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As filed with the Securities and Exchange Commission on April 5, 2021.

Registration Statement No. []

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

KALEYRA INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   7374   82-3027430
(Jurisdiction of Incorporation
or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

 

Dario Calogero

Chief Executive Officer

Kaleyra Inc.

Via Marco D’Aviano, 2

Milano MI, Italy 20131

Telephone: +39 02 288 5841

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

 

 

Copies to:

 

Jeffrey C. Selman, Esq.

Peter J. Ekberg, Esq.

DLA Piper LLP (US)

555 Mission Street, Suite 2400

San Francisco, CA 94105

Tel: (415) 615-6095

 

Richard G. Halle

Nick Continenza

Vivial Inc.

160 Inverness Drive West, Suite 250

Englewood, CO 80112

Tel: (877) 742-3779

 

Ackneil M. Muldrow III, Esq.

Adé Heyliger, Esq.

Weil, Gotshal & Manges LLP

767 Fifth Avenue,

New York, NY 10153
Tel: (212) 310-8825

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and on completion of the Merger described in the enclosed proxy statement/prospectus.

If the securities being registered on this Form are to be 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, 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 or an 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 Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      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 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)  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Amount

to be
Registered(1)

 

Proposed

Maximum
Offering Price
per Share

 

Proposed

Maximum
Aggregate

Offering Price(2)

 

Amount of

Registration Fee(3)

Common stock, par value $0.0001 per share

  1,600,000   N/A   $20,000,000.00   $ 2,182.00

 

(1)

Based on the maximum number of shares of common stock, par value $0.0001 per share (“Common Stock”), of the registrant (“Kaleyra”) to be issued in connection with the Merger.

(2)

Pursuant to Rules 457(c) and 457(f)(1) promulgated under the Securities Act and solely for the purpose of calculating the registration fee, the proposed maximum aggregate offering price is an amount equal to $20,000,000.00, calculated as the product of (i) 1,600,000 shares of Common Stock, the estimated maximum number of shares of Common Stock that may be issued in the Merger and (ii) $12.50.

(3)

Calculated pursuant to Rule 457 of the Securities Act by calculating the product of (i) the proposed maximum aggregate offering price and (ii) 1,600,000.

 

 

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

 

 

 


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The information in this preliminary proxy statement/prospectus is not complete and may be changed. These securities described herein may not be sold until the registration statement filed with the U.S. Securities and Exchange Commission is declared effective. This preliminary 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.

 

SUBJECT TO COMPLETION, DATED APRIL 5, 2021

PROXY STATEMENT FOR

SPECIAL MEETING OF

KALEYRA, INC.

PROSPECTUS FOR 1,600,000 SHARES OF COMMON STOCK

OF

KALEYRA INC.

The board of directors of Kaleyra Inc., a Delaware corporation (“Kaleyra”), has unanimously approved the merger (the “Merger”) of Volcano Merger Sub Inc., a Delaware corporation (“Merger Sub”), and Vivial Inc., a Delaware corporation (“Vivial”), with Vivial surviving the Merger as a wholly-owned subsidiary of Kaleyra pursuant to the terms of that certain Agreement and Plan of Merger dated as of February 18, 2021 (the “Merger Agreement”) by and among Kaleyra, Merger Sub, Vivial and GSO Special Situations Master Fund LP, an exempted limited partnership formed under the laws of the Cayman Islands solely in its capacity as Stockholder Representative (“Stockholder Representative”), for the acquisition of the business owned by Vivial known as mGage (“mGage”), a leading global mobile messaging provider. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A (the “Merger Agreement”) and is more fully described elsewhere in this proxy statement/prospectus.

In connection with the Merger, Vivial will form a wholly-owned subsidiary (“SpinCo”), into which it will transfer two other wholly-owned subsidiaries, Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, and its subsidiaries (the “Reorganization”). Following the Reorganization, Vivial will cause its stockholders to receive on a pro rata basis 100% of the shares of SpinCo common stock (the “Distribution”, and the Distribution together with the Reorganization is referred to as the “Separation”). As a result of and following the Separation, Vivial will solely own the business of mGage immediately prior to the consummation of the Merger.

Kaleyra will acquire mGage for a total purchase price of approximately $215 million, subject to adjustments. The consideration to mGage shareholders will consist of cash in the amount of $195 million and an additional $20 million in consideration paid through the issuance of 1,600,000 shares of Kaleyra common stock, par value $0.0001 per share (“Common Stock”), at $12.50 per share. The Merger is expected to be consummated in the second fiscal quarter of 2021. In support of the consummation of the Merger, on February 18, 2021, Kaleyra entered into subscription agreements (the “PIPE Subscription Agreements”), each dated February 18, 2021, with certain institutional investors (the “PIPE Investors”), pursuant to which, among other things, Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, an aggregate of 8,400,000 shares (the “PIPE Shares”) of Kaleyra Common Stock to the PIPE Investors at $12.50 per share, and Kaleyra also entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”), each dated February 18, 2021, with certain institutional investors (the “Convertible Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, $200 million aggregate principal amount of 6.125% unsecured convertible notes (the “Convertible Notes”). The issuance of the Convertible Notes, together with the issuance of the PIPE Shares, constitutes the “Financing.”

Certain of our stockholders who collectively own approximately 39.3% of the outstanding shares of Kaleyra Common Stock have each entered into support agreements pursuant to which such stockholders have agreed, subject to the terms and conditions of such support agreements, to execute and return written consents/proxies approving the proposals for which Kaleyra is soliciting consents in connection with the merger agreement. Nonetheless, we will still require holders of additional shares outstanding and entitled to vote to approve the proposals included in this proxy statement/prospectus.

The Kaleyra Common Stock is currently listed on the NYSE American stock exchange (“NYSE American”) under the symbol “KLR.” Upon closing, we intend to apply to list the shares of our Common Stock to be issued to the Vivial equity holders under the Merger Agreement, as well as our shares of Common Stock to be issued in the Financing, on the NYSE American under the same symbol. It is a condition to consummation of the Merger Agreement described above that Kaleyra receives confirmation from the NYSE American that the securities to be issued under the Merger Agreement and as part of the Financing have been conditionally approved for listing on the NYSE American, but there can be no assurance such listing conditions will be met or that Kaleyra will obtain such confirmation from the NYSE American. If such listing conditions are not met or if such confirmation is not obtained, the Merger Agreement described above may not be consummated unless the NYSE American condition set forth in the Merger Agreement is waived by the applicable parties.

This proxy statement/prospectus provides shareholders of Kaleyra with detailed information about the proposed issuance of Common Stock in the Merger and the Financing other matters to be considered at the special meeting of Kaleyra. We encourage you to read this entire document, including the Annexes and other documents referred to herein, carefully and in their entirety. You should also carefully consider the risk factors described in the section entitled “Risk Factors” and incorporated by reference to Item 1A of our Annual Report on Form 10-K for our most recent fiscal year ended December 31, 2020.

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

This proxy statement/prospectus is dated [●], 2021, and is first being mailed to Kaleyra’s shareholders on or about [●], 2021.


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Kaleyra Inc.

Via Marco D’Aviano, 2

Milano MI, Italy 20131

Dear Kaleyra Inc. Stockholder:

We cordially invite you to attend a special meeting (the “Special Meeting”) of the stockholders of Kaleyra Inc., a Delaware corporation (“Kaleyra,” “we,” “us,” “our” or the “Company”), which will be held [●], 2021 at     :         .    ., Eastern Daylight Time, via live webcast at https://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://[●] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Please note that you will only be able to access the Special Meeting by means of remote communication.

On February 18, 2021, Kaleyra executed an Agreement and Plan of Merger (the “Merger Agreement”), dated as of February 18, 2021, by and among Kaleyra, its wholly-owned subsidiary, Volcano Merger Sub, Inc. (“Merger Sub”), Vivial Inc. (“Vivial”) and GSO Special Situations Master Fund LP, solely in its capacity as the Stockholder Representative (“Stockholder Representative”), for the acquisition of the business owned by Vivial known as mGage (“mGage”), a leading global mobile messaging provider (the transaction contemplated by the Merger Agreement, the “Merger”). Kaleyra will acquire mGage for a total purchase price of approximately $215,000,000, subject to adjustments. The consideration to mGage shareholders will consist of cash in the amount of $195,000,000 and an additional $20 million in consideration paid through the issuance of 1,600,000 shares of Kaleyra common stock, par value $0.0001 per share (“Parent Common Stock”) at $12.50 per share.

In connection with the Merger, Vivial will form a wholly-owned subsidiary (“SpinCo”), into which it will transfer two other wholly-owned subsidiaries, Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, and its subsidiaries (the “Reorganization”). Following the Reorganization, Vivial will cause its stockholders to receive on a pro rata basis 100% of the shares of SpinCo common stock (the “Distribution”, and the Distribution together with the Reorganization is referred to as the “Separation”). As a result of and following the Separation, Vivial will solely own the business of mGage immediately prior to the consummation of the Merger.

In support of the consummation of the Merger, on February 18, 2021, Kaleyra entered into subscription agreements (the “PIPE Subscription Agreements”), each dated February 18, 2021, with certain institutional investors (the “PIPE Investors”), pursuant to which, among other things, Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, an aggregate of 8,400,000 shares (the “PIPE Shares”) of Parent Common Stock to the PIPE Investors at $12.50 per share, and Kaleyra also entered into convertible note subscription agreements (the “Convertible Note Subscription Agreements”), each dated February 18, 2021, with certain institutional investors (the “Convertible Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, $200,000,000 aggregate principal amount of 6.125% unsecured convertible notes (the “Convertible Notes”). The issuance of the Convertible Notes, together with the issuance of the PIPE Shares, constitutes the “Financing.”

At the effective time of the Merger (the “Effective Time”), each share of Vivial common stock, par value $0.01 per share (collectively, the “Vivial Common Stock”), issued and outstanding immediately prior to the Effective Time (including shares of Vivial Common Stock resulting from the conversion of restricted stock units prior to the Effective Time) will be cancelled and converted into and will thereafter represent the right to receive, without interest, in accordance with a schedule to be delivered by Vivial prior to the closing of the Merger, (i) the

 

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Estimated Per Share Merger Consideration plus (ii) such share’s Allocable Share of any Adjustment Amount distributed pursuant to the Merger Agreement and Adjustment Escrow Amount in accordance with an escrow agreement to be established for the Adjustment Escrow Amount plus (iii) its Allocable Share of any amount from the Stockholder Representative Expense Fund distributed. “Allocable Share” means with respect to each share of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held in Vivial’s treasury or by Kaleyra or Merger Sub and the such amount of shares that are repurchased in accordance with Vivial’s existing Investor Rights Agreement)), a fraction (a) the numerator of which is one and (b) the denominator of which is the aggregate number of shares of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held in Vivial’s treasury or by Kaleyra or Merger Sub). The “Adjustment Amount” means the Final Merger Consideration minus the Estimated Merger Consideration.

The “Merger Consideration” means an amount equal to (a) $195,000,000 minus (b) the amount of the Closing Debt plus (c) the amount of the Closing Cash plus (d) if the Closing Net Working Capital exceeds $7,500,000 (the “Net Working Capital Target”), the amount of such excess minus (e) if the Net Working Capital Target exceeds the Closing Net Working Capital, the amount of such excess minus (f) the Closing Company Transaction Expenses plus (g) $20,000,000 (the “Parent Common Stock Consideration Amount”); provided, however, in no event shall Closing Cash exceed $7,000,000 (the “Maximum Closing Cash Amount”). The “Estimated Merger Consideration” is the estimated calculation of the Merger Consideration that will be made by Vivial two business days prior to the anticipated date of closing of the Merger (the “Closing Date”) using the formula set forth in the prior sentence. The “Estimated Per Share Merger Consideration” means an amount equal to (x) the Closing Payment divided by (y) the aggregate number of shares of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held in the Vivial’s treasury or by Kaleyra or Merger Sub). The “Closing Payment” means the Estimated Merger Consideration minus $2,000,000 (the “Adjustment Escrow Amount”) minus $500,000 (the “Stockholder Representative Expense Fund”). “Final Merger Consideration” means the Merger Consideration finally determined by the parties following the adjustment process specified in the Merger Agreement.

The “Closing Cash” means the cash outstanding of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. (Eastern Daylight Time) on the date immediately preceding the Closing Date. The “Closing Debt” means the aggregate indebtedness outstanding of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. (Eastern Daylight Time) on the date immediately preceding the Closing Date. The “Closing Net Working Capital” means the Net Working Capital of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. (Eastern Daylight Time) on the date immediately preceding the Closing Date. “Net Working Capital” means: (a) current assets minus (b) current liabilities (including uncleared checks written by Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation), in each case determined in accordance with Vivial’s accounting principles. For the avoidance of doubt, Net Working Capital shall exclude long term assets and liabilities, and any items of Indebtedness, income taxes, deferred tax assets and liabilities, cash, Closing Company Transaction Expenses, and intercompany balances among Vivial, mGage and any of Vivial’s wholly owned subsidiaries that remain following the Separation.

The “Closing Company Transaction Expenses” means the Company Transaction Expenses outstanding on the Closing Date to the extent not paid by Vivial at 11:59 p.m. (Eastern Daylight Time) on the date immediately preceding the Closing Date. “Company Transaction Expenses” means all (a) expense reimbursement payable to any other bidders of the transactions contemplated by the Merger Agreement, (b) fees, costs, charges, expenses and obligations payable to Vivial’s advisors and other fees, costs, charges, expenses and obligations of professional service firms incurred by Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation in connection with the transactions contemplated by the Merger Agreement, the Separation and Distribution Agreement and the Distribution and Reorganization, in each case to the extent unpaid as of the Closing Date, (c) the amount of the aggregate of the Employee Payments, and all employer taxes related thereto, (d) the cost of terminating in full all obligations or liabilities under any advisory or similar affiliate agreements

 

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(if any), (e) all transfer taxes allocable to SpinCo under the Merger Agreement, (f) 50% of all other transfer taxes not expressly allocable to SpinCo, (g) 50% of the costs fees and expenses of obtaining, and relating to, a tail director and officer insurance policy, and (h) 50% of the fees to be paid for antitrust review of the Merger; provided, that Company Transaction Expenses shall not include any amounts (i) to the extent included in the calculation of the Adjustment Amount as Closing Debt, (ii) to the extent included as current liabilities in the calculation of Net Working Capital and (iii) any fees or expenses incurred by or on behalf of Kaleyra or Merger Sub in connection with the transactions contemplated by the Merger Agreement or any other transaction document, whether or not billed or accrued (including any fees and expenses of legal counsel, financial advisors, investment bankers, brokers and accountants of Kaleyra or Merger Sub). The “Employee Payments” means, without duplication, in respect of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation any payments in respect of (a) severance, change in control, retention, transaction or similar bonus, termination or similar amounts payable and (b) any payments in respect of equity-based compensation (including any profits interests), in each case of clause (a) or (b), payable to any person solely in connection with the closing of the Merger to the extent due and payable as of such closing.

The Parent Common Stock Consideration Amount shall be paid with the issuance of such number of shares of Parent Common Stock equal to (a) the Parent Common Stock Consideration Amount, divided by (b) $12.50, or a total of 1,600,000 shares of Parent Common Stock. The remainder of the Merger Consideration shall be paid in cash.

Certain of our stockholders who collectively own approximately 39.3% of the outstanding shares of Parent Common Stock have each entered into support agreements pursuant to which such stockholders have agreed, subject to the terms and conditions of such support agreements, to execute and return written consents/proxies approving the proposals for which Kaleyra is soliciting consents in connection with the merger agreement. Nonetheless, we will still require holders of additional shares outstanding and entitled to vote to approve the proposals included in this proxy statement/prospectus.

The Parent Common Stock is currently listed on the NYSE American stock exchange (“NYSE American”) under the symbol “KLR.” Upon Closing, we intend to apply to list the shares of the Parent Common Stock to be issued to the Vivial equity holders under the Merger Agreement, as well as our shares Parent Common Stock to be issued in the Financing, on the NYSE American under the same symbol. It is a condition to consummation of the Merger Agreement described above that Kaleyra receives confirmation from the NYSE American that the securities to be issued under the Merger Agreement and as part of the Financing have been conditionally approved for listing on the NYSE American, but there can be no assurance such listing conditions will be met or that Kaleyra will obtain such confirmation from the NYSE American. If such listing conditions are not met or if such confirmation is not obtained, the Merger Agreement described above may not be consummated unless the NYSE American condition set forth in the Merger Agreement is waived by the applicable parties.

At the Special Meeting, Company stockholders will be asked to consider and vote upon (1) a proposal to approve the issuance of more than 20% of the outstanding Parent Common Stock in connection with the shares of the Parent Common Stock issuable under the Merger Agreement as well as in connection with the Financing, as well as (2) a proposal to increase the number of shares of the Parent Common Stock available for issuance under the Kaleyra Inc 2019 Equity Incentive Plan by 4,000,000.

We are providing you with the accompanying proxy statement/prospectus and accompanying proxy card in connection with the solicitation of proxies to be voted at the Special Meeting and at any adjournments or postponements of the Special Meeting. Information about the Special Meeting, the Merger and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement/prospectus. Whether or not you plan to attend the Special Meeting, we urge you to read this proxy statement/prospectus, including the Annexes and the accompanying financials statements of the Company and of Vivial carefully and in their entirety. In particular, we urge you to read carefully the section entitled Risk Factors included as Item 1A to our Annual Report on Form 10-K for our most recent fiscal year ended December 31, 2020 and incorporated by reference herein, a copy of which accompanies this proxy statement/prospectus.

 

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After careful consideration, our Board has approved the Merger Agreement and the transactions contemplated therein, and recommends that our stockholders vote “FOR” adoption of the NYSE American Stock Issuance Proposal to facilitate the financing of the Merger, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement/prospectus.

Approval of each of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast at the Special Meeting.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in this proxy statement/prospectus to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. Even if you have voted by proxy, you may still vote during the Special Meeting by visiting https://[] with your 12-digit control number assigned by Continental Stock Transfer & Trust Company included on your proxy card or obtained from them via email. The transactions contemplated by the Merger Agreement will be consummated only if the Transaction Proposals are approved at the Special Meeting.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting. If you are a stockholder of record and you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person.

On behalf of our Board, I would like to thank you for your support of Kaleyra and look forward to a successful completion of the Merger.

Sincerely,

Dario Calogero

Chief Executive Officer

[●], 2021

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

This proxy statement/prospectus is dated [●], 2021, and is expected to be first mailed to Company stockholders on or about [●], 2021.

 

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NOTICE OF SPECIAL MEETING OF

STOCKHOLDERS OF KALEYRA, INC.

TO BE HELD [●], 2021

To the Stockholders of Kaleyra Inc.:

NOTICE IS HEREBY GIVEN that a special meeting (the “Special Meeting”) of the stockholders of Kaleyra Inc., a Delaware corporation (“Kaleyra,” “we,” “us,” “our” or the “Company”), which will be held on [●], 2021 at 10:00 a.m., Eastern Daylight Time, via live webcast at https:// [●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://[●] and using a control number assigned by Continental Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Please note that you will only be able to access the Special Meeting by means of remote communication. You are cordially invited to attend the Special Meeting to conduct the following items of business which you will be asked to consider and vote on:

 

1.

Proposal No. 1 - The NYSE American Stock Issuance Proposal - To approve, for purposes of complying with applicable listing rules of NYSE American (“NYSE American”), the issuance of more than 20% of the outstanding Parent Common Stock in connection with the Merger, and the transactions contemplated by the PIPE Subscription Agreements (as defined below) and the Convertible Note Subscription Agreements (as defined below), including up to 8,400,000 shares of Parent Common Stock to the PIPE Investors and 11,851,852 shares of the Parent Common Stock upon conversion of the Convertible Notes (as defined below);

 

2.

Proposal No. 2 - The Incentive Plan Proposal – To approve an increase to the number of shares of the Parent Common Stock available for issuance under the Kaleyra Inc. 2019 Equity Incentive Plan (the “Incentive Plan”) by 4,000,000 shares;

 

3.

Proposal No. 3 - Adjournment Proposal - To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal.

The above matters are more fully described in the accompanying proxy statement/prospectus, which also includes, as Annex A, a copy of the Merger Agreement. We urge you to read carefully the accompanying proxy statement/prospectus in its entirety, including the Annexes and accompanying financial statements of the Company and Vivial.

The record date for the Special Meeting is [●], 2021. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting and electronically during the Special Meeting at https://[●].

The Company and Vivial cannot complete the Merger unless the Company’s stockholders approve the issuance of additional shares of the Parent Common Stock as contemplated under the NYSE American Stock Issuance Proposal, including the issuance of Parent Common Stock to Vivial equity holders as merger consideration and the issuance of shares of to the PIPE Investors and upon conversion of the Convertible Notes. The Company is sending you this proxy statement/prospectus to ask you to vote in favor of the matters described in this proxy statement/prospectus.

 

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A majority of the voting power of all outstanding shares of capital stock of the Company entitled to vote must be present in person via the virtual meeting platform or by proxy to constitute a quorum for the transaction of business at the Special Meeting. Approval of each of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal require the affirmative vote of a majority of the votes cast at the Special Meeting. The Board unanimously recommends that you vote “FOR” each of these proposals.

By Order of the Board of Directors

Dario Calogero

Chief Executive Officer

Milan, Italy

[●], 2021

 

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TABLE OF CONTENTS

 

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     3  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

     5  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     15  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     25  

SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF VIVIAL NETWORKS

     26  

SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     27  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     30  

RISK FACTORS

     33  

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

     34  

COMPARATIVE SHARE INFORMATION

     44  

THE MERGER

     45  

SPECIAL MEETING OF THE COMPANY’S STOCKHOLDERS

     60  

PROPOSAL NO. 1—THE NYSE AMERICAN STOCK ISSUANCE PROPOSAL

     65  

PROPOSAL NO. 2—THE INCENTIVE PLAN PROPOSAL

     67  

PROPOSAL NO. 3 — THE ADJOURNMENT PROPOSAL

     75  

INFORMATION ABOUT MGAGE

     76  

VIVIAL NETWORKS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     84  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     91  

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     92  

LEGAL MATTERS

     97  

EXPERTS

     97  

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     97  

HOUSEHOLDING INFORMATION

     98  

INDEX TO FINANCIAL STATEMENTS

     F-1  

ANNEX A—MERGER AGREEMENT

  

ANNEX B—KALEYRA INC. 2019 EQUITY INCENTIVE PLAN, AS PROPOSED TO BE AMENDED AND RESTATED

  


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SUMMARY TERM SHEET

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

 

   

There are currently 30,930,117 shares of Parent Common Stock issued and outstanding, and 12,780,483 shares of Parent Common Stock issued to our directors and our executive officers or any of their affiliates (the “Insider Shares”). We refer to the holders of the remaining 18,149,634 shares of Parent Common Stock as our “public stockholders.” There are currently no shares of preferred stock issued and outstanding.

 

   

For more information regarding the Parent Common Stock and warrants, please see the section entitled “Description of Securities” contained in the Company’s Registration Statement on Form 8-A (File No. 001-38320), filed with the Commission on November 25, 2019 pursuant to the Exchange Act, including any amendment or report filed for the purpose of updating such description.

 

   

Vivial Networks, a wholly-owned subsidiary of Vivial, which also does business as mGage, is a leading global mobile messaging provider. For more information about Vivial Networks, please see the sections entitled “Information about mGage-Business” and “Vivial Networks’ Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

 

   

Subject to the terms of the Merger Agreement and customary adjustments, at the Effective Time (as defined below) of the Merger, each share of Vivial Common Stock (as defined below) issued and outstanding immediately prior to the Effective Time of the Merger (other than shares owned by Vivial as treasury stock or Dissenting Shares (as defined below)) will convert into a number of shares of Parent Common Stock as set forth in the Merger Agreement (the “Merger Consideration”).

 

   

The Company has agreed to pay Vivial equity holders aggregate consideration consisting of cash proceeds of $195,000,000 and up to 1,600,000 shares of Parent Common Stock valued at $12.50 per share.

 

   

The PIPE Investors (as defined below) have agreed to purchase 8,400,000 shares of Parent Common Stock at $12.50 per share, in the aggregate, for $105,000,000 of gross proceeds.

 

   

The Convertible Note Investors (as defined below) have agreed to purchase pursuant to the Convertible Note Subscription Agreements (as defined below) with the Convertible Note Investors, pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to the Closing, the Convertible Notes (as defined below) for an aggregate purchase price of $200,000,000. The Convertible Notes are convertible into 11,851,852 shares of Parent Common Stock.

 

   

It is anticipated that, upon completion of the Merger: (i) the Company’s existing public stockholders (other than the PIPE Investors and the Convertible Note Investors) will retain an ownership interest of approximately 44.3% in the post-combination company; (ii) the PIPE Investors will own approximately 20.5% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 64.9% of the post-combination company); and (iii) the former Vivial equity holders will own approximately 3.9% of the post-combination company.

 

   

The ownership percentage with respect to the post-combination company following the Merger does not take into account (i) warrants to purchase Parent Common Stock that will remain outstanding immediately following the Merger, (ii) conversion of any of the Convertible Notes or (iii) the issuance

 

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of any shares upon completion of the Merger under the Incentive Plan, a copy of which as proposed to be amended and restated is attached to this proxy statement/prospectus as Annex B. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement/Prospectus - Impact of the Merger on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” “Proposal No. 2 - The Incentive Plan Proposal.”

 

   

At the Special Meeting, the stockholders of the Company will be asked to vote on:

 

   

Proposal No. 1 - The NYSE American Stock Issuance Proposal - To approve, for purposes of complying with applicable listing rules of the NYSE American, the issuance of more than 20% of the outstanding Parent Common Stock in connection with the Merger, and the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements, including up to 1,600,000 shares of Parent Common Stock to the Vivial equity holders, 8,400,000 shares of Parent Common Stock to the PIPE Investors, 11,851,852 shares of the Parent Common Stock upon conversion of the Convertible Notes (as defined below);

 

   

Proposal No. 2 - The Incentive Plan Proposal –- To approve an increase in the number of shares of the Parent Common Stock available for issuance under the Kaleyra Inc. 2019 Equity Incentive Plan by 4,000,000 shares;

 

   

Proposal No. 3 - Adjournment Proposal - To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal, and the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal.

 

   

The Merger Agreement may be terminated at any time prior to the consummation of the Merger upon agreement of the parties thereto, or by the Company or Vivial in specified circumstances. For more information about the termination rights under the Merger Agreement, please see the section entitled “The Merger - Agreement and Plan of Merger - Termination.”

 

   

The proposed Merger involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors” and our risk factors included under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020, a copy of which is included with this proxy statement/prospectus and which is incorporated herein by reference.

 

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FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Kaleyra” refer to Kaleyra Inc., a Delaware corporation, and the term “post-combination company” refers to the Company following the consummation of the Merger.

In this proxy statement/prospectus:

Board” or “Board of Directors” means the board of directors of the Company.

Closing” means the closing of the transactions contemplated by the Merger Agreement.

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

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

Convertible Note Investment” means the private placement pursuant to which the Convertible Note Investors have subscribed for the Convertible Notes for an aggregate purchase price of $200,000,000.

Convertible Note Investors” means certain institutional investors that will invest in the Convertible Note Investment.

Convertible Note Shares” means the 11,851,852 shares of Parent Common Stock to be issued upon conversion of the Convertible Notes, in accordance with the terms and subject to the conditions of the Convertible Note Subscription Agreements and the Indenture.

Convertible Note Subscription Agreements” means, collectively, those certain subscription agreements entered into on February 18, 2021, between the Company and certain investors, pursuant to which such Convertible Note Investors have agreed to purchase an aggregate of $200,000,000 in the Convertible Note Investment.

Convertible Notes” means the 6.125% Convertible Senior Notes due 2026 and that are convertible into Convertible Note Shares at a conversion price of $16.875 per share.

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

DLA” means DLA Piper LLP (US), counsel to the Company.

Distribution” means the distribution by Vivial, after the Reorganization and prior to the Closing, of all of the shares of SpinCo common stock to Vivial equity holders on a pro rata basis according to their ownership of Vivial.

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

Effective Time” means the effective time of the Merger.

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

Financing” means the issuance of the Convertible Notes, together with the issuance of the PIPE Shares.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

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

 

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

JOBS Act” means the Jumpstart Our Business Startups Act.

mGage” means the global mobile engagement business of Vivial prior to the Closing.

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

Merger” means the transactions contemplated by the Merger Agreement, including the Merger of Merger Sub with and into Vivial, with Vivial continuing as the surviving company.

Merger Agreement” means that certain Merger Agreement, dated as of February 18, 2021, by and among Company, Merger Sub, Vivial and GSO Special Situations Master Fund LP, as the Stockholder Representative.

Merger Sub” means Project Volcano Merger Sub Inc., a Delaware corporation.

NYSE American” means the NYSE American stock exchange.

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

Registration Statement” means this registration statement on Form S-4 and any amendments thereto, as filed with the SEC.

Reorganization” means the transfer by Vivial to SpinCo of all equity, assets and liabilities of Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, each of which is a wholly-owned subsidiary of Vivial, and their respective subsidiaries.

SEC” means the United States Securities and Exchange Commission.

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

Separation” means the Reorganization and the Distribution, collectively.

Separation and Distribution Agreement” means that certain Separation and Distribution Agreement to be entered into by the parties thereto for purposes of effectuating the Separation.

“SpinCo” means a Delaware corporation to be formed by Vivial as a wholly-owned subsidiary of Vivial for purposes of effectuating the Separation.

Transition Services Agreement” means a Transition Services Agreement to be entered into immediately prior to Closing between SpinCo and Merger Sub pursuant to which the parties would provide certain business services to one another for a limited period after the Closing.

“Transfer Agent” means Continental Stock Transfer & Trust Company.

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

Vivial” means Vivial Inc., a Delaware corporation and its subsidiaries.

Vivial Common Stock” means the shares of Vivial common stock, par value $0.01 per share.

Vivial equity holder” means each holder of Vivial Common Stock or a vested equity award.

 

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Vivial Networks” means Vivial Networks LLC, a wholly-owned subsidiary of Vivial, and the owner of the business known as mGage.

Weil” means Weil, Gotshal & Manges LLP, counsel to Vivial.

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Merger. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Merger and the Proposals and the voting procedures for the Special Meeting, which will be held on [], 2021 at     :         .    ., Eastern Daylight Time, via live webcast at https:// []. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend and vote at the Special Meeting online by visiting https://[] and using a control number assigned by Continental Stock Transfer & Trust Company.

Q: Why am I receiving this proxy statement/prospectus?

A: You are being asked to consider and vote upon proposals to approve the issuance of additional shares of our Common Stock that will exceed 20% of our currently outstanding fully-diluted shares in connection with the issuance of shares to Vivial equity holders under the Merger as well as in connection with the Financing, and to approve an increase to the number of our shares of Parent Common Stock available for issuance under our 2019 Equity Incentive Plan by 4,000,000 shares, among other proposals. These proposals are required under the terms of the Merger Agreement. We have entered into the Merger Agreement, pursuant to which the Company’s wholly owned subsidiary, Merger Sub, will merge with and into Vivial, with Vivial surviving the Merger. Subject to the terms of the Merger Agreement and customary adjustments, at the Effective Time of the Merger, each share of Vivial Common Stock issued and outstanding immediately prior to the Effective Time of the Merger (other than shares owned by Vivial as treasury stock or Dissenting Shares) will convert into a number of shares of Parent Common Stock as set forth in the Merger Agreement. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

This proxy statement/prospectus and its Annexes contain important information about the proposed Merger and the other matters to be acted upon at the Special Meeting. You should read this proxy statement/prospectus and its Annexes carefully and in their entirety.

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

Q: When and where is the Special Meeting?

A: The Special Meeting will be held on [●], 2021 at 10:00 a.m., Eastern Daylight Time, via live webcast at https://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. You or your proxyholder will be able to attend the virtual Special Meeting online, vote, view the list of stockholders entitled to vote at the special meeting and submit questions during the Special Meeting by visiting https:// [●] and using a control number assigned by Continental

 

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Stock Transfer & Trust Company. To register and receive access to the virtual meeting, registered stockholders and beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) will need to follow the instructions applicable to them provided in the proxy statement/prospectus. Because the special meeting is completely virtual and being conducted via live webcast, stockholders will not be able to attend the meeting in person.

Q: How can I attend and vote at the Special Meeting?

A: Any stockholder wishing to attend the virtual meeting should register for the meeting by [●], 2021. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of our Common Stock:

 

   

If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the Special Meeting, go to https:// [●], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.

 

   

Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the Special Meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access

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

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

1. Proposal No. 1 - The NYSE American Stock Issuance Proposal - To approve, for purposes of complying with applicable listing rules of the NYSE American, the issuance of more than 20% of the outstanding Parent Common Stock in connection with the Merger, including 1,600,000 shares of our Common Stock to former Vivial stockholders under the Merger, 8,400,000 shares of Common Stock to the PIPE Investors, and 11,851,852 shares of our Common Stock upon conversion of the Convertible Notes;

2. Proposal No. 2 - The Incentive Plan Proposal - To approve the increase in the number of shares of Parent Common Stock available for issuance under Incentive Plan by 4,000,000 shares; and

3. Proposal No. 3 - Adjournment Proposal - To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal.

Q: Are the proposals conditioned on one another?

A: No. The proposals in this proxy statement/prospectus (other than the Adjournment Proposal) are not conditioned on approval of any other proposal. However, the transactions contemplated by the Merger Agreement may not be consummated if the NYSE American Stock Issuance Proposal is not approved at the Special Meeting.

 

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Our current deadline to consummate the Merger is June 30, 2021; however this can be extended to July 31, 2021 upon the occurrence of certain circumstances.

Q: Why are we not providing stockholders with the opportunity to vote on the Merger?

A: Our Board of Directors has unanimously approved of the Merger Agreement and the transactions contemplated thereby, and under the Delaware General Corporation Law and other governing documents, approval of our stockholders of the Merger Agreement is not required. Vivial stockholders are required to approve the Merger Agreement, however, Kaleyra and two stockholders of Vivial owning a majority of the Vivial Common Stock (the “Key Company Stockholders”), concurrently with the execution and delivery of the Merger Agreement, have entered into the Stockholder Support Agreement (the “Stockholder Support Agreement”), pursuant to which such Key Company Stockholders have agreed, among other things, to vote all of their shares of Vivial Common Stock in favor of the Merger Agreement and the Merger. As a result, approval by the Vivial stockholders of the Merger and the Merger Agreement is assured. Separately, Vivial and certainly stockholders of Kaleyra owning beneficially approximately 39.3% of our outstanding shares of Common Stock have entered into the Parent Insider Support Agreement (the “Parent Insider Support Agreement”), pursuant to which the stockholders of Kaleyra who entered into such agreement have agreed, among other things, to vote (or execute and return an action by written consent), or cause to be voted at the stockholders’ meeting of Kaleyra (or validly execute and return and cause such consent to be granted with respect to), all of their shares of Parent Common Stock (subject to the right to be able to transfer a certain specified amount of shares) in favor of “Proposal 1 – NYSE American Stock Issuance Proposal” and against any action, agreement or transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Kaleyra under the Merger Agreement or that would reasonably be expected to result in the failure of the Merger from being consummated.

Q: What revenues and profits/losses has Vivial Networks generated in the last two years?

A: For its most recent fiscal years ended December 31, 2020 and 2019, Vivial Networks generated revenues of approximately $141.3 million and $111.9 million, respectively, and earned income of approximately $23.8 million and $10.8 million, respectively. For additional information, please see the sections entitled “Selected Consolidated Historical Financial and Other Information of Vivial Networks” and “Vivial Networks’ Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Q: How will Vivial be acquired in the Merger?

A: Pursuant to the Merger Agreement, Vivial will become a wholly owned subsidiary of the Company as a result of the Company’s wholly owned subsidiary, Merger Sub, merger with and into Vivial, with Vivial surviving the Merger.

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

A: Yes. We intend to apply to continue the listing of our Common Stock on the NYSE American under the symbol “KLR”, upon the Closing.

Q: What has been the trading price of our Common Stock following the announcement of the Merger?

A: On February 18, 2021, the trading date immediately prior to the public announcement of the Merger, our Common Stock, closed at $16.68. On [●], 2021, the trading date immediately prior to the date of this proxy statement/prospectus, our Common Stock closed at $[●].

Q: How will the Merger impact the shares of the Company outstanding after the Merger?

A: After the Merger and the consummation of the transactions contemplated thereby, including the PIPE Investment and the Convertible Note Investment, the amount of Parent Common Stock outstanding will increase

 

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by approximately 32.3% to 40,930,117 shares of Parent Common Stock. Additional shares of Parent Common Stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including the issuance of shares of Parent Common Stock upon exercise of warrants, conversion of the Convertible Notes and settlement of our existing restricted stock units or those that are issued in the future.

Q: Will the management and board of directors of each of the Company and Vivial change in the Merger?

A: Yes. The Board of the Company currently consists of six directors, but will be increased to seven directors, with [●] joining the Company’s Board. Management of the Company will not change as a result of the Merger. The board of directors of Vivial will be replaced at the Closing by the board members of Merger Sub (each of whom is a current officer of the Company). Management of Vivial will be replaced by current members of management of the Company.

Q: What equity stake will current stockholders of the Company, the PIPE Investors and the Vivial equity holders hold in the Company after the Closing?

A: It is anticipated that, upon completion of the Merger: (i) the Company’s existing public stockholders (other than the PIPE Investors and the Convertible Note Investors) will retain an ownership interest of approximately 44.3% in the post-combination company; (ii) the PIPE Investors will own approximately 20.5% of the post-combination company (such that public stockholders, including the PIPE Investors, will own approximately 64.9% of the post-combination company); and (iii) the former Vivial equity holders will own approximately 3.9% of the post-combination company.

For more information, please see the sections entitled “Summary of the Proxy Statement - Impact of the Merger on the Company’s Public FloatandUnaudited Pro Forma Condensed Combined Financial Information.

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

A: Yes. The PIPE Investors have agreed to purchase 8,400,000 shares of Parent Common Stock for $12.50 per share in the aggregate, for $105,000,000 of gross proceeds pursuant to the PIPE Subscription Agreement. The PIPE Subscription Agreements are contingent upon, among other things, stockholder approval of the NYSE American Stock Issuance Proposal and the Closing.

Additionally, the Convertible Note Investors have agreed to purchase an aggregate of $200,000,000 of gross proceeds, pursuant to the Convertible Note Subscription Agreements. The Convertible Note Subscription Agreements are contingent upon, among other things, stockholder approval of the NYSE American Stock Issuance Proposal and the Closing.

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

A: There are a number of closing conditions in the Merger Agreement, including the approval by the stockholders of the Company of the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Merger, please see the section entitled “The Merger - Agreement and Plan of Merger - Conditions to Closing.”

Q: Are there any arrangements to help ensure that the Company will have sufficient funds from the PIPE Investment and the Convertible Note Investment, to fund the aggregate purchase price?

A: The Company will use the proceeds of the PIPE Investment and the Convertible Note Investment to pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Merger Agreement in connection with the transactions contemplated by the Merger Agreement, including the Merger, and pursuant to the terms of the Merger Agreement.

 

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Q: Why is the Company proposing the NYSE American Stock Issuance Proposal?

A: We are proposing the NYSE American Stock Issuance Proposal in order to comply with NYSE American Company Guide Sections 712(b) and 713(a), which requires stockholder approval of certain transactions that result in the issuance of 20% or more of the outstanding voting power or shares of Common Stock outstanding before the issuance of stock or securities.

In connection with the Merger, we expect to issue (i) up to 1,600,000 shares of Parent Common Stock to the Vivial equity holders, (ii) 8,400,000 shares of Parent Common Stock to the PIPE Investors, and (iii) 11,851,852 shares of our Common Stock upon conversion of the Convertible Notes. Because we may issue 20% or more of outstanding Parent Common Stock when considering together the Merger Consideration, the PIPE Investment and the Convertible Note Investment, we are required to obtain stockholder approval of such issuance pursuant to NYSE American Company Guide Sections 712(b) and 713(a). For more information, please see the section entitled “Proposal No. 1 - The NYSE American Stock Issuance Proposal.”

Q: Why is the Company proposing the Incentive Plan Proposal?

A: The purpose of the Incentive Plan Proposal is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the performance of the Company. Please see the section entitled “Proposal No. 2 - The Incentive Plan Proposal” for additional information.

Q: Why is the Company proposing the Adjournment Proposal?

A: We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal, but no other proposal if the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal are approved. Please see the section entitled “Proposal No. 3 - The Adjournment Proposal” for additional information.

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

A: The record date for the Special Meeting is earlier than the date of the Special Meeting. If you transfer your shares of Parent Common Stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting.

Q: What constitutes a quorum at the Special Meeting?

A: A majority of the voting power of all outstanding shares of the capital stock of the Company entitled to vote must be present in person or by proxy (which would include presence at the virtual Special Meeting) to constitute a quorum for the transaction of business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of the record date for the Special Meeting, [            ] shares of Parent Common Stock would be required to achieve a quorum.

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

A:

Proposal No. 1 - The NYSE American Stock Issuance Proposal: The approval of the NYSE American Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present

 

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in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the NYSE American Stock Issuance Proposal. For purposes of NYSE American rules, however, abstentions are treated as “votes cast” and will be counted as votes “AGAINST” this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Proposal No. 2 - The Incentive Plan Proposal: The approval of the Incentive Plan Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote by proxy, as well as an abstention and broker non-vote, will have no effect on the Incentive Plan Proposal. For purposes of NYSE American rules, however, abstentions are treated as “votes cast” and will be counted as votes “AGAINST” this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Proposal No. 3 - The Adjournment Proposal: The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal.

Q: May the Company or the Company’s directors or officers or their affiliates purchase shares in connection with the Merger?

A: In connection with the stockholder vote to approve the proposed Merger, directors and officers or their respective affiliates may purchase shares in the open market or privately negotiate transactions to purchase shares from stockholders. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act.

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

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

Q: How will our directors and officers vote?

A: Neither we nor our directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Merger. Currently, our directors and officers, along with those affiliated stockholders party to the Parent Insider Support Agreement, own approximately 39.3% of our issued and outstanding shares of Parent Common Stock and will be able to vote all such shares at the Special Meeting.

Q: How do I vote?

A: If you were a stockholder of record on [●], 2021, you may vote by granting a proxy. Specifically, you may vote:

 

   

By Mail - You may vote by mail by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. Votes submitted by mail must be received by 5:00 p.m. Eastern Daylight Time on [●], 2021.

 

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You should sign your name exactly as it appears on the proxy card. If you are signing in a representative capacity (for example, as guardian, executor, trustee, custodian, attorney or officer of a corporation), indicate your name and title or capacity.

 

   

We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting.

 

   

If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted.

 

   

Voting at the Special Meeting - We will be hosting the Special Meeting via live webcast. If you attend the Special Meeting, you may submit your vote at the Special Meeting online at http:// [●], in which case any votes that you previously submitted will be superseded by the vote that you cast at the Special Meeting.

If you hold your shares in street name, you must submit voting instructions to your broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your bank, broker, or other nominee on how to submit voting instructions.

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

A: At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have no effect on the Adjournment Proposal. In addition, for purposes of the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal, the NYSE American considers an abstention vote as a “vote cast”, and therefore, an abstention will have the same effect as a vote “AGAINST” such proposals, while a failure to vote will have no effect on these two proposals.

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

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

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

A: Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement/prospectus carefully. If you are a stockholder of record of Parent Common Stock as of the close of business on the record date, you can vote by proxy by mail by following the instructions provided in the enclosed proxy card. Please note that if you are a beneficial owner of Parent Common Stock, you may vote by submitting voting instructions to your broker, bank or nominee, or otherwise by following instructions provided by your broker, bank or nominee. Telephone and internet voting may be available to beneficial owners. Please refer to the vote instruction form provided by your broker, bank or nominee.

Q: What is the difference between a stockholder of record and a “street name” holder?

A: If your shares are registered directly in your name with the Company’s Transfer Agent, you are considered the stockholder of record with respect to those shares, and access to proxy materials is being provided directly to you. If your shares are held in a stock brokerage account or by a bank or other nominee, then you are considered the beneficial owner of those shares, which are considered to be held in “street name.” Access to proxy materials is being provided to you by your broker, bank or other nominee who is considered the stockholder of record with respect to those shares.

 

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

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

Q: How will a broker non-vote impact the results of each proposal?

A: Broker non-votes will not have any effect on the outcome of any proposals.

Q: May I change my vote after I have returned my signed proxy card or voting instruction form?

A: Yes. If you are a holder of record of Parent Common Stock as of the close of business on the record date, whether you vote by mail, you can change or revoke your proxy before it is voted at the Special Meeting by:

 

   

delivering a signed written notice of revocation to our Secretary at [●], bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

   

signing and delivering a new proxy, relating to the same shares and bearing a later date; or

 

   

attending and voting at the Special Meeting and voting, although attendance at the special meeting will not, by itself, revoke a proxy.

If you are a beneficial owner of Parent Common Stock as of the close of business on the record date, you must follow the instructions of your broker, bank or other nominee to revoke or change your voting instructions.

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 complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

Q: What happens if the Merger is not consummated?

A: There are certain circumstances under which the Merger Agreement may be terminated. Please see the section entitled “The Merger - Agreement and Plan of Merger” for information regarding the parties’ specific termination rights.

In addition, if the Merger is not consummated, which would occur in the event “Proposal 1 – The NYSE American Stock Issuance Proposal” is not approved, the Merger Agreement would be subject to termination and neither the Separation nor the Financing would be consummated. In addition, in certain circumstances where a termination of the Merger Agreement occurs, the Company would be obligated to pay Vivial a termination fee. See “The Merger – Agreement and Plan of Merger – Termination.”

 

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Q: When is the Merger expected to be completed?

A: The closing of the Merger is expected to take place on or prior to the second business day following the satisfaction or waiver of the conditions described below in the subsection entitled “The Merger - Agreement and Plan of Merger - Conditions to Closing.” The closing is expected to occur in the first half of 2021. The Merger Agreement may be terminated by the Company or Vivial if the Closing has not occurred by June 30, 2021, although either the Company or Vivial may extend this date to July 31, 2021 in the event that the SEC has not declared this Registration Statement effective by May 14, 2021.

For a description of the conditions to the completion of the Merger, see the section entitled “The Merger - Agreement and Plan of Merger – Conditions to Closing.”

Q: What do you need to do now?

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

Q: Who can vote at the special meeting?

A: Only holders of record of the Parent Common Stock, including those shares held as a constituent part of our units, at the close of business on [●], 2021 are entitled to have their vote counted at the special meeting and any adjournments or postponements thereof. On this record date, [            ] shares of Parent Common Stock were outstanding and entitled to vote.

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

Beneficial Owner: Shares Registered in the Name of a Broker or Bank. If on the record date your shares or units were held, not in your name, but rather in an account at a brokerage firm, bank, dealer, or other similar organization, then you are the beneficial owner of shares held in “street name” and this proxy statement/ prospectus are being forwarded to you by that organization. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. You are also invited to attend the Special Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid proxy from your broker or other agent.

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

A: We will pay the cost of soliciting proxies for the Special Meeting. We have engaged MacKenzie to assist in the solicitation of proxies for the Special Meeting. We have agreed to pay MacKenzie a fee of $9,000, plus disbursements, and will reimburse MacKenzie for its reasonable out-of-pocket expenses and indemnify MacKenzie and its affiliates against certain claims, liabilities, losses, damages and expenses. We will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of Parent Common Stock for their expenses in forwarding soliciting materials to beneficial owners of Parent Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

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Q: Who can help answer my questions?

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

c/o Kaleyra Inc.

Via Marco D’Aviano, 2

Milano MI, Italy 20131

Attn: Secretary

Telephone: +39 02 288 5841

You may also contact our proxy solicitor at:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

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

or

Call Toll-Free: (800) 322-2885

E-mail: proxy@mackenziepartners.com

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

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

 

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SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

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

Unless otherwise specified, all share calculations assume: (i) no inclusion of any shares of Parent Common Stock issuable pursuant to the Incentive Plan at or following the Closing; (iii) an equity raise of approximately $105,000,000 of gross proceeds from the PIPE Investment of 8,400,000 shares of Parent Common Stock at $12.50 per share; and (iv) no issuance of 11,851,852 shares of Parent Common Stock on conversion of the Convertible Notes issued pursuant to the convertible debt raise of approximately $200,000,000 of gross proceeds from the Convertible Investment.

Parties to the Merger

The Company

We are a Delaware corporation formerly known as GigCapital, Inc., and as a result of our business combination with Kaleyra S.p.A. on November 25, 2019, we changed our name to Kaleyra, Inc.

Kaleyra provides its customers and business partners with a trusted cloud communications platform (the “Platform”) that seamlessly integrates software services and applications for business-to-consumer communications between Kaleyra’s customers and their end-user customers and partners on a global basis. The demand for cloud communications is increasingly driven by the growing, and often mandated, need for enterprises to undertake a digital transformation that includes omnichannel, mobile-first interactive end-user customer communications. This complements new workflows that Kaleyra’s customers have developed which are driven by software and artificial intelligence to automate certain end-user customer-facing processes before, during and after transactions. These communications are increasingly managed through mobile network operators as the gateway to reach end-user consumers’ mobile devices. Kaleyra’s Platform enables these communications by integrating mobile alert notifications and interactive capabilities to reach and engage end-user customers. Kaleyra’s Platform couples a “Software as a Service” or SaaS business model, creating what is generally referred to as a “cloud communications platform as a service”, or simply CPaaS.

Kaleyra is a result of the expansion of the former Ubiquity, which was founded in Milan, Italy in 1999. Ubiquity secured a leading market position in mobile messaging on behalf of the Italian financial services industry and then sought to expand its products and geographic offerings. Ubiquity acquired Solutions Infini of Bangalore, India in 2017 and Buc Mobile of Vienna, Virginia in 2018. It was rebranded as Kaleyra S.p.A. in February 2018. Following the integration of the acquired entities, the combined company is collectively engaged in the operation of the Platform on behalf of Kaleyra’s customers.

The mailing address of the Company’s principal executive office is c/o Kaleyra Inc., Via Marco D’Aviano, 2, Milano MI, Italy.

Additional information regarding the Company can be found in Item 1 (“Business”) in our Annual Report on Form 10-K for our fiscal year ended December 31, 2020 filed with the SEC on March 16, 2021, a copy of which is incorporated by reference into this proxy statement/prospectus and which is incorporated by reference herein.

 

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Merger Sub

Merger Sub, a Delaware corporation, is a wholly owned subsidiary of the Company, formed by the Company in February 2021 to consummate the Merger. In the Merger, Merger Sub will merge with and into Vivial, with Vivial continuing as the surviving corporation (the “Surviving Corporation”).

The mailing address of Merger Sub’s principal executive office is Via Marco D’Aviano, 2, Milano MI, Italy.

Vivial

Vivial Networks, a wholly-owned indirect subsidiary of Vivial, was formed to invest in and acquire digital marketing companies. On August 21, 2015, Vivial Networks completed the acquisition of mGage. mGage is a global mobile engagement provider which enables brands to intelligently personalize mobile communications for the omni-channel consumer, across marketing and customer care interactions, primarily through SMS and MMS text marketing and engagement campaigns. Currently, mGage provides these services in North America, South America, Europe, and Asia with plans for further global expansion

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

Emerging Growth Company

The Company is an “emerging growth company,” as defined under the JOBS Act. As an emerging growth company, the Company is eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. These include, but are not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of an extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. The Company has elected to take advantage of such extended transition period.

The Company will remain an emerging growth company until the earlier of (1) December 31, 2025 (the last day of the fiscal year following the fifth anniversary of the consummation of the Company’s initial public offering), (2) the last day of the fiscal year in which the Company has total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which the Company is deemed to be a “large accelerated filer,” as defined in the Exchange Act, and (4) the date on which the Company has issued more than $1.0 billion in nonconvertible debt during the prior three-year period.

Separation

In connection with the Merger, Vivial will form a wholly-owned subsidiary (“SpinCo”), into which it will transfer two other wholly-owned subsidiaries, Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, and its subsidiaries (the “Reorganization”). Following the Reorganization, Vivial will cause its stockholders to receive on a pro rata basis 100% of the shares of SpinCo common stock (the “Distribution”, and the Distribution together with the Reorganization is referred to as the “Separation”). As a result of and following the Separation, Vivial will solely own the business of mGage immediately prior to the consummation of the Merger.

 

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Merger Consideration to the Vivial Stockholders

At the Effective Time, each share of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (including shares of Vivial Common Stock resulting from the conversion of restricted stock units prior to the Effective Time) will be cancelled and converted into and will thereafter represent the right to receive, without interest, in accordance with a schedule to be delivered by Vivial prior to the closing of the Merger, (i) the Estimated Per Share Merger Consideration plus (ii) such share’s Allocable Share of any Adjustment Amount distributed pursuant to the Merger Agreement and Adjustment Escrow Amount in accordance with an escrow agreement to be established for the Adjustment Escrow Amount plus (iii) its Allocable Share of any amount from the Stockholder Representative Expense Fund distributed. See “The Merger – Agreement and Plan of Merger – The Merger” for additional information about the consideration payable to the Vivial Stockholders under the Merger.

Related Agreements

There are a number of separate agreements that have been entered into under the Merger Agreement, including the Stockholder Support Agreement, Parent Insider Support Agreement, a Separation and Distribution Agreement, and a Transition Services Agreement.

Stockholder Support Agreement. Kaleyra and two stockholders of Vivial owning a majority of the Vivial Common Stock (the “Key Company Stockholders”), concurrently with the execution and delivery of the Merger Agreement, have entered into the Stockholder Support Agreement (the “Stockholder Support Agreement”), pursuant to which such Key Company Stockholders have agreed, among other things, to vote all of their shares of Vivial Common Stock in favor of the Merger Agreement and the Merger.

Parent Insider Support Agreement. Vivial and those stockholders of Kaleyra identified in the Parent Insider Support Agreement, concurrently with the execution and delivery of the Merger Agreement, have entered into the Parent Insider Support Agreement (the “Parent Insider Support Agreement”), pursuant to which the stockholders of Kaleyra who entered into such agreement have agreed, among other things, to vote (or execute and return an action by written consent), or cause to be voted at the stockholders’ meeting of Kaleyra (or validly execute and return and cause such consent to be granted with respect to), all of their shares of Parent Common Stock (subject to the right to be able to transfer a certain specified amount of shares) in favor of (A) the approval and adoption of the Merger Agreement and approval of the Merger, including the Merger, (B) against any action, agreement or transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Kaleyra under the Merger Agreement or that would reasonably be expected to result in the failure of the Merger from being consummated and (C) each of the proposals and any other matters necessary or reasonably requested by Kaleyra for consummation of the Merger.

The foregoing descriptions of the related agreements and the transactions contemplated thereby are not complete and are subject to, and qualified in its entirety by reference to, the actual agreement, a copy of which has been filed with our Current Report on Form 8-K on February 23, 2021, the terms of which are incorporated herein by reference. See also “The Merger – Related Agreements.

Separation and Distribution Agreement. Vivial and Spinco will enter into a Separation and Distribution Agreement immediately prior to the consummation of the Merger (the “Separation and Distribution Agreement”) which will memorialize the various rights and obligations of such parties in connection with the Separation. Pursuant to the Separation and Distribution Agreement, Vivial and SpinCo will agree, among other things, to (i) allocate and transfer those assets used in the SpinCo business and separately identified by such parties, along with any liabilities relating to, arising out of or resulting from the operation of the SpinCo business along with specified liabilities relating to operation of SpinCo business prior to the Distribution and, (ii) terminate certain intercompany contracts and liabilities and settle all intercompany receivables at the time of the Distribution. The Distribution shall occur prior to Closing so long as (a) the Reorganization has been completed and the conditions

 

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set forth in Article VI of the Merger Agreement, other than those conditions that, by their nature, are to be satisfied contemporaneously with the Distribution or the Merger. The foregoing description of the Separation and Distribution Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement. See also “The Merger – Related Agreements – Separation and Distribution Agreements.”

Transition Services Agreement. Simultaneously with the consummation of the Merger, SpinCo and Merger Sub will enter into a Transition Services Agreement (the “Transition Services Agreement”) pursuant to which SpinCo will agree to provide certain services related to the mGage business for a specified period of time in order to facilitate the transactions contemplated by the Merger. Merger Sub will further agree to pay a service fee specified for each service provided. The foregoing description of the Transition Services Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement. See “The Merger – Related Agreements – Transition Services Agreement.”

Kaleyra Inc. 2019 Equity Incentive Plan

Our Board and stockholders approved the Incentive Plan, effective on November 25, 2019. The purpose of the Incentive Plan is to advance the interest of the Company by providing stock-based compensation to participating thereby promoting the long-term alignment with the Company and the creation of stockholder value by encouraging service providers to focus on critical long-range corporate objectives, encouraging the attraction and retention of service providers with exceptional qualifications and linking service providers directly to stockholder interests through increased stock ownership. These incentives are provided through the grant of incentive stock options, nonqualified stock options, stock appreciation rights, performance awards, cash-based awards, unrestricted stock, restricted stock, and restricted stock units. For more information about the Incentive Plan, please see the section entitled “Proposal No. 2 - The Incentive Plan Proposal - Summary of the Incentive Plan.”

Board of the Company following the Merger

Immediately upon Closing, our Board of Directors will be expanded from six members to seven members, and [●] has agreed to join our Board of Directors as a Class [●] director with a term expiring [●].

Board of Vivial following the Merger

Following the merger, the board of directors of Vivial will be replaced by the members of the board of directors of Merger Sub, each of whom is currently an officer of the Company.

Impact of the Merger on the Company’s Public Float

It is anticipated that, upon completion of the Merger: (i) the Company’s existing public stockholders (other than the PIPE Investors and the Convertible Note Investors) will retain an ownership interest of approximately 44.3% in the Company; (ii) the PIPE Investors will own approximately 20.5% of the Company (such that public stockholders, including PIPE Investors, will own approximately 64.9% of the Company); and (iii) the former Vivial equity holders will own approximately 3.9% of the Company, not including any shares of Parent Common Stock that will be issuable upon conversion of the Convertible Notes or the exercise of any warrants. The PIPE Investors have agreed to purchase 8,400,000 shares of Parent Common Stock in the aggregate, for $105,000,000 of gross proceeds. The Convertible Note Investors have agreed to purchase an aggregate principal amount of $200,000,000 of Convertible Notes. The ownership percentage with respect to the Company following the Merger does not take into account (i) warrants to purchase Parent Common Stock that will remain outstanding immediately following the Merger, (ii) conversion of any of the Convertible Notes, or (iii) the issuance of any shares upon completion of the Merger under the Incentive Plan, a copy of which as proposed to be amended and restated is attached to this proxy statement/prospectus as Annex B. If the actual facts are different than these

 

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assumptions, the percentage ownership retained by the Company’s existing stockholders in the Company as a result of the Merger will be different. For more information, please see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 2 - The Incentive Plan Proposal.”

Please see “Unaudited Pro Forma Condensed Combined Financial Information - Description of the Merger” on page [●].

Proposals

The stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable sections of the NYSE American Company Guide, the issuance of more than 20% of the outstanding Parent Common Stock pursuant to the Merger, the PIPE Investment and the Convertible Note Investment (Proposal No. 1);

 

   

a proposal to approve an increase to the number of shares of Parent Common Stock available for issuance under the Incentive Plan, a copy of which as proposed to be amended and restated is attached to this proxy statement/prospectus as Annex B (Proposal No. 2); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal (Proposal No. 3).

Please see the sections entitled “Proposal No. 1 - The NYSE American Stock Issuance Proposal,” “Proposal No. 2 -The Incentive Plan Proposal,” and “Proposal No. 3 - The Adjournment Proposal” for more information.

Date, Time and Place of Special Meeting

The Special Meeting will be held on [●], 2021 at 10:00 a.m., Eastern Daylight Time, via live webcast at https://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. The Special Meeting will be conducted exclusively via live webcast and so stockholders will not be able to attend the meeting in person. Stockholders may attend the special meeting online and vote at the Special Meeting by visiting https://[●] and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company.

Registering for the Special Meeting

Any stockholder wishing to attend the virtual meeting should register for the meeting by [●], 2021 at https:// [●]. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of Parent Common Stock:

 

   

If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to https:// [●], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.

 

   

Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a

 

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legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.

Voting Power and Record Date

Only Company stockholders of record at the close of business on [●], 2021, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were [            ] shares of Parent Common Stock outstanding and entitled to vote, and 12,780,483 are Insider Shares held by our officers and directors.

Tax Consequences

For a description of the material U.S. federal income tax consequences of the ownership and disposition of Parent Common Stock, please see the information set forth in the section entitled “Certain U.S. Federal Income Tax Considerations.

Accounting Treatment

The Merger will be accounted for as an acquisition of Vivial by the Company under the acquisition method of accounting in accordance with U.S. GAAP. For additional information, see note 1 in “Unaudited Pro Forma Combined Financial Information” and “The Merger – Accounting Treatment” on page [●].

Appraisal Rights

Appraisal rights are not available to holders of shares of Parent Common Stock in connection with the Merger.

Pursuant to Section 262 of the DGCL, Vivial stockholders who comply with the applicable requirements of Section 262 of the DGCL and do not otherwise fail to perfect or waive, lose, forfeit, validly withdraw or revoke or lose the right to appraisal under Delaware law have the right to seek appraisal of the fair value of their shares of Vivial Common Stock, as determined by the Court of Chancery, if the Merger is completed. The “fair value” of such shares of Vivial Common Stock as determined by the Court of Chancery may be more or less than, or the same as, the value of the consideration that such stockholder would otherwise be entitled to receive under the Merger Agreement. Vivial stockholders who do not vote in favor of the Merger nor consent in writing to it and who wish to preserve their appraisal rights must so advise Vivial by submitting a demand for appraisal within the period prescribed by Section 262 of the DGCL after receiving a notice from Vivial or the Company that appraisal rights are available to them, and must otherwise precisely follow the procedures prescribed by Section 262 of the DGCL to properly exercise and perfect their right to appraisal. Failure to follow any of the statutory procedures set forth in Section 262 of the DGCL will result in the loss or waiver of appraisal rights under Delaware law. In view of the complexity of Section 262 of the DGCL, Vivial stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors. Any shares of Vivial Common Stock that are outstanding immediately prior to the Effective Time and that are held by stockholders of Vivial who shall have neither voted in favor of the Merger nor consented thereto in writing and who shall have demanded properly in writing appraisal for such Vivial Common Stock in accordance with Section 262 of the DGCL and otherwise complied

 

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with all of the provisions of the DGCL relevant to the exercise and perfection of dissenters’ rights are referred to as “Dissenting Shares”.

Please see the sections entitled “Appraisal Rights.

Proxy Solicitation

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

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

Reasons for the Approval of the Merger

In approving the Merger Agreement and the Merger and recommending that the Company’s stockholders approve the Merger Agreement and the Merger, the Board considered the following positive factors which are based upon our due diligence, although not weighted or in any order of significance:

 

   

Market Impact. A combination of the Company with the mGage business will create a top-5 global CPaaS platform with a strong position in the US, Latin American and Asian Pacific markets.

 

   

Expansion for the Company. An mGage acquisition vastly expands the Company’s existing U.S. customer base and research and development footprint.

 

   

Product Fit. The mGage business provides a highly complementary product, market and channel fit across CPaaS services and marketing / engagement services.

 

   

Synergies. The acquisition of the mGage business brings significant potential for highly realizable cost synergies and cross-selling opportunities.

 

   

Client Base. Vivial Networks has an entrenched, long-term and blue-chip client base across diverse and attractive end-markets.

 

   

Terms of the Merger Agreement. The financial and other terms of the Merger Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between the Company and Vivial.

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

For more information about our decision-making process, please see the section entitled “The Merger – The Company Board’s Reasons for Approval of the Merger.

Conditions to Closing of the Merger

Conditions to Each Party’s Obligations

The respective obligations of the Company and Vivial to complete the Merger are subject to the satisfaction of the following conditions:

 

   

the applicable waiting period(s) under the HSR Act and, if required, any other applicable antitrust law in respect of the transactions contemplated by the Merger Agreement must have expired or been terminated;

 

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there must not be in effect any governmental order, statute, rule or regulation enjoining or prohibiting the consummation of the transactions contemplated by the Merger Agreement;

 

   

the approval by the Vivial stockholders of the Merger Agreement pursuant to stockholder consent, and approval by the Company stockholders at the Special Meeting of the NYSE American Stock Issuance Proposal shall have been obtained; and

 

   

the Company Common Stock to be issued in connection with the Merger must have been approved for listing on the NYSE American, subject only to official notice of issuance thereof.

Conditions to the Company’s Obligations

The obligation of the Company to complete the Merger is also subject to the satisfaction, or waiver by the Company, of the following conditions:

 

   

the accuracy of the representations and warranties of Vivial as of the date of the Merger Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “The Merger – Agreement and Plan of Merger - Conditions to Closing” on page [●];

 

   

each of the covenants of Vivial to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects;

 

   

no material adverse effect must have occurred since the date of the Merger Agreement that is continuing;

 

   

Vivial must have delivered a certificate signed by an officer of Vivial certifying that the preceding conditions have been satisfied;

 

   

the transactions contemplated by the PIPE Subscription Agreement must be consummated concurrently with the Closing;

 

   

the transactions contemplated by the Convertible Note Subscription Agreements must be consummated concurrently with the Closing;

 

   

certain specified individuals must have entered into employment agreements with the Company or Vivial on terms and conditions reasonably satisfactory to the Company (but no less favorable to such employees than their current employment arrangements); and

 

   

consents to certain specified contracts must have been obtained.

Conditions to Vivial’s’ Obligations

The obligation of Vivial to complete the merger is also subject to the satisfaction, or waiver by Vivial, of the following conditions:

 

   

the accuracy of the representations and warranties of the Company as of the date of the Merger Agreement and as of the Closing, subject to certain materiality and material adverse effect thresholds, as more fully described in “The Merger – Agreement and Plan of Merger - Conditions to Closing” on page [●];

 

   

each of the covenants of the Company to be performed or complied with as of or prior to the Closing must have been performed or complied with in all material respects; and

 

   

the Company must have delivered a certificate signed by an officer of the Company, dated as of the Closing, certifying that, to the knowledge and belief of such officer, the two preceding conditions have been fulfilled.

Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the

 

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Antitrust Division of the Department of Justice (“Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Merger is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. If the FTC or the Antitrust Division makes a request for additional information or documentary material related to the Merger (a “Second Request”), the waiting period with respect to the Merger will be extended for an additional period of 30 calendar days, which will begin on the date on which the Company and Vivial each certify compliance with the Second Request. Complying with a Second Request can take a significant period of time. On March 11, 2021, the Company and Vivial filed the required forms under the HSR Act with the Antitrust Division and the FTC. The 30-day waiting period with respect to the Merger, which cannot expire on a Saturday, Sunday or a U.S. federal holiday, is expected to expire at 11:59 p.m. Eastern Daylight Time on April 12, 2021 unless the FTC and the Antitrust Division earlier terminate the waiting period or issue a Second Request.

At any time before or after consummation of the Merger, notwithstanding any termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Merger. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Merger on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. Neither the Company nor Vivial is aware of any material regulatory approvals or actions that are required for completion of the Merger other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Parent Common Stock outstanding and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal, and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of Parent Common Stock represented in person or by proxy and entitled to vote at the Special Meeting.

A failure to vote or an abstention will have no effect on the Adjournment Proposal. In addition, for purposes of the NYSE American Stock Issuance Proposal, and the Incentive Plan Proposal, the NYSE American considers an abstention vote as a “vote cast”, and therefore, an abstention will have the same effect as a vote “AGAINST” such proposals, while a failure to vote will have no effect on these two proposals.

It is important for you to note that in the event that the NYSE American Stock Issuance Proposal does not receive the requisite vote for approval, we will not consummate the Merger.

Recommendation to Company Stockholders

Our Board believes that each of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and recommends that its stockholders vote “FOR” each of the proposals.

Risk Factors

In evaluating the Merger and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section included as Item 1A in our Annual

 

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Report on Form 10-K for our fiscal year ended December 31, 2021, a copy of which accompanies this proxy statement/prospectus and which is incorporated herein by reference. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and Vivial to complete the Merger, and (ii) the business, cash flows, financial condition and results of operations of Vivial prior to the consummation of the Merger and the performance of Vivial’s business following consummation of the Merger.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data for the Company as of and for the years ended December 31, 2020 and 2019. The information below is only a summary and should be read in conjunction with our audited consolidated financial statements and the notes related thereto, which are included elsewhere in this proxy statement/prospectus.

 

     Year Ended December 31,  
(in thousands, except share and per share data)    2020      2019  

Statement of Operations Data:

     

Revenue

   $ 147,368      $ 129,558  

Cost of revenue

     122,932        103,205  
  

 

 

    

 

 

 

Gross profit

     24,436        26,353  
  

 

 

    

 

 

 

Operating expenses:

     

Research and development

     9,745        5,310  

Sales and marketing

     12,866        6,031  

General and administrative

     28,195        17,431  
  

 

 

    

 

 

 

Total operating expenses

     50,806        28,772  
  

 

 

    

 

 

 

Loss from operations

     (26,370      (2,419

Other income, net

     112        136  

Financial expense, net

     (1,475      (439

Foreign currency loss

     (1,353      (517
  

 

 

    

 

 

 

Loss before income tax expense (benefit)

     (29,086      (3,239

Income tax expense (benefit)

     (2,276      2,273  
  

 

 

    

 

 

 

Net loss

   $ (26,810    $ (5,512
  

 

 

    

 

 

 

Net loss per common share, basic and diluted

   $ (1.09    $ (0.48
  

 

 

    

 

 

 

Weighted-average shares used in computing net loss per common share, basic and diluted

     24,652,004        11,603,381  
  

 

 

    

 

 

 

 

     As of December 31,  
(in thousands)    2020      2019  

Balance Sheet Data:

     

Cash and cash equivalents

   $ 32,970      $ 16,103  

Restricted cash

     —          20,894  

Total assets

     118,502        117,404  

Debt for forward share purchase agreements

     483        34,013  

Bank and other borrowings, current and noncurrent portion

     42.772        23,698  

Lines of credit

     5,273        3,627  

Notes payable, current and noncurrent portion

     10,200        18,578  

Total liabilities

     125,931        156,178  

Total stockholders’ equity (deficit)

     (7,429      (38,774

 

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SELECTED CONSOLIDATED HISTORICAL FINANCIAL AND OTHER INFORMATION OF VIVIAL NETWORKS

The following tables show selected historical financial information of Vivial Networks for the periods and as of the dates indicated. This information was derived from the audited financial statements of Vivial Networks for the two years ended December 31, 2020 and December 31, 2019. The information below is only a summary and should be read in conjunction with the section entitled “Vivial Networks’ Management’s Discussion and Analysis of Financial Condition and Results of Operations of Vivial Networks.” as well as Vivial’s historical financial statements and the notes and schedules related thereto, included elsewhere in this Registration Statement.

VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands)

 

     December 31,     December 31,  
     2020     2019  

Revenue

   $ 141,274     $ 111,890  

Operating expenses:

    

Cost of revenue (exclusive of certain depreciation and amortization expense included below)

     89,906       72,727  

Selling, general and administrative expense

     24,112       24,526  

Depreciation and amortization

     3,496       3,843  
  

 

 

   

 

 

 

Total operating expenses

     117,514       101,096  
  

 

 

   

 

 

 

Operating income

     23,760       10,794  

Other (income) expenses:

    

Interest (income)

     (2     (10
  

 

 

   

 

 

 

Total other (income) expenses, net

     (2     (10
  

 

 

   

 

 

 

Net income

   $ 23,762     $ 10,804  
  

 

 

   

 

 

 

VIVIAL NETWORKS LLC

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     December 31,
2020
     December 31,
2019
 

Working capital

   $ 5,612      $ 4,876  

Cash and cash equivalents

   $ 27,839      $ 11,013  

Property and equipment, net

   $ 8,478      $ 9,281  

Total assets

   $ 69,032      $ 50,391  

Total liabilities

   $ 27,150      $ 25,319  

Total member equity

   $  41,882      $ 25,072  

 

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SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Defined terms included below have the same meaning as terms defined and included elsewhere in this proxy statement/prospectus.

The following tables show selected unaudited pro forma combined financial information about the financial condition and results of operations of the combined company after giving effect to Transactions, as defined in the section entitled “Unaudited Pro Forma Combined Financial Information.” The selected unaudited pro forma combined balance sheet data as of December 31, 2020 give effect to the Transactions as if they occurred on December 31, 2020. The selected unaudited pro forma combined statement of operations data for the year ended December 31, 2020 give effect to the Transactions as if they occurred on January 1, 2020.

 

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The selected unaudited pro forma combined financial information has been derived from, and should be read in conjunction with, the more detailed unaudited pro forma combined financial information of the combined company appearing elsewhere in this proxy statement/prospectus and the accompanying notes to the unaudited pro forma combined financial information. Additionally, the unaudited pro forma combined financial information contains estimated adjustments, based upon available information and certain assumptions that we believe are reasonable under the circumstances. The assumptions underlying the pro forma adjustments are described in greater detail in the section entitled “Notes to the Pro Forma Combined Financial Information.” In addition, the unaudited pro forma combined financial information was based on, and should be read in conjunction with, the audited historical consolidated financial statements of Kaleyra and Vivial Networks as of and for the year ended December 31, 2020, which have been included in this proxy statement/prospectus. See the sections entitled “Unaudited Pro Forma Combined Financial Information” and “Where You Can Find More Information” for additional information.

 

     Historical      Pro forma  
(in thousands, except share and per share data)    Kaleyra      Vivial
Networks
     Pro forma
Combined
 
            Note 3         

Revenue

   $ 147,368      $ 141,274      $ 288,642  

Cost of revenue

     122,932        92,973        223,525  
  

 

 

    

 

 

    

 

 

 

Gross profit

     24,436        48,301        65,117  
  

 

 

    

 

 

    

 

 

 

Operating expenses:

        

Research and development

     9,745        12,943        22,688  

Sales and marketing

     12,866        5,761        26,645  

General and administrative

     28,195        5,608        37,653  
  

 

 

    

 

 

    

 

 

 

Total operating expenses

     50,806        24,312        86,986  
  

 

 

    

 

 

    

 

 

 

Income (loss) from operations

     (26,370      23,989        (21,869

Other income, net

     112        —          112  

Financial income (expense), net

     (1,475      2        (40,478

Foreign currency income (loss)

     (1,353      (229      (1,582
  

 

 

    

 

 

    

 

 

 

Loss before income tax expense (benefit)

     (29,086      23,762        (63,817

Income tax expense (benefit)

     (2,276      —          (6,506
  

 

 

    

 

 

    

 

 

 

Net income (loss)

   $ (26,810    $ 23,762      $ (57,311
  

 

 

    

 

 

    

 

 

 

Net loss per common share basic and diluted:

   $ (1.09       $ (1.65
  

 

 

       

 

 

 

Weighted average common shares used in computing net loss per common share basic and diluted

     24,652,004           34,652,004  
  

 

 

       

 

 

 

 

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     Historical      Pro forma  
(in thousands)    Kaleyra      Vivial
Networks
     Pro forma
Combined
 

Cash and cash equivalents

   $ 32,970      $ 27,839      $ 121,820  

Intangible assets, net

     7,574        —          111,274  

Goodwill

     16,657        —          124,727  

Total assets

     118,502        69,032        463,984  

Debt for forward share purchase agreements

     483        —          483  

Bank and other borrowings, current and noncurrent portion

     42,772        —          42,772  

Lines of credit

     5,273        —          5,273  

Notes payable, current and noncurrent portion

     10,200        —          85,594  

Total liabilities

     125,931        27,150        347,955  

Total stockholders’ equity (deficit)

     (7,429      41,882        116,029  

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this proxy statement/prospectus, including those incorporated by reference from the Annual Report on Form 10-K for our fiscal year ended December 31, 2020, a copy of which accompanies this proxy statement/prospectus, including, without limitation, statements in the section of the Annual Report entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. Actual results and stockholders’ value will be affected by a variety of risks and factors, including, without limitation, international, national and local economic conditions, merger, acquisition and Merger risks, financing risks, geo-political risks, acts of terror or war, and those risk factors described under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for our fiscal year ended December 31, 2020, a copy of which accompanies this proxy statement/prospectus and which is incorporated herein by reference. Many of the risks and factors that will determine these results and stockholders’ value are beyond the Company’s ability to control or predict. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

All such forward-looking statements speak only as of the date of this proxy statement/prospectus. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this Special Note Regarding Forward-Looking Statements.

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

 

   

benefits from the Merger;

 

   

ability to complete an initial Merger, including the Merger;

 

   

future financial performance following the Merger;

 

   

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

 

   

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

 

   

public securities’ potential liquidity and trading; and

 

   

impact from the outcome of any known and unknown litigation.

 

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Forward-looking statements in this proxy statement/prospectus include, but are not limited to, statements about Vivial or the business owned by Vivial known as mGage:

 

   

the financial and business performance of Vivial, including financial projections and business metrics and any underlying assumptions thereunder;

 

   

changes in Vivial’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans;

 

   

Vivial’s product development timeline and expected start of production;

 

   

the implementation, market acceptance and success of Vivial’s business model;

 

   

Vivial’s ability to scale in a cost-effective manner;

 

   

developments and projections relating to Vivial’s competitors and industry;

 

   

the impact of health epidemics, including the COVID-19 pandemic, on Vivial’s business and the actions Vivial may take in response thereto;

 

   

Vivial’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others;

 

   

expectations regarding the time during which we will be an emerging growth company under the JOBS Act;

 

   

Vivial’s future capital requirements and sources and uses of cash;

 

   

Vivial’s ability to obtain funding for its operations;

 

   

Vivial’s business, expansion plans and opportunities; and

 

   

the outcome of any known and unknown litigation and regulatory proceedings.

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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

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

 

   

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

 

   

the outcome of any legal proceedings that may be instituted against the Company, Vivial or others following announcement of the Merger and the transactions contemplated in the Merger Agreement;

 

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

 

   

the ability to maintain the listing of the Parent Common Stock on the NYSE American following the Merger;

 

   

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

 

   

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

 

   

costs related to the proposed Merger;

 

   

changes in applicable laws or regulations;

 

   

the effect of the COVID-19 pandemic on the Company’s business;

 

   

the ability of the Company to execute its business model, including market acceptance of its planned products and services and achieving sufficient production volumes at acceptable quality levels and prices;

 

   

the Company’s ability to raise capital;

 

   

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

 

   

future exchange and interest rates; and

 

   

other risks and uncertainties indicated in this proxy statement/prospectus, including those under “Item 1A. Risk Factors” in our Annual Report on Form 10-K that accompanies this proxy statement/prospectus, and other filings that have been made or will be made with the SEC by the Company.

 

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RISK FACTORS

Pursuant to General Instruction B to Form S-4 regarding registration of additional securities, Item 1A (Risk Factors) of Kaleyra’s Annual Report on Form 10-K for its fiscal year ended December 31, 2020 is incorporated herein by reference. A copy of our most recent Annual Report on Form 10-K accompanies this proxy statement/prospectus.

The Restructuring and the Distribution could result in tax liability for Vivial

The Distribution is expected to be a taxable event for Vivial and, therefore, if any gain is recognized by Vivial, Inc. it could be responsible for any federal, state or local income tax resulting from such gain. Similarly, the steps comprising the Restructuring could result in income or non-income taxes. Pursuant to the Merger Agreement, SpinCo has agreed to indemnify Vivial and the Company for any such taxes, but if any such taxes are due and indemnification payments are not received from SpinCo, the liability for such taxes could negatively impact the Company and Vivial.    

No Indemnification for other tax liabilities of Vivial

The Merger Agreement does not provide for indemnification for any tax liabilities of Vivial other than those associated with the Restructuring or the Distribution. Thus, if Vivial and its subsidiaries have a material amount of unpaid historic tax liabilities, the payment of such liabilities could negatively impact the Company and Vivial.

 

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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Introduction

On February 18, 2021, Kaleyra and Vivial executed the Merger Agreement for the acquisition by Kaleyra of the business owned by Vivial known as mGage.

For the purpose of the preparation of this unaudited pro forma combined financial information the historical financial information of mGage has been derived from the audited historical consolidated financial statements of Vivial Networks LLC (“Vivial Networks”), a subsidiary of Vivial, which, together with its subsidiaries, substantially represents the operations of mGage.

The following unaudited pro forma combined financial information is based on the audited historical consolidated financial statements of Kaleyra as of and for the year ended December 31, 2020, and the audited historical consolidated financial statements of Vivial Networks as of and for the year ended December 31, 2020, as adjusted to give effect to the following transactions (together, the “Transactions”):

 

   

The Merger;

 

   

The issuance of PIPE Shares;

 

   

The issuance of the Convertible Notes;

 

   

The payment by Kaleyra of the Merger Consideration to Vivial equity holders (as further described below); and

 

   

The payment by Kaleyra of certain fees, expenses and other amounts associated with the Merger.

The unaudited pro forma combined balance sheet as of December 31, 2020 (the “pro forma combined balance sheet”) gives effect to the Transactions as if they had occurred on December 31, 2020. The unaudited pro forma combined statement of operations for the year ended December 31, 2020 (the “Pro forma combined statement of operations”) gives effect to the Transactions as if they had occurred on January 1, 2020.

The unaudited pro forma combined financial information does not necessarily reflect what the combined company’s financial condition or results of operations would have been, had the Merger occurred on the dates indicated. It also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial condition and results of operations of the combined company may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

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Kaleyra Inc.

Pro Forma Combined Balance Sheet

As of December 31, 2020

(Unaudited)

 

    Historical     Pro forma  
(in thousands)   Kaleyra     Vivial
Networks
    Closing
Cash
Adjustment
    Financing
Adjustment
    Merger
Adjustment
    Pro forma
Combined
 
                Note 4     Note 5     Note 6        

ASSETS

           

Current assets:

           

Cash and cash equivalents

  $ 32,970     $ 27,839     $ (27,839   $ 287,000     $ (198,150   $ 121,820  

Short-term investments

    4,843       —         —         —         —         4,843  

Trade receivables, net

    43,651       31,224       —         —         —         74,875  

Prepaid expenses

    1,447       1,491       —         —         —         2,938  

Other current assets

    2,134       —         —         —         —         2,134  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

    85,045       60,554       (27,839     287,000       (198,150     206,610  

Property and equipment, net

    6,726       8,478       —         —         —         15,204  

Intangible assets, net

    7,574       —         —         —         103,700       111,274  

Goodwill

    16,657       —         —         —         108,070       124,727  

Deferred tax assets

    703       —         —         —         3,669       4,372  

Other long-term assets

    1,797       —         —         —         —         1,797  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

  $ 118,502     $ 69,032     $ (27,839   $ 287,000     $ 17,289       463,984  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

           

Current liabilities:

           

Accounts payable

  $ 51,768     $ 26,525     $ —       $ —       $ —       $ 78,293  

Debt for forward share purchase agreements

    483       —         —         —         —         483  

Notes payable due to related parties

    7,500       —         —         —         —         7,500  

Lines of credit

    5,273       —         —         —         —         5,273  

Current portion of bank and other borrowings

    10,798       —         —         —         —         10,798  

Deferred revenue

    3,666       578       —         —         —         4,244  

Payroll and payroll related accrued liabilities

    3,292       —         —         —         —         3,292  

Other current liabilities

    5,988       —         —         —         —         5,988  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

    88,768       27,103       —           —         115,871  

Long-term portion of bank and other borrowings

    31,974       —           —         —         31,974  

Long-term portion of notes payable

    2,700       —         —         75,394       —         78,094  

Derivative liability

    —         —         —         113,206       —         113,206  

Deferred tax liabilities

            6,274       6,274  

Long-term portion of employee benefit obligation

    1,886       —         —         —         —         1,886  

Other long-term liabilities

    603       47         —         —         650  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

    125,931       27,150       —         188,600       6,274       347,955  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Stockholders’ equity (deficit):

           

Common stock

    3       —         —         8       2       13  

Additional paid-in capital

    93,628       65,497       (27,839     98,392       (9,452     220,226  

Treasury stock, at cost

    (30,431     —         —         —         —         (30,431

Accumulated other comprehensive income (loss)

    (2,826     (225     —         —         225       (2,826

Accumulated deficit

    (67,803     (23,390     —         —         20,240       (70,953
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity (deficit)

    (7,429     41,882       (27,839     98,400       11,015       116,029  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity (Deficit)

  $ 118,502     $ 69,032     $ (27,839   $ 287,000     $ 17,289     $ 463,984  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to unaudited pro forma combined financial information.

 

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Kaleyra Inc.

Pro Forma Combined Statement of Operations

For the year Ended December 31, 2020

(Unaudited)

 

     Historical     Pro forma  
(in thousands, except share and per share data)    Kaleyra     Vivial
Networks
Reclassified
    Financing
Adjustment
    Merger
Adjustment
    Pro forma
Combined
 
           Note 3     Note 5     Note 6        

Revenue

   $ 147,368     $ 141,274     $ —       $ —       $ 288,642  

Cost of revenue

     122,932       92,973       —         7,620       223,525  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     24,436       48,301       —         (7,620     65,117  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Research and development

     9,745       12,943       —         —         22,688  

Sales and marketing

     12,866       5,761       —         8,018       26,645  

General and administrative

     28,195       5,608       —         3,850       37,653  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     50,806       24,312       —         11,868       86,986  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (26,370     23,989       —         (19,488     (21,869

Other income, net

     112       —         —         —         112  

Financial income (expense), net

     (1,475     2       (39,005     —         (40,478

Foreign currency income (loss)

     (1,353     (229     —         —         (1,582
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit)

     (29,086     23,762       (39,005     (19,488     (63,817

Income tax expense (benefit)

     (2,276     —         —         (4,230     (6,506
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (26,810   $ 23,762     $ (39,005   $ (15,258   $ (57,311
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share basic and diluted:

   $ (1.09         $ (1.65
  

 

 

         

 

 

 

Weighted average common shares used in computing net loss per common share basic and diluted

     24,652,004             34,652,004  
  

 

 

         

 

 

 

See accompanying notes to unaudited pro forma combined financial information.

 

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NOTES TO THE PRO FORMA COMBINED FINANCIAL INFORMATION

(Unaudited)

 

1.

Basis of Presentation

The unaudited pro forma combined financial information has been derived from the audited historical consolidated financial statements of Kalerya as of and for the year ended December 31, 2020 and the audited historical consolidated financial statements of Vivial Networks as of and for the year ended December 31, 2020. Certain Vivial Networks historical amounts have been reclassified to conform to the Kaleyra’s financial statement presentation.

The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X. In addition, the acquisition method of accounting for business combinations was used in accordance with Accounting Standards Codification 805, Business Combinations, with Kaleyra treated as the acquirer. Under the acquisition method of accounting, the fair value of the purchase consideration, will be determined as of the closing date of the Merger when Kaleyra obtains control of Vivial Networks. The purchase price will be allocated to the underlying assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill. The preliminary pro forma purchase price allocation was based on the fair value of the estimated Merger Consideration (as described below) and preliminary estimates of the fair values of the acquired assets and liabilities assumed. In arriving at the estimated fair values, Kaleyra has considered the estimates of independent valuation professionals, which were based on preliminary and limited reviews of the assets related to mGage. Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma financial combined information, and are subject to revision based on a final determination of fair values as of the closing of the Merger. Differences between these preliminary estimates and the final Merger accounting may have a material impact on the accompanying pro forma combined financial information and the post-Merger company’s future results of operations and financial position.

Kaleyra and Vivial have not had any historical relationship prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

2.

The Merger

Estimated Merger Consideration

As per the Merger Agreement, the Merger Consideration shall consist of cash consideration and Parent Common Stock. In particular, the Common Stock Consideration shall be paid with the issuance of a total of 1,600,000 shares of Parent Common Stock. The remainder of the Merger Consideration shall be paid in cash (Cash Consideration).

The estimated Merger Consideration may be adjusted for customary adjustments in respect of the cash, indebtedness, and net working capital as of the closing of the Merger, as well as an adjustment on the basis of the stock price of Parent Common Stock as of the closing date of the Merger. These adjustments, if any, will affect the estimated Merger Consideration.

The following table summarizes the components of the estimated Merger Consideration:

 

(in thousands, except share data)

   Shares      Kalerya
share price as of
March 15, 2021
        

Estimated Cash Consideration (1)

         $ 195,000  

Estimated fair value of Parent Common Stock to be issued to Vivial equity holders (2)

     1,600,000        17.63      $ 28,208  
        

 

 

 

Estimated Merger Consideration

         $ 223,208  
        

 

 

 

 

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Table of Contents
(1)

Amount subject to adjustment upon finalization of the net working capital adjustment.

(2)

1,600,000 shares of Kaleyra newly issued common stock will be issued as pursuant to the Merger Agreement to the Vivial equity holders. For purposes of the unaudited pro forma combined balance sheet, the estimated value of Parent Common Stock for the Merger Consideration is based upon the $17.63 per share closing Parent Common Stock price as of March 15, 2021. The final Merger Consideration at closing may change materially from the amount shown. A 15% change in the closing price per share of Parent Common Stock would increase or decrease the estimated Merger Consideration by approximately $4,231,000.

Preliminary Purchase Price Allocation

The table below represents the preliminary purchase price allocation as if the Merger had been completed on December 31, 2020:

 

(in thousands)

  As of December 31,
2020
 

Property and equipment

  $ 8,478  

Intangible assets (1)

    103,700  

Deferred tax assets on NOLs

    25,446  

Trade receivables

    31,224  

Prepaid expenses

    1,491  

Deferred tax liabilities on Intangible assets

    (28,051

Accounts payable and other liabilities (current and non-current)

    (26,572

Deferred revenue

    (578
 

 

 

 

Net identifiable assets acquired

    115,138  

Goodwill

    108,070  
 

 

 

 

Net assets acquires

  $ 223,208  
 

 

 

 

 

(1)

Refer to Note 6 a. (ii) for information on the intangible assets acquired.

The preliminary purchase price allocation has been used to prepare the Merger pro forma adjustment (See Note 6). The purchase price allocation will be finalized following the effective date of the Merger when the valuation analysis is complete. The final allocation could differ materially from the preliminary allocation used in the Merger pro forma adjustment.

 

3.

Accounting Policies and Reclassifications

For the purpose of the preparation of this unaudited pro forma combined financial information, Kaleyra performed a preliminary assessment of Vivial Networks’ financial information to identify differences in accounting policies in financial statements presentation as compared to those of Kaleyra. At the time of preparing this unaudited pro forma combined financial information, Kaleyra has not identified all the proper reclassifications necessary to conform Vivial Networks’ accounting policies to Kaleyra’s accounting policies. Following the Merger, the combined company will finalize the review of accounting policies, which could be materially different from the amounts set forth in the unaudited pro forma combined financial information presented herein.

No reclassifications were made to present Vivial Networks’ balance sheet as of December 31, 2020 to conform with that of Kaleyra.

 

 

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Refer to the table below for a summary of reclassifications made to present Vivial Networks’ statement of operations for the year ended December 31, 2020 to conform with that of Kaleyra:

 


(in thousands)
Kaleyra Presentation
  Vivial Networks Presentation   Historical
Vivial
Networks
    Accounting
policy and
reclassification
adjustments
    Note     Historical
Vivial
Networks
reclassified
 

Revenue

  Revenue   $ 141,274     $ —         $ 141,274  
  Operating expenses:       -         —    

Cost of revenue

  Cost of revenue (exclusive of certain depreciation and amortization expenses included below)     89,906       3,067       (1     92,973  
         

 

 

 

Gross profit

            48,301  

Operating expenses:

        —        

Research and development

        12,943       (2     12,943  

Sales and marketing

        5,761       (3     5,761  

General and administrative

  Selling, general and administrative expense     24,112       (18,504     (4     5,608  
  Depreciation and amortization     3,496       (3,496     (5     —    
   

 

 

   

 

 

     

 

 

 

Total operating expenses

  Total operating expenses     117,514       (229       24,312  
   

 

 

   

 

 

     

 

 

 

Loss from operations

  Operating income     23,760       229         23,989  
  Other(income) expense:        

Other income, net

  Other(income)           —    

Financial income (expense), net

  Interest income     2           2  

Foreign currency income (loss)

  Interest expense       (229     (6     (229
   

 

 

   

 

 

     
  Total other expense, net     2       (229    
   

 

 

   

 

 

     

 

 

 

Loss before income tax expense (benefit)

  Income (Loss) before income taxes     23.762       —           23,762  
   

 

 

       

Income tax expense (benefit)

  Income tax (benefit)     —             —    
   

 

 

   

 

 

     

 

 

 

Net income

  Net income   $ 23,762     $ —         $ 23,762  
   

 

 

   

 

 

     

 

 

 

 

(1)

Represents a reclassification of Depreciation and amortization to Cost of revenue.

(2)

Represents a reclassification of Selling, general and administrative expense to Research and development.

(3)

Represents a reclassification of Selling, general and administrative expense to Sales and marketing.

(4)

Includes a reclassification of Depreciation and amortization to General and administrative.

(5)

Represents a reclassification of Depreciation and amortization to Cost of revenue and General and administrative.

(6)

Represents a reclassification of Selling, general and administrative expense to Foreign currency income (loss).

 

4.

Closing cash pro forma adjustment

As per the Merger Agreement, closing cash shall not exceed $7,000,000 and the final Cash Consideration will be adjusted for any residual cash amount. For the purpose of the preparation of the unaudited pro forma combined financial information, Kaleyra has assumed closing cash equal to zero and the estimated Cash Consideration equal to $195,000,000. Kaleyra has assumed the reduction of cash will be accounted for as an equity distribution. Vivial Networks final closing cash may differ from that presented in the pro forma combined financial information; the estimated Cash Consideration will be adjusted accordingly.

 

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Table of Contents
5.

Financing pro forma adjustment

The following summarizes the pro forma adjustments related to the Financing. Proceeds from the Financing include:

 

  (i)

Proceeds from the issue and sale by Kaleyra (to be completed immediately prior to the closing of the Merger), of an aggregate of 8,400,000 shares of Parent Common Stock (the “PIPE Shares”) to certain institutional investors (the “PIPE Investors”) at $12.50 per share, pursuant to the subscription agreements dated February 18, 2021 (the “PIPE Subscription Agreements”); and

 

  (ii)

Proceeds from the issue in a private placement (to be completed immediately prior to the closing of the Merger), of $200,000,000 aggregate principal amount of unsecured convertible notes (the “Notes”) to certain institutional investors. The Notes will bear interest at a rate of 6.125% per annum, payable semi-annually, and will be convertible into shares of Parent Common Stock at a conversion price of $16.875 per share in accordance with the terms of the indenture governing the Notes, and will mature five years after their issuance.

a. Financing pro forma adjustments to the Balance Sheet

 

  i.

Pro forma adjustment to Cash and cash equivalents consists of the following:

 

(in thousands)

  As of December 31,
2020
 

Proceeds from Parent Common Stock issued to the PIPE Investors

  $ 105,000  

Common stock issuance costs

    (6,600

Proceeds from issuance of the Notes

    200,000  

Notes issuance costs

    (11,400
 

 

 

 

Net pro-forma adjustment to Cash and cash equivalents

  $ 287,000  
 

 

 

 

 

  ii.

Pro forma adjustment to Long-term portion of notes payable consists of the following:

 

(in thousands)

   As of December 31,
2020
 

Proceeds from issuance of the Notes

   $ 200,000  

Notes issuance costs (1)

     (11,400

Derivative liability value

     (113,206
  

 

 

 

Net pro forma adjustment to Long- term portion of notes payable

   $ 75,394  
  

 

 

 

 

(1)

Amortized over the contractual term of the Notes.

 

  iii.

Pro forma adjustment to Derivative liability consists of $113,206,000 and reflects the bifurcation of: the conversion feature, the mandatory and voluntary redemption provisions and the interest make-whole provision.

 

  iv.

Pro forma adjustment to Total stockholders’ equity (deficit) consists of the following:

 

(in thousands)

  As of December 31, 2020  
    Common Stock     Additional paid-in
capital
    Total stockholders’
equity
 

Proceeds from Parent Common Stock issued to the PIPE Investors

  $ 8     $ 104,992     $ 105,000  

Common stock issuance costs

    —         (6,600     (6,600
 

 

 

   

 

 

   

 

 

 
  $ 8     $ 98,392     $ 98,400  
 

 

 

   

 

 

   

 

 

 

 

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b. Financing pro forma adjustments to the Statement of Operations

 

  i.

Pro forma adjustment to Financial expense, net consists of the following:

 

(in thousands)

   Year ended
December 31,
2020
 

Contractual interest expense on the Notes

   $ 12,250  

Amortization of the Notes issuance costs

     2,906  

Accretion expenses of the Notes discount

     23,849  
  

 

 

 

Financial expense, net

   $ 39,005  
  

 

 

 

No pro forma adjustment was recognized for the change in fair value of derivative related to the Notes, as it cannot be reasonably estimated.

No pro forma tax benefit has been reflected in connection with the pro forma adjustment on Financial expense, net as Kaleyra is in a net loss tax position and a valuation allowance would be established for the amount of any deferred tax assets.

 

6.

Merger pro forma adjustment

a. Merger pro forma adjustment to the Balance Sheet

 

  i.

Pro forma adjustment to Cash and cash equivalents consists of the following:

 

(in thousands)

  As of
December 31,

2020
 

Estimated Cash Consideration (1)

  $ 195,000  

Estimated Merger expenses

    3,150  
 

 

 

 

Net pro forma adjustment to Cash and cash equivalents

  $ 198,150  
 

 

 

 

 

(1)

Amount subject to adjustment upon finalization of the net working capital adjustment.

 

  ii.

Pro forma adjustment to Intangible assets, net to recognize the estimated fair value of intangible assets acquired consisting of customer relationships, developed technology and trade names that would have been recorded if the Merger occurred on December 31, 2020 consists of the following:

 

(in thousands)

   As of
December 31,
2020
 

Preliminary fair value of identifiable intangible assets:

  

Customer relationships

   $ 57,400  

Developed technology

     38,100  

Trade names

     8,200  
  

 

 

 

Total adjustment to Intangible assets, net

   $ 103,700  
  

 

 

 

The fair value estimates for identifiable intangible assets are preliminary and are based upon assumptions that market participants would use in pricing an asset. The calculated value is preliminary and subject to change could vary materially from the final purchase allocation.

 

  iii.

Pro forma adjustment of $108,070,000 to Goodwill to recognize the resulting goodwill that would have been recorded if the Merger had been completed on December 31, 2020.

 

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Table of Contents
  iv.

Pro forma adjustments of $28,051,000 to record deferred tax liabilities recognized on Intangible assets, net acquired in the Merger and of $25,466,000 to record deferred tax assets on Vivial federal net operating loss carryforwards (“NOLs”). Deferred tax assets and liabilities have been presented on a net basis, where applicable. The combined company’s ability to use NOLs to offset future taxable income for U.S. federal and state income tax purposes is subject to limitations. In general, under Section 382 of the U.S. Internal Revenue 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. As of the date hereof, Kaleyra has not made a final determination of the ability to utilize all tax attributes, which determination will be subject to a formal Section 382 analysis upon consummation of the Merger.

 

  v.

Pro forma adjustment to Total stockholders’ equity consists of the following:

 

     As of December 31, 2020  

(in thousands)

   Common
Stock
     Additional
paid-in
capital
    Accumu-
lated other
comprehen-
sive
income
(loss)
     Accumulated
deficit
    Total
stockholders’
equity
 

Shares of Parent Common Stock to be issued to Vivial equity holders

   $ 2      $ 28,206     $ —        $ —       $ 28,208  

Elimination of Vivial Networks’ historical equity, as adjusted to reflect the closing cash distribution

        (37,658     225        23,390       (14,043

Estimated Merger expenses (1)

     —          —         —          (3,150     (3,150
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
   $ 2      $ (9,452   $ 225      $ 20,240     $ 11,015  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

Represents estimated transactions expenses and fees incurred in connection with the Merger. These expenses will not affect the combined statement of operations beyond twelve months after the Merger.

b. Merger pro forma adjustment to the statement of operations

 

  i.

Pro forma adjustment for amortization of Intangible assets, net is based on the estimated fair values of intangible assets acquired amortized over the respective estimated useful lives. The table below presents the pro forma adjustments for amortization for the year ended December 31, 2020:

 

(in thousands, except estimated useful life in years)

   Estimated
useful life
(in years)
     Estimated
Fair
Value
     Year ended
December 31,
2020
 

Customer relationships

     9      $ 57,400      $ 6,378  

Developed technology

     5        38,100        7,620  

Trade names

     5        8,200        1,640  
        

 

 

 

Pro forma adjustment for Amortization expense

         $ 15,638  
        

 

 

 

Amortization expense related to customer relationships and trade names has adjusted Sales and marketing; amortization expense related to developed technology has adjusted Cost of revenue.

 

  ii.

Pro forma adjustment to record estimated transaction costs incurred in connection with the Merger for $3,150,000 and certain incremental insurance costs associated with the Merger for $700,000. The estimated Merger transaction costs will not affect the combined statements of operations beyond twelve months after the Merger.

 

  iii.

Pro forma adjustment to record the income tax impacts of the pro forma adjustments for amortization using a statutory tax rate of 27.05%. This rate does not reflect the combined company’s effective tax

 

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  rate, which may differ from the rates assumed for purposes of preparing these statements. The applicable statutory tax rates used for these unaudited pro forma combined financial statements will likely vary from the actual effective rates in periods as of and subsequent to the completion of the Merger.

 

7.

Pro forma loss per common share

Pro forma loss per common share for the year ended December 31, 2020 has been calculated based on the estimated weighted average number of common shares outstanding on a pro forma basis, as described below. The pro forma weighted average number of common shares outstanding has been calculated as if the shares issued in the Transactions had been issued and outstanding on January 1, 2020. The following table sets forth the computation of pro forma weighted average common and diluted shares outstanding for the year ended December 31, 2020:

 

     Year ended
December 31,
2020
 

Historical Kaleyra weighted average shares

     24,652,004  

Shares of Parent Common Stock issued to Vivial equity holders

     1,600,000  

Shares of Parent Common Stock issued to PIPE Investors

     8,400,000  
  

 

 

 

Pro forma weighted average shares used in computing net loss per share – basic and diluted

     34,652,004  
  

 

 

 

Kaleyra’s historical consolidated statement of operations for the year ended December 31, 2020 was in a net loss position, thus Kaleyra’s stock awards and outstanding warrants were excluded from the computation of diluted loss per share because their effect would have been anti-dilutive. There is no adjustment for the dilutive impact of stock awards and outstanding warrants in the pro forma combined financial information due to the combined results being in a net loss position.

***

 

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COMPARATIVE SHARE INFORMATION

The following tables set forth:

 

   

historical per share information of the Company for the year ended December 31, 2020; and

 

   

unaudited pro forma per share information of the post-combination company for the year ended December 31, 2020.

This information is based on, and should be read together with, the selected historical financial information, the unaudited pro forma combined financial information and the historical financial information of the Company and Vivial Networks, and the accompanying notes to such financial statements, that are included in this proxy statement/prospectus. The unaudited pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of actual or future financial position or results of operations that would have been realized if the Merger had been completed as of the dates indicated or will be realized upon the completion of the Merger. Uncertainties that could impact the Company’s or Vivial’s financial condition include risks that affect its operations and outlook such as increases in costs, disruption of supply or shortage of raw materials, including as a result of the COVID-19 pandemic. For more information on the risks that could impact the Company’s or Vivial’s financial condition and results of operations, please see the section entitled “Risk Factors.”

You are also urged to read the section entitled “Unaudited Pro Forma Combined Financial Information.

 

    Historical      Combined Pro Forma  
    Kaleyra    

Vivial

Networks

        

Selected Unaudited Pro Forma Combined Statement of Operations – As of December 31, 2020 and for the year ended December 31, 2020

      

Net income (loss)

  $ (26,810   $ 23,762      $ (57,311

Net loss per share – basic and diluted

  $ (1.09     NA      $ (1.65

Cash dividends per share (1)

  $ —       $ —        $ —    

Weighted average shares outstanding – basic and diluted

    24,652,004          34,652,004  

 

(1)

No dividends have been paid by the Company or Vivial.

 

Weighted average common shares outstanding, basic and diluted:

  

Kaleyra weighted average shares outstanding

     24,652,004  

Sale of additional Kaleyra shares to the PIPE Investors

     8,400,000  

Sale of additional Kaleyra shares in conjunction with the Merger

     1,600,000  
  

 

 

 

Weighted average common shares outstanding, basic and diluted

     34,652,004  
  

 

 

 

Percent of shares owned by former Vivial equity holders

     3.9

 

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THE MERGER

Background of the Merger

The terms of the Merger are the result of negotiations among the representatives of the Company and Vivial. The following is a brief description of the background of these negotiations and the resulting Merger.

On October 8, 2020, representatives of Guggenheim Securities, LLC (“Guggenheim Securities”), the financial advisor to Vivial, met with the Company’s Executive Chairman of the Board, Dr. Avi Katz, and another member of the Board, Mr. Neil Miotto, as well as counsel to the Company, Mr. Jeffrey Selman of DLA Piper LLP (US) (“DLA Piper”). Although the purpose of the meeting was broader than discussing Vivial, and Dr. Katz and Mr. Miotto were attending the meeting as members of GigFounders, LLC (“GigFounders”), which was at the time an investor in the Company, the representatives of Guggenheim Securities informed Dr. Katz and Mr. Miotto that Vivial had separately engaged an advisory team from Guggenheim Securities to assist in the sale of the mGage business. Immediately following the meeting, Guggenheim Securities forwarded to Dr. Katz a non-disclosure agreement for GigFounders to execute and learn more about the opportunity.

On October 9, 2020, Dr. Katz executed the non-disclosure agreement as the sole managing member of GigFounders. The non-disclosure agreement did not contain any standstill provisions.

On October 11, 2020, a representative of the investment banking team of Guggenheim Securities provided to GigFounders for evaluation a presentation of mGage and the financial model.

On October 12, 2020, Dr. Katz e-mailed representatives of the investment banking team at Guggenheim Securities and raised the possibility of Vivial selling the mGage business to the Company. Dr. Katz and representatives of Guggenheim Securities agreed to arrange a call for later that week to discuss this possibility. Dr. Katz also informed the Company’s Chief Executive Officer, Mr. Dario Calogero, and Chief Financial Officer, Mr. Giacomo Dall’Aglio, that he had spoken with the investment banking team at Guggenheim Securities about the possibility of the Company acquiring the mGage business and that he was continuing the discussions.

Following a telephone conversation with Dr. Katz, on October 17, a representative of the investment banking team of Guggenheim Securities provided a non-disclosure agreement for the Company to sign that was identical to the non-disclosure agreement that GigFounders had entered into. Mr. Dall’Aglio executed the non-disclosure agreement on behalf of the Company and returned it to Guggenheim Securities on October 18, 2020.

Over the next nine days, representatives of the Company conducted initial business diligence on the mGage business, including an introductory telephone conversation between Dr. Katz and Vivial’s Chief Executive Officer, Mr. James Continenza, that occurred on October 26, 2020, and representatives of the Company participating in a meeting where the mGage business was presented to the Company on October 27, 2020. Following that latter meeting, a representative of the investment banking team at Guggenheim Securities provided the Company with a process letter for the submission of an indication of interest in the acquisition of the mGage business that was to be submitted to Guggenheim Securities by November 2, 2020.

On November 1, 2020, the Company delivered to representatives of the investment banking team at Guggenheim Securities a non-binding written indication of interest of the Company to acquire the mGage business from Vivial. The indication of interest contemplated, subject to the completion of the Company’s due diligence of mGage, an enterprise valuation of $225 million, with cash and/or Parent Common Stock valued at $190 million to be paid at the closing of the transaction and $35 million to be deferred for one year pursuant to a seller’s note bearing simple interest at the rate of LIBOR plus a margin of one percent (1%) per annum.

On November 2, 2020, a representative of the investment banking team of Guggenheim Securities e-mailed Dr. Katz to state that Vivial was considering the submitted indication of interest and that the submission was competitive with other offers that Vivial had received.

 

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The following day, on November 3, 2020, a representative of the investment banking team of Guggenheim Securities provided the Company with a final offer instruction letter for submission of a final bid on December 2, 2020, and also informed the Company that it would be conducting management presentations and opening up a virtual data room, and asked the Company to submit its full due diligence request list.

On November 4, 2020, Mr. Dall’Aglio asked the investment banking team of Guggenheim Securities if management presentations could be conducted on either November 11 or 12, 2020, and the parties agreed to hold the presentation meeting on November 11, 2020.

On November 10, 2020, a representative of Guggenheim Securities provided to representatives of the Company a copy of the written presentation materials that would be provided during the management presentation the following day.

On November 11, 2020, representatives of Vivial, the Company and the investment banking team of Guggenheim Securities attended a meeting where the representatives of Vivial presented the mGage business to the representatives of the Company and answered questions about the business.

Following this meeting and the presentation of the mGage business, the Company began discussions with (a) another team at Guggenheim Securities about the Company engaging Guggenheim Securities to raise debt for the Company to facilitate the cash component of the proposed purchase price, and (b) Oppenheimer & Co. Inc. (“Oppenheimer”) about serving as financial advisor to the Company and also acting to raise capital through the offering and sale of equity securities, including convertible instruments.

On November 23, 2020, the Company executed an engagement letter with Guggenheim Securities to engage it to act as the Company’s sole placement agent or sole arranger with respect to any private placement of debt securities and/or senior secured credit facilities.

On that same day, the Company executed an engagement letter with Oppenheimer to act as the Company’s financial advisor in connection with the possible acquisition of the mGage business and to also serve as co-placement agent with Northland Securities, Inc. (“Northland”) if the Company were to seek to raise additional capital to fund the acquisition through a private-investment-in-public-equity (“PIPE”) private placement of equity or equity-linked securities.

On November 24, 2020, the Company separately executed an engagement with Northland to serve as co-placement agent with Oppenheimer.

Between the November 11, 2020 management presentation of Vivial to the Company and continuing through December 1, 2020, the Company continued to conduct initial business diligence of the mGage business, and the Company also requested on November 23, 2020 that DLA Piper commence legal diligence, which began on November 24, 2020. The virtual data room to which the Company and DLA Piper were provided access included a draft Merger Agreement, TSA and SDA which the November 3, 2020 final offer instruction letter directed be marked up when submitting a bid for the mGage acquisition by December 2, 2020. DLA Piper conducted a review of those three agreements, but the Company opted to not mark those documents up as part of the Company’s response to the final offer instruction letter.

Between November 23, 2030, when the Company engaged it, and December 1, 2020, the financing team of Guggenheim Securities began initial outreach to potential lenders to provide debt capital to the Company in support of a possible acquisition of the mGage business.

On December 1, 2020, the Company provided Guggenheim Securities with (a) a non-binding letter of intent to acquire Vivial Networks and the mGage business, (b) a comment memorandum prepared by DLA Piper to the draft Merger Agreement that was in the virtual data room, (c) a support letter for the proposed acquisition from

 

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one of the Company’s existing lenders, and (d) a letter from one of the potential lenders to the Company that the financing team of Guggenheim Securities had reached out to, that it was highly interested in providing senior secured term loan financing to support the proposed acquisition. The non-binding letter of intent stated that the Company had set the cash-free/debt-free enterprise value for Vivial Networks and the mGage business at $225 million, and that the Company would pay all of the consideration payable at closing in cash. The non-binding letter of intent also stated that the Company intended to fund this cash payment through a combination of debt financing, the sale of equity securities in a PIPE and a $35 million seller’s note that would be due on the first anniversary of the closing of the acquisition and that would bear simple interest at the rate of LIBOR plus a margin of one percent (1%) per annum, provided that post-closing and through these periods, it has not been determined that there were any breaches or inaccuracies in any of the representations and warranties provided by Vivial Networks or its sellers.

On December 2, 2020, representatives of the investment banking team of Guggenheim Securities informed the Company that Vivial had decided to move forward with the Company to negotiate the acquisition of Vivial Networks and the mGage business along the lines set out in the non-binding letter of intent, and also introduced DLA Piper to Vivial’s counsel at Akin Gump Strauss Hauer & Feld LLP (“Akin Gump”).

During the month of December 2020, the Company and its advisors, including DLA Piper, continued to conduct business, legal and tax diligence on Vivial Networks and the mGage business. During this time, representatives of DLA Piper and Akin Gump also began discussing the Merger Agreement and the proposed structure of both the acquisition and the spin out of the other parts of Vivial that would not be acquired by the Company.

On December 16, 2020, representatives of DLA Piper provided to Akin Gump an initial set of revisions to the draft Merger Agreement.

On December 21, 2020, representatives of the investment banking team of Guggenheim Securities informed the Company that Vivial had determined that it needed to revise down its previously forecast projected gross profit and adjusted EBITDA for the periods of 2021 through 2025.

On December 22, 2020, a representative of the investment banking team of Guggenheim Securities provided to the Company a revised financial model that reflected these revisions to the previously forecast projected gross profit and adjusted EBITDA for the periods of 2021 through 2025, showing a compound annual growth rate of revenues of 19% during this period, but the compound annual growth rates for gross profit was reduced from a prior projection of 16.1% to 12.3%, and for adjusted EBITDA, a reduction from 22.1% to 16.5%. Following the delivery of this information, the Company informed Guggenheim Securities that it would reconsider the terms of its proposed purchase price for the acquisition of Vivial Networks and the mGage business.

On December 23, 2020, a representative of Akin Gump provided DLA Piper with a material issues list to the draft of the Merger Agreement provided on December 16, 2020.

On December 24, 2020, the Company told the investment banking team of Guggenheim Securities that it believed that in light of the revised financial model, the purchase price should be reduced to $190 million and the amount of cash paid at closing should also be reduced to $160 million, and requested to be able to speak directly with representatives of an affiliate of the majority stockholder of Vivial (“Blackstone”) regarding the acquisition and purchase price.

On December 28, 2020, a representative of the investment banking team of Guggenheim Securities informed the Company that Vivial proposed a revised purchase price of $220 million with $30 million to be paid by way of a one year promissory note after the closing and the remaining $190 million to be paid in cash at the closing of the acquisition. The proposal also provided that the existing Vivial stockholders would be willing to backstop the transaction by participating in a convertible note offering by the Company through the purchase by such parties in up to $20 million of convertible notes.

 

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That same day, Dr. Katz communicated to the investment banking team of Guggenheim Securities that the Company proposed a total enterprise value for Vivial Networks of $210 million and to pay $160 million in cash at the closing of the acquisition and to issue an additional $50 million of senior convertible preferred stock to the existing Vivial stockholders on a term sheet to be prepared by Blackstone for a larger offering of senior convertible preferred stock that would be part of the financing of the $160 million cash payment.

On December 30, 2020, a representative of the investment banking team of Guggenheim Securities provided to the Company a proposed term sheet prepared by Blackstone that provided illustrative terms for a senior convertible preferred stock offering of $100 million that would include $55 million to be purchased by existing Vivial stockholders, provided that the Company agree to a total enterprise value of Vivial Networks of $215 million, with a cash payment for the acquisition of Vivial Networks at the closing of $160 million. That night, the Company provided Guggenheim Securities and Blackstone with comments to the proposed term sheet.

On December 31, 2020, a representative of Guggenheim Securities provided to the Company a revised proposed term sheet prepared by the investment banking team of Blackstone in response to the Company’s comments. The revised proposed term sheet reduced the amount of the senior convertible preferred stock that would be purchased by existing Vivial stockholders to $35 million, and provided that there would also be a separate PIPE for $100 million of common stock of which the existing Vivial stockholders would purchase $20 million of Kaleyra Common Stock.

That evening, Dr. Katz, Mr. Selman, and representatives of Blackstone and the investment banking team of Guggenheim Securities met to discuss the revised proposed term sheet. During this meeting, it was agreed that the enterprise value for Vivial Networks would be $215 million, that the Company would pay $160 million in cash at the closing of the acquisition, and that the existing Vivial stockholders would purchase $35 million in a convertible preferred stock offering of $100 million, and an additional $20 million in Parent Common Stock in a PIPE offering of $100 million.

On January 3 and 4, 2021, representatives of the Company, Blackstone, the investment banking team of Guggenheim Securities and Oppenheimer began planning for the Company’s proposed Financing. Between those dates and January 12, 2021, the parties prepared an investor presentation to be used in support of the anticipated securities offerings.

Also during January 2021, the Company and DLA Piper continued to engage in business, tax and legal diligence of Vivial Networks and the mGage business.

On January 16, 2021, a representative of Akin Gump provided a revised draft Merger Agreement to DLA Piper. Among other things, this revised draft of the Merger Agreement reflected the revised proposed payment structure for the acquisition of Vivial Networks and the mGage business.

During the remainder of January 2021, the Company, with the assistance of Oppenheimer and Northland, began to contact potential purchasers of convertible preferred stock and a common stock PIPE. During these meetings, it was communicated by potential investors that there would be a preference for a convertible note security rather than convertible preferred stock. In addition, the financing team of Guggenheim Securities continued to engage with potential lenders that might finance the cash acquisition price if the Company’s equity offerings were unsuccessful.

On January 28, 2021, representatives of the Company, Oppenheimer, the investment banking team of Guggenheim Securities and Blackstone met to discuss the status of the Company’s financing efforts. At that meeting, it was decided that the Company would pursue a convertible note security rather than the issuance of convertible preferred stock. As a result, the Company directed the financing team of Guggenheim Securities to no longer pursue potential lenders in connection with debt financing in support of the potential acquisition of Vivial Networks and the mGage business.

 

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On January 29, 2021, Dr. Katz discussed with a representative of Blackstone that the convertible note security offering would be for $180 million, and that the Company’s common stock PIPE offering would be for $30 million. Following this discussion, between the end of January and February 17, 2021, meetings with potential purchasers of each of these securities occurred.

On January 31, 2021, a representative of DLA Piper provided a revised draft Merger Agreement to Akin Gump that, among other things, further reflected the change in securities that would be part of the financing of the acquisition.

On February 8, 2021, in advance of a call to discuss the draft Merger Agreement, a representative of Akin Gump sent DLA Piper a material issues list for the Merger Agreement, which representatives of the two law firms then discussed. One of the issues that was raised was the amount of securities that would be part of the merger consideration with the change in securities from convertible preferred stock to convertible notes.

On February 12, 2021, Dr. Katz spoke with a representative of Blackstone, and they agreed that the Company would pay $195 million in cash to the existing stockholders of Vivial at the closing, and that those stockholders would also receive $20 million in newly issued shares of the Company’s common stock at the same purchase price as the Company’s proposed common stock PIPE offering.

Also on February 12, 2021, drafts of subscription agreements for both the convertible note security and the common stock PIPE were distributed by DLA Piper for review by potential investors, including Blackstone and the other existing stockholders of Vivial.

On February 13, 2021, Vivial’s principal outside lawyer at Akin Gump announced he would be joining the law firm of Weil, and Vivial indicated it would continue its engagement on the potential transaction with Weil.

From February 15, 2021 through February 18, 2021, various potential purchasers of the Company’s convertible note security and common stock PIPE provided comments to the forms of subscription agreements, which were discussed by representatives of the Company, Blackstone, Oppenheimer, the investment banking team of Guggenheim Securities, DLA Piper, Akin Gump and Weil.

During this same period, representatives of DLA Piper, Akin Gump and Weil worked to complete the negotiations and drafting of the Merger Agreement. On February 15, 2021, a representative of DLA Piper provided to Akin Gump and Weil a revised draft Merger Agreement that responded to the material issues list provided by Akin Gump February 8, 2021.

On this same date, the Company’s Board met and received a status update regarding the negotiations of both the Merger Agreement and the subscription agreement. The Board also discussed the enterprise valuation for Vivial Networks, and the information that it felt that it needed to consider in assessing the fairness of this valuation to the Company and its stockholders.

On February 17, 2021, a representative of Akin Gump provided to DLA Piper a revised draft of the Merger Agreement, and later that day, a representative of DLA Piper returned to Akin Gump and Weil a further revision to the draft Merger Agreement, with additional incremental revisions provided by DLA Piper the following day on February 18, 2021. During the course of that day, the respective law firms continued to exchange drafts of the Merger Agreement until that evening when the Merger Agreement was finalized.

Also during the afternoon of February 18, 2021 after the closing of the trading day on the NYSE American, the Company’s Board convened a remote special meeting by videoconference. Representatives of DLA Piper attended the meeting to review with the Board the terms of the Merger Agreement, PIPE Investment and Convertible Note Investment. The Board decided that the Company should sell shares of Common Stock as part of the PIPE Investment at the price of $12.50. Dr. Katz informed the Board that investor demand for the

 

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Company’s common stock supported increasing the size of the PIPE Investment to $105 million, in addition to the $20 million of Common Stock that would be issued to existing stockholders of Vivial as merger consideration under the terms of the Merger Agreement, and the Board approved this issuance as fair to the Company and its stockholders. The Board also decided to increase the size of the Convertible Note Investment to

$200 million, and approved a conversion price of $16.875, and an annual interest rate of 6.125%. Finally, the Board provided DLA Piper with direction on the remaining open issues on the Merger Agreement, and subject to those issues being resolved in accordance with the direction of the Board, and after considering and discussing information available to it for the purpose of assessing the enterprise valuation of Vivial Networks of $215 million, approved the Merger Agreement and the acquisition of Vivial Networks as fair to the Company and its stockholders.

On the night of February 18, 2021, (1) the parties executed the Merger Agreement, (2) the Convertible Note Investors subscribing to purchase the Convertible Notes in connection with the Convertible Note Investment executed the Convertible Note Subscription Agreements, and (3) the PIPE Investors executed the PIPE Subscription Agreements.

Before the market opened on February 19, 2021, the Company announced the acquisition of Vivial Networks and the mGage Business together with the execution of the Merger Agreement, the PIPE Subscription Agreement and the Convertible Note Subscription Agreements.

The Company Board’s Reasons for Approval of the Merger

The Company’s Board considered a wide variety of factors in connection with its evaluation of the Merger. In light of the complexity of those factors, the Company’s Board, as a whole, did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific factors it took into account in reaching its decision. The Company’s Board viewed its decision as being based on all of the information available and the factors presented to and considered by it. In addition, individual members of the Company’s Board may have given different weight to different factors. This explanation of the reasons for the Company’s Board’s approval of the Merger, and all other information presented in this section, is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Before reaching its decision, the Company’s Board reviewed the results of the due diligence conducted by the Company’s management and advisors. The Company’s management, including its directors and advisors, has many years of experience in both operational management and investment and financial management and analysis and, in the opinion of the Company’s Board, was suitably qualified to conduct the due diligence and other investigations and analyses required in connection with the search for an acquisition candidate. A detailed description of the experience of the Company’s executive officers and directors is included in Item 10 (Directors, Executive Officers and Corporate Governance) in our Annual Report on Form 10-K filed with the SEC on March 16, 2021, a copy of which accompanies this proxy statement/prospectus. The due diligence which was conducted included:

 

   

meetings and calls with the management teams, advisors and Vivial Networks regarding operations and forecasts;

 

   

research on comparable public companies;

 

   

review of material contracts;

 

   

review of intellectual property matters;

 

   

review of financial, tax, legal, insurance and accounting due diligence;

 

   

consultation with legal and financial advisors and industry experts;

 

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financial and valuation analysis of Vivial Networks and the mGage business and the Merger; and

 

   

the financial statements of Vivial Networks.

The Company’s Board also considered the extensive feedback obtained by the Company as part of the PIPE financing process as well as in engaging with potential Convertible Note Investors and in entering into the Convertible Note Subscription Agreements and the PIPE Subscription Agreement with the PIPE Investors.

The factors considered by the Company’s Board include, but are not limited to, those set forth above as well as the following which are based upon our due diligence:

 

   

Market Impact. A combination of the Company with the mGage business will create a top-5 global CPaaS platform with a strong position in the US, Latin American and Asian Pacific markets.

 

   

Expansion for the Company. An mGage acquisition vastly expands the Company’s existing U.S. customer base and research and development footprint.

 

   

Product Fit. The mGage business provides a highly complementary product, market and channel fit across CPaaS services and marketing / engagement services.

 

   

Synergies. The acquisition of the mGage business brings significant potential for highly realizable cost synergies and cross-selling opportunities.

 

   

Client Base. Vivial Networks has an entrenched, long-term and blue-chip client base across diverse and attractive end-markets.

 

   

Terms of the Merger Agreement. The financial and other terms of the Merger Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between the Company and Vivial.

In the course of its deliberations, the Company’s Board also considered a variety of uncertainties, risks and other potentially negative factors relevant to the Merger, including the following which are based upon our diligence:

 

   

Growth Risk. Vivial Networks is a company with fast-growing revenues, and the risk that the Company may not be able to execute on its business plan as it becomes part of the Company.

 

   

Macroeconomic Risk. The risk of macroeconomic uncertainty and the effects it could have on Vivial Network’s’ revenues.

 

   

Benefits May Not Be Achieved Risk. The risk that the potential benefits of the Merger may not be fully achieved or may not be achieved within the expected timeframe.

 

   

Stockholder Vote Risk. The risk that the Company’s stockholders may fail to provide the votes necessary to effect the Merger.

 

   

Litigation Risk. The risk of the possibility of litigation challenging the Merger or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Merger.

 

   

Closing Conditions Risk. The risk that completion of the Merger is conditioned on the satisfaction of certain closing conditions that are not within the Company’s control.

 

   

Fees, Expenses and Time Risk. The risk of incurring significant fees and expenses associated with completing the Merger and the substantial time and effort of management required to complete the Merger.

 

   

Other Risks Factors. Various other risk factors associated with Vivial Network’s’ business, as described in the section entitled “Risk Factors.”

The Company’s Board concluded that the potential benefits that it expects the Company and its stockholders to achieve as a result of the Merger outweigh the potentially negative factors associated with the Merger.

 

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Accordingly, the Company’s Board, based on its consideration of the specific factors listed above, unanimously (a) determined that the Merger and the other transactions contemplated by the Merger Agreement, the PIPE Subscription Agreement and PIPE Investment, and the Convertible Note Subscription Agreements, Convertible Note Investment and the other agreements contemplated by the Convertible Note Subscription Agreements are just and equitable and fair as to the Company and its stockholders, and that it is advisable and in the best interests of the Company to adopt and approve these agreements and transactions, (b) approved, adopted and declared advisable the Merger Agreement, the PIPE Subscription Agreement, the Convertible Note Subscription Agreements and the agreements and transactions contemplated thereby and (c) recommended that the stockholders of the Company approve each of the Proposals.

The above discussion of the material factors considered by the Company’s Board is not intended to be exhaustive but does set forth the principal factors considered by the Company’s Board.

Structure of the Merger

On February 18, 2021, the Company, Merger Sub and Vivial entered into the Merger Agreement, pursuant to which the Company and Vivial will enter into the Merger whereby Merger Sub will merge with and into Vivial in the Merger, with Vivial surviving the Merger as a wholly owned subsidiary of the Company. The Merger Agreement contains customary representations and warranties, covenants, closing conditions, termination provisions and other terms relating to the Merger and the other transactions contemplated by the Merger Agreement. The Merger Agreement is summarized below.

The Merger will be consummated by the filing of a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware and will be effective immediately upon such filing or upon such later time as may be agreed by the parties and specified in the Certificate of Merger (the date and time of the filing of such Certificate of Merger (or such later time as may be agreed by each of the parties to the Merger Agreement and specified in such Certificate of Merger) being the “Effective Time”). The Certificate of Merger will be filed as promptly as practicable, but in no event later than three (3) business days, after the satisfaction or, if permissible, waiver of the closing conditions set forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or, if permissible, waiver of such conditions at the Closing). The parties will hold the Closing immediately prior to the filing of the Certificate of Merger. The date on which the Closing shall occur is referred to as the Closing Date.

Agreement and Plan of Merger

The below description of the Merger Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement, a copy of which is filed with this proxy statement/prospectus as Annex A, and the terms of which are incorporated herein by reference. Capitalized terms used but not otherwise defined herein will have the meanings given to them in the Merger Agreement. The Merger Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about Kaleyra, Vivial, mGage or Merger Sub. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about Kaleyra, Merger Sub or Vivial at the time they were made or otherwise and should only be read in conjunction with the other information that Kaleyra makes publicly available in reports, statements and other documents filed with the Securities and Exchange Commission (“SEC”).

The Merger

Pursuant to the terms of the Merger Agreement, Kaleyra will acquire mGage through the Merger of Merger Sub with and into Vivial, with Vivial surviving the merger as a wholly owned subsidiary of Kaleyra. In

 

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connection with the Merger, Vivial will form a wholly-owned subsidiary (“SpinCo”), into which it will transfer two other wholly-owned subsidiaries, Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, and its subsidiaries (the “Reorganization”). Following the Reorganization, Vivial will cause its stockholders to receive on a pro rata basis 100% of the shares of SpinCo common stock (the “Distribution”, and the Distribution together with the Reorganization is referred to as the “Separation”). As a result of and following the Separation, Vivial will solely own the business of mGage immediately prior to the consummation of the Merger.

At the Effective Time, each share of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (including shares of Vivial Common Stock resulting from the conversion of restricted stock units prior to the Effective Time) will be cancelled and converted into and will thereafter represent the right to receive, without interest, in accordance with a schedule to be delivered by Vivial prior to the closing of the Merger, (i) the Estimated Per Share Merger Consideration plus (ii) such share’s Allocable Share of any Adjustment Amount distributed pursuant to the Merger Agreement and Adjustment Escrow Amount in accordance with an escrow agreement to be established for the Adjustment Escrow Amount plus (iii) its Allocable Share of any amount from the Stockholder Representative Expense Fund distributed.

The Merger Consideration means an amount equal to (a) $195,000,000 minus (b) the amount of the Closing Debt plus (c) the amount of the Closing Cash plus (d) if the Closing Net Working Capital exceeds $7,500,000 (the “Net Working Capital Target”), the amount of such excess minus (e) if the Net Working Capital Target exceeds the Closing Net Working Capital, the amount of such excess minus (f) the Closing Company Transaction Expenses plus (g) $20,000,000 (the “Parent Common Stock Consideration Amount”); provided, however, in no event shall Closing Cash exceed $7,000,000 (the “Maximum Closing Cash Amount”). The “Estimated Merger Consideration” is the estimated calculation of the Merger Consideration that will be made by Vivial two business days prior to the anticipated date of closing of the Merger (the “Closing Date”) using the formula set forth in the prior sentence. The “Estimated Per Share Merger Consideration” means an amount equal to (x) the Closing Payment divided by (y) the aggregate number of shares of Vivial Common Stock issued and outstanding immediately prior to the Effective Time (other than shares held in the Vivial’s treasury or by Kaleyra or Merger Sub). The “Closing Payment” means the Estimated Merger Consideration minus $2,000,000 (the “Adjustment Escrow Amount”) minus $500,000 (the “Stockholder Representative Expense Fund”). “Final Merger Consideration” means the Merger Consideration finally determine by the parties following the adjustment process specified in the Merger Agreement.

The “Closing Cash” means the cash outstanding of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. Eastern Daylight Time on the date immediately preceding the Closing Date. The “Closing Debt” means the aggregate indebtedness outstanding of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. Eastern Daylight Time on the date immediately preceding the Closing Date. The “Closing Net Working Capital” means the Net Working Capital of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation at 11:59 p.m. Eastern Daylight Time on the date immediately preceding the Closing Date. “Net Working Capital” means: (a) current assets minus (b) current liabilities (including uncleared checks written by Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation), in each case determined in accordance with Vivial’s accounting principles. For the avoidance of doubt, Net Working Capital shall exclude long term assets and liabilities, and any items of Indebtedness, income taxes, deferred tax assets and liabilities, cash, Closing Company Transaction Expenses, and intercompany balances among Vivial, mGage and any of Vivial’s wholly owned subsidiaries that remain following the Separation.

The “Closing Company Transaction Expenses” means the Company Transaction Expenses outstanding on the Closing Date to the extent not paid by Vivial at 11:59 p.m. Eastern Daylight Time on the date immediately preceding the Closing Date. “Company Transaction Expenses” means all (a) expense reimbursement payable to any other bidders of the transactions contemplated by the Merger Agreement, (b) fees, costs, charges, expenses and obligations payable to Vivial’s advisors and other fees, costs, charges, expenses and obligations of

 

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professional service firms incurred by Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation in connection with the transactions contemplated by the Merger Agreement, the Separation and Distribution Agreement and the Distribution and Reorganization, in each case to the extent unpaid as of the Closing Date, (c) the amount of the aggregate of the Employee Payments, and all employer taxes related thereto, (d) the cost of terminating in full all obligations or liabilities under any advisory or similar affiliate agreements (if any), (e) all transfer taxes allocable to SpinCo under the Merger Agreement, (f) 50% of all other transfer taxes not expressly allocable to SpinCo, (g) 50% of the costs fees and expenses of obtaining, and relating to, a tail director and officer insurance policy, and (h) 50% of the fees to be paid for antitrust review of the Merger; provided, that Company Transaction Expenses shall not include any amounts (i) to the extent included in the calculation of the Adjustment Amount as Closing Debt, (ii) to the extent included as current liabilities in the calculation of Net Working Capital and (iii) any fees or expenses incurred by or on behalf of Kaleyra or Merger Sub in connection with the transactions contemplated by the Merger Agreement or any other transaction document, whether or not billed or accrued (including any fees and expenses of legal counsel, financial advisors, investment bankers, brokers and accountants of Kaleyra or Merger Sub). The “Employee Payments” means, without duplication, in respect of Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation any payments in respect of (a) severance, change in control, retention, transaction or similar bonus, termination or similar amounts payable and (b) any payments in respect of equity-based compensation (including any profits interests), in each case of clause (a) or (b), payable to any person solely in connection with the closing of the Merger to the extent due and payable as of such closing.

The Parent Common Stock Consideration Amount shall be paid with the issuance of such number of shares of Vivial Common Stock equal to (a) the Parent Common Stock Consideration Amount, divided by (b) $12.50, or a total of 1,600,000 shares of Parent Common Stock. The remainder of the Merger Consideration shall be paid in cash.

The Closing

The Closing of the Merger will occur as promptly as practicable, but in no event later than two business days, after the satisfaction or, if permissible, waiver of the conditions set forth in the Merger Agreement.

Representations and Warranties

The Merger Agreement contains customary representations and warranties of the parties thereto with respect to, among other things, (a) entity organization, formation and authority, (b) capital structure, (c) authorization to enter into the Merger Agreement, (d) licenses and permits, (e) taxes, (f) financial statements, (g) real property, (h) material contracts, (i) title to assets, (j) absence of changes, (k) employee matters, (l) compliance with laws, (m) litigation, (n) transactions with affiliates and (o) regulatory matters.

Covenants

The Merger Agreement includes customary covenants of the parties with respect to the operation of their respective businesses prior to the consummation of the Merger and efforts to satisfy the conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, covenants providing for Kaleyra and Vivial to use their reasonable best efforts to obtain all permits, consents, approvals, authorizations, qualifications and orders of governmental authorities and parties to contracts with Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation as set forth in the Merger Agreement necessary for the consummation of the Merger and to fulfill the conditions to the Merger, and for the preparation and filing of this registration statement on Form S-4 (theRegistration Statement”) relating to the Merger and containing a proxy statement of Kaleyra. Kaleyra also agreed that, from and after the closing of the Merger, neither Kaleyra, nor Vivial, mGage and the other subsidiaries of Vivial that remain following the Separation nor any of their respective affiliates shall use the name “Vivial.” Prior to or at the Closing, Kaleyra shall use commercially reasonable efforts to obtain and bind an insurance policy in

 

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connection with the representations and warranties made by Vivial and the other provisions set forth in the Merger Agreement.

Vivial Exclusivity Restrictions

Pursuant to the terms of the Merger Agreement, from the date of the Merger Agreement to the closing of the Merger or, if earlier, the termination of the Merger Agreement in accordance with its terms, Vivial has agreed, among other things, not to, directly or indirectly, (i) encourage, initiate, facilitate or engage in discussions or negotiations with, or enter into any proposal to acquire or merge with Vivial, mGage or the other subsidiaries of Vivial that remain following the Separation (an “Acquisition Proposal”), (ii) enter into or consummate any agreement with respect to any Acquisition Proposal or enter into any agreement requiring it to abandon, terminate or fail to consummate the transactions contemplated by the Merger Agreement or (iii) participate or engage in any way in any discussions or negotiations with, or furnish any information to, any person in connection with, or the making of any proposal that constitutes, or any would otherwise reasonably be expected to result in the making of, an Acquisition Proposal. Notwithstanding the foregoing, Vivial shall be permitted to engage in discussions or negotiations with respect to the Separation and Distribution or in disposition transactions with respect to SpinCo.

Conditions to Closing

The consummation of the Merger is subject to the fulfillment of certain conditions, as described in greater detail below.

Mutual Conditions

Under the terms of the Merger Agreement, the obligations of Vivial, Kaleyra and Merger Sub to consummate the Merger, including the Merger, are subject to the satisfaction or waiver (where permissible) at or prior to the closing of the Merger of the following conditions: (i) the stockholders of Vivial shall have delivered their written consent approving the Merger to Kaleyra; (ii) the proposals required under the continued listing standards of the NYSE American to obtain the approval by Kaleyra’s stockholders of the issuance of Parent Common Stock that will be issued or issuable as part of the Financing (as defined below) and the Parent Common Stock Merger Consideration shall have been approved and adopted by the requisite affirmative vote of the stockholders of Kaleyra in accordance with the Proxy Statement, the Delaware General Corporation Law, Kaleyra’s Amended and Restated Certificate of Incorporation and Bylaws, and the rules and regulations of the NYSE American; (iii) all required filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1979, as amended (the “HSR Act”) shall have been completed and any applicable waiting period (and any extension thereof) applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated, and any pre-Closing approvals or clearances reasonably required thereunder shall have been obtained; (iv) the Reorganization and the Distribution shall have been consummated; (v) no governmental authority shall have enacted, issued, promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive order or award which is then in effect and has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (vi) all consents, approvals and authorizations set forth in the Merger Agreement shall have been obtained from and made with all governmental authorities; (vi) the Registration Statement shall have been declared effective under the Securities Act of 1933, as amended (the “Securities Act”), no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for purposes of suspending the effectiveness of the Registration Statement shall have been initiated or threatened by the SEC; (vii) the shares of Parent Common Stock shall have been listed on the NYSE American as of the Closing Date.

Kaleyra Conditions to Closing

Additionally, under the terms of the Merger Agreement, the obligations of Kaleyra and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where permissible) at or prior to the

 

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closing of the Merger of, among other customary closing conditions, (i) conditions pertaining to the accuracy of the representations and warranties made by Vivial; (ii) the performance by Vivial of its covenants ; and (iii) Kaleyra having received at the closing of the Merger all of the documents and certificates required to be delivered by Vivial.

Vivial Conditions to Closing

Additionally, under the terms of the Merger Agreement, the obligations of Vivial to consummate the Merger are subject to the satisfaction or waiver (where permissible) at or prior to the Closing of, among other customary closing conditions, (i) conditions pertaining to the accuracy of the representations and warranties made by Kaleyra and Merger Sub; (ii) the performance by Kaleyra and Merger Sub of each of their covenants ; and (iii) Vivial having received at the closing of the Merger all of the documents and certificates required to be delivered by Kaleyra and Merger Sub.

Termination

The Merger Agreement allows the parties to terminate the agreement if certain conditions described in the Merger Agreement are satisfied. Additionally, under the Merger Agreement, in certain circumstances, if Kaleyra terminates the Merger Agreement, it will be obligated to pay to Vivial, as liquidated damages in connection with any such termination, a fee in an amount equal to $11,825,000.

Related Agreements

Stockholder Support Agreement

Kaleyra and two stockholders of Vivial owning a majority of the Vivial Common Stock (the “Key Company Stockholders”), concurrently with the execution and delivery of the Merger Agreement, have entered into the Stockholder Support Agreement (the “Stockholder Support Agreement”), pursuant to which such Key Company Stockholders have agreed, among other things, to vote all of their shares of Vivial Common Stock in favor of the Merger Agreement and the Merger. The foregoing description of the Stockholder Support Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement, a copy of which is filed with the Company’s Current Report on Form 8-K filed February 23, 2021 as Exhibit 10.1, and the terms of which are incorporated herein by reference.

Parent Insider Support Agreement

Vivial and those stockholders of Kaleyra identified in the Parent Insider Support Agreement, concurrently with the execution and delivery of the Merger Agreement, have entered into the Parent Insider Support Agreement (the “Parent Insider Support Agreement”), pursuant to which the stockholders of Kaleyra who entered into such agreement have agreed, among other things, to vote (or execute and return an action by written consent), or cause to be voted at the stockholders’ meeting of Kaleyra (or validly execute and return and cause such consent to be granted with respect to), all of their shares of Parent Common Stock (subject to the right to be able to transfer a certain specified amount of shares) in favor of (A) the approval and adoption of the Merger Agreement and approval of the Merger, including the Merger, (B) against any action, agreement or transaction or proposal that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of Kaleyra under the Merger Agreement or that would reasonably be expected to result in the failure of the Merger from being consummated and (C) each of the proposals and any other matters necessary or reasonably requested by Kaleyra for consummation of the Merger. The foregoing description of the Parent Insider Support Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement, a copy of which is filed with the Company’s Current Report on Form 8-K filed February 23, 2021 as Exhibit 10.2, and the terms of which are incorporated herein by reference.

 

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Separation and Distribution Agreement

In connection with the Merger, Vivial will form a wholly-owned subsidiary (“SpinCo”), into which it will transfer two other wholly-owned subsidiaries, Vivial Mobile LLC, a Delaware limited liability company, and Vivial Media LLC, a Colorado limited liability company, and its subsidiaries (the “Reorganization”). Following the Reorganization, Vivial will cause its stockholders to receive on a pro rata basis 100% of the shares of SpinCo common stock (the “Distribution”, and the Distribution together with the Reorganization is referred to as the “Separation”). As a result of and following the Separation, Vivial will solely own the business of mGage immediately prior to the consummation of the Merger. Vivial and SpinCo will enter into the Separation and Distribution Agreement immediately prior to the consummation of the Merger (the “Separation and Distribution Agreement”) which will memorialize the various rights and obligations of such parties in connection with the Separation. Pursuant to the Separation and Distribution Agreement, Vivial and SpinCo will agree, among other things, to (i) allocate and transfer those assets used in the SpinCo business and separately identified by such parties, along with any liabilities relating to, arising out of or resulting from the operation of the SpinCo business along with specified liabilities relating to operation of SpinCo’s business prior to the Distribution, (ii) terminate certain intercompany contracts and liabilities and settle all intercompany receivables at the time of the Distribution. The Distribution shall occur prior to Closing so long as (a) the Reorganization has been completed and the conditions set forth in Article VI of the Merger Agreement, other than those conditions that, by their nature, are to be satisfied contemporaneously with the Distribution or the Merger. The foregoing description of the Separation and Distribution Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement, which will be entered into immediately prior to, and in connection with, the Closing.

Transition Services Agreement

Simultaneously with the consummation of the Merger, SpinCo and Merger Sub will enter into a Transition Services Agreement (the “Transition Services Agreement”) pursuant to which SpinCo will agree to provide certain services related to the mGage business for a specified period of time in order to facilitate the transactions contemplated by the Merger. Merger Sub has further agreed to pay a service fee specified for each service provided. The foregoing description of the Transition Services Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the actual agreement, which will be entered into immediately prior to, and in connection with, the Closing.

The Financing

In support of the consummation of the Merger, on February 18, 2021, Kaleyra entered into the PIPE Subscription Agreements, each dated February 18, 2021, with certain institutional investors (the “PIPE Investors”), pursuant to which, among other things, Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, an aggregate of 8,400,000 shares (the “PIPE Shares”) of Parent Common Stock to the PIPE Investors at $12.50 per share, and Kaleyra also entered into Convertible Note Subscription Agreements, each dated February 18, 2021, with certain institutional investors (the “Convertible Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in private placements to close immediately prior to the closing of the Merger, $200,000,000 aggregate principal amount of unsecured convertible notes (the “Convertible Notes”). The issuance of the Convertible Notes, together with the issuance of the PIPE Shares, constitutes the “Financing”.

PIPE Subscription Agreement

The obligations to consummate the subscriptions under the PIPE Subscription Agreements are conditioned upon, among other things, all conditions precedent to the closing of the transactions contemplated by the Convertible Note Subscription Agreements (as defined below) having been satisfied or waived, and the closing of the transaction contemplated by the PIPE Subscription Agreements occurring concurrently with the closing of the transactions contemplated by the Convertible Note Subscription Agreements.

 

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Pursuant to the PIPE Subscription Agreements, Kaleyra agreed that, prior to the closing of the Merger, Kaleyra will file with the SEC (at Kaleyra’s sole cost and expense) a registration statement registering the resale of the PIPE Shares (the “Resale Registration Statement”), and Kaleyra will use its commercially reasonable efforts to have the Resale Registration Statement declared effective upon the closing of the Merger, but no later than 60 calendar days (or 90 calendar days if the SEC notifies Kaleyra that it will not review the Resale Registration Statement) after the closing of the Merger, subject to customary conditions and covenants.

The foregoing description of the PIPE Subscription Agreements and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the agreed upon form of PIPE Subscription Agreements, a copy of which is filed with our Current Report on Form 8-K filed February 18, 2021 as Exhibit 10.3, and the terms of which are incorporated herein by reference.

Note Subscription Agreements and Indenture

On February 18, 2021, Kaleyra also entered into the Convertible Note Subscription Agreements, each dated February 18, 2021, with certain institutional investors (the “Note Investors”), pursuant to which Kaleyra agreed to issue and sell, in a private placements to close immediately prior to the closing of the Merger, $200,000,000 aggregate principal amount of unsecured Convertible Notes. The Convertible Notes are to be issued under an indenture to be entered into in connection with the closing of the Merger, between Kaleyra and Wilmington Trust, National Association, a national banking association, in its capacity as trustee thereunder (the “Indenture”). The Convertible Notes will bear interest at a rate of 6.125% per annum, payable semi-annually, and be convertible into shares of Parent Common Stock at a conversion price of $16.875 per share of Parent Common Stock in accordance with the terms of the Indenture, and will mature five years after their issuance.

Kaleyra may, at its election, force conversion of the Convertible Notes after (i) first anniversary of the issuance of the Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Parent Common Stock exceeds 150% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter and (ii) the second anniversary of the issuance of the Convertible Notes, subject to a holder’s prior right to convert, if the last reported sale price of the Parent Common Stock exceeds 130% of the conversion price for at least 20 trading days during the period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter. Following certain corporate events that occur prior to the maturity date or if Kaleyra forces a mandatory conversion, Kaleyra will, in certain circumstances, increase the conversion rate for a holder who elects to convert its Convertible Notes in connection with such a corporate event or has its Convertible Notes mandatorily converted, as the case may be. In addition, in the event that a holder of the Convertible Notes elects to convert its Convertible Notes prior to the third anniversary of the issuance of the Convertible Notes, Kaleyra will be obligated to pay an amount equal to twelve months of interest, or if on or after such third anniversary of the issuance of the Convertible Notes, any remaining amounts that would be owed to, but excluding, the fourth anniversary of the issuance of the Convertible Notes (the “Interest Make-Whole Payment”). The Interest Make-Whole Payment will be payable in cash or shares of the Parent Common Stock as set forth in the Indenture.

 

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Kaleyra will be obligated to register the shares issuable upon conversion of the Convertible Notes. Kaleyra agreed that, prior to the consummation of the Merger (the “Convertible Note Resale Registration Filing Deadline”), Kaleyra will file with the SEC a registration statement (the “Convertible Note Resale Registration Statement”) registering the resale of the shares of Parent Common Stock issuable upon conversion of the Convertible Notes (the “Convertible Note Registrable Securities”), and Kaleyra will use its commercially reasonable efforts to have the Convertible Note Resale Registration Statement declared effective as soon as practicable after the filing thereof, but no later than the 60th calendar day (or 90th calendar day if the SEC notifies Kaleyra that it will “review” the Convertible Note Resale Registration Statement) following the Convertible Note Resale Registration Filing Deadline.

The foregoing description of the Convertible Note Subscription Agreements, the Indenture and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the agreed upon form of Convertible Note Subscription Agreements and Indenture, copies of which are filed with Kaleyra’s Current Report on Form 8-K dated February 18, 2021 as Exhibits 10.4 and 10.5, respectively, and the terms of which are incorporated herein by reference.

Total Company Shares Following the Merger and the Financing

We anticipate that, upon completion of the Merger and the Financing, the ownership of the Company will be as follows1:

 

   

the former Vivial equity holders will own 1,600,000 shares of Parent Common Stock, representing a 3.9% interest;

 

   

there will be 12,780,483 Insider Shares issued to our directors and our executive officers or any of their affiliates;

 

   

the existing public stockholders will own 18,149,634 shares of Parent Common Stock, representing a 44.3% interest; and

 

   

the PIPE Investors will own 8,400,000 shares of Parent Common Stock, representing a 20.5% interest.

The ownership percentage with respect to the Company following the Merger and the Financing does not take into account (i) warrants to purchase Parent Common Stock that will remain outstanding immediately following the Merger, (ii) conversion of any of the Convertible Notes or (iii) the issuance of any shares upon completion of the Merger under the Incentive Plan, a copy of which as proposed to be amended and restated is attached to this proxy statement/prospectus as Annex B. If the actual facts are different than these assumptions, the percentage ownership retained by the Company’s existing stockholders in the Company will be different. As a result of the Merger, the economic and voting interests of our public stockholders will decrease.

Please read “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

Board of Directors of the Company and Vivial Following the Merger

We expect the Board of the Company to be comprised of the individuals who currently hold a seat on our Board following the completion of the Merger, with the addition of [●], who will join the Board as a Class [●] director with a term expiring [●]. Upon the Closing Date, we anticipate that the Vivial Board will consist of the members of the Board of Merger Sub, all of whom are current officers of the Company.

For information on our current Board, please see Item 10 (Directors, Executive Officers and Corporate Governance) in our Annual Report on Form 10-K filed with the SEC on March 16, 2021, a copy of which accompanies this proxy statement/prospectus.

 

1 

The aggregate outstanding number of shares of Parent Common Stock will be 40,930,117 shares.

 

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Accounting Treatment

The Merger will be accounted for as an acquisition of Vivial by the Company under the acquisition method of accounting in accordance with U.S. GAAP. For additional information, see note 1 in “Unaudited Pro Forma Combined Financial Information.

Name; Headquarters

Following the Closing, Vivial Inc. will change its name to mGage Group Holdings Inc. and will be a wholly-owned subsidiary of Kaleyra Inc. The headquarters of the Company will remain at Via Marco D’Aviano, 2, Milano MI, Italy.

SPECIAL MEETING OF THE COMPANY’S STOCKHOLDERS

This proxy statement/prospectus is being provided to Company stockholders as part of a solicitation of proxies by the Board for use at the Special Meeting of Stockholders to be held on [•], 2021, and at any adjournment or postponement thereof. This proxy statement/prospectus contains important information regarding the Special Meeting, the proposals on which you are being asked to vote and information you may find useful in determining how to vote and voting procedures.

This proxy statement/prospectus is being first mailed on or [●] 2021 to all stockholders of record of the Company as of [●], 2021, the record date for the Special Meeting. Stockholders of record who owned Parent Common Stock at the close of business on the record date are entitled to receive notice of, attend and vote at the Special Meeting. On the record date, there were [            ] shares of Parent Common Stock outstanding.

Date, Time and Place of Special Meeting

The Special Meeting will be held on [●], 2021 at [●]., Eastern Daylight Time, via live webcast at https://[●]. In light of ongoing developments related to coronavirus (COVID-19), after careful consideration, the Company has determined that the Special Meeting will be a virtual meeting conducted exclusively via live webcast in order to facilitate stockholder attendance and participation while safeguarding the health and safety of our stockholders, directors and management team. The Special Meeting will be conducted exclusively via live webcast and so stockholders will not be able to attend the meeting in person. Stockholders may attend the special meeting online and vote at the Special Meeting by visiting https://[●] and entering your 12-digit control number, which is either included on the proxy card you received or obtained through Continental Stock Transfer & Trust Company.

Registering for the Special Meeting

Any stockholder wishing to attend the virtual meeting should register for the meeting by [●], 2021 at https://[●]. To register for the Special Meeting, please follow these instructions as applicable to the nature of your ownership of Parent Common Stock:

 

   

If your shares are registered in your name with Continental Stock Transfer & Trust Company and you wish to attend the online-only Special Meeting, go to https://[●], enter the 12-digit control number included on your proxy card or notice of the meeting and click on the “Click here to preregister for the online meeting” link at the top of the page. Just prior to the start of the meeting you will need to log back into the meeting site using your control number. Pre-registration is recommended but is not required in order to attend.

 

   

Beneficial stockholders (those holding shares through a stock brokerage account or by a bank or other holder of record) who wish to attend the virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible

 

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photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a 12-digit meeting control number that will allow them to register to attend and participate in the Special Meeting. After contacting Continental Stock Transfer & Trust Company, a beneficial holder will receive an e-mail prior to the meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Continental Stock Transfer & Trust Company at least five (5) business days prior to the meeting date in order to ensure access.

Voting Power; Record Date

As a stockholder of the Company, you have a right to vote on certain matters affecting the Company. The proposals that will be presented at the Special Meeting and upon which you are being asked to vote are summarized below and fully set forth in this proxy statement/prospectus. You will be entitled to vote or direct votes to be cast at the Special Meeting if you owned shares of Parent Common Stock at the close of business on [●], 2021, which is the record date for the Special Meeting. You are entitled to one vote for each share of Parent Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On the record date, there were [                ] shares of Parent Common Stock outstanding and entitled to vote.

Proposals at the Special Meeting

At the Special Meeting, Company stockholders will vote on the following proposals:

 

   

Proposal No. 1 - The NYSE American Stock Issuance Proposal - To approve, for purposes of complying with applicable listing rules of NYSE American, the issuance of more than 20% of the Company’s outstanding Common Stock in connection with the Merger, and the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements, including up to 1,600,000 shares of Parent Common Stock to the Vivial equity holders, 8,400,000 shares of Parent Common Stock to the PIPE Investors and 11,851,852 shares of Parent Common Stock upon conversion of the Convertible Notes;

 

   

Proposal No. 2 - The Incentive Plan Proposal – To approve an increase to the number of shares of Parent Common Stock available for issuance under the Kaleyra Inc. 2019 Equity Incentive Plan by 4,000,000 shares;

 

   

Proposal No. 3 - Adjournment Proposal - To approve, if necessary, the adjournment of the Special Meeting to a later date or dates to permit further solicitation and votes of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the NYSE American Stock Issuance Proposal or the Incentive Plan Proposal.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” EACH OF THESE

PROPOSALS.

Quorum and Required Vote for Proposals for the Special Meeting

The approval of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposals and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of Parent Common Stock represented in person or by proxy and entitled to vote at the Special Meeting.

Under these voting standards, a failure to vote or an abstention will have no effect on the Adjournment Proposal. In addition, for purposes of the NYSE American Stock Issuance Proposal and the Incentive Plan

 

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Proposal the NYSE American considers an abstention vote as a “vote cast”, and therefore, an abstention will have the same effect as a vote “AGAINST” such proposals, while a failure to vote will have no effect on these two proposals.

The transactions contemplated by the Merger Agreement will be consummated only if the NYSE American Stock Issuance Proposal is approved at the Special Meeting.

It is important for you to note that in the event that the NYSE American Stock Issuance Proposal does not receive the requisite vote for approval, we may not consummate the Merger.

Recommendation to Company Stockholders

Our Board believes that each of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and recommends that its stockholders vote “FOR” each of the proposals.

Broker Non-Votes and Abstentions

Abstentions are considered present for the purposes of establishing a quorum. Abstentions will have the same effect as a vote “AGAINST” the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal.

In general, if your shares are held in “street” name and you do not instruct your broker, bank or other nominee on a timely basis on how to vote your shares, your broker, bank or other nominee, in its sole discretion, may either leave your shares unvoted or vote your shares on routine matters, but not on any non-routine matters. None of the proposals at the Special Meeting are routine matters. As such, without your voting instructions, your brokerage firm cannot vote your shares on any proposal to be voted on at the Special Meeting.

Voting Your Shares—Stockholders of Record

If you are a Company stockholder of record, you may vote by mail or in person at the Special Meeting. Each share of our Common Stock that you own in your name entitles you to one vote on each of the proposals for the Special Meeting. Your one or more proxy cards show the number of shares of Parent Common Stock that you own.

Voting by Mail. You can vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. If you sign and return the proxy card but do not give instructions on how to vote your shares, your shares of our Common Stock will be voted as recommended by our Board. Our Board recommends voting “FOR” the NYSE American Stock Issuance Proposal, “FOR” the Incentive Plan Proposal and “FOR” the Adjournment Proposal. Votes submitted by mail must be received by 5:00 p.m. Eastern Daylight Time on [●], 2021.

Voting at the Meeting - We will be hosting the Special Meeting via live webcast. If you attend the Special Meeting, you may submit your vote at the Special Meeting online at http://[●], in which case any votes that you previously submitted will be superseded by the vote that you cast at the Special Meeting. See “- Registering for the Special Meeting” above for further details on how to attend the Special Meeting.

 

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Voting Your Shares—Beneficial Owners

If your shares are held in an account at a brokerage firm, bank or other nominee, then you are the beneficial owner of shares held in “street name” and this proxy statement/prospectus is being sent to you by that broker, bank or other nominee. The broker, bank or other nominee holding your account is considered to be the stockholder of record for purposes of voting at the Special Meeting. As a beneficial owner, you have the right to direct your broker, bank or other nominee regarding how to vote the shares in your account by following the instructions that the broker, bank or other nominee provides you along with this proxy statement/prospectus. However, since you are not the stockholder of record, you may not vote your shares in person at the Special Meeting unless you request and obtain a valid proxy from your broker or other agent.

Revoking Your Proxy

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

 

   

you may send another proxy card with a later date;

 

   

you may notify the Company’s Secretary in writing to c/o Via Marco D’Aviano, 2, Milano MI, Italy, Attn: Secretary, before the Special Meeting that you have revoked your proxy; or

 

   

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

No Additional Matters

The Special Meeting has been called only to consider the approval of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal and the Adjournment Proposal. Under our 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.

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 our Common Stock, you may contact MacKenzie, our proxy solicitor, at (212) 929-5500 (call collect), (800) 322-2885 (call toll-free), or by sending an e-mail to proxy@mackenziepartners.com.

Appraisal Rights

Appraisal rights are not available to holders of shares of Parent Common Stock in connection with the Merger or any of the proposals to be considered at the Special Meeting.

Pursuant to Section 262 of the DGCL, Vivial stockholders who comply with the applicable requirements of Section 262 of the DGCL and do not otherwise fail to perfect or waive, lose, forfeit, validly withdraw or revoke or lose the right to appraisal under Delaware law have the right to seek appraisal of the fair value of their shares of Vivial Common Stock, as determined by the Court of Chancery, if the Merger is completed. The “fair value” of such shares of Vivial Common Stock as determine by the Court of Chancery may be more or less than, or the same as, the value of the consideration that such stockholder would otherwise be entitled to receive under the Merger Agreement. Vivial stockholders who do not vote in favor of the Merger nor consent in writing to it and who wish to preserve their appraisal rights must so advise Vivial by submitting a demand for appraisal within the period prescribed by Section 262 of the DGCL after receiving a notice from Vivial or the Company that appraisal rights are available to them, and must otherwise precisely follow the procedures prescribed by Section 262 of the DGCL to property exercise and perfect their right to appraisal. Failure to follow any of the statutory procedures set forth in Section 262 of the DGCL will result in the loss or waiver of appraisal rights under Delaware law. In view of the complexity of Section 262 of the DGCL, Vivial stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors.

 

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Proxy Solicitation Costs

The Company is soliciting proxies on behalf of its Board. This proxy solicitation is being made by mail, but also may be made by telephone or in person. The Company has engaged MacKenzie to assist in the solicitation of proxies for the Special Meeting. The Company and its directors, officers and employees may also solicit proxies in person. The Company will ask banks, brokers and other institutions, nominees and fiduciaries to forward the proxy materials to their principals and to obtain their authority to execute proxies and voting instructions.

The Company will bear the entire cost of the proxy solicitation, including the preparation, assembly, printing, mailing and distribution of the proxy materials. The Company will pay MacKenzie a fee of $9,000, plus disbursements, reimburse MacKenzie for its reasonable out-of-pocket expenses and indemnify MacKenzie and its affiliates against certain claims, liabilities, losses, damages and expenses for their services as our proxy solicitor. We will reimburse brokerage firms and other custodians for their reasonable out-of-pocket expenses for forwarding the proxy materials to our stockholders. Directors, officers and employees of the Company who solicit proxies will not be paid any additional compensation for soliciting proxies.

 

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PROPOSAL NO. 1—THE NYSE AMERICAN STOCK ISSUANCE PROPOSAL

Overview

We are asking our stockholders to approve, for purposes of complying with applicable listing rules of the NYSE American, the issuance of more than 20% of the outstanding Parent Common Stock in connection with the Merger, including up to 1,600,000 shares of Common Stock to the Vivial equity holders and the issuances described below.

Issuance of Parent Common Stock to PIPE Investors

In connection with the execution of the Merger Agreement, the Company entered into the PIPE Subscription Agreement with the PIPE Investors, pursuant to which, among other things, the Company agreed to issue and sell, in a private placement to close immediately prior to the Closing, an aggregate of 8,400,000 shares of Parent Common Stock at $12.50 per share to the PIPE Investors for an aggregate purchase price of $105,000,000.

Issuance of Parent Common Stock to Convertible Note Investors

Also in connection with the execution of the Merger Agreement, the Company entered into the Convertible Note Subscription Agreements with the Convertible Note Investors, pursuant to which, among other things, the Company agreed to issue and sell to the Convertible Note Investors, in private placements to close immediately prior to Closing, the Convertible Notes for an aggregate purchase price of $200,000,000. The Convertible Notes are convertible into 11,851,852 shares of Parent Common Stock at a conversion price of $16.85.

Why the Company Needs Stockholder Approval

Pursuant to NYSE American Company Guide Sections 712(b) and 713(a), stockholder approval is required prior to the issuance of common stock in any transaction or series of related transactions if the number of shares of common stock to be issued is, or will be upon issuance, equal to or in excess of 20 percent of the number of shares of common stock outstanding before the issuance of the common stock.

As described above, upon the consummation of the Merger and the transactions contemplated by the PIPE Subscription Agreement and the Convertible Note Subscription Agreements, we expect to issue (1) 1,600,000 shares of Parent Common Stock to the Vivial equity holders as part of the Merger Consideration at the Closing, (2) 8,400,000 shares of Parent Common Stock to the PIPE Investors, in accordance with the terms and subject to the conditions of the PIPE Subscription Agreements and (3) 11,851,852 shares of Parent Common Stock upon conversion of the Convertible Notes, in accordance with the terms and subject to the conditions of the Convertible Note Subscription Agreements. Accordingly, the aggregate number of shares of Parent Common Stock that we will issue in connection with the transactions contemplated by Merger Agreement, the PIPE Subscription Agreements and the Convertible Note Subscription Agreements will exceed 20% of the number of shares of Common Stock outstanding before such issuance, and for this reason, we are seeking the approval of our stockholders for the issuance of shares of Parent Common Stock pursuant to the Merger Agreement, the PIPE Investment and the Convertible Note Investment.

In the event that this proposal is not approved by Company stockholders, the transactions contemplated by the PIPE Subscription Agreements and the Convertible Note Subscription Agreements may not be consummated. In the event that this proposal is approved by Company stockholders, but the Merger Agreement is terminated (without the Merger being consummated) prior to the issuance of shares of Parent Common Stock pursuant to the Merger Agreement, the PIPE Investment or the Convertible Note Investment, such shares of Parent Common Stock will not be issued.

Vote Required for Approval

The approval of the NYSE American Stock Issuance Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special

 

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Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the NYSE American Stock Issuance Proposal. For purposes of NYSE American rules, however, abstentions are treated as “votes cast” and will be counted as votes “AGAINST” this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Recommendation of the Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE NYSE AMERICAN STOCK ISSUANCE PROPOSAL.

 

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PROPOSAL NO. 2—APPROVAL OF INCREASE TO SHARES OF COMMON STOCK AVAILABLE UNDER THE KALEYRA, INC. 2019 EQUITY INCENTIVE PLAN BY 4,000,000 SHARES

Overview

In connection with the Merger, our Board recommends that the stockholders approve an increase to the number of shares of Parent Common Stock available for issuance under the Kaleyra Inc. 2019 Equity Incentive Plan (“Incentive Plan”). As of December 31, 2020, we had 3,31,037 Restricted Stock Units (“RSUs”) outstanding and 530,667 shares of Parent Common Stock available for issuance under the Incentive Plan. On January 1, 2021, an additional 1,514,434 shares of Parent Common Stock became available for issuance under the Incentive Plan. As of March 31, 2021, we had [    ] RSUs outstanding, and [    ] shares of Parent Common Stock available for issuance under the Incentive Plan. We are proposing to increase that number by 4,000,000 shares in light of the larger workforce that we will have following the Merger, and the larger number of shares of Parent Common Stock that will be outstanding as a result of the Merger and the Financing. Our Board believes that the approval of the amendment to the Incentive Plan to increase the shares reserved under the Incentive Plan by 4,000,000 shares, is essential to our continued success. We believe that our employees are our most valuable assets and that the awards permitted under the Incentive Plan are vital to our ability to attract and retain outstanding and highly skilled individuals in the competitive labor markets in which we compete. These awards also are crucial to our ability to motivate our employees to achieve our Company goals.

The following is a summary of certain terms and conditions of the Incentive Plan. This summary is qualified in its entirety by reference to the Incentive Plan, which as proposed to be amended and restated is attached as Annex B to this proxy statement/prospectus. You are encouraged to read the entirety of the Incentive Plan.

Summary of the Equity Incentive Plan

The purpose of the Incentive Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons for performing services and by motivating such persons to contribute to the growth and profitability of the Company and its subsidiaries following the closing of the Merger.

Approval of the increase of shares of Parent Common Stock available for issuance under Incentive Plan by the Company’s stockholders is required, among other things, in order to: (i) comply with stock exchange listing rules requiring stockholder approval of equity compensation plans and increases to shares of capital stock available thereunder; and (ii) allow the grant of incentive stock options to employees under the Incentive Plan.

If this increase of shares of Parent Common Stock available for issuance under the Incentive Plan Proposal is approved by the Company’s stockholders, the amendment to our Incentive Plan will become effective immediately. In the event that the Company’s stockholders do not approve this Proposal, the increase of shares of Parent Common Stock available for issuance under the Incentive Plan will not become effective. Approval of the shares of Parent Common Stock available for issuance under the Incentive Plan by the Company’s stockholders will allow the post-combination company to grant restricted stock unit awards, stock options, stock appreciation rights or “SARs”, restricted stock purchase rights, restricted stock bonuses, performance shares, performance units, cash-based awards and other stock-based awards at levels determined appropriate by the Board or the Board’s compensation committee following the Closing of the Merger. The increase of shares available under the Incentive Plan will allow the post-combination company to utilize the foregoing types of equity and cash incentives in order to attract, retain and motivate employees, officers, directors, and consultants following the Closing of the Merger.

The post-combination company’s employee equity compensation program, as implemented under the Incentive Plan, will allow the post-combination company to remain competitive with comparable companies in its industry by giving it resources to attract and retain talented individuals. Approval of the increase to shares

 

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available under the Incentive Plan will provide the post-combination company with flexibility to use equity compensation and other incentive awards to attract, retain and motivate talented employees, officers, directors, and consultants.

Best Practices Integrated into the Post-Combination Company’s Equity Compensation Program and the Incentive Plan

The Incentive Plan includes provisions that are designed to protect the interests of the stockholders of the post-combination company following its effectiveness and to reflect corporate governance best practices including:

 

   

Awards granted under the Incentive Plan will be subject to reduction, cancellation, forfeiture, or recoupment in accordance with any “clawback” policy or similar provisions required by applicable law, stock exchange listing standards, or policies adopted by the post-combination company, or as specified in a particular award agreement.

 

   

No discounted stock options or stock appreciation rights. All stock options and stock appreciation rights granted under the Incentive Plan must have an exercise price not less than the fair market value of a share of Parent Common Stock on the effective date the stock option or stock appreciation right is granted.

 

   

Certain amendments to the Incentive Plan require stockholder approval. The Incentive Plan requires stockholder approval to the extent such approval is required by law including the Internal Revenue Code and applicable stock exchange requirements.

 

   

Limit on non-employee director awards and other awards. The annual compensation awarded to any non-employee directors of the post-combination company during each calendar year, including both shares subject to stock awards granted under the Incentive Plan or otherwise and any cash fees paid to such non-employee director during any calendar year may not exceed $1,000,000 in total value, or $2,000,000 for the calendar year in which a non-employee director is first appointed or elected to the Board. Such limitation on non-employee director stock awards does not apply to any cash retainer fees, including cash retainer fees converted into equity awards at the election of the non-employee director.

Information Regarding the Post-Combination Company’s Equity Incentive Program

It is critical to the post-combination company’s long-term success that the interests of its employees, directors, officers, and consultants are tied to its success as “owners” of the business. Approval of the increase to shares available under the Incentive Plan will allow the post-combination company to grant restricted stock unit awards, stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, performance shares, performance units, cash-based awards and other stock-based awards at levels determined appropriate by the Board or the Board’s compensation committee following the Closing of the Merger in order to attract new employees, directors, officers, and consultants, retain existing employees, directors, officers, and consultants, and to motivate such persons to exert maximum efforts for the post-combination company’s success. The Incentive Plan will allow the post-combination company to utilize these foregoing types of equity and cash incentive awards with flexibility to offer competitive equity compensation packages in order to retain and motivate the talent necessary for the post-combination company.

If the Company’s proposal to approve the increases to shares available for issuance under the Incentive Plan is approved by the Company’s stockholders, the Company will reserve [    ]% of its anticipated fully-diluted capitalization following the Closing of the Merger available for grant under the Incentive Plan as of the effective time of the Closing of the Merger, which includes 1,600,000 shares of Parent Common Stock issued to the former Vivial equity holders in the Merger, 8,400,000 shares issued to the PIPE Investors and 11,851,852 shares of Parent Common Stock into which the Convertible Notes are convertible, plus those shares issuable upon the Company’s outstanding warrants. This pool size is necessary to provide sufficient reserved shares for a level of

 

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grants that will attract, retain, and motivate employees and other participants under the Incentive Plan. Furthermore, if the increase to shares available for issuance under our Incentive Plan is approved by the Company’s stockholders, the number of shares available for grant (other than incentive stock options) pursuant to the Incentive Plan will be subject to annual increases effective as of the first day of the Company’s fiscal year beginning in 2022 and the first day of each subsequent fiscal year through and including the first day of the Company’s fiscal year commencing in 2029 in an amount equal to the lesser of (i) 5% of the number of shares of the Parent Common Stock outstanding as of the post-combination company’s immediately preceding fiscal year or (ii) such amount, if any, as the Board may determine.

Description of the Incentive Plan

The material features of the Incentive Plan are described below. The following description of the Incentive Plan is a summary only and is qualified in its entirety by reference to the complete text of the Incentive Plan. Stockholders are urged to read the actual text of the Incentive Plan in its entirety.

Purpose

The purpose of the Incentive Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons for performing services and by motivating such persons to contribute to the growth and profitability of the Company and its subsidiaries.

Types of Awards

The terms of the Incentive Plan provide for the grant of unit awards (including restricted stock unit awards), incentive stock options (within the meaning of Section 422 of the Code), nonstatutory stock options, SARs, unrestricted stock awards, restricted stock awards, restricted stock units awards, performance awards, cash-based awards, and other stock-based awards that are convertible or otherwise based on our stock.

Shares Available for Awards

Subject to adjustment for specified changes in the Company’s capitalization as set forth in the Incentive Plan, the maximum aggregate number of shares of Parent Common Stock that may be issued under the Incentive Plan if the Incentive Plan Proposal is approved will be [    ] shares, plus (2) except with respect to awards of incentive stock options, annual increases effective as of the first day of the post-combination company’s fiscal year beginning in 2022 and the first day of each subsequent fiscal year through and including the first day of the post-combination company’s fiscal year commencing in 2029 in an amount equal to the lesser of (i) 5% of the number of shares of the Parent Common Stock outstanding as of the post-combination company’s immediately preceding fiscal year or (ii) such amount, if any, as the Board may determine.

The Company’s Board or the Board’s compensation committee may authorize the issuance or assumption of benefits under the Incentive Plan in connection with any stock dividend, stock split, combination of shares (including a reverse stock split), recapitalization, or other change in the Company’s capital structure or any other event that the Plan Administrator deems appropriate to avoid distortion in operation of the Incentive Plan and to preserve the value of awards made under the Incentive Plan. In addition, subject to compliance with applicable laws, and stock exchange listing requirements, shares available for grant under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for awards under the Incentive Plan to individuals who were not employees or directors of the Company or a parent or subsidiary of the Company prior to the transaction and will not reduce the number of shares otherwise available for issuance under the Incentive Plan.

Shares issued under the Incentive Plan will consist of authorized but unissued or reacquired shares of Parent Common Stock. No fractional shares of Parent Common Stock will be delivered under the Incentive Plan.

 

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The following shares of Parent Common Stock will become available again for issuance under the Incentive Plan: (i) any shares that are forfeited back to or are repurchased by the Company because of a failure to meet a contingency or condition required for the vesting of such shares, (ii) any shares reacquired by the post-combination company to satisfy a tax withholding obligation in connection with the award, and (iii) any shares that are reaquired by the Company to satisfy the exercise, strike or purchase price of an award.

Non-Employee Director Compensation Limit

Under the Incentive Plan, the annual compensation awarded to any non-employee directors of the post-combination company during each calendar year, including both shares subject to stock awards granted under the Incentive Plan or otherwise and any cash fees paid to such non-employee director during any calendar year may not exceed $1,000,000 in total value, or $2,000,000 for the calendar year in which a non-employee director is first elected or appointed to the Board. Such limitation on non-employee director stock awards does not apply to any cash retainer fees, including cash retainer fees converted into equity awards at the election of the non-employee director.

Administration

The Incentive Plan will be concurrently administered by the Board or the Board’s compensation committee. The Board and the Board’s compensation committee may each be considered to be a “Plan Administrator” for purposes of this Equity Incentive Plan Proposal.

Subject to the terms of the Incentive Plan, the Plan Administrator has full and final power and authority to interpret the Incentive Plan, determine, modify or waive the terms or conditions of any award, prescribe forms, rule or procedures, or do all things necessary to carry out the purposes of the plan.

Amendment and Termination

The Plan Administrator may at any time amend the Incentive Plan or any outstanding award and may at any time terminate or suspend the Incentive Plan as to future grants of awards, provided that the Plan Administrator may not, without the affected award recipient’s consent or unless expressly reserved in the participant’s award agreement, alter the terms of the Plan so as to adversely affect a participant’s rights under an award without the consent of the Participant.

No awards may be made under the Incentive Plan following November 25, 2029, but previously granted awards may continue in accordance with their terms beyond that date.

Eligibility

All of the Company’s (including its affiliates) employees, directors, consultants and advisors are eligible to participate in the Incentive Plan and may receive all types of awards, except that only employees may receive incentive stock options. Incentive stock options may be granted under the Incentive Plan only to the Company’s employees (including employees who are officers) and employees of its parent and subsidiary corporations (as determined in accordance with Section 424 of the Code).

Terms and Conditions of Awards

All Awards

Generally, the Plan Administrator will determine the terms of all awards under the Incentive Plan, including the vesting and acceleration of vesting of awards, provisions for the withholding of taxes, and payment of amounts in lieu of cash dividends or other cash distributions with respect to the Parent Common Stock subject to awards.

 

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Awards Requiring Exercise

Incentive stock options and, except as provided in the award agreement, nonqualified stock options, may not be transferred other than by will or the laws of descent and distribution, and during an employee’s lifetime may be exercised only by the employee or the employee’s guardian or legal representative. Upon the cessation of a participant’s employment with the post-combination company, an award requiring exercise will cease to be exercisable and will terminate and all other unvested awards will be forfeited, except that:

 

   

All stock options and SARs held by the participant which were exercisable immediately prior to the participant’s termination of service with the post-combination company other than for Cause (as defined in the Incentive Plan) will, except as otherwise set forth in the option award agreement, remain exercisable for the lesser of (i) three months or (ii) the period ending on the latest date such stock option or SAR could have been exercised;

 

   

All stock options and SARs held by the participant which were exercisable immediately prior to the participant’s termination of service with the post-combination company due to death will remain exercisable for the lesser of (i) the one year period ending with the first anniversary of the participant’s termination or (ii) the period ending on the latest date on which such stock option or SAR could have been exercised (provided that a participant’s service will be deemed to have terminated due to death if the participant dies within three (3) months (or such other period provided by the participant’s award agreement) after the participant’s termination of service); and

 

   

All stock options and SARs held by a participant which were exercisable immediately prior to the participant’s termination of service with the post-combination company due to Disability (as defined in the Incentive Plan) will remain exercisable for the lesser of (i) the one year period ending with the first anniversary of the participant’s termination or (ii) the period ending on the latest date on which such stock option or SAR could have been exercised.

The exercise price (or base value from which appreciation is to be measured) of each award requiring exercise will be 100% of the fair market value of the Parent Common Stock subject to such award, as determined on the effective date of the grant, or such higher amount as the Plan Administrator may determine; provided that incentive stock options granted to participants who own stock of the post-combination company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the post-combination company or any parent corporation, subsidiary corporation or affiliate of the post-combination company (a “Ten Percent Holder”) must have an exercise price per share not less than 110% of the fair market value of a share of Parent Common Stock on the effective date the incentive stock option is granted. Fair market value will be determined by the Plan Administrator consistent with the applicable requirements of Section 409A of the Code.

Awards requiring exercise will have a maximum term not to exceed ten years from the date of grant. Incentive stock options granted to a Ten Percent Holder will have a maximum term not to exceed five years from the date of grant.

Effect of a Change in Control

In the event of a “Covered Transaction” as described in the Incentive Plan, the acquiring or successor entity may assume or continue all or any awards outstanding under the Incentive Plan or substitute substantially equivalent awards.

Any awards that are not assumed or continued in connection with a Covered Transaction or are not exercised or settled prior to the Change in Control will full accelerate in full to a date prior to the effective time of the Covered Transaction (contingent upon the effectiveness of the Covered Transaction) as the Board determines (or, if the Board does not determine such a date, to the date that is five days prior to the effective time of the Covered Transaction) and such awards will terminate effective as of the time of the Change in Control if not exercised (if applicable) at or prior to the effective time of the Covered Transaction, and any reacquisition or

 

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repurchase rights held will lapse. With respect to the vesting of any performance award, that will acceleration due to non-assumption or non-continuation, such award will accelerate at 100% of the target level upon the occurrence of a Covered Transaction. Notwithstanding the foregoing, the Board may in its sole discretion provide that the holder of an award may not exercise such award and will instead receive a payment at the effective time of the Covered Transaction equal to any excess of the value of property the participant would have received had he or she exercised less any exercise or purchase price,.

Effect of Section 280G and Section 4999 of the Code in Connection with a Change in Control

If any payment or benefit received or to be received by a participant from the Company or otherwise would subject the participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of the payment or benefit as an “excess parachute payment” under Section 280G of the Code, then the particpant’s award or benefit (including, but not limited to, any acceleration of vesting) will be reduced if the reduction would result in a greater economic benefit to the participant on an after-tax basis.

Clawback Policy

All awards under the Incentive Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any stock exchange on which the Company’s securities are listed or as otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection At or other applicable law and any clawback policy that the Company otherwise adopts to the extent applicable and permissible under applicable law. Further, no recovery of compensation under a Company clawback policy will be an event giving rise to a participant’s right to voluntarily terminate his or her employment upon a “resignation for good reason” or for a “constructive termination” or similar term under any plan or agreement with the Company.

If the post-combination company is required to prepare an accounting restatement due to the material noncompliance of the post-combination company, as a result of misconduct, with any financial reporting requirement under the securities laws, any participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, will reimburse the post-combination company for (i) the amount of any payment in settlement of an award received by such participant during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such participant from the sale of securities of the post-combination company during such 12-month period.

U.S. Federal Income Tax Consequences

The following is a general summary of the material U.S. federal income tax consequences of the grant, exercise and vesting of awards under the Incentive Plan and the disposition of shares acquired pursuant to the exercise or settlement of such awards and is intended to reflect the current provisions of the Code and the regulations thereunder. This summary is not intended to be a complete statement of applicable law, nor does it address foreign, state, local or payroll tax considerations. This summary further 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. Holders of incentive stock options will generally incur no federal income tax liability at the time of grant or upon vesting or exercise of those options. However, the spread at exercise may give rise to “alternative minimum tax” liability for the taxable year in which the exercise occurs. If the holder does not dispose of the shares before the later of two years following the date of grant and one year following the date of

 

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exercise, the difference between the exercise price and the amount realized upon disposition of the shares will constitute long-term capital gain or loss, as the case may be. Assuming the holding period is satisfied, no deduction will be allowed to us for federal income tax purposes in connection with the grant or exercise of the incentive stock option or the disposition of the shares acquired on exercise of the option. If, within two years following the date of grant or within one year following the date of exercise, the holder of shares acquired through the exercise of an incentive stock option disposes of those shares, the participant will generally realize taxable compensation at the time of such disposition equal to the difference between the exercise price and the lesser of the fair market value of the share on the date of exercise or the amount realized on the subsequent disposition of the shares, and that amount will generally be deductible by us for federal income tax purposes, subject to the possible limitations on deductibility under Sections 280G and 162(m) of the Code for compensation paid to individuals designated in those Sections. Finally, if incentive stock options (granted under all stock plans of the post-combination company and its parent and subsidiary corporations, including the Incentive Plan) first become exercisable by a participant in any one year for shares having an aggregate value in excess of $100,000 (based on the grant date value), the portion of the incentive stock options in respect of those excess shares will be treated as non-qualified stock options for federal income tax purposes.

No income will be realized by a participant upon grant or vesting of an option that does not qualify as an incentive stock option (a “non-qualified stock option”). Upon the exercise of a non-qualified stock option, the participant will recognize ordinary compensation income in an amount equal to the excess, if any, of the fair market value of the underlying exercised shares over the option exercise price paid at the time of exercise, and the participant’s tax basis will equal the sum of the compensation income recognized and the exercise price. We will be able to deduct this same excess 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 individuals designated in those Sections. In the event of a sale of shares received upon the exercise of a non-qualified stock option, any appreciation or depreciation after the exercise date generally will be taxed as capital gain or loss and will be long-term gain or loss if the holding period for such shares is more than one year.

SARs. 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 individuals 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), 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 restricted stock forfeited 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 individuals 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

 

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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 individuals designated in those Sections.

New Incentive Plan Benefits

Grants under the Incentive Plan will be made at the discretion of the compensation committee of the post-combination company. Any grants under the Incentive Plan are not yet determinable. Our executive officers and directors have an interest in this proposal because they are eligible to receive awards under the Incentive Plan. To date, only RSUs have been granted under the Incentive Plan. The following table sets forth (a) the aggregate number of shares of Parent Common Stock subject to RSUs granted under the Incentive Plan during the last fiscal year, and (b) the weighted-average grant date fair value of such RSUs:

 

Name of Individual or Group    Number of
RSUs
Granted in 2020
     Weighted-average
grant date fair value
(per share)
 

Dario Calogero

     [        $ [    

Giacomo Dall’Aglio

     [        $ [    

All executive officers, as a group

     [        $ [    

All directors who are not executive officers, as a group

     [        $ [    

All employees who are not executive officers, as a group

     [        $ [    

The value of the awards granted under the Incentive Plan will depend on a number of factors, including the fair market value of the Parent Common Stock on future dates, and the extent to which any applicable performance goals necessary for vesting are achieved.

Effective Date; Term

If this Incentive Plan Proposal is approved by the Company’s stockholders, the Incentive Plan will be effective immediately upon the closing of the Merger. No award will be granted under the Incentive Plan on or after November 25, 2029. Any award outstanding under the Incentive Plan at the time of termination will remain in effect until such award is exercised or has expired in accordance with its terms.

Vote Required for Approval

Approval of this proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, under Delaware law, a Company stockholder’s failure to vote, as well as an abstention and broker non-vote, will have no effect on the Incentive Plan Proposal. For purposes of NYSE American rules, however, abstentions are treated as “votes cast” and will be counted as votes “AGAINST” this proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established.

Recommendation of the Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” PROPOSAL NO. 2.

 

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PROPOSAL NO. 3 — THE ADJOURNMENT PROPOSAL

Overview

The Adjournment Proposal, if adopted, will allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies. The Adjournment Proposal will only be presented to our stockholders in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal and the Incentive Plan Proposal.

Consequences if the Adjournment Proposal is Not Approved

If the Adjournment Proposal is not approved by our stockholders, our Board may not be able to adjourn the Special Meeting to a later date in the event that there are insufficient votes for, or otherwise in connection with, the approval of the NYSE American Stock Issuance Proposal, the Incentive Plan Proposal or any other proposal.

Vote Required for Approval

The approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote, as well as an abstention from voting and a broker non-vote, will have no effect on the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Adjournment Proposal.

Recommendation of the Board of Directors

OUR BOARD OF DIRECTORS RECOMMENDS THAT OUR STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL.

The existence of financial and personal interests of one or more of the Company’s directors or officers may result in a conflict of interest on the part of such director(s) or officer(s) between what he or they may believe is in the best interests of the Company and its stockholders and what he or they may believe is best for himself or themselves in determining to recommend that stockholders vote for the proposals.

 

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INFORMATION ABOUT MGAGE

References in this section to “we,” “our,” “us,” the “Company” or “mGage” generally refer to Vivial Networks LLC and its consolidated subsidiaries.

Business

Introduction

Vivial Networks LLC, a wholly-owned indirect subsidiary of Vivial Inc., was formed to invest in and acquire digital marketing companies. On August 21, 2015, Vivial Networks completed the acquisition of mGage, LLC (“mGage”). mGage is a global mobile engagement provider that enables brands to intelligently personalize mobile communications for the omnichannel consumer, across marketing and customer care interactions, primarily through SMS and MMS text marketing and engagement campaigns. Currently mGage provides these services in North America, South America, Europe, and Asia with plans for continued global expansion.

Overview

The mobile advertising industry is growing rapidly, forecast by eMarketer, to grow in the U.S. at a 16% CAGR from 2020-2024, reaching a total size of $174 billion. Globally, the industry is expected to exceed $600 billion by 2026, per ResearchandMarkets.com. Industry growth is primarily driven by the ongoing mass adoption of mobile devices and effectiveness of mobile as a means of engaging audiences on a highly targeted, personalized basis. The Pew Research Center estimates that 93% of adults in advanced economies own a mobile phone, providing advertisers with near-ubiquitous reach to the global population. eMarketer estimates that mobile advertising comprises two-thirds of total U.S. digital ad spending, up from 36% in 2017.

As mobile advertising continues to expand, marketers are increasingly turning to text messaging (SMS, MMS) as their preferred mobile communication channel. By 2024, Mobilesquared estimates that total “application-to-person” (“A2P”) message volume, whereby a text message is sent between an application on behalf of a business and an end-user, will exceed 3.2 trillion messages annually, more than double its 2019 level. With total A2P messaging spend by marketers expected to grow at a 19% CAGR from 2019-2023, reaching a size of $43 billion, best-of-breed providers with the most reliable networks, broadest reach and industry vertical expertise are poised to capture this spend.

Beyond marketing use cases, A2P messages have emerged as a highly effective tool for areas such as account security, contact centers and a variety of other scenarios where businesses require an effective means of communication with their customers. Businesses’ demand for customer communications technology that can be implemented and scaled efficiently gave rise to the Communications-Platform-as-a-Service (”CPaaS”) solution model, a cloud-based, platform that offers Application Programming Interfaces (“APIs”) and integrated development environments that simplify the integration of communications capabilities. The CPaaS market is forecast to grow at a 29% CAGR over the next five years, adding a hyper-growth tailwind to providers such as mGage.

mGage is positioned as a clear leader in the A2P messaging and CPaaS industries with the following highly valuable set of distinctive business characteristics:

 

   

mGage is just one of four companies with direct physical network connections to, and commercial contracts with, the top four U.S. carrier networks (prior to the recent combination of T-Mobile and Sprint), providing network latency, operational efficiency and cost advantages;

 

   

mGage has over 300 enterprise clients, including several of the world’s most recognizable brands;

 

   

mGage offers cloud-based technology across all major messaging channels;

 

   

mGage’s ultra low-latency network is built on modern infrastructure with global scale; and

 

   

mGage has re-ocurring message volume and negligible customer churn.

 

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Our Vision

mGage’s vision is empowering brands to connect, engage and inspire consumers when and where it matters most.

mGage Today

mGage has more than 300 customers and business partners worldwide across industry verticals such as telecom, gaming travel & hospitality, retail, financial services, emergency alerts, media and enterprise software providers, mGage’s customers are located in regions throughout the world including North and South America, Europe, and Asia.

Although mGage continues to expand by introducing new customers to its key product Communicate Pro, the breadth and stability of its existing customers provide it with a solid base of revenue upon which it can continue to innovate and make investments to strengthen its product portfolio, expand its global presence, and in particular into the Americas and European markets following the recruit of world-class talent.

Customers

mGage’s customers are enterprises which use digital mobile communications in the conduct of their business. mGage’s platform enables these communications by integrating mobile alert notifications and interactive capabilities to reach and engage end-user customers. mGage enables its customers and business partners to connect enterprise software and applications to mobile network operators by providing a simple user interface for programmable communication services and carefully-documented APIs. mGage’s also enables customer’s to manage end-user communications through its functionally rich Communicate Pro user interface.

mGage is constantly adding and upgrading its service offerings to account for new end-user consumer behavior changes and progress (such as adding new instant messaging communication channels). mGage provides multiple levels of global 24x7 customer support, SLAs and network reliability to meet the expectations and requirements of its customers. Customers and business partners who use mGage’s platform value its network reliability, mGage’s responsive customer support, competitive pricing, and collaborative approach. In particular, mGage is a co-creator – meaning it is a CPaaS focused on a consultative business model that charges customers through a combination of CPaaS usage, platform fee and professional service fees.

Seasonality

Historically, mGage has experienced seasonality in its revenue generation, with slower traction in the first calendar quarter, and increasing revenues as the year progresses toward fourth calendar quarter, during which the Company usually registers the higher revenues in messaging and notification services. This patterned revenue generation behavior takes place due to mGage’s customers sending more messages to their end-user customers who are engaged in consumer transactions at the end of the calendar year, resulting in the increase in notifications of electronic payments, credit card transactions and e-commerce.

The Market for mGage’s Products

The CPaaS market is evolving and is expanding in several directions as enterprise adoption of cloud-based communications occurs. The need for enterprises to provide enhanced omnichannel end-user customer experiences is driving the adoption of embedded, real-time messaging communications for enhanced end-user customer-interfacing interactions. The CPaaS market is expected to reach $25.9 billion in 2025 from $7.2 billion in 2020.2 The size of the global A2P messaging market will grow from $61B in 2019 to $78B in 2022.3 The volume of chatbot usage is expected to grow by 84% globally (2018 - 2023). In the U.S., access to chatbots will grow YoY by 160%, in India by 342%, in Western Europe 170%.4 mGage’s products and services available through its platform address all the above-mentioned markets.

 

2 

Source: Juniper Research, CPaaS-2020-2025-Deep-Dive-Data-and-Forecasting.

3 

Source: Statista estimates, Credence Research (2020).

4 

Source: Juniper Research (July 2020).

 

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mGage’s Key Products and Services

Communicate Pro: Communicate Pro allows mGage’s customers to follow end-users through each step of their buying journey, enabling customers to acquire and build a database of customers who want to interact with the company and receive relevant information, target end-users with relevant information such as sales alerts and coupons, and provide end-users with exclusive offers.

 

   

Acquisition: Build a database of customers who want to interact with your brand and receive relevant information.

 

   

Sales Growth: Target customers in opt-in database with relevant information such as sales alerts and coupons.

 

   

Loyalty: Provide special offers exclusively to loyalty club members/frequent shoppers such as “bonus” coupons, sales and special events.

Communicate Pro supports clients by providing the following services:

 

   

Tracking & Retargeting: Communicate Pro provides tracking and retargeting tools to create repeat business or bring consumers back into the buying cycle. Gathering personalized information such as location, purchase history or demographics provides opportunities to tailor messages to the right customers at the right times.

 

   

Broadcasts: Send personalized messages to customers in opt-in marketing lists based on pre-defined attributes. Flexible API integrations allow clients to pull information from external services such as CRM or email platform and dynamically insert it into messages. Broadcast Messages also support advanced features such as message delivery by time zone or by delivery window, or throttled message delivery at a specified rate.

 

   

Chat: Receive and respond to incoming text messages from customers, and route incoming requests to the right agent. Gain a more complete picture of customer care needs by knowing when new messages are received, and avoid having multiple agents work on the same customer’s case.

 

   

Multistep Programs: Multistep programs take recipients on a unique path based on responses and personal information. Interactive programs such as coupons, sweepstakes and surveys can be implemented immediately through pre-configured templates, while more sophisticated programs can be customized for the most detailed level of customer engagement.

 

   

Third Party Integration: Data can easily be integrated and shared with external services and applications and customers segmented using the attributes collected within Communicate Pro along with those from external services such as CRM.

Connect: Connect is a user interface for programmable communication services, making use of APIs to allow mGage’s customers to directly connect to mGage’s platform for use in their own campaign management platforms. This enables mGage’s customers to seamlessly build on existing messaging programs without the need for extensive development.

Features and functionalities include:

 

   

Straightforward Documentation: easy-to-understand documentation and code examples available in various programming languages.

 

   

Flexible Implementation: mGage’s customers can use mGage’s REST APIs or connect via SMPP for increased throughput.

 

   

Global Reach: mGage’s customers can reach an audience across more than 185 countries with high quality connections to more than 600 carriers worldwide

 

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Unicode Support: mGage’s full Unicode support ensures that customers’ messages are received the way they are intended, regardless of language.

 

   

Concatenation: messages that are 160+ characters are automatically combined into a single message on recipient’s device.

 

   

Multiple Sender ID Options: short code, long code, alphanumeric, and alpha sender originator types are all supported.

 

   

Delivery and Status Receipts: mGage’s customers receive updated on the state of a message within the carrier network and know immediately if there has been a problem.

 

   

CRM system integration from external services and applications.

 

   

Drilldown Reporting: web-based reporting tool for viewing reports in macro and granular detail with advanced graphics.

Operations

mGage offers best in class customer support with a network operations center, carrier relations and business intelligence teams ensuring client satisfaction. mGage’s network operation center is a single point of contact for all production issues, offering 24/7 support and platform monitoring. mGage has a carrier relations team with expertise in compliance and has the number one migration team in the U.S. mGage’s business intelligence team offers custom reporting, KPI measurement, campaign analysis and strategic recommendations to drive further success.

Sales and Marketing

mGage has a dedicated mission-specific salesforce driving top-line targets which combines client relationship management with technical expertise. mGage sales directors source new client relationships in specific end-markets to build sector focus and knowledge, and team up with solutions engineers to provide technical expertise to integrate with new clients. All mGage accounts have a dedicated account manager who engage in frequent, continuous communication with accounts to ensure client satisfaction, while technical program managers provide post-sale technical support to all existing clients.

Competitive Strengths

Over mGage’s history, mGage has developed a powerful CPaaS solution that it believes represents a unique, high growth opportunity in the CPaaS market. The Communicate Pro platform is accessible globally, has a high-volume infrastructure that has been designed to be easily scalable, and allows for communications services that have been designed having security, compliance and integration capabilities that can meet the needs of mGage’s customers and their customers and regulators. Furthermore, mGage continues to develop organically and strategically new communications services to meet the evolving needs of its customers and business partners. In addition, mGage has identified the following competitive strengths:

 

   

Experienced Management Team: mGage has a proven management team with many decades of combined experience at industry-relevant companies.

 

   

Existing Customers and Relationships: mGage believes its deep customer relationships provide it with the opportunity to expand deployment of its products and the opportunity to quickly deploy new communications service offerings. mGage’s top-10 clients have an average tenure of over 10 years. mGage’s industry leading product offerings and long-term blue-chip customer base has generated 20%+ revenue growth, 30%+ gross margin profile, high-teens EBITDA margin profile along with generating free cash flow at scale. mGage’s loyal enterprise client base includes world-renowned brands that span several end markets including, telecom, gaming travel & hospitality, retail, financial services, emergency alerts, media and enterprise software providers.

 

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Superior reliability and network. mGage has invested heavily in an ultra low-latency network built on modern and highly scalable infrastructure that meet and beats the most stringent network performance requirements of very demanding customers.

 

   

Outstanding customer support: Dedicated support team which provides our customers with strategic and technical guidance at every step of the process. Their expertise and deep knowledge is unmatched in the industry.

Growth Strategy

mGage’s growth strategy is predicated on leveraging its competitive advantages in global scale, network breadth and quality, a global brand and product innovation to continue expansion of its core messaging business. Market growth will support continued strong growth within mGage’s existing customer base, which mGage will supplement through new customer acquisition. Specific growth initiatives that mGage plans to execute on in the near-term include:

 

   

Product innovation and enhancement – mGage continues to invest in all key mobile messaging protocols & channels and launching new products;

 

   

Increase penetration within existing client organizations – the variety of mobile messaging use cases provides an opportunity for mGage to expand its efforts in selling across departments at existing clients;

 

   

International expansion – mGage’s global enterprise client relationships and deep knowledge of country-specific market dynamics and regulations make it uniquely equipped for profitable international expansion; and

 

   

Increase penetration in the healthcare end-market – mGage recently received its ISO 27001 certification, which will unlock access to a vast healthcare industry customer engagement spend.

Competition

The CPaaS market is highly competitive and characterized by continuous technological change. The principal competitive factors in this market include: completeness of offering, credibility with developers and business users, global reach, ease of integration, product features, platform scalability, brand reputation and awareness, customer support, and the cost of deployment of product offerings. mGage believes that it competes favorably within each of these categories.

As mGage is one of 4 Tier 1 providers in the US, mGage competes with the other Tier 1 aggregators including Sinch, Vibes, and Infobip (who recently acquired OpenMarket). Additionally, mGage completes with other CPaaS providers and Tier 2 aggregators including Twilio, Syniverse, Attentive Mobile, Upland Software, to name a few. Finally, mGage competes with many other international aggregators in the markets it serves.

Some competitors have greater financial, technical and other resources, greater name and brand recognition, larger sales and marketing efforts and larger portfolios of intellectual property. As a result, certain competitors may be able to respond more quickly to new or changing technologies, opportunities, standards or customer needs and requests. With the introduction of new products and services and new market entrants, mGage expects competition to intensify in the future. mGage is also addressing enterprises that have developed over the years “in-house” products for which mGage can offer a more cost-effective, robust and richer set of products to enhance the total cost of ownership and return on investment for such customers.

Employees

As of December 31, 2020, mGage has a headcount of 158, of which 148 are employees and 10 are full time contractors. None of mGage’s employees is currently covered under any collective bargaining agreements. mGage believes its relations with its employees are good and it has never experienced a material work stoppage.

 

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Facilities

mGage maintains a global footprint with leased facilities located in Los Angeles, Atlanta, The Netherlands and London. mGage believes that its current facilities are adequate to meet its ongoing needs and that, if it requires adjusted or additional space, it will be able to obtain additional facilities on commercially reasonable terms, or further consolidate facilities. Going forward, mGage will continue to assess its facilities requirements and make appropriate adjustments as needed and dictated by the business.

mGage operates infrastructure in three (3) third-party data centers under colocation agreements and leverages cloud services operated by Amazon Web Services.

Intellectual Property

mGage relies on a combination of patent, copyright, trademark and trade secret laws in the U.S. and other jurisdictions, as well as license agreements and other contractual protections, to protect mGage’s proprietary technology. In addition, mGage protects intellectual property rights by implementing a policy that requires its employees and independent contractors involved in the development of intellectual property on its behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on its behalf are mGage’s property, and assigning to mGage any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.

 

   

mGage, as of December 31, 2020, has been issued 4 patents in the U.S.

 

   

mGage’s trademark and certain variations thereof are registered or are the subject of pending trademark applications in the U.S. In addition to the mGage trademark, mGage has 10 additional trademark registrations or pending registrations with the following authorities/countries: the UK, Ireland, Canada, Australia, China, Hong Kong, India, Spain, Mexico, South Korea,

 

   

mGage owns an Internet domain registration for mGage.com and certain other domains.

 

   

mGage generally controls access and the use of its proprietary software and other confidential information through internal and external controls including contractual protections with employees, contractors, customers and partners. Unauthorized parties may, nonetheless, still copy or otherwise obtain and use mGage’s software and technology despite mGage’s efforts to protect its trade secrets and proprietary rights through intellectual property rights, licenses and confidentiality agreements.

Regulatory

mGage is subject to a number of U.S. federal, state and foreign laws and regulations that involve matters central to its business. These laws and regulations may involve privacy, data protection, intellectual property, competition, consumer protection, general telecommunications laws or other subjects. Many of the laws and regulations to which mGage is subject are still evolving and being tested in courts and could be interpreted in ways that could harm its business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which mGage operates. Because global laws and regulations have continued to develop and evolve rapidly, it is possible that mGage or its communications services or mGage’s platform may not be, or may not have been, compliant with each such applicable law or regulation.

In addition, as mGage expands internationally, it will be subject to laws and regulations in the countries in which it offers services. Many foreign countries and governmental bodies, including the EU member states, have laws and regulations concerning the collection and use of Personally Identifiable Information (“PII”) obtained from individuals located in the EU or by businesses operating within their jurisdiction, which are often

 

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more restrictive than those in the U.S. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of PII that identifies or may be used to identify an individual, such as names, telephone numbers, message addresses and, in some jurisdictions, IP addresses and other online identifiers.

For example, in April 2016 the EU adopted General Data Protection Regulation (“GDPR”), which took full effect on May 25, 2018. GDPR enhances data protection obligations for businesses and requires service providers (data processors) processing personal data on behalf of customers to cooperate with European data protection authorities, implement security measures and keep records of personal data processing activities. Noncompliance with the GDPR can trigger fines equal to or greater of €20 million or 4% of global annual revenues. Given the breadth and depth of changes in data protection obligations, preparing to meet the requirements of GDPR has required significant time and resources, including a review of mGage’s technology, systems, policies and procedures currently in use against the requirements of GDPR. There are also additional EU laws and regulations (and member states’ implementations thereof) which govern the protection of consumers and of electronic communications and which may impact mGage’s business.

Furthermore, outside of the EU, mGage continues to see increased regulation of data privacy and security, including the adoption of more stringent subject matter specific state laws in the U.S. For example, on June 28, 2018, California enacted the California Consumer Privacy Act (“CCPA”), which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt-out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches, which is expected to increase data breach related litigation.

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

As mGage continues to expand internationally, mGage has become subject to telecommunications laws and regulations in the foreign countries where mGage offers its services. mGage’s international operations are subject to country-specific governmental regulation or local rules, as well as rules imposed by local carriers with whom mGage may have a direct contractual relationship, and related actions that have increased and may continue to increase mGage’s costs or impact its services, mGage’s platform, platform or prevent mGage from offering or providing mGage’s services in certain countries.

In addition, there are several U.S. laws that are applicable to mGage’s services. For instance, the Telephone Consumer Protection Act (“TCPA”) restricts telemarketing calls and the use of automatic telephone dialing systems without proper consent from consumers. Another example is the federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (“CAN-SPAM Act”) which establishes certain requirements for commercial messages and transactional messages and specifies penalties for the transmission of messages that are intended to deceive the recipient as to source or content. In addition, some states have passed laws regulating commercial communication practices that are significantly more restrictive and difficult to comply with than the CAN-SPAM Act. Some portions of these state laws may not be preempted by the CAN-SPAM Act.

The scope and interpretation of such U.S. laws, including the TCPA and the CAN-SPAM Act, that are or may be applicable to the delivery of text messages are continuously evolving and developing. If mGage does

 

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not comply with these laws, or regulations or if mGage becomes liable under these laws or regulations due to the failure of its customers to comply with these laws by obtaining proper consent, mGage could face direct liability.

In addition, certain non-U.S. jurisdictions have enacted laws that regulate sending messages, and some of these laws are more restrictive than U.S. laws. For example, some foreign laws prohibit sending broad categories of messages unless the recipient has provided the sender advance consent to receipt of such messages, or in other words has “opted-in” to receiving such communication.

If mGage were found to be in violation of the TCPA, the CAN-SPAM Act, applicable state laws governing messages not preempted by the CAN-SPAM Act or foreign laws regulating the distribution of messages, whether as a result of violations by mGage’s customers or its own acts or omissions, mGage could be required to pay large penalties, which would adversely affect its financial condition, significantly harm mGage’s business, injure mGage’s reputation and erode customer trust. The terms of any injunctions, judgments, consent decrees or settlement agreements entered into in connection with enforcement actions or investigations against mGage in connection with any of the foregoing laws may also require mGage to change one or more aspects of the way mGage operates its business, which could impair mGage’s ability to attract and retain customers or could increase its operating costs.

Further, in order to provide services to consumer telephone numbers from the EU or certain other regions, companies may be required to register with the local telecommunications regulatory authorities, some of which have been increasingly monitoring and regulating the categories of sender identity and numbers that are eligible for provisioning services to end-users. Where necessary, mGage is registered in the countries in which it does business. Furthermore, in some countries, the regulatory regime around provisioning of services to consumer telephone numbers is unclear, subject to change over time, and sometimes may conflict from jurisdiction to jurisdiction. These regulations and governments’ approach to their enforcement are still evolving. As such, compliance with these types of regulation may require changes in products or business practices.

Legal Proceedings

mGage may be a plaintiff or defendant in certain lawsuits from time to time, may be involved in other pending and threatened litigation or other adversarial matters which arise in the ordinary course of business. While the ultimate outcome with respect to such proceedings cannot be predicted with certainty, at this time we believe such matters will not have a material adverse effect on mGage’s financial condition or results of operations.

 

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VIVIAL NETWORKS’ MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following management’s discussion and analysis in conjunction with (i) “Selected Historical Financial Information of Vivial Networks,” (ii) “Unaudited Pro Forma Condensed Combined Financial Information”; and (iii) the audited consolidated financial statements of Vivial Networks as of December 31, 2020 and 2019 and for the years then ended and the related notes. The discussion below includes forward-looking statements about Vivial Networks’ business, operations and industry that are based on current expectations that are subject to uncertainties and unknown or changed circumstances. Vivial Networks’ actual results may differ materially from these expectations as a result of many factors, including those risks and uncertainties described in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements.”

Overview

Vivial Networks, a wholly-owned indirect subsidiary of Vivial, was formed to invest in and acquire digital marketing companies. On August 21, 2015, Vivial Networks completed the acquisition of mGage. mGage is a global mobile engagement provider which enables brands to intelligently personalize mobile communications for the omni-channel consumer, across marketing and customer care interactions, primarily through SMS and MMS text marketing and engagement campaigns. Currently mGage provides these services in North America, South America, Europe, and Asia with plans for further global expansion.

Key Business Metrics

Revenue

Vivial Networks’ revenue is generated primarily from usage-based fees earned from the sale of mobile messaging services (including SMS, MMS, Push, OTT and RCS) offered to our customers through Communicate Pro, our cloud-based enterprise-level campaign management tool or through our APIs to easily integrate text messaging into existing systems and applications. Revenue can be billed in advance or in arrears depending on the term of the agreement; for the majority of customers revenue is invoiced on a monthly basis in arrears.

Operating Expenses

Vivial Networks’ operating expenses include cost of revenue, selling, general and administrative expense, and depreciation and amortization expense.

Cost of Revenue

The cost of revenue is comprised of carrier costs for the delivery of mobile messages.

Selling, General and Administrative Expense

Selling expense is comprised of compensation, variable incentive compensation, benefits related to sales personnel, along with travel expenses, other employee related costs, and expenses related to advertising, marketing programs and events. General and administrative expense is comprised of compensation and benefits of administrative personnel, including variable incentive pay and other administrative costs such as information technology, facilities expenses, professional fees, and travel expenses.

Depreciation and Amortization Expense

Depreciation and amortization expense is related to the depreciation and amortization of property and equipment that includes furniture, fixtures and equipment, computer equipment and purchased software, internally developed software and leasehold improvements.

 

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RESULTS OF OPERATIONS

The following table sets forth the results of operations for periods presented:

VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands)

 

     December 31,      December 31,  
     2020      2019  

Revenue

   $ 141,274      $ 111,890  

Operating expenses:

     

Cost of revenue (exclusive of certain depreciation and amortization expense included below)

     89,906        72,727  

Selling, general and administrative expense

     24,112        24,526  

Depreciation and amortization

     3,496        3,843  
  

 

 

    

 

 

 

Total operating expenses

     117,514        101,096  
  

 

 

    

 

 

 

Operating income

     23,760        10,794  

Other (income) expenses:

     

Interest (income)

     (2      (10
  

 

 

    

 

 

 

Total other (income) expenses, net

     (2      (10
  

 

 

    

 

 

 

Net income

   $ 23,762      $ 10,804  
  

 

 

    

 

 

 

Comparison of Years Ended December 31, 2020 and 2019

Revenue

In 2020, revenue increased by $29.4 million, or 26%, compared to 2019. This was primarily driven by an increase in revenue from message termination in international markets.

Cost of Revenue and Gross Profit

In 2020, cost of revenue increased by $17.2 million, or 24%, compared to 2019. The increase in cost of revenue was primarily attributable to the increase in message termination costs in international markets.

In 2020, gross profit of $51.4 million increased by $12.2 million, or 31%, compared to 2019 mainly as a result of the effects of higher gross profit resulting from message termination in international markets.

Selling, General and Administrative Expense

In 2020, Selling, general and administrative expenses decreased by $0.4 million, or 2%, compared to 2019. The decrease was primarily driven by lower Travel and Entertainment due to COVID-19 and a lower charge for shared services from Vivial Media (see Related Party Transactions in Note 2 of the Audited Financial Statements).

Foreign Currency Translation Adjustments

In 2020, Foreign Currency Translation adjustments, net of tax of zero increased $37,000 due to the strengthening of the British Pound vs. the US Dollar.

 

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Income Tax Expense

As a limited liability company, Vivial Networks’ taxable income or loss is allocated to the sole member. Therefore, no provision for income taxes has been included in the financial statements.

The Company evaluates its tax positions that have been taken or are expected to be taken to determine if any accrual is necessary for uncertain tax positions. As of December 31, 2020, and 2019, the unrecognized tax benefits accrual was zero. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2020, Vivial Networks had $27.8 million of cash, no short-term investments and $46,000 of restricted cash for UK short term deposits, compared to $11.0 million in cash as of December 31, 2019. Of the $27.8 million in cash, $1.5M million was held outside the US, primarily in the UK.

The consolidated balance sheet as of December 31, 2020 includes total current assets of $60.6 million and total current liabilities of $27.1 million.

Long-term financial obligations, excluding obligations due under purchase agreements are $47,000 relating to long term deferred rent.

Liquidity

Vivial Networks funds its short and long-term liquidity needs through a combination of cash on hand and cash flows generated from operations.

The consolidated balance sheet as of December 31, 2020 includes total current assets of $60.6 million and total current liabilities of $27.1 million. In addition, as of December 31, 2020 Vivial Networks had Total Member Equity of $41.9 million.

Growth in Vivial Networks’ revenue and gross profit from business operations, combined with declining Selling, general and administrative expense, created additional operating leverage and positive operating margins.

Cash Flows

Historical Cash Flows for the Fiscal Years Ended December 31, 2020 and 2019

The following table summarizes our cash flows for the periods presented:

VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     December 31,      December 31,  
     2020      2019  

Net cash provided by operating activities

   $ 26,478      $ 8,510  

Net cash (used in) investing activities

     (2,700      (4,490

Net cash (used in) financing activities

     (7,000      —    

Effects of foreign exchange rates on cash

     48        11  
  

 

 

    

 

 

 

Net increase in cash

   $ 16,826      $ 4,031  
  

 

 

    

 

 

 

 

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In the year ended December 31, 2020, cash provided by operating activities was $26.5 million, primarily consisting of the net income of $23.8 million also including non-cash items, mainly $3.5 million of depreciation and amortization expense, $282,000 of allowance for doubtful which were partially offset by $1.1 million of net cumulative changes in operating assets and liabilities.

In the year ended December 31, 2019, cash provided by operating activities was $8.5 million, primarily consisting of net income of $10.8 million also including non-cash items, mainly $3.8 million of depreciation and amortization expense, $431,000 of allowance for doubtful accounts which were partially offset by $6.6 million of net cumulative changes in operating assets and liabilities.

In the year ended December 31, 2020, cash used in investing activities was $2.7 million, primarily consisting of $2.7 million to fund the cost of internally developed software.

In the year ended December 31, 2019, cash used by investing activities was $4.5 million, consisting of $2.2 million to fund the cost of internally developed software and $2.3 million of purchases of hardware and software.

In the year ended December 31, 2020, cash used by financing activities was $7.0 million, consisting of capital distributions to parent.

In the year ended December 31, 2019, there were no financing activities.

Contractual Obligations and Other Commitments

The following table summarizes the non-cancelable contractual obligations as of December 31, 2020 as derived from the audited consolidated financial statements of Vivial Networks.

 

     Payments due by period  
Contractual Obligations    Total      Less
than
1
year
     1-3
years
     3-5
years
     More
than
5
years
 
(in thousands)                                   

Operating Lease Obligations

     2,064        931        955        178        [ ●] 

Vivial Networks leases certain office facilities and certain equipment under operating lease agreements which expire through 2025.

Litigation

Various lawsuits and other claims that are ordinary and typical for a business of Vivial Networks’ size and nature are pending against it, and Vivial Networks may be involved in future claims and legal proceedings incident to the conduct of its business. In addition, from time to time Vivial Networks receives communications from government or regulatory agencies concerning investigations or allegations of noncompliance with laws or regulations in jurisdictions in which it operates. Vivial Networks believes, based on its review of the latest information available, that its ultimate liability in connection with pending or threatened legal proceedings will not have a material adverse effect on our results of operations, cash flows or financial position. Since these matters are subject to inherent uncertainties, Vivial Networks’ view of them may change in the future.    

Debt

While Vivial Networks and its subsidiaries do not hold any debt, mGage and Vivial Networks are co-borrowers on the debt agreements of its parent company Vivial. The debt is comprised of a financing agreement and a revolving credit and security agreement. Total outstanding debt of its parent company was $100,098 thousand and $93,727 thousand for the years ending December 31, 2020 and 2019, respectively.

 

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Off-Balance Sheet Arrangements

In 2020 and 2019, Vivial Networks did not have any relationships with any entities or financial partnerships, such as structure finance or special purposes entities established for the purpose of facilitating off-balance sheet arrangements or other purposes.

Seasonality

Vivial Networks results are affected by the business cycles of its customer base, which generally results in stronger revenue in the fourth quarter of the financial year. Vivial Networks believes this variability is largely due to the market’s demand for its customers’ and/or business partners’ services due to higher levels of purchasing activity in the holiday season. As a result of Vivial Networks’ historically higher portion of sales in the fourth quarter of each year, its cost of revenue increases during such period relative to any increase in revenue.

Taxes

As a limited liability company, Vivial Networks’ taxable income or loss is allocated to the sole member, Vivial. Therefore, no provision for income taxes has been included in the financial statements.

Vivial Networks evaluates its tax positions that have been taken or are expected to be taken to determine if any accrual is necessary for uncertain tax positions. As of December 31, 2020, and 2019, the unrecognized tax benefits accrual was zero. Vivial Networks will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred.

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, the reported amounts of revenues and expenses during the period and the disclosure of contingent assets and liabilities in the consolidated financial statements and accompanying notes. Although these estimates are based on management’s knowledge of current events and actions that may be undertaken in the future, actual results may ultimately differ from estimates and assumptions, and such differences may be material to the consolidated financial statements. Examples of significant estimates include but are not limited to the allowance for doubtful accounts.

Revenue Recognition

Vivial Networks recognizes revenue over time as services are being rendered and in the amount of consideration described in the customer contracts. The performance obligation detailed in the contracts are for mobile messaging services. The mGage segment provides access to messaging applications as well as several mobile messaging services (SMS, MMS, Push, OTT and RCS). These performance obligations are clearly stated and easily identifiable in each of the customer contracts. The services are distinct and are promised within the contracts. The price for each service is clearly stated and fixed per month or variable depending on volumes (for Mobile Messaging). The prices can be subject to change by Vivial Networks for standard price increases in the market. Prices are allocated to each performance obligation under the contract in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the services to the customer. Recognition of revenue begins when the services are delivered and recognized ratably over the life of the contract as the customer simultaneously receives and consumes the benefits of the services.

Contract liabilities include unearned revenue. Unearned revenue is primarily made up of short code revenue, which is billed quarterly and amortized over the three-month service period. Another component of

 

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unearned revenue is prepaid message revenue which is billed per the terms of the customer contract but recognized over time as messages are used. There is also a small component of setup fee revenue that is recognized over time. The opening balance of unearned revenue at January 1, 2019 was $1,113 thousand.

Internal-Use Software Development Costs

Certain costs of the technology platform and other software applications developed for internal use are capitalized. Vivial Networks capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed, and (ii) it is probable that the software will be completed and used for its intended purpose. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all-significant testing. Costs related to specific upgrades and enhancements are also capitalized when it is probable the expenditures will result in additional functionality. Any costs incurred for maintenance and minor upgrades and enhancements are expensed.

Capitalized costs of the platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over five years. Management evaluates the useful life of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could affect the recoverability of these assets.

Impairment of Long-Lived Assets

Vivial Networks reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment at December 31, 2020 and 2019.

Recent Accounting Pronouncements Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02 “Leases (Topic 842)”. The standard requires lessees to recognize most leases on the balance sheet and addresses certain aspects of lessor accounting. The effective date of the standard will be for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022 and early adoption is permitted. Entities are allowed to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the consolidated financial statements, with an option to use certain relief. We are currently assessing the impact that adopting this new accounting guidance will have on our consolidated financial statements and related disclosures.

Qualitative and Quantitative Disclosures About Market Risk

We are subject to various risks and uncertainties which include, but are not limited to, competition in the marketplace, including new marketing products and services, our failure to respond adequately to changes in technology and user preferences, certain regulatory risks and reliance on systems and production platforms both owned and operated by third parties. To address these risks, we must, among other things, grow revenue from our Services, enhance advertiser value and expand value-added services, continue to focus on product operations and sales, and implement and maintain successful sales and marketing strategies. There can be no assurance that we will be successful in addressing these or other such risks.

 

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Factors that could adversely impact our operations or financial results include, but are not limited to, the following: unfavorable economic conditions; increased competition in the market; inability to expand our operations; fluctuations in interest rates; increased direct and indirect costs; unfavorable economic and political conditions in markets in which we operate; regulatory requirements; and litigation or legal proceedings.

Vivial Networks did not have any significantly adverse financial impacts due to the COVID-19 pandemic.

Foreign Currency Risk

Vivial Networks’ consolidated financial statements are presented in U.S. dollars. The functional currencies of our operations are the local currencies. The financial statements of our foreign subsidiaries have been translated into U.S. dollars. All asset and liability accounts have been translated using the exchange rates in effect at the balance sheet date. Income statement amounts have been translated using the average exchange rate for the respective year. Accumulated net translation adjustments are reported separately in other comprehensive income in the consolidated financial statements.    

Approximately 21% of Vivial Networks’ cost of revenue are paid in foreign currency, predominantly the Euro. Vivial has engaged in limited hedging activity to hedge against some international vendor costs. Vivial may elect to expand its hedging activity if the greater use of derivatives was determined to be beneficial to Vivial.

 

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PRICE RANGE OF SECURITIES AND DIVIDENDS

The Company

Price Range of the Company’s Securities

Kaleyra’s common stock and warrants began trading on the NYSE American under the symbols “KLR” and “KLR WS”, on November 26, 2019 and December 2, 2019, respectively. Each warrant entitles the holder to purchase one share of Parent Common Stock at a price of $11.50. Warrants may only be exercised for whole shares and became exercisable December 24, 2019 and will expire five years from such date or earlier upon redemption or liquidation.

The following table sets forth, for the calendar quarter indicated, the high and low sales prices per share of Parent Common Stock and warrant as reported on NYSE American for the periods presented.

 

     Common
Stock (KLR)
     Warrants
(KLR.WS)
 
     High      Low      High      Low  

Year ended December 31, 2020

           

Quarter ended June 30, 2020

   $ 4.12      $ 4.00      $ 0.65      $ 0.60  

Quarter ended September 30, 2020

   $ 7.69      $ 6.91      $ 1.32      $ 1.30  

Quarter ended December 31, 2020

   $ 9.9787      $ 9.55      $ 1.81      $ 1.66  

Quarter ended March 31, 2021

   $ 14.87      $ 14.10      $ 4.40      $ 4.35  

On February 18, 2020, the trading date immediately prior to the public announcement of the Merger, the Parent Common Stock and warrants closed at $16.68 and $5.72, respectively.

Dividend Policy of the Company

We have not paid any cash dividends on our shares of common stock to date and do not intend to pay cash dividends. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition of the Company. The payment of any dividends will be within the discretion of our then Board. It is the present intention of our Board to retain all earnings, if any, for use in our business operations and, accordingly, our Board does not anticipate declaring any dividends in the foreseeable future.

Vivial

Price Range of Vivial Securities

Historical market price information regarding Vivial is not provided because there is no public market for the Vivial Common Stock. For information about distributions paid by Vivial to the holders of Vivial Common Stock, please see the sections entitled “Vivial Networks’ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources and Uses of Cash.”

 

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CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a discussion of certain U.S. federal income tax consequences of the ownership and disposition of Parent Common Stock. This discussion is limited to holders that hold Parent Common Stock as a “capital asset” for U.S. federal income tax purposes (generally, property held for investment). This summary is based on the provisions of the Code, U.S. Treasury regulations, administrative rules and judicial decisions, all as in effect on the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect holders to which this section applies. We have not sought and will not seek any rulings from the IRS with respect to the statements made and the conclusions reached in the following discussion, and there can be no assurance that the IRS or a cParentt will agree with such statements and conclusions.

The following does not purport to be a complete analysis of all potential tax effects resulting from the ownership and disposition of Parent Common Stock, and this discussion does not address all aspects of U.S. federal income taxation that may be relevant to particular holders in light of their personal circumstances. In addition, this summary does not address the Medicare tax on certain investment income, U.S. federal estate or gift tax laws, any state, local or non-U.S. tax laws or any tax treaties. This summary also does not address tax considerations applicable to investors that may be subject to special treatment under the U.S. federal income tax laws, such as:

 

   

banks, insurance companies or other financial institutions;

 

   

tax-exempt or governmental organizations;

 

   

qualified foreign pension funds (or any entities all of the interests of which are held by a qualified foreign pension fund);

 

   

brokers or dealers in securities or foreign currencies;

 

   

U.S. persons whose functional currency is not the U.S. dollar;

 

   

“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

   

traders in securities that use the mark-to-market method of accounting for U.S. federal income tax purposes;

 

   

persons subject to the alternative minimum tax;

 

   

partnerships or other pass-through entities for U.S. federal income tax purposes or holders of interests therein;

 

   

persons deemed to sell Parent Common Stock under the constructive sale provisions of the Code;

 

   

persons that acquired Parent Common Stock through the exercise of employee stock options or otherwise as compensation or through a tax-qualified retirement plan;

 

   

real estate investment trusts;

 

   

regulated investment companies;

 

   

certain former citizens or long-term residents of the United States; and

 

   

persons that hold Parent Common Stock as part of a straddle, appreciated financial position, synthetic security, hedge, conversion transaction or other integrated investment or risk reduction transaction.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Parent Common Stock, the tax treatment of a partner in the partnership generally will depend upon the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, we urge partners in partnerships (including entities or arrangements treated as partnerships for U.S. federal income tax purposes) holding Parent Common Stock to consult their tax advisors regarding the U.S. federal income tax consequences to them relating to the matters discussed below.

 

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THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

U.S. Holders

This section is addressed to “U.S. holders” of Parent Common Stock. For purposes of this discussion, a “U.S. holder” is a beneficial owner of shares of Parent Common Stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;

 

   

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

 

   

a trust (i) the administration of which is subject to the primary supervision of a U.S. court and which has one or more United States persons (within the meaning of the Code) who have the authority to control all substantial decisions of the trust or (ii) which has made a valid election under applicable U.S. Treasury regulations to be treated as a United States person.

Distributions on Parent Common Stock

If we pay cash distributions to U.S. holders of shares of Parent Common Stock, such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of current and accumulated earnings and profits will constitute a return of capital that will be applied against and reduce (but not below zero) the U.S. holder’s adjusted tax basis in Parent Common Stock. Any remaining excess will be treated as gain realized on the sale or other disposition of the Parent Common Stock and will be treated as described under “—Sale, Taxable Exchange or Other Taxable Disposition of Our Common Stock” below.

Dividends we pay to a U.S. holder that is a corporation generally will qualify for the dividends received deduction (at varying percentages based upon such U.S. holder’s ownership percentage in the Company) if the requisite holding period is satisfied. With certain exceptions (including, but not limited to, dividends treated as investment income for purposes of investment interest deduction limitations) and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder generally will constitute “qualified dividends” that will be subject to tax at the maximum tax rate accorded to long-term capital gains.

Sale, Taxable Exchange or Other Taxable Disposition of Parent Common Stock

Upon a sale, taxable exchange or other taxable disposition of Parent Common Stock, a U.S. holder generally will recognize capital gain or loss in an amount equal to the difference between the amount realized and the U.S. holder’s adjusted tax basis in the shares of Parent Common Stock. Any such capital gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for shares of Parent Common Stock so disposed of exceeds one year. Long-term capital gains recognized by non-corporate U.S. holders will be eligible to be taxed at reduced rates. The deductibility of capital losses is subject to limitations. Generally, the amount of gain or loss recognized by a U.S. holder is an amount equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such disposition and (ii) the U.S. holder’s adjusted tax basis in its Parent Common Stock so disposed of.

 

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Information Reporting and Backup Withholding

Payments received by a U.S. holder may be subject, under certain circumstances, to information reporting and backup withholding. Backup withholding will not apply, however, to a U.S. holder that (i) is a corporation or entity that is otherwise exempt from backup withholding (which, when required, certifies as to its exempt status) or (ii) furnishes a correct taxpayer identification number and makes any other required certification on IRS Form W-9.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.

Non-U.S. Holders

This section is addressed to “Non-U.S. holders” of Parent Common Stock. For purposes of this discussion, a “Non-U.S. holder” is any beneficial owner of Parent Common Stock that is neither a U.S. holder nor an entity treated as a partnership for U.S. federal income tax purposes.

Distributions on Our Common Stock

In general, any distributions we make to a Non-U.S. holder of shares of Parent Common Stock, to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles), will constitute dividends for U.S. federal income tax purposes and, provided such dividends are not effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States, we will be required to withhold tax from the gross amount of the dividend at a rate of 30%, unless such Non-U.S. holder is eligible for a reduced rate of withholding tax under an applicable income tax treaty and provides proper certification of its eligibility for such reduced rate (usually on an applicable IRS Form W-8). Any distribution not constituting a dividend will be treated first as reducing (but not below zero) the Non-U.S. holder’s adjusted tax basis in its shares of Parent Common Stock and, to the extent such distribution exceeds the Non-U.S. holder’s adjusted tax basis, as gain realized from the sale or other disposition of the Parent Common Stock, which will be treated as described under “—Sale, Taxable Exchange or Other Taxable Disposition of Parent Common Stock” below.

This withholding tax does not apply to dividends paid to a Non-U.S. holder who provides a Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. holder’s conduct of a trade or business within the United States. Instead, the effectively connected dividends will be subject to regular U.S. income tax as if the Non-U.S. holder were a U.S. resident, subject to an applicable income tax treaty providing otherwise. A Non-U.S. corporation receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate). In addition, if we determine that we are likely to be classified as a USRPHC (see “—Sale, Taxable Exchange or Other Taxable Disposition of Parent Common Stock ” below), we may withhold up to 15% of any distribution to a Non-U.S. holder to which Section 301 of the Code applies and which is not made out of our earnings and profits.

Sale, Taxable Exchange or Other Taxable Disposition of Parent Common Stock

Subject to the discussions below under “Non-U.S. Holders—Information Reporting and Backup Withholding” and “Non-U.S. Holders—Foreign Account Tax Compliance Act,” a Non-U.S. holder generally should not be subject to U.S. federal income or withholding tax in respect of any gain recognized on a sale, taxable exchange or other taxable disposition of our Common Stock, unless:

 

   

the Non-U.S. holder is an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met;

 

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the gain is effectively connected with a trade or business conducted by the Non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment maintained by the Non-U.S. holder in the United States); or

 

   

we are or have been a USRPHC for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of disposition or the period that the Non-U.S. holder held Parent Common Stock, and, in the case where shares of Parent Common Stock are regularly traded on an established securities market, the Non-U.S. holder has owned, directly or constructively, more than 5% of Parent Common Stock at any time within the shorter of the five-year period preceding the disposition or such Non-U.S. holder’s holding period for the shares of Parent Common Stock.

A Non-U.S. holder described in the first bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate as specified by an applicable income tax treaty) on the amount of such gain, which generally may be offset by U.S. source capital losses.

A Non-U.S. holder whose gain is described in the second bullet point above generally will be taxed on a net income basis at the rates and in the manner generally applicable to United States persons (as defined in the Code) unless an applicable income tax treaty provides otherwise. If the Non-U.S. holder is a corporation for U.S. federal income tax purposes whose gain is described in the second bullet point above, then such gain would also be included in its effectively connected earnings and profits (as adjusted for certain items), which may be subject to a branch profits tax (at a rate of 30% or such lower rate as specified by an applicable income tax treaty).

If the third bullet point above applies to a Non-U.S. holder, gain recognized by such holder on the sale, exchange or other disposition of Parent Common Stock will be subject to tax at generally applicable U.S. federal income tax rates. In addition, a buyer of Parent Common Stock from such holder may be required to withhold U.S. federal income tax at a rate of 15% of the amount realized upon such disposition. We do not believe we currently are a USRPHC and we do not anticipate becoming one in the near future, although no assurances can be given in this regard.

Information Reporting and Backup Withholding

Any dividends paid to a Non-U.S. holder must be reported annually to the IRS and to the Non-U.S. holder. Copies of these information returns may be made available to the tax authorities in the country in which the Non-U.S. holder resides or is established. Any dividends paid to a Non-U.S. holder generally will not be subject to backup withholding if the Non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an applicable IRS Form W-8 (or a successor form).

Payments of the proceeds of the sale or other disposition by a Non-U.S. holder of Parent Common Stock effected by or through a U.S. office of a broker generally will be subject to information reporting and backup withholding (at the applicable rate) unless the Non-U.S. holder establishes an exemption by properly certifying its non-U.S. status on an applicable IRS Form W-8 (or a successor form) and certain other conditions are met. Information reporting and backup withholding generally will not apply to any payment of the proceeds from a sale or other disposition of Parent Common Stock effected outside the United States by a non-U.S. office of a broker. However, unless such broker has documentary evidence in its records that the Non-U.S. holder is not a United States person and certain other conditions are met, or the Non-U.S. holder otherwise establishes an exemption, information reporting will apply to a payment of the proceeds of the disposition of Parent Common Stock effected outside the United States by such a broker if it has certain relationships within the United States.

Backup withholding is not an additional tax. Rather, the U.S. federal income tax liability (if any) of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is timely furnished to the IRS.

 

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Additional Withholding Requirements under FATCA

Sections 1471 through 1474 of the Code, and the U.S. Treasury regulations and administrative guidance issued thereunder (“FATCA”), impose a 30% withholding tax on any dividends paid on Parent Common Stock, and subject to the discussion of certain proposed Treasury regulations below, on the gross proceeds from a disposition of Parent Common Stock, in each case if paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code) (including, in some cases, when such foreign financial institution or non-financial foreign entity is acting as an intermediary), unless (i) in the case of a foreign financial institution, such institution enters into an agreement with the U.S. government to withhold on certain payments, and to collect and provide to the U.S. tax authorities substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are non-U.S. entities with U.S. owners), (ii) in the case of a non-financial foreign entity, such entity certifies that it does not have any “substantial United States owners” (as defined in the Code) or provides the applicable withholding agent with a certification identifying the direct and indirect substantial United States owners of the entity, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules and provides appropriate documentation. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these rules may be subject to different rules. Under certain circumstances, a holder might be eligible for refunds or credits of such taxes.

The U.S. Treasury released proposed Treasury regulations which, if finalized in their present form, would eliminate the federal withholding tax of 30% applicable to the gross proceeds of a sale or other disposition of Parent Common Stock. In its preamble to such proposed Treasury regulations, the U.S. Treasury stated that taxpayers may generally rely on the proposed regulations until final regulations are issued.

Non-U.S. holders are encouraged to consult their own tax advisors regarding the possible implications of FATCA to them.

 

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LEGAL MATTERS

The legality of shares of Parent Common Stock offered by the proxy statement/prospectus will be passed upon for the Company by DLA Piper LLP (US).

EXPERTS

The consolidated financial statements of the Company as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020, incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 2020, have been so incorporated in reliance on the report of BPM LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.

The Vivial Network balance sheets as of December 31, 2020 and 2019, and the related statements of operations and comprehensive loss, redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2020, included in this prospectus and elsewhere in the registration statement have been so included in reliance upon the report of Eide Bailly LLP, independent registered public accountants, upon the authority of said firm as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The SEC allows us to “incorporate by reference” information from other documents that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus. Information in this prospectus supersedes information incorporated by reference that we filed with the SEC prior to the date of this prospectus, while information that we file later with the SEC will automatically update and supersede the information in this prospectus. We incorporate by reference into this prospectus and the Registration Statement of which this prospectus is a part the information or documents listed below that we have filed with the SEC (Commission File No. 001-34767):

 

   

our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on March 8, 2021;

 

   

our Current Report on Form 8-K filed with the SEC on February 16, 2021;

 

   

our Current Report on Form 8-K filed with the SEC on February 19, 2021;

 

   

our Current Report on Form 8-K filed with the SEC on February 23, 2021;

 

   

our Current Report on Form 8-K filed with the SEC on March 1, 2021;

 

   

our Current Report on Form 8-K filed with the SEC on March 12, 2021;

 

   

the description of Parent Common Stock contained in our Registration Statement on Form 8-A (File No. 001-38320) filed with the SEC on November 25, 2019 under the Exchange Act, including any amendment or report filed for the purpose of updating such description.

We also incorporate by reference any future filings (other than any filings or portions of such reports that are not deemed “filed” under the Exchange Act in accordance with the Exchange Act and applicable SEC rules, including current reports furnished under Item 2.02 or Item 7.01 of Form 8-K and exhibits furnished on such form that are related to such items unless such Form 8-K expressly provides to the contrary) made with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, until we file a post-effective amendment which indicates the termination of the offering of the securities made by this prospectus and the accompanying

 

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prospectus. Information in such future filings updates and supplements the information provided in this prospectus and the accompanying prospectus. Any statements in any such future filings will automatically be deemed to modify and supersede any information in any document we previously filed with the SEC that is incorporated or deemed to be incorporated herein by reference to the extent that statements in the later filed document modify or replace such earlier statements.

You may obtain copies of any of these filings by contacting us at the address and telephone number indicated below.

Documents incorporated by reference are available from us without charge, excluding all exhibits unless an exhibit has been specifically incorporated by reference into this prospectus, by requesting them in writing or by telephone at:

Kaleyra Inc.

Attention: Corporate Secretary

Via Marco D’Aviano, 2,

Milano MI, Italy

+39 02 288 5841

HOUSEHOLDING INFORMATION

Pursuant to the rules of the SEC, unless we have received contrary instructions, we are permitted to send a single copy of this proxy statement/prospectus to any household at which two or more stockholders reside if we believe the stockholders are members of the same family. This process, known as “householding,” reduces the volume of duplicate information received at any one household and helps to reduce our expenses. However, if stockholders prefer to receive multiple sets of our disclosure documents at the same address this year or in future years, the stockholders should follow the instructions described below. Similarly, if an address is shared with another stockholder and together both of the stockholders would like to receive only a single set of our disclosure documents, the stockholders should follow these instructions:

 

   

If the shares are registered in the name of the stockholder, the stockholder should contact us at our offices at c/o. Kaleyra Inc. Attention: Secretary or by telephone at (+39 02 288 5841), to inform us of his or her request; or

 

   

If a bank, broker or other nominee holds the shares, the stockholder should contact the bank, broker or other nominee directly.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent for our securities is Continental Stock Transfer & Trust Company.

SUBMISSION OF STOCKHOLDER PROPOSALS

Our Board is aware of no other matter that may be brought before the Special Meeting. Under Delaware law, only business that is specified in the notice of Special Meeting to stockholders may be transacted at the Special Meeting.

 

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WHERE YOU CAN FIND MORE INFORMATION

We file reports, proxy statements and other information with the SEC as required by the Exchange Act. You can read the Company’s SEC filings, including this proxy statement/prospectus, over the Internet at the SEC’s website at http://www.sec.gov. You may also obtain copies of the materials described above at prescribed rates by writing to the SEC, Public Reference Section, 100 F Street, N.E., Washington, D.C. 20549.

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 the Company at the following address and telephone number:

Kaleyra Inc.

Via Marco D’Aviano, 2

Milano MI, Italy 20131

Telephone: +39 02 288 5841

You may also obtain these documents by requesting them in writing or by telephone from the Company’s proxy solicitation agent at the following address and telephone number:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

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

or

Call Toll-Free: (800) 322-2885

E-mail: proxy@mackenziepartners.com

If you are a stockholder of the Company and would like to request documents, please do so by one week prior to the Special Meeting, in order to receive them before the Special Meeting. If you request any documents from us, we will mail them to you by first class mail, or another equally prompt means.

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

This document is a proxy statement of the Company for the Special Meeting. We have not authorized anyone to give any information or make any representation about the Merger, the Company or Vivial that is different from, or in addition to, that contained in this proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this proxy statement/prospectus speaks only as of the date of this proxy statement/prospectus, unless the information specifically indicates that another date applies.

 

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INDEX TO FINANCIAL STATEMENTS

 

Kaleyra Inc.—Financial Statements

   Our unaudited financial statements for our fiscal years ended December 31, 2020 and 2019 are hereby incorporated by reference to our Annual Report on Form 10-K for our most recent fiscal year ended December 31, 2020, a copy of which accompanies this proxy statement/prospectus.

Vivial Networks LLC — Financial Statements

   F- 2

 

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Vivial Networks LLC

Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years ended

December 31, 2020, and 2019; and Independent Auditor’s Report.

 

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VIVIAL NETWORKS LLC

TABLE OF CONTENTS

 

 

     Page  

INDEPENDENT AUDITOR’S REPORT

     F-4  

CONSOLIDATED FINANCIAL STATEMENTS

  

Balance Sheets

     F-5  

Statements of Operations and Comprehensive Income

     F-6  

Statements of Changes in Member Equity

     F-7  

Statements of Cash Flows

     F-8  

Notes to Consolidated Financial Statements

     F-9  

 

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Independent Auditor’s Report

To the Audit Committee and Board of Directors

Vivial Inc.

Englewood, Colorado

Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Vivial Networks LLC, which comprise the consolidated balance sheets as of December 31, 2020 and 2019, and the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vivial Networks LLC as of December 31, 2020 and 2019, and the results of its operations and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

/s/ Eide Bailly LLP

Denver, Colorado

March 15, 2021

 

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VIVIAL NETWORKS LLC

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

     December 31,
2020
    December 31,
2019
 

Assets

    

Current assets:

    

Cash

   $ 27,839     $ 11,013  

Accounts receivable, net

     31,224       28,965  

Prepaid expenses and other current assets

     1,491       1,132  
  

 

 

   

 

 

 

Total current assets

     60,554       41,110  

Property and equipment, net

     8,478       9,281  
  

 

 

   

 

 

 

Total Assets

   $ 69,032     $ 50,391  
  

 

 

   

 

 

 

Liabilities and Member Equity

    

Current liabilities:

    

Accounts payable and accrued liabilities

   $ 26,525     $ 24,929  

Unearned revenue

     578       292  
  

 

 

   

 

 

 

Total current liabilities

     27,103       25,221  

Long-term liabilities

     47       98  
  

 

 

   

 

 

 

Total liabilities

     27,150       25,319  
  

 

 

   

 

 

 

Commitments and contingencies (Note 4)

    

Member equity:

    

Member Contribution

     65,497       65,497  

Accumulated (deficit)

     (23,390     (40,152

Accumulated other comprehensive (loss)

     (225     (273
  

 

 

   

 

 

 

Total member equity

     41,882       25,072  
  

 

 

   

 

 

 

Total Liabilities and Member Equity

   $ 69,032     $ 50,391  
  

 

 

   

 

 

 

Refer to accompanying notes to these consolidated financial statements

 

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VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(In thousands)

 

     December 31,
2020
    December 31,
2019
 

Revenue

   $ 141,274     $ 111,890  

Operating expenses:

    

Cost of revenue (exclusive of certain depreciation and amortization expense included below)

     89,906       72,727  

Selling, general and administrative expense

     24,112       24,526  

Depreciation and amortization

     3,496       3,843  
  

 

 

   

 

 

 

Total operating expenses

     117,514       101,096  
  

 

 

   

 

 

 

Operating income

     23,760       10,794  

Other (income) expenses:

    

Interest (income)

     (2     (10
  

 

 

   

 

 

 

Total other (income) expenses, net

     (2     (10
  

 

 

   

 

 

 

Net income

   $ 23,762     $ 10,804  
  

 

 

   

 

 

 

Other comprehensive income:

    

Foreign currency translation adjustments, net of tax of zero

     48       11  
  

 

 

   

 

 

 

Comprehensive income

   $ 23,810     $ 10,815  
  

 

 

   

 

 

 

Refer to accompanying notes to these consolidated financial statements

 

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VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENT OF CHANGES IN MEMBER EQUITY

(In thousands)

 

     Member
Contribution
     Accumulated
Other
Comprehensive
(Loss)
    Accumulated
(Deficit)
    Total
Member
Equity
 

Balance at January 1, 2019

   $ 65,497      $ (284   $ (50,956   $ 14,257  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

     —          —         10,804       10,804  

Foreign currency translation adjustment

     —          11       —         11  
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at December 31, 2019

   $ 65,497      $ (273   $ (40,152   $ 25,072  
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income

     —          —         23,762       23,762  

Capital distributions

     —          —         (7,000     (7,000

Foreign currency translation adjustment

     —          48       —         48  
  

 

 

    

 

 

   

 

 

   

 

 

 

Balance at December 31, 2020

   $ 65,497      $ (225   $ (23,390   $ 41,882  
  

 

 

    

 

 

   

 

 

   

 

 

 

Refer to accompanying notes to these consolidated financial statements

 

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VIVIAL NETWORKS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

     December 31,
2020
    December 31,
2019
 

Operating Activities

    

Net income

   $ 23,762     $ 10,804  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization expense

     3,496       3,843  

Provision for doubtful accounts

     282       431  

Changes in operating assets and liabilities:

    

Accounts receivable

     (2,541     (5,961

Prepaid expenses and other current assets

     (359     653  

Accounts payable and accrued liabilities

     1,552       (439

Unearned revenue

     286       (821
  

 

 

   

 

 

 

Net cash provided by operating activities

     26,478       8,510  
  

 

 

   

 

 

 

Investing Activities

    

Acquisition of property and equipment

     (2,700     (4,490
  

 

 

   

 

 

 

Net cash (used in) investing activities

     (2,700     (4,490
  

 

 

   

 

 

 

Financing Activities

    

Capital distributions

     (7,000