plan.

 

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No Discounted Options or Stock Appreciation Rights. Options and stock appreciation rights must have an exercise price or strike price at or above the fair market value per share of our Class A common stock on the date of grant.

 

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No Repricing. The Omnibus Incentive Plan prohibits the repricing of stock options and stock appreciation rights without the approval of our stockholders.

 

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Independent Committee Administration. The Omnibus Incentive Plan is administered by a committee of the Board whose members satisfy the independence requirements of applicable rules and regulations.

 

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Awards Subject to Clawback. Awards under the Omnibus Incentive Plan may be subject to forfeiture, recoupment or other recovery if the Committee determines in good faith that such action is required by applicable law or Company policy.

Summary of the Omnibus Incentive Plan

The following is a brief description of the material features of the Omnibus Incentive Plan, a copy of which is attached as Annex B to this proxy statement/prospectus, and is qualified in its entirety by reference to the Omnibus Incentive Plan. SeaChange stockholders should carefully read the Omnibus Incentive Plan in its entirety.

Administration

The Omnibus Incentive Plan will be administered by the compensation committee of our board of directors or a subcommittee if required in compliance with Rule 16b-3 promulgated under the Exchange Act, or if no such committee or subcommittee exists, our board of directors (the “Committee”). The Committee will have the authority to determine the terms and conditions of any agreements evidencing any awards granted under the Omnibus Incentive Plan and to adopt, alter and repeal rules, guidelines and practices relating to the Omnibus Incentive Plan. The Committee will have full discretion to administer and interpret the Omnibus Incentive Plan and to adopt such rules, regulations and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised.

Eligibility

Any current or prospective employees, directors, officers, consultants or advisors of the Company or its affiliates will be eligible for awards under the Omnibus Incentive Plan. The Committee will have the sole and complete authority to determine who will be granted an award under the Omnibus Incentive Plan.

Number of Shares Authorized

We have reserved an aggregate of [            ] shares of our Class A common stock for issuance pursuant to awards under the Omnibus Incentive Plan, all of which may be issued with respect to incentive stock options under the Omnibus Incentive Plan. The maximum grant date fair value of cash and equity awards that may be awarded to a non-employee director under the Omnibus Incentive Plan during any one fiscal year, taken together with any cash fees paid to such non-employee director during such fiscal year, in respect of service as a member of the board of directors during such year will be $[750,000] (excluding any one-time awards granted in connection

 

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with the consummation of the merger or a director’s initial appointment to the board of directors). If any award granted under the Omnibus Incentive Plan expires, terminates, or is canceled or forfeited without being settled, vested or exercised, any shares subject to such award will again be available for future grants. Any shares that are used to pay the exercise price of an award or to satisfy withholding taxes owed, or any shares reserved for issuance but not issued, with respect to settlement of a stock appreciation right, will not again be available for grants under the Omnibus Incentive Plan.

Change in Capitalization

If there is a change in our capitalization in the event of a stock or extraordinary cash dividend, recapitalization, stock split, reverse stock split, reorganization, merger, amalgamation, consolidation, split-up, split-off, spin-off, combination, repurchase or exchange of shares of our Class A common stock or other relevant change in capitalization or applicable law or circumstances, the Committee will make certain necessary or appropriate adjustments to the terms of the Omnibus Incentive Plan and awards in a manner that it deems equitable. Such adjustments may be to the number of shares reserved for issuance under the Omnibus Incentive Plan, the number of shares covered by awards then outstanding, the limitations on awards under the Omnibus Incentive Plan, the exercise price of outstanding options, or such other equitable substitution or adjustments as the Committee may determine appropriate.

Awards Available for Grant

The Committee may grant awards of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights (“SARs”), restricted stock awards, restricted stock units, other stock-based awards, other cash-based awards or any combination of the foregoing. Awards may be granted under the Omnibus Incentive Plan in assumption of, or in substitution for, outstanding awards previously granted by an entity acquired by the Company or with which the Company combines, which are referred to herein as “Substitute Awards.”

Stock Options

The Committee will be authorized to grant options to purchase shares of our Class A common stock that are either “qualified,” meaning they are intended to satisfy the requirements of Section 422 of the Code for incentive stock options, or “non-qualified,” meaning they are not intended to satisfy the requirements of Section 422 of the Code. All options granted under the Omnibus Incentive Plan will be non-qualified unless the applicable award agreement expressly states that the option is intended to be an incentive stock option. The exercise price for an option will not be less than the fair market value (or 110% of the fair market value in the case of a qualified option granted to a 10% stockholder) per share of our Class A common stock at the time of grant (except with respect to Substitute Awards). The maximum term of an option granted under the Omnibus Incentive Plan will be 10 years from the date of grant (or five years in the case of a qualified option granted to a 10% stockholder). However, if the term of a non-qualified option would expire at a time when trading in the shares of our Class A common stock is prohibited by the Company’s insider trading policy, the option’s term will be extended automatically until the 30th day following the expiration of such prohibition. The Committee will determine the methods and form of payment for the exercise price of an option (including, in the Committee’s discretion, payment by delivery of shares of our Class A common stock, by means of a broker-assisted cashless exercise mechanism or by means of a “net exercise” procedure effected by withholding the minimum number of shares otherwise deliverable in respect of an option that are needed to pay the exercise price and all applicable required withholding taxes).

Stock Appreciation Rights

The Committee will be authorized to award SARs under the Omnibus Incentive Plan. A SAR is a contractual right that allows a participant to receive, in the form of either cash, shares or any combination of cash and shares, the appreciation, if any, in the value of a share over a certain period of time. An option granted under

 

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the Omnibus Incentive Plan may include SARs, and SARs may also be awarded to a participant independent of the grant of an option. SARs granted in connection with an option will be subject to terms similar to the option corresponding to such SARs, including with respect to vesting and expiration. Except as otherwise provided by the Committee (in the case of Substitute Awards or SARs granted in tandem with previously granted options), the strike price per share of our Class A common stock underlying each SAR will not be less than 100% of the fair market value of such share, determined as of the date of grant and the maximum term of a SAR granted under the Omnibus Incentive Plan will be 10 years from the date of grant.

Restricted Stock

The Committee will be authorized to grant awards of restricted stock under the Omnibus Incentive Plan. Restricted stock is Class A common stock that is generally non-transferable and is subject to other restrictions determined by the Committee for a specified period. Any accumulated dividends will be payable at the same time that the underlying restricted stock vests.

Restricted Stock Unit Awards

The Committee will be authorized to grant restricted stock unit awards under the Omnibus Incentive Plan. A restricted stock unit award, once vested, may be settled in a number of shares of our Class A common stock equal to the number of units earned, in cash equal to the fair market value of the number of shares of our Class A common stock earned in respect of such restricted stock unit award or in a combination of the foregoing, at the election of the Committee. Restricted stock units may be settled at the expiration of the period over which the units are to be earned or at a later date selected by the Committee. The holder of restricted stock units generally will not be entitled to receive dividends or dividend equivalents, but the Committee may provide in an award agreement for the holder to be credited with dividend equivalent payments upon the payment by us of dividends on shares of our Class A common stock, subject to such terms as determined by the Committee, to be accumulated and payable, if at all at the same time that the underlying restricted stock units are settled.

Other Stock-Based Awards

The Committee will be authorized to grant awards of unrestricted shares of our Class A common stock, rights to receive grants of awards at a future date, other awards denominated in shares of our Class A common stock, or awards that provide for cash payments based in whole or in part on the value of our Class A common stock under such terms and conditions as the Committee may determine and as set forth in the applicable award agreement.

Effect of Termination of Employment or a Change in Control

The Committee will determine the effect of a termination of employment or service on outstanding awards, including whether the awards will vest, become exercisable, settle, be paid, or be forfeited. In the event of a change in control, as defined in the Omnibus Incentive Plan, the Committee may provide for:

 

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continuation or assumption of outstanding awards under the Omnibus Incentive Plan by us (if we are the surviving corporation) or by the surviving corporation or its parent;

 

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substitution by the surviving corporation or its parent of awards with substantially the same terms and value as such outstanding awards under the Omnibus Incentive Plan;

 

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acceleration of the vesting (including the lapse of any restrictions, with any performance criteria or conditions deemed met at target) or the right to exercise outstanding awards immediately prior to the date of the change of control and the expiration of awards not timely exercised by the date designated by the Committee; or

 

 

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in the case of outstanding options and SARs, cancelation in consideration of a payment in cash or other consideration equal to the intrinsic value of the award. The Committee may, in its sole discretion, terminate without the payment of any consideration, any options or SARs for which the exercise or strike price is equal to or exceeds the per share value of the consideration to be paid in the change of control transaction.

Nontransferability

Unless otherwise permitted by the Committee, awards are nontransferable and may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a participant other than by will or by the laws of descent and distribution.

Amendment

The Omnibus Incentive Plan will have a term of 10 years. The board of directors may amend, suspend or terminate the Omnibus Incentive Plan at any time, subject to stockholder approval if necessary to comply with any tax, exchange rules, or other applicable regulatory requirement. No amendment, suspension or termination will materially and adversely affect the rights of any participant or recipient of any award without the consent of the participant or recipient.

The Committee generally may waive any conditions or rights under awards, or may amend, cancel or terminate any award, provided that any such waiver, amendment, cancellation or termination that would materially and adversely affect the rights of the participant with respect to any award will require the consent of the affected participant. In addition, the Committee may not reduce the exercise price of any option or the strike price of any SAR, or cancel any outstanding option or SAR and replace it with a new option or SAR with a lower exercise price or strike price or with another award or cash in a manner that would be treated as a repricing, or take any other action considered a repricing for purposes of the stockholder approval rules of the applicable securities exchange on which our Class A common shares are listed. However, stockholder approval is not required with respect to adjustments on changes in capitalization.

Clawback or Forfeiture

Awards may be subject to clawback or forfeiture to the extent required by applicable law (including, without limitation, Section 304 of the Sarbanes-Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act), the rules and regulations of Nasdaq or other applicable securities exchange, or if so required pursuant to a written policy adopted by the Company or the provisions of an award agreement.

U.S. Federal Income Tax Consequences of Awards under the Omnibus Incentive Plan

The following is a general summary of the material U.S. federal income tax consequences relating to awards under the Omnibus Incentive Plan, and is intended to reflect the current provisions of the Code and the regulations thereunder and judicial and administrative interpretations of the Code and regulations. This summary is not intended to be a complete statement of applicable tax law, nor does it address foreign, state, local or payroll tax considerations. This summary assumes that all awards described in the summary are exempt from, or comply with, the requirement of Section 409A of the Code. Moreover, the U.S. federal income tax consequences to any particular participant may differ from those described herein by reason of, among other things, the particular circumstances of such participant.

Stock Options

Stock options may be intended to qualify as incentive stock options under Section 422 of the Code or may be nonqualified stock options governed by Section 83 of the Code. A participant generally will not recognize any

 

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taxable income, and we will not be entitled to a tax deduction, on the grant of a stock option. On exercise of a nonqualified stock option a participant generally will recognize ordinary taxable income equal to the excess of the fair market value of the acquired Class A common stock on the exercise date over the exercise price paid for those shares. Subject to satisfying applicable reporting requirements and certain deduction limitations under Section 162(m) or 280G of the Code for certain individuals (discussed below), we should be entitled to a corresponding income tax deduction. A participant generally will not recognize taxable income on exercise of an incentive stock option and we will not be entitled to a deduction. However, the excess of the fair market value of the acquired Class A common stock on the exercise date over the exercise price for those shares could result in alternative minimum tax liability for the participant. A participant’s disposition of shares acquired on exercise of any stock option will ordinarily result in capital gain or loss. However, a disposition of shares acquired on exercise of an incentive stock option less than two years after the grant date or one year after the exercise date (referred to as a “disqualifying disposition”) generally will result in ordinary taxable income equal to the excess of the fair market value of the acquired Class A common stock on the exercise date and the exercise price for those shares, with any excess of the amount received by the participant over the fair market value of the stock on the exercise date being treated as capital gain. We may be entitled to a deduction corresponding to the participant’s ordinary taxable income in the case of such a disqualifying disposition.

Stock Appreciation Rights

No income will be realized by a participant upon grant or vesting of a SAR. Upon the exercise of a SAR, the participant will recognize ordinary compensation income in an amount equal to the fair market value of the payment received in respect of the SAR. We will be able to deduct this same amount for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Restricted Stock

A participant will not be subject to tax upon the grant of an award of restricted stock unless the participant otherwise elects to be taxed at the time of grant pursuant to Section 83(b) of the Code. On the date an award of restricted stock becomes transferable or is no longer subject to a substantial risk of forfeiture (i.e., the vesting date), the participant will have taxable compensation equal to the difference between the fair market value of the shares on that date over the amount the participant paid for such shares, if any, unless the participant made an election under Section 83(b) of the Code to be taxed at the time of grant. If the participant made an election under Section 83(b) of the Code, the participant will have taxable compensation at the time of grant equal to the difference between the fair market value of the shares on the date of grant over the amount the participant paid for such shares, if any. If the election is made, the participant will not be allowed a deduction for amounts subsequently required to be returned to us. (Special rules apply to the receipt and disposition of restricted shares received by officers and directors who are subject to Section 16(b) of the Exchange Act). We will be able to deduct, at the same time as it is recognized by the participant, the amount of taxable compensation to the participant for U.S. federal income tax purposes, but such deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

Restricted Stock Units

A participant will not be subject to tax upon the grant or vesting of a restricted stock unit award. Rather, upon the delivery of shares or cash pursuant to a restricted stock unit award, the participant will have taxable compensation equal to the fair market value of the number of shares (or the amount of cash) the participant actually receives with respect to the award. We will be able to deduct the amount of taxable compensation to the participant for U.S. federal income tax purposes, but the deduction may be limited under Sections 280G and 162(m) of the Code for compensation paid to certain executives designated in those Sections.

 

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Other Tax Considerations

In general, Section 162(m) of the Code denies a publicly held corporation a deduction for U.S. federal income tax purposes for compensation exceeding $1 million per year per person to certain designated executives, including, but not limited to, its chief executive officer, chief financial officer and the three most highly compensated executives of such corporation whose compensation is required to be disclosed in its proxy statement. We reserve the right to award compensation as to which a deduction may be limited under Section 162(m) where we believe it is appropriate to do so.

Section 409A of the Code imposes complex rules on nonqualified deferred compensation arrangements, including requirements with respect to elections to defer compensation and the timing of payment of deferred amounts. Code Section 409A generally should not apply to awards under the Omnibus Incentive Plan, but may apply in some cases to restricted stock units and performance awards if so determined by the Committee. For awards subject to Code section 409A, certain key employees of the Company may experience a six-month delay in the settlement of such awards.

A participant who receives accelerated vesting, exercise or payment of awards under the Omnibus Incentive Plan contingent upon or in connection with a change in control may be deemed to have received an “excess parachute payment” under Section 280G of the Code. In such event, the participant may be subject to a 20% excise tax and we may be denied a tax deduction for such payments.

New Plan Benefits

Because awards under the Omnibus Incentive Plan will be granted in amounts and to persons in the sole discretion of the Committee, the benefits or amounts allocable under the Plan are not currently determinable. No grants or awards have been made under the Omnibus Incentive Plan to date and no grants or awards will be made under the Omnibus Incentive Plan unless and until it is approved by the stockholders of the Company.

Required Vote

Assuming that a quorum is present at the special meeting, the approval of the Omnibus Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by the SeaChange stockholders present (including virtually) in person or represented by proxy at the special meeting and entitled to vote on the Omnibus Incentive Plan. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The Omnibus Incentive Plan Proposal is conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal and the Nasdaq Proposal. If any of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal or the Nasdaq Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Omnibus Incentive Plan Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Omnibus Incentive Plan proposal.

Proposal 7: The Nasdaq Proposal

The SeaChange board of directors unanimously recommends that you vote “FOR” the Nasdaq Proposal, for purposes of complying with Nasdaq Listing Rules 5635(a), (b) and (c).

Assuming the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal are approved, our stockholders are also being asked to approve the Nasdaq Proposal.

 

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We are seeking stockholder approval in order to comply with Nasdaq Listing Rules 5635(a), (b) and (c). Under Nasdaq Listing Rule 5635(a), stockholder approval is required prior to the issuance of securities in connection with the acquisition of another company if such securities are not issued in a public offering and (A) have, or will have upon issuance, voting power equal to or in excess of 20% of the voting power outstanding before the issuance of common stock (or securities convertible into or exercisable for common stock); or (B) the number of shares of common stock to be issued is or will be equal to or in excess of 20% of the number of shares of common stock outstanding before the issuance of the stock or securities. Collectively, SeaChange will issue 20% or more of our outstanding common stock or 20% or more of the voting power, in each case outstanding before the issuance, pursuant to the issuance of common stock in connection with the merger. Under Nasdaq Listing Rule 5635(b), stockholder approval is required when any issuance or potential issuance will result in a “change of control” of the issuer. Although Nasdaq has not adopted any rule on what constitutes a “change of control” for purposes of Rule 5635(b), Nasdaq has previously indicated that the acquisition of, or right to acquire, by a single investor or affiliated investor group, as little as 20% of the common stock (or securities convertible into or exercisable for common stock) or voting power of an issuer could constitute a change of control.

Under Nasdaq Listing Rule 5635(c), stockholder approval is required prior to the issuance of securities when a plan or other equity compensation arrangement is established or materially amended.

Required Vote

Assuming that a quorum is present at the special meeting, the affirmative vote of a majority of the votes cast by the SeaChange stockholders present in person (including virtually) or represented by proxy at the special meeting and entitled to vote on the Nasdaq Proposal is required to approve the Nasdaq Proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The Nasdaq Proposal is conditioned on the approval of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal and the Omnibus Incentive Plan Proposal. If any of the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal or the Omnibus Incentive Plan Proposal is not approved, this proposal will have no effect even if approved by our stockholders.

Because stockholder approval of this Nasdaq Proposal is a condition to completion of the merger, if this proposal is not approved by our stockholders, the merger will not occur unless we and Triller waive the applicable closing condition.

The SeaChange board recommends that you vote “FOR” the Nasdaq Proposal.

Proposal 8: The SeaChange Compensation Proposal

The SeaChange board of directors unanimously recommends that you vote “FOR” this Proposal to approve, on an advisory (non-binding) basis, certain compensation arrangements for SeaChange’s named executive officers in connection with the merger (the “SeaChange Compensation Proposal”).

Pursuant to Rule 14a-21(c) of the Exchange Act and as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, SeaChange is providing its stockholders with a separate advisory (non-binding) vote to approve the merger-related compensation for its named executive officers as described in “The Merger — Interests of SeaChange Directors and Officers” beginning on page [•].

SeaChange stockholders are being asked to approve the following resolution on an advisory (non-binding) basis:

“RESOLVED, that the compensation that will or may be paid or become payable to SeaChange’s named executive officers in connection with the merger, and the agreements or understandings pursuant to which

 

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such compensation will or may be paid or become payable, in each case as disclosed pursuant to Item 402(t) of Regulation S-K in ‘The Merger — Interests of SeaChange Directors and Officers,’ are hereby APPROVED.”

The vote is advisory in nature and, therefore, is not binding on SeaChange or the SeaChange board of directors or the compensation committee of the SeaChange board of directors, regardless of whether the Merger Proposal is approved.

Stockholders should note that approval of this SeaChange Compensation Proposal is not a condition to completion of the merger. If the merger is completed, the merger-related compensation may be paid to SeaChange’s named executive officers to the extent payable in accordance with the terms of their respective compensation agreements and arrangements and the outcome of this advisory (non-binding) vote will not affect SeaChange’ obligations to make these payments even if SeaChange stockholders do not approve, on an advisory (non-binding) basis, this SeaChange Compensation Proposal.

Required Vote

Assuming that a quorum is present at the special meeting, the affirmative vote of a majority of the votes cast by the stockholders present in person (including virtually) or represented by proxy at the special meeting and entitled to vote on the SeaChange Compensation Proposal is required to approve the SeaChange Compensation Proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, a broker non-vote nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The SeaChange Compensation Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

The SeaChange board recommends that you vote “FOR” the SeaChange Compensation Proposal.

Proposal 9: The Adjournment Proposal

The SeaChange board of directors unanimously recommends that you vote “FOR” the Adjournment Proposal to approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, the Omnibus Incentive Plan Proposal, and the Nasdaq Proposal at the time of the special meeting (the “Adjournment Proposal”).

The Adjournment Proposal, if adopted, will approve the chairman’s adjournment of the special meeting to a later date to permit further solicitation of proxies. The Adjournment Proposal will only be presented to the stockholders of SeaChange in the event, based on the tabulated votes, there are not sufficient votes received at the time of the special meeting to approve the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, Omnibus Incentive Plan Proposal or the Nasdaq Proposal.

Consequences if the Adjournment Proposal is Not Approved

If the Adjournment Proposal is not approved by the stockholders of SeaChange, the chairman will not adjourn the special meeting to a later date in the event, based on the tabulated votes, there are not sufficient votes received at the time of the special meeting to approve the Merger Proposal, the Certificate of Incorporation Amendment Proposal, the Incentive Plan Proposal, Omnibus Incentive Plan Proposal, and the Nasdaq Proposal.

Required Vote

Assuming that a quorum is present at the special meeting, the affirmative vote of a majority of the votes cast by the SeaChange stockholders present in person (including virtually) or represented by proxy at the special

 

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meeting and entitled to vote on the Adjournment Proposal is required to approve the Adjournment Proposal. Accordingly, neither a stockholder’s failure to vote online or by proxy, nor an abstention will be considered a “vote cast,” and thus will have no effect on the outcome of this proposal.

The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

The SeaChange board recommends that you vote “FOR” the Adjournment Proposal.

 

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THE MERGER

This section and the section entitled “The Merger Agreement” in this proxy statement/prospectus describe the material aspects of the merger, including the Merger Agreement. While SeaChange and Triller believe that this description covers the material terms of the merger and the Merger Agreement, it may not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus for a more complete understanding of the merger and the Merger Agreement, including the Merger Agreement attached as Annex A, and the other documents to which you are referred herein. See the section entitled “Where You Can Find More Information” in this proxy statement/prospectus.

Background of the Merger

Each of the SeaChange and Triller boards of directors and senior management teams regularly review and assess their respective business prospects, strategies and objectives, all with the goal of enhancing long-term value for their respective stockholders. For each company, this review and assessment has included the consideration of various strategic alternatives, such as growth strategies (whether through acquisitions or organic growth), capital planning and raising, potential earnings improvement through revenue increases, expense reductions and strategic mergers.

In April, 2020, SeaChange retained SC Cowen Securities Corp (“Cowen”) an investment banker to provide assistance in seeking a potential business combination with strategic buyers or engaging with other financial sponsors. During 2020, SeaChange from time to time engaged in discussions through its investment banker with more than thirty of such potential counterparties. (Triller was not involved in these discussions.) Only three such discussions resulted in indications of interest, which were received in September 2020. The indications of interest had implied enterprise valuation ranges of between $58 million and $68 million and a range of price per share of $1.24 to $1.61. By the end of 2020, each party which had submitted an indication of interest had elected to exit the process prior to coming to terms with SeaChange. Thereafter, SeaChange ceased active pursuit of a potential business combination, but remained receptive to proposals.

In September 2021, Peter D. Aquino joined as President and Chief Executive Officer as well as a director of SeaChange. Following such appointment, on September 27, 2021, Mr. Aquino’s former business acquaintance and former banker, Prem Parameswaran, introduced Mr. Aquino to Mr. Ryan Kavanaugh, an investor in Triller. Mr. Kavanaugh wanted to explore if SeaChange could be a potential merger candidate to bring Triller to a publicly traded national stock exchange. Recognizing the alignment between SeaChange and Triller in certain advertising business segments, as well as the companies’ similarity of customer prospects in the cable television, satellite, and telecommunications business segments, on September 30, 2021, Mr. Aquino arranged for himself, Mr. Julian Singer and Mr. Matthew Stecker to review basic investor information prepared by Triller. Further calls between SeaChange and Triller occurred from September 28, 2021 through October 12, 2021, during which the representatives of SeaChange and Triller began considering advancing negotiations and a potential draft term sheet.

On October 8, 2021, Trller proposed initial terms of the merger to SeaChange, including that the consideration for the merger would be (A) (i) $75 million in equity plus (ii) $25 million in cash, or (B) $0 to SeaChange stockholders and a straightforward issuance of equity securities equaling 98.5% of the pro forma combined company to Triller’s equityholders. The SeaChange stockholders would be subject to a one year lock-up and a mutual “put-call” right such that, at any time during the lockup period, the combined company would be obligated to redeem the SeaChange stockholders’ shares for $75 million (assuming all shares were so redeemed). This draft also proposed a valuation of Triller at $4.9 billion, meaning Triller holders would receive $4.9 billion in company equity upon consummation of the merger.

Following additional negotiations between the parties, on October 11, 2021, Triller, proposed changes to the consideration of the merger, including the proposal that there would be $0 consideration to SeaChange directly, and concurrently with the proposed merger, the pro forma combined company would offer the SeaChange stockholders the right to have up to 25% of their shares redeemed for $75 million in aggregate (assuming all shares subject to redemption so redeemed).

 

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On October 12, 2021, Messrs. Aquino, Parameswaran and Gary Singer, along with a subset of the SeaChange board of directors that included Messrs. J. Singer and Stecker discussed the seriousness and probability of a potential transaction with Triller and Mr. Kavanaugh. Soon after, Mr. Parameswaran forwarded a non-binding draft term sheet on behalf of Triller to Mr. Aquino to facilitate further discussions. Mr. Aquino subsequently shared the term sheet with this subset of the SeaChange board of directors for further input. The initial draft term sheet reflected the terms negotiated previously by the parties.

Effective October 15, 2021, SeaChange entered into an engagement letter agreement by which it engaged K&L Gates, LLP, which we refer to as K&L Gates, to serve as legal counsel for the proposed transaction, and to advise the SeaChange board of directors on the initial term sheet draft. Shortly thereafter, Mr. Aquino communicated concerns to Mr. Kavanaugh about the terms of the transaction as set forth in the initial daft term sheet received from Tiller on October 12, 2021. Considering these concerns, Mr. Kavanaugh proactively re-circulated a revised term sheet on October 15, 2021, which the parties negotiated for several days. The revised term sheet proposed that SeaChange stockholders would receive a pro rata share of $25 million in cash plus $75 million in notes that mature on the one year anniversary of the closing of the merger as merger consideration.

On October 20, 2021, K&L Gates circulated a revised term sheet to Triller and Triller’s legal counsel, Akin Gump Strauss Hauer & Feld LLP, which we refer to as Akin Gump following several days of negotiations between the parties. The revised term sheet proposed that SeaChange stockholders would have the option to keep their shares or convert into pro rata share of $25 million in cash plus $75 million in senior secured notes, with an interest rate of 5% payable in cash or PIK at the holders’ option as consideration for the merger. The senior secured notes would mature on the one year anniversary of the closing of the transaction and convert into shares at the valuation of Triller based on Triller’s supplemental financing transaction, which would close either at the same time as the transaction or prior to maturity. The term sheet also contained footnotes stating that the parties would discuss the valuation of Triller and the planned financing of the combined company.

On October 26, 2021, Triller and Akin Gump circulated a revised term sheet to SeaChange and K&L Gates following several days of negotiations between the parties. The revised term sheet proposed that SeaChange stockholders would receive $25 million in cash plus $75 million in senior secured notes, or shares in the combined company based upon their pro rata portion of $100 million, converted at the same price as the convertible notes as consideration for the merger. The senior secured notes would mature on the one year anniversary of the closing of the merger with an interest rate of 5% PIK.

On October 28, 2021, K&L Gates circulated a revised term sheet to Triller and Akin Gump following several days of negotiations between the parties. The revised term sheet clarified that the conversion price applicable to the pre-closing convertible debt financing would be at an agreed discount of 20% to an assumed $5 billion Triller valuation.

On October 29, 2021, Triller and Akin Gump circulated a revised term sheet to SeaChange and K&L Gates following several days of negotiations between the parties. The revised term sheet removed the clarification regarding the conversion price from the last draft and added that the target working capital for SeaChange would be $20,000,000 in cash, including certain receivables, and that all other working capital items must be positive. Shortly thereafter, Triller and Akin Gump circulated a revised term sheet to SeaChange and K&L Gates with a clarification that the target working capital for SeaChange would be approximately $20,000,000 in cash, including certain receivables, and that all other working capital items must be positive. Shortly thereafter, Mr. Kavanaugh circulated the updated version of the term sheet, and the full board of directors of SeaChange met the same day to review the offer. Messrs. Robert Matlin and Steven Shur, representatives from K&L Gates, attended the SeaChange board meeting. The SeaChange board of directors approved the proposed terms. The term sheet was later executed effective as of October 29, 2021.

 

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Following the execution of the term sheet, the parties negotiated a non-disclosure agreement, which was executed by Triller and SeaChange effective as of November 3, 2021.

On November 8, 2021, Messrs. Aquino; J. Singer; Stecker; Robert Pons, Chairman of the SeaChange board of directors; Michael Prinn, SeaChange’s Chief Financial Officer; Christoph Klimmer, SeaChange’s Senior Vice President & Chief Revenue Officer; and Igor Volshteyn, a SeaChange advisor; and Ms. Elaine Martel, SeaChange’s General Counsel and Secretary, participated in a telephonic meeting with Triller management, during which Triller management conducted a presentation describing Triller’s business. The following day, during a telephonic meeting, Messrs. Aquino, Prinn, and Klimmer and Ms. Martel presented an overview of SeaChange’s business to Triller management.

Throughout November and December 2021, each of SeaChange and Triller continued their respective due diligence investigations, and each party’s respective representatives held discussions with the other’s management team and advisors concerning their respective businesses and prospects, key value drivers and the potential synergies and commercial benefits that could result from a potential combination.

Effective November 12, 2021, SeaChange entered into an engagement letter agreement by which it engaged Scura Partners LLC, which we refer to as Scura Partners, to prepare a fairness opinion for the SeaChange board of directors to review in considering the terms of the merger.

On November 18, 2021, a subset of the SeaChange board of directors that included Messrs. Stecker, David Nicol, J. Singer and Steven Singer, which we refer to as the Strategic Advisory Committee, executed a unanimous written consent recommending approval of certain revisions to the Strategic Advisory Committee’s charter with the effect of empowering them to explore acquisitions or dispositions on behalf of SeaChange.

On November 22, 2021, the SeaChange board of directors convened a meeting, joined by Ms. Martel and Mr. Matlin, and approved revisions to the charter of the Strategic Advisor Committee. That same day, the Strategic Advisory Committee convened a meeting. Messrs. Aquino, Prinn and Matlin, and Ms. Martel were also in attendance. Mr. Aquino briefed the Strategic Advisory Committee on the status of the proposed business combination with Triller.

On November 24, 2021, Triller circulated its form of the Agreement and Plan of Merger by and between SeaChange and Triller, which we refer to as the Merger Agreement, to SeaChange. Throughout November and December 2021, each of SeaChange, Triller and each party’s respective representatives negotiated the terms of the Merger Agreement.

On December 8, 2021, the SeaChange board of directors convened a meeting, joined initially by Mr. Prinn and Ms. Martel, and later by Mr. Matlin, and Messrs. Paul Scura and Robert Aiello of Scura Partners. Mr. Aiello discussed the assumptions and methodologies Scura Partners employed in preparing its fairness opinion.

Also on December 8, 2021, SeaChange, Triller and their respective legal counsels held a telephonic meeting during which they discussed various issues related to the merger, including certain key terms of the Merger Agreement and other transactional documents. Later on the same day, Mr. Volshteyn provided, on behalf of SeaChange, an initial draft of the senior notes term sheet, which we refer to as the Senior Notes Term Sheet, to Triller and Akin Gump. Throughout December, SeaChange, Triller and each party’s respective representatives negotiated the terms of the Senior Notes Term Sheet.

On December 9, 2021, SeaChange circulated an initial draft of the SeaChange disclosure schedules to Triller and Akin Gump.

On December 10, 2021, the Strategic Advisory Committee convened a meeting, joined by Messrs. Aquino, Matlin and Prinn and Ms. Martel. Mr. Aquino briefed the Strategic Advisory Committee on the status of negotiations with Triller and outlined the expected calendar for the potential transaction.

 

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On December 11, 2021, Akin Gump circulated an initial draft of Triller disclosure schedules to SeaChange and K&L Gates. Later that day, K&L Gates circulated its comments on the draft Merger Agreement and draft Triller disclosure schedules to Triller and Akin Gump.

On December 12, 2021, representatives of each of the parties and their respective legal counsels participated in a telephonic meeting to discuss issues related to SeaChange’s international operations. Akin Gump later circulated a revised draft of the Senior Notes Term Sheet and the initial drafts of the Certificates of Amendment to the Amended and Restated Certificate of Incorporation of SeaChange to SeaChange, K&L Gates and Mr. Volshteyn which we refer to as the Charter Amendments.

On December 13, 2021, the SeaChange board of directors, along with Mr. Prinn, Messrs. Matlin and Jonathan Barron, both of K&L Gates, as well as Ms. Martel, convened a meeting whereby Mr. Aquino briefed attendees on the status of the ongoing negotiations. Later that same day, representatives of each of the parties and their respective outside counsel participated in a telephonic meeting to discuss Triller’s disclosure schedules.

On December 14, 2021, Akin Gump circulated its comments on the draft Merger Agreement to SeaChange and K&L Gates. On the same day, K&L Gates circulated an initial draft of a support agreement with a large SeaChange stockholder, which we refer to as Support Agreement, to Triller and Akin Gump. Additionally, representatives of each of the parties and their respective outside counsel participated in a second telephonic meeting to discuss additional questions related to Triller’s disclosure schedules.

On December 15, 2021, representatives of each of the parties and their respective legal counsels participated in a telephonic meeting to discuss the Merger Agreement and other transaction documents. Negotiations focused on parties’ closing working capital, the default stockholder’s election in the potential merger, SeaChange’s international operations, and Triller’s acquisition of Truverse, Inc. Also on December 15, 2021, on behalf of Triller, Akin Gump Gates made additional diligence requests to SeaChange.

On December 16, 2021, the SeaChange board of directors, along with Messrs. Prinn and Barron, as well as Ms. Martel, convened a meeting. Mr. Aquino briefed attendees on the status of the ongoing negotiations. On the same day, Akin Gump circulated its additional comments on the draft Merger Agreement and Senior Notes Term Sheet to SeaChange, K&L Gates and Mr. Volshteyn. Later on the same day, Akin Gump circulated its comments on the draft Support Agreement and circulated a revised draft of the Triller disclosure schedules to SeaChange, K&L Gates and Mr. Volshteyn. Additionally, on December 16, 2021, Akin Gump held a telephonic meeting with SeaChange’s local foreign counsel to discuss issues related to SeaChange’s international operations. Akin Gump and K&L Gates also held a telephonic meeting on the same day to discuss outstanding issues related to the Merger Agreement.

On December 17, 2021, Mr. Volshteyn circulated, on behalf of SeaChange, comments on the Senior Notes Term Sheet to Triller and Akin Gump. On the same day, the SeaChange board of directors, along with Messrs. Prinn, Matlin and Barron, as well as Ms. Martel, convened a meeting whereby Mr. Aquino briefed attendees on the status of the ongoing negotiations.

On December 18, 2021, K&L Gates circulated its comments on the draft Merger Agreement and circulated an initial draft of Amendment No. 3 to the Rights Agreement by and between SeaChange and Computershare Inc., dated as of March 4, 2019, which we refer to as the Amendment to the Rights Agreement, to Triller and Akin Gump.

On December 20, 2021, Akin Gump circulated its comments on the Senior Notes Term Sheet and the Amendment to Rights Agreement to SeaChange, K&L Gates and Mr. Volshteyn. Later the same day, Akin Gump circulated its comments on the draft Merger Agreement and circulated revised drafts of the Charter Amendments to SeaChange and K&L Gates.

 

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Between December 21, 2021 and the early morning of December 22, 2021, Triller and SeaChange, through their respective legal counsels and representatives, exchanged several revisions to the draft Merger Agreement, Senior Notes Term Sheet, Support Agreement and each party’s Merger Agreement exhibits and schedules. On the same day, representatives of each of the parties and their respective legal counsels participated in a telephonic meeting to discuss the outstanding issues related to various transaction documents.

Also on December 21, 2021, the SeaChange board of directors and Strategic Advisory Committee convened for a joint special meeting. All directors were present at this meeting. This meeting was also attended by members of SeaChange senior management, including Messrs. Aquino and Prinn and Ms. Martel, representatives from K&L Gates, including Messrs. Matlin, Barron and Shur, and representatives from Scura Partners, including Messrs. Scura, Aiello, Sean Smith and Maxx Trotsky. In advance of this meeting, SeaChange board members were provided with information prepared by Scura Partners with respect to the fairness of the financial terms of the merger, as well as drafts of the Merger Agreement and related ancillary agreements. At this meeting, the SeaChange board of directors and the Strategic Advisory Committee reviewed certain information regarding the proposed merger. A K&L Gates representative reviewed with the SeaChange board members their fiduciary duties in the context of the board of directors’ consideration of and decisions and actions with respect to the Merger Agreement and the proposed merger and reviewed with the board the terms of, and answered questions of board members regarding, the merger, the Merger Agreement, and related ancillary agreements. A representative from Scura Partners reviewed with the SeaChange board the financial terms of the proposed merger and, at the request of the board, rendered to the board of directors Scura Partners’ opinion to the effect that, as of December 21, 2021, and based upon and subject to the assumptions and qualifications set forth in the opinion, the cash merger consideration to be paid in the merger pursuant to the Merger Agreement was fair, from a financial point of view, to holders of SeaChange common stock. The Strategic Advisory Committee approved the Merger Agreement and recommended that the SeaChange board of directors adopt and approve the Merger Agreement and that SeaChange’s stockholders approve the Merger Agreement. After considering the proposed terms of the Merger Agreement and the merger and the various presentations made to the SeaChange board by SeaChange’s senior management and its financial and legal advisors, and taking into consideration the matters discussed during the meeting and prior meetings of the board of directors, including consideration of the factors described under “—SeaChange Reasons for the Merger beginning on page 124, the SeaChange board of directors determined that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger, were fair to and advisable and in the best interests of SeaChange and its stockholders and resolved to adopt and approve the Merger Agreement and related documents, and to recommend to SeaChange’s stockholders that they approve the Merger Proposal.

On December 22, 2021, the Merger Agreement, the Support Agreement, and the Amendment to Rights Agreement were all executed. Later on December 22, 2021, SeaChange and Triller issued a joint press release announcing the execution of the Merger Agreement.

The parties did not have any discussions about post-closing employment for any directors or officers of SeaChange prior to the execution of the Merger Agreement on December 22, 2021. As discussed in the Section titled “Management Following the Merger” beginning on page [•], all of the post-closing officers of TrillerVerz will be persons currently employed by Triller, not SeaChange. In addition, each of SeaChange’s incumbent directors have advised us that they will resign from our board of directors upon closing of the merger.

Opinion of SeaChange’s Financial Advisor

At the meeting of the Board on January 28, 2022 to evaluate and approve the Transaction, Scura Partners delivered an oral opinion, which was confirmed by delivery of a written opinion, dated January 28, 2022, addressed to the Board to the effect that, as of the date of the opinion and based upon and subject to the assumptions, conditions and limitations set forth in the opinion, (i) the Merger Consideration as a whole was fair from a financial view to the holders of SeaChange Common Stock, and (ii) the Buyer Stock Merger Consideration was fair from a financial view to the holders of SeaChange Common Stock. SeaChange also asked us to reaffirm the fairness opinion to the Board of Directors of SeaChange dated December 21, 2021 (the

 

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“December Fairness Opinion”) that the Cash/Notes Merger Consideration was fair from a financial point of view to the holders of SeaChange Common Stock without any assumption that there shall be no diminution in the

economic value of Buyer Senior Notes as a result of conversion of those note.

The full text of Scura Partners’ written opinion, dated January 28, 2022, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion (which are also summarized herein), is attached as Annex [    ] to this proxy statement/consent solicitation statement/prospectus and is incorporated herein by reference. Scura Partners’ opinion was provided for the use and benefit of the Board (in its capacity as such and not in any other capacity) in its evaluation of the Transaction (and, in its engagement letter, Scura Partners provided its consent to the inclusion of the text of its opinion as part of this proxy statement/consent solicitation statement/prospectus). Scura Partners’ opinion is limited solely to the fairness, from a financial point of view, of the Merger Consideration, the Buyer Stock Merger Consideration and the Cash/Notes Merger Consideration to be paid by SeaChange in the Transaction and does not address SeaChange’s underlying business decision to effect the Transaction or the relative merits of the Transaction as compared to any alternative business strategies or initial Transactions that might be available to SeaChange. Scura Partners’ opinion does not constitute a recommendation as to how any stockholder of SeaChange should vote or act with respect to the Transaction or any other matter. Scura Partners’ opinion was approved by a Scura Partners fairness opinion committee.

In arriving at its opinion, Scura Partners, among other things:

 

•

reviewed the executed Agreement and Plan of Merger dated December 22, 2021, including a summary of terms for the Buyer Senior Notes;

 

•

reviewed the Triller Convertible Note Term Sheet and the form of Triller Convertible Promissory Note provided to us;

 

•

reviewed certain internal information relating to the business, earnings, cash flow, assets, liabilities and prospects of SeaChange and Triller furnished to Scura Partners by the management of SeaChange, including financial and other forecasts provided to, or discussed with, Scura Partners by the management of SeaChange;

 

•

reviewed the capital structure of SeaChange and Triller furnished to us by the management of SeaChange;

 

•

reviewed publicly available financial and stock market data of SeaChange and certain other companies in lines of business that we deemed relevant.

 

•

reviewed certain internal information relating to expenses expected to result from the Transaction;

 

•

conducted discussions with members of management of SeaChange and Triller concerning the information described in the foregoing, as well as the business and prospects of Triller and SeaChange generally;

 

•

reviewed publicly available financial and stock market data of certain other companies in lines of business that Scura Partners deemed relevant;

 

•

reviewed, but did not rely on for purposes of its opinion, the financial terms of certain other transactions that it deemed relevant; and

 

•

conducted such other financial studies and analyses and took into account such other information as Scura Partners deemed appropriate.

In connection with its review, Scura Partners, with the consent of the Board, relied on the information supplied to, discussed with or reviewed by it for the purpose of its opinion being complete and accurate in all material respects. Scura Partners did not assume any responsibility for independent verification of, and did not independently verify, any such information. With the consent of the Board, Scura Partners relied upon, without independent verification, the assessment of SeaChange and its legal, tax, regulatory, and accounting advisors with respect to legal, tax, regulatory, and accounting matters. With respect to the financial and other forecasts

 

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and other information relating to Triller and SeaChange, Scura Partners assumed, at the Board’s direction, that they were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of SeaChange as to the future performance of Triller and SeaChange. Scura Partners also assumed, at the Board’s direction, that the future financial results reflected in such forecasts and other information will be achieved at the times and in the amounts projected. With the consent of the Board, Scura Partners assumed that, following consummation of the Transaction, SeaChange would have cash, net of debt, of at least $100 million on its balance sheet. In addition, Scura Partners relied, with the Board’s consent, on the assessments of the management of SeaChange as to the ability to retain key employees of Triller. Scura Partners expressed no views as to the reasonableness of any financial forecasts or the assumptions on which they are based. In addition, with the Board’s consent, Scura Partners did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet, or otherwise) of Triller or SeaChange, nor was Scura Partners furnished with any such evaluation or appraisal.

Scura Partners’ opinion did not address SeaChange’s underlying business decision to effect the Transaction or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to SeaChange and did not address any legal, regulatory, tax, or accounting matters. At the direction of the Board, Scura Partners was not asked, nor did it offer, any opinion as to any terms of the Agreement and Plan of Merger or any aspect or implication of the Transaction, except for the fairness from a financial point of view to the holder of SeaChange Common shares of (i) the Merger Consideration as a whole and (ii) the Buyer Stock Merger Consideration and (iii) the Cash/Notes Merger Consideration. With the Board’s consent, Scura Partners expressed no opinion as to what the value of the shares of any stock of SeaChange will be when issued pursuant to the Transaction or the prices at which any securities of SeaChange may trade at any time. Scura Partners did not express any opinion as to the fair value or the solvency of SeaChange following the closing of the Transaction. In rendering its opinion, Scura Partners assumed, with the Board’s consent, that the final executed form of the Triller Convertible Promissory would not differ in any material respect from the draft that it reviewed, that the final executed form of the Buyer Senior Notes would not differ in any material respect from the summary terms set out in Agreement and Plan of Merger, that the Transaction would be consummated in accordance with the terms of the Agreement and Plan of Merger without any waiver or modification that could be material to Scura Partners’ analysis, and that the parties to the Agreement and Plan of Merger will comply with all the material terms of the Agreement and Plan of Merger. Scura Partners assumed, with the Board’s consent, that all governmental, regulatory or other consents and approvals necessary for the completion of the Transaction will be obtained except to the extent that could not be material to its analysis. In addition, representatives of SeaChange advised Scura Partners, and Scura Partners assumed, with the Board’s consent, that the Transaction will qualify as a tax-free reorganization for federal income tax purposes. Scura Partners also was not requested to, and did not, participate in the structuring or negotiation of the Transaction.

Except as described in this summary, the Board imposed no other instructions or limitations on Scura Partners with respect to the investigations made, or procedures followed, by Scura Partners in rendering its opinion.

Scura Partners’ opinion was necessarily based on economic, monetary, market and other conditions as in effect on, and the information made available to Scura Partners as of, the date of the opinion, and Scura Partners assumed no responsibility to update the opinion for developments after the date of the opinion.

Scura Partners’ opinion did not address the fairness of the Transaction or any aspect or implication of the Transaction to, or any other consideration of or relating to, the holders of any class of securities, creditors or other constituencies of SeaChange or Triller. In addition, Scura Partners did not express any opinion as to the fairness of the amount or nature of any compensation to be received by any officers, directors or employees of any parties to the Transaction, or any class of such persons, whether relative to the Consideration or otherwise.

The following is a summary of the material financial analyses presented by Scura Partners to the Board at its meeting held on January 28, 2022, in connection with its opinion.

 

 

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Some of the summaries of financial analyses below include information presented in tabular format. In order to fully understand Scura Partners’ analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Scura Partners’ analyses.

The following chart summarizes certain aspects of the financial analysis carried out by Scura Partners, as more fully set out below.

 

Financial Analysis of SeaChange on a Standalone Basis

Financial data for SeaChange was based on financial forecasts and other information and data provided by SeaChange’s management, including the summary of an offering process carried out in 2020 and 2021 and management projections for fiscal years 2022-27 which are summarized on page [    ] (the “Management Projections”).

SeaChange Share Price Analysis

Scura Partners reviewed the enterprise value of SeaChange on a standalone basis implied by the price of SeaChange common shares for the period of 20 trading days and 6 months up to December 10, 2021. The period from December 13 to the announcement of the Transaction was excluded because of the effect of press reports of the potential Transaction.

 

		Share Price				Implied Enterprise Value (millions)
Trailing 20 Trading Days
Average		$	0.77			$	38.0
Maximum		$	0.88			$	43.5
Minimum		$	0.67			$	33.1
Trading 6 Months
Average		$	1.02			$	50.0
Maximum		$	1.36			$	66.7
Minimum		$	0.67			$	33.1

 

 

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The enterprise value of SeaChange was calculated assuming a total of 49.0 million common shares outstanding, and net working capital of $27.0 million.

SeaChange Offering Process Analysis

In the second quarter of 2020 SeaChange retained Cowen to represent it in exploring the sale of the company. In August and September Cowen approached more than 30 potential counterparties. At the end of September 2020, SeaChange received three indications of interest with enterprise values ranging between $50 million and $68 million, a range of price per share of $1.24 to $1.61. None of the conversations with parties providing these indications of interest led to a proposal to acquire SeaChange. SeaChange elected to end the offering process in January 2021. Cowen will receive a fee with a value at approximately $2 million as a result of this engagement if the Transaction closes. No part of Cowen’s fee will be payable if the Transaction does not close.

SeaChange Selected Public Companies Analysis.

In determining its reference range for its selected publicly traded companies analysis, Scura Partners believed, based on its experience and professional judgement, that the following companies are generally relevant in certain respects to SeaChange for the purposes of its financial analyses:

 

(i)	content application software: Akamai Technologies, Inc., Amdocs Limited, Calix, Inc., Limelight Networks, Inc., Bright Cove Inc. and Digital Turbine, Inc.;

 

(ii)	video streaming and enablement: Alchimie S.A.S., fuboTV Inc., Roku, Inc., Vimeo, Inc. and Xperi Holdings Corporation.

Although none of these selected public companies are directly comparable to SeaChange, Scura Partners focused on these companies because, among other things, these companies have one or more similar operating and financial characteristics as SeaChange.

Scura Partners reviewed the enterprise value of each of the selected companies (calculated as market value of the relevant company’s diluted common equity based on its closing stock price on January 26, 2022, plus, as of the relevant company’s most recently reported quarter end (with pro forma adjustments for any publicly announced corporate actions following the most recent reporting quarter), preferred stock, net debt and, where applicable, book value of non-controlling interests) as (i) a multiple of management’s estimated revenue for FY2021 through FY2026 and (ii) a multiple of management’s estimated EBITDA for FY2022 through FY2026. Revenue and EBITDA data for the selected companies was based on publicly available consensus research analysts’ estimates and enterprise value related data for the selected companies was based on public filings and other publicly available information, all as of January 26, 2022. The enterprise value and estimated revenue and EBITDA multiples for the remaining companies (to the extent publicly available) are summarized in the table below:

 

Enterprise Value (in millions)

Enterprise Value / Revenue

Company

FY 2021

FY 2022

FY 2023

FY 2024

FY 2025

FY 2026

Content Application Software

Akamai Technologies, Inc.

$

17,956

5.2x

4.8x

4.4x

4.0x

3.7x

3.5x

Amdocs Limited

$

9,215

2.0x

1.9x

1.8x

1.6x

1.4x

—

Bright Cove Inc.

$

337

1.6x

1.5x

Calix Inc.

$

2,442

3.6x

3.3x

2.9x

Digital Turbine, Inc.

$

3,928

3.3x

2.5x

1.8x

Harmonic Inc.

$

1,119

2.2x

1.9x

1.8x

Limelight Networks, Inc.

$

621

2.5x

2.3x

2.1x

1.9x

1.8x

1.6x

Median

2.5x

2.3x

2.0x

1.9x

1.8x

2.6x

Minimum

1.6x

1.5x

1.8x

1.6x

1.4x

1.6x

Maximum

5.2x

4.8x

4.4x

4.0x

3.7x

3.5x

 

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Enterprise Value (in millions)

Enterprise Value / EBITDA

Company

FY 2022

FY 2023

FY 2024

FY 2025

FY 2026

Content Application Software

Akamai Technologies, Inc.

$

17,956

11.0x

10.1x

9.2x

8.5x

8.2x

Amdocs Limited

$

9,215

8.0x

8.4x

7.1x

6.5x

Bright Cove Inc.

$

337

15.5x

Calix Inc.

$

2,442

23.9x

Digital Turbine, Inc.

$

3,928

13.8x

9.0x

Harmonic Inc.

$

1,119

14.6x

Limelight Networks, Inc.

$

621

18.0x

12.7x

9.7x

7.4x

6.0x

Median

14.6x

9.5x

9.2x

7.4x

7.1x

Minimum

8.0x

8.4x

7.1x

6.5x

6.0x

Maximum

23.9x

12.7x

9.7x

8.5x

8.2x

Based on this information, and using its professional judgment, Scura Partners developed a reference range of enterprise value and per share value for SeaChange as follows. Scura Partners derived an upper and lower Enterprise Value/Revenue multiple for each year using a 1/3 range around the median multiple for the Content Application Software comparable companies, less a 20% size discount. Those upper and lower multiples were then multiplied by management’s projected revenue for each year, and the average of those upper and lower results were used to the create a range of enterprise value for SeaChange between $48.4 million and $67.7 million, or a range of price per share of $1.21 to $1.60. No individual multiple was determinative of the reference range. A similar procedure was used to develop a reference range of enterprise value and per share value using the Enterprise Value / EBITDA multiples for Content Application Software comparable companies creating a range of enterprise value for SeaChange of between $21.8 million to $30.5 million, or a range of price per share of $0.67 to $0.85. No individual multiple was determinative of the reference range.

 

Enterprise Value (in millions)

Enterprise Value / Revenue

Company

FY 2021

FY 2022

FY 2023

FY 2024

FY 2025

FY 2026

Streaming & Video Enablement

Alchimie S.A.S.

$

15

0.5x

0.4x

0.3x

0.2x

fuboTV Inc.

$

1,377

2.2x

1.3x

0.9x

0.6x

0.5x

0.4x

Roku, Inc.

$

18,189

6.5x

4.8x

3.7x

2.9x

2.8x

2.2x

Vimeo, Inc.

$

1,853

4.7x

3.8x

3.0x

2.4x

1.9x

1.5x

Xperi Holding Corporation

$

2,353

2.7x

2.6x

2.5x

Median

2.7x

2.6x

2.5x

1.5x

1.9x

1.5x

Minimum

0.5x

0.4x

0.3x

0.2x

0.5x

0.4x

Maximum

6.5x

4.8x

3.7x

2.9x

2.8x

2.2x

 

Enterprise Value (in millions)

Enterprise Value / EBITDA

Streaming & Video Enablement

FY 2022

FY 2023

FY 2024

FY 2025

FY 2026

Alchimie S.A.S.

$

15

fuboTV Inc.

$

1,377

0.0x

Roku, Inc.

$

18,189

34.3x

21.4x

15.8x

14.4x

12.5x

Vimeo, Inc.

$

1,853

73.5x

25.9x

15.1x

10.4x

Xperi Holding Corporation

$

2,353

8.8x

8.4x

Median

21.6x

21.4x

20.9x

14.7x

10.4x

Minimum

8.8x

8.4x

15.8x

14.4x

0.0x

Maximum

34.3x

73.5x

25.9x

15.1x

12.5x

 

120