Risk Factors Summary
We are a newly incorporated company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company.
You should carefully consider these and the other risks set forth in the section entitled “Risk Factors” of this Form 10-K and the factors discussed in the Risk Factors section of the final prospectus in connection with the Initial Public Offering filed with the SEC on June 30, 2025. Such risks include, but are not limited to:
Risks Related to the Business and Strategy of TMGCS
Cronos tokens are not currently used in an operating business, which makes it difficult to evaluate the Combined Company’s business and future prospects, and the Combined Company may not be able to achieve or maintain profitability in any given period.
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The Combined Company’s operating results, revenues and expenses may significantly fluctuate, including due to the highly volatile nature of CRO, which could have an adverse effect on the market price of the Combined Company’s Class A Common Stock.
A significant decrease in the market value of our CRO holdings or the trading of the Combined Company’s Class A Common Stock at a discount to the value of our CRO holdings could adversely affect our ability to satisfy our financial obligations, which in turn could negatively impact our ability to execute our business strategy.
The Combined Company’s CRO holdings will be less liquid than its cash and cash equivalents and may not be able to serve as a source of liquidity for the Combined Company.
The Combined Company will operate in a highly competitive environment and will compete against companies and other entities with similar strategies, and the Combined Company’s business, operating results and financial condition may be adversely affected if the Combined Company is unable to compete effectively.
The Combined Company will face risks relating to the custody of its CRO. If the Combined Company or its third-party service providers, including Crypto.com Custody, experience a security breach or cyberattack and unauthorized parties obtain access to the Combined Company’s CRO, or other similar circumstances or events occur, the Combined Company may lose some or all of its CRO.
The regulatory environment for digital assets in the United States and globally remains highly uncertain and is evolving rapidly.
CRO’s status as a product that may be offered and sold as a “security” in any relevant jurisdiction, as well as the status of CRO-related products and activities in general, is subject to uncertainty, and if the Combined Company is unable to properly characterize such products or activities, the Combined Company may be subject to regulatory scrutiny, inquiries, investigations, fines and other penalties.
Risks Related to Being a Public Company
A substantial part of the Combined Company’s assets following the consummation of the Business Combination will be its CRO holdings and cash and cash equivalents from the proceeds of the Business Combination. Although the Combined Company is expected to have certain other operations, the Combined Company will depend on such retained cash and cash equivalents to pay its debts and other obligations.
The Combined Company may be subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities.
The Combined Company may issue additional shares of the Combined Company’s Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
Risks Related to Ownership of the Combined Company Common Stock
Following the Business Combination
The Sellers whose interests may conflict with yours, can exercise significant influence over the Combined Company. The concentrated ownership of the Combined Company’s Common Stock may prevent you and other shareholders from influencing significant decisions and may prevent or discourage unsolicited acquisition proposals or offers for the Combined Company’s Common Stock, and that may adversely affect the trading price of the Combined Company’s Class A Common Stock.
Currently, there is no public market for the shares of the Combined Company’s Class A Common Stock. Shareholders of the Company cannot be sure about whether the shares of the Combined Company’s Class A Common Stock will develop an active trading market or whether the Combined Company will be able to maintain the listing of the Combined Company’s Class A Common Stock in the future on any national securities exchange, which could limit investors’ ability to make transactions in shares of the Combined Company’s Class A Common Stock and subject the Combined Company to additional trading restrictions.
Risks Related to Taxation
Unrealized fair value gains on the Combined Company’s CRO holdings could cause it to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022.
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The treatment of digital currency for U.S. federal income tax purposes is uncertain.
A 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of our shares in connection with redemptions pursuant to the Business Combination.
Risks Related to the Company’s Business, the Combined Company, and the Business Combination
If the perceived benefits of the proposed Business Combination do not meet the expectations of investors or securities analysts, the market price of our Class A Ordinary Shares could decline before the closing of the Business Combination, and the market price of the Combined Company’s securities could decline after closing.
Anti-takeover provisions contained in the Combined Company’s Proposed Articles of Incorporation and Proposed Bylaws, as well as provisions of Florida law, could impair a takeover attempt.
The Company may not be able to consummate an initial business combination within the required time period, in which case it would cease all operations except for the purpose of winding up and it would redeem the Public Shares and liquidate, in which case the Public Shareholders may only receive $10.05 per share, or less than such amount in certain circumstances, and the Public Warrants will expire worthless.
Neither the Company nor its shareholders will have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total indemnification in the event that any of the representations and warranties made by Crypto.com and Crypto.com Sub or TMTG in the Business Combination Agreement ultimately proves to be inaccurate or incorrect.
The consummation of the Business Combination is subject to a number of conditions and if those conditions are not satisfied or waived, the Business Combination Agreement may be terminated.
The exercise of the Company’s directors’ and officers’ discretion in agreeing to changes or permitted waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the best interests of the Company’s Shareholders.
The Company may amend the terms of the Public Warrants in a manner that may be ad-verse to holders of Public Warrants with the approval by the holders of at least a majority of the then outstanding Public Warrants or for amendments necessary for the warrants to be classified as equity..
Risks Related to Redemptions
If a shareholder fails to receive notice of the Company’s offer to redeem the Public Shares in connection with the Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
If we are unable to consummate our initial business combination, Public Shareholders may be forced to wait until after the Deadline Date, as defined below, before redemption from the Trust Account.
There is no guarantee that a shareholder’s decision whether to redeem their Class A Ordinary Shares for a pro rata portion of the Trust Account will put the shareholder in a better future economic position.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the factors discussed in the Risk Factors section of the final prospectus in connection with the Initial Public Offering filed with the SEC on June 30, 2025, which could materially affect our business, financial condition or future results.
In light of our entry into a Business Combination Agreement during the quarter, you should also consider the transaction specific risks associated with the proposed Business Combination and related transactions.
Risks Related to the Business and Strategy of the Combined Company
Cronos tokens are not currently used in an operating business, which makes it difficult to evaluate the Combined Company’s business and future prospects, and the Combined Company may not be able to achieve or maintain profitability in any given period.
The Company was formed as a blank check company incorporated as a Cayman Islands exempted company with limited liability on March 3, 2025 and, subject to the conditions of the Business Combination Agreement, will domesticate into a Florida
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corporation at least two business days before the closing of the Business Combination. The Company has no operating history, and the volatile nature of the market price of Cronos (“CRO”), which will constitute a substantial portion of our assets, creates significant uncertainty and makes it difficult to evaluate our future prospects. The absence of a predecessor business in this transaction will also make it difficult to accurately forecast the future results of operations, which is subject to a number of uncertainties including the Combined Company’s ability to grow its CRO reserves per share (i.e., the amount of CRO per each fully diluted share), CRO generation per share (i.e., the incremental CRO generated per share over a certain time period) and external delegation to validator (i.e., the total CRO delegated by third-party holders to the Combined Company’s validator), and the market size and growth opportunities in each of the Combined Company’s anticipated lines of business.
We cannot guarantee the Combined Company’s ability to raise additional capital, or to raise additional capital on favorable terms, which may adversely impact our business and initial business strategy. See “ The Combined Company’s ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. the Combined Company’s failure to raise capital when needed could harm its business, operating results and financial condition .”
The Combined Company’s ability to generate cash flow initially will largely be dependent on the Combined Company’s ability to raise capital to acquire additional CRO, to access and acquire CRO not held in exchanges, to establish and operate a Cronos validator node and staking infrastructure for delegation of CRO holdings and delegation by third parties and to carry out activities aimed at catalyzing the fusion between CRO and traditional capital markets and greater adoption of CRO. The Combined Company’s business strategy may not be realized as quickly as hoped, or even at all. Further, even if we achieve growth, in future periods, that growth could slow or decline for a number of reasons, including, but not limited to, CRO volatility, increased competition, digital coins that compete with and may result in a decline in utilization of CRO or replace CRO, its inability to develop, improve or effectively scale CRO acquisition, negative publicity or sentiments relating to CRO or a perceived affiliation between Crypto.com or the Combined Company and Cronos Labs, government regulation or the Combined Company’s , for any reason, to continue to take of growth .
CRO market opportunity estimates and growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. There is no assurance that any estimates driving CRO acquisition strategies will accurately reflect any particular level of revenue or growth prospects for the Combined Company.
The Combined Company will encounter risks and difficulties as described in this section. If the Combined Company does not manage these risks successfully, the Combined Company’s business may be adversely impacted. If the Combined Company’s assumptions regarding these risks and uncertainties and its future growth are incorrect or change adversely, or if the Combined Company does not address these risks successfully, the Combined Company’s operating and financial results could differ materially from its expectations, and its business could suffer. If the Combined Company’s revenue growth rate, when the Combined Company is at a revenue generation stage, were to decline significantly or become negative, it could adversely affect the Combined Company’s operating results and financial condition. If the Combined Company is not able to achieve or maintain cash flow from operations, or if the price of CRO significantly, the Combined Company’s business may be impacted and the Combined Company’s may require additional financing, which may not be available on terms or at all, may restrict the distribution of dividends or other payments to shareholders, or may be dilutive to our shareholders.
The Combined Company may not be able to successfully execute its business strategies.
A significant part of the Combined Company’s strategy is CRO acquisition, however:
its acquisition strategy is susceptible to various risks associated with CRO, including price volatility and liquidity;
it may compete with others to acquire CRO, and as competition increases, decreased availability or increased prices for acquisition could result;
it may experience difficulty in anticipating the timing and availability of CRO acquisition;
it may not be able to obtain further financing, on favorable terms or at all, to finance any of its potential CRO acquisitions; and
it may not be able to generate the cash necessary to execute our CRO acquisition strategy.
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The occurrence of any of these factors could adversely affect our CRO acquisition strategy.
We also expect the Combined Company to carry out other CRO-related activities, such as staking its CRO holdings and establishing and operating a Cronos validator node. The Combined Company may in the future consider offering or engaging in other CRO-related products, services or activities. See “ We expect the Combined Company to engage in other CRO-related activities, including participating in staking activities and operating a validator node, all of which are subject to regulation. The Combined Company has not previously engaged in these business lines and the it may be unable to implement its business plan, including, without limitation, due to operational challenges, significant competition and regulation .”
The Combined Company’s operating results, revenues and expenses may significantly fluctuate, including due to the highly volatile nature of CRO, which could have an adverse effect on the market price of the Combined Company’s Class A Common Stock.
The Combined Company’s operating results will be dependent on the broader CRO economy. Due to the rapidly evolving nature of digital assets and the volatile price of CRO, which has experienced and continues to experience significant volatility, we expect that the Combined Company’s operating results will fluctuate significantly from quarter to quarter in accordance with market sentiments and movements in the broader CRO economy. We expect that the Combined Company’s operating results will fluctuate significantly as a result of a variety of factors, many of which are unpredictable and in certain instances are outside of its control, including:
fluctuations in the price of CRO, of which the Combined Company will have significant holdings, and in which we expect it will continue to make significant purchases and announcements about its transactions in CRO;
regulatory, commercial and technical developments related to CRO or the Cronos network;
investor perception of the Combined Company, including as compared to investment vehicles that are expected to be designed to track the price of CRO and other digital assets, such as anticipated CRO-focused exchange-traded products (“ETPs”);
changes in the legislative or regulatory environment or actions by U.S. or non-U.S. governments or regulators, including fines, orders or consent decrees;
regulatory changes or scrutiny that impact the Combined Company’s ability to offer certain products or services;
pricing for or temporary suspensions of products and services we expect to offer in the future in accordance with the Combined Company’s strategy;
investments the Combined Company may make in the development of products and services, and sales and marketing;
changes to the supply of CRO resulting from governance actions adopted by network consensus, including any proposal to issue additional CRO tokens or any proposal to substantially reduce supply through token burns;
market conditions of, and overall sentiment towards, CRO, including negative publicity, media or social media coverage, or sentiment due to events in or relating to, or perception of, CRO or the broader digital assets industry, for example: (i) public perception that CRO can be used as a vehicle to circumvent sanctions, including sanctions imposed on Russia or certain regions related to the ongoing conflict between Russia and Ukraine, or to fund criminal or terrorist activities, such as the purported use of certain digital assets by Hamas to fund its terrorist attack against Israel in October 2023; (ii) previous, pending or expected civil, criminal, regulatory enforcement or other high profile actions against major participants in the digital assets ecosystem, including the SEC’s dismissed enforcement actions against Coinbase, Inc., Payward Inc. and Payward Ventures Inc. (together known as “Kraken”), and Binance Holdings Ltd.; (iii) additional filings for bankruptcy protection or proceedings of major digital asset industry participants, such as the proceeding of FTX Trading Ltd. and its affiliates; (iv) the digital asset market in October 2025, widely attributed to global trade tensions, among other things, triggering a number of dislocations in the digital asset market (including of up to $20 billion in collateral in the form of various digital assets, including, but not limited to, CRO); and (v) the actual or perceived environmental impact of CRO and related activities, including environmental raised by private individuals, governmental and non-governmental organizations and other actors;
investment and trading activities, such as (i) trading activities of highly active retail and institutional users, speculators, validators and investors; (ii) actual or expected significant dispositions of CRO by large holders, including the expected liquidation of digital assets associated with entities that have filed for bankruptcy protection, such as FTX Trading Ltd., which in late 2023 and early 2024 sold several billion dollars’ worth of digital assets, including Bitcoin, and the transfer and sale of Bitcoin associated with significant hacks, seizures or forfeitures, such as the transfers of Bitcoin to (a) creditors of the hacked cryptocurrency exchange Mt. Gox which began in July 2024, (b) claimants following restitution proceedings allocating $9 billion of recovered Bitcoin related to a 2016 hack of the Bitfinex cryptocurrency exchange, (c) the German
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government following the seizure of about 50,000 Bitcoin in January 2024 from the operator of the website Movie2k.to, or (d) the government of the United Kingdom after £5 billion worth of Bitcoin seizures from criminal defendants, (e) the United States government after the Southern District of New York seized 51,680 Bitcoin in late 2021 and early 2022 from a defendant convicted of wire fraud or (f) the U.S. Department of Justice which in January 2025 gained approval from the Northern District Court of California to liquidate 69,370 Bitcoin seized from the Silk Road marketplace; and (iii) actual or perceived manipulation of the spot or derivative markets for CRO or anticipated CRO-focused ETPs;
macroeconomic conditions, including interest rates, inflation and central banking policies;
regulatory, legislative, enforcement and judicial actions that adversely affect the price, ownership, transferability, trading volumes, legality or public perception of CRO, or that adversely affect the operations of or otherwise prevent digital asset custodians, trading venues, lending platforms or other digital assets industry participants from operating in a manner that allows them to continue to deliver services to the digital assets industry;
the development and introduction of existing and new products and services by the Combined Company’s competitors;
competition from other digital assets that exhibit better speed, security, scalability or energy efficiency, that feature other more favored characteristics, that are backed by governments, including the U.S. government, or reserves of fiat currencies, or that represent ownership or security interests in physical assets;
a decrease in the price of other digital assets, including stablecoins, or the crash or unavailability of stablecoins that are used as a medium of exchange for CRO purchase and sale transactions, such as the temporary or total loss of value of certain stablecoins in recent years, including to the extent the decrease in the price of such other digital assets or the unavailability of such stablecoins may cause a decrease in the price of CRO or adversely affect investor confidence in digital assets generally;
disruptions, failures, unavailability or interruptions in service of trading venues for digital assets, such as, for example, the announcement by the digital asset exchange FTX Trading Ltd. that it would freeze withdrawals and transfers from its accounts and subsequent filing for bankruptcy protection and the SEC enforcement action brought against BAM Trading Services Inc., which initially sought to freeze all of its assets during the pendency of the enforcement action and has since resulted in Binance Holdings Ltd. discontinuing all fiat deposits and withdrawals in the U.S.;
the development and introduction of new products, services and activities by us;
the Combined Company’s ability to control costs, including its operating expenses incurred to grow and expand its operations and to remain competitive;
system failure, outages or interruptions, including with respect to the Combined Company’s CRO custodian and its platforms, including those due to third-party actions;
the Combined Company’s lack of control over decentralized or third-party blockchains and networks that may experience downtime, cyber-attacks, critical failures, errors, bugs, corrupted files, data losses or other similar software failures, outages, breaches and losses;
breaches of security or privacy;
transaction congestion and fees associated with processing transactions on the Cronos network;
developments in mathematics or technology, including in artificial intelligence, digital computing, algebraic geometry and quantum computing or new applications of current knowledge in these fields, that could result in the cryptography used by the Cronos network becoming insecure or ineffective;
legal, commercial and regulatory uncertainty regarding CRO and other digital assets due to their novelty, see “CRO and other digital assets are novel assets, which will expose the Combined Company to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Combined Company’s financial position, operations and prospects”;
changes in national and international economic and political conditions, including, without limitation, federal government policies, trade tariffs and trade disputes, the adverse impacts attributable to the current conflict between Russia and Ukraine and the economic sanctions adopted in response to the conflict and the broadening of the Israel-Hamas conflict, and the ongoing conflicts in Israel, the Gaza Strip, Syria and Lebanon, to other countries in the Middle East;
the Combined Company’s ability to establish and maintain any future partnerships, collaborations, joint ventures or strategic alliances with third parties; and
the Combined Company’s ability to attract and retain talent.
As a result of these factors, it is difficult for us to forecast growth trends accurately and the Combined Company’s business and future prospects are difficult to evaluate, particularly in the short term.
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Further, we cannot predict what further action may be taken with respect to tariffs or trade relations between the U.S. and other governments. Any such changes could fundamentally alter the competitive and regulatory landscape in which the Combined Company will operate, and political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets, all of which could potentially having a material adverse effect on the Combined Company’s business, financial condition and results of operation. Global trade relations may also impact digital asset price in the short and long term, including the price of CRO, as seen during the crypto market turmoil and decrease in price across digital assets, including CRO, in October 2025.
In addition, the stock market and the markets for both CRO-influenced and technology companies have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of companies in those markets. In particular, future trading prices in the Combined Company’s Class A Common Stock may reflect market dynamics that are not connected to valuation methods commonly associated with operating companies in similar industries or with companies engaged predominantly in passive investments in CRO or other commodities, such as exchange-traded funds (“ETFs”). Equity market capitalizations of other such companies are often in excess of stockholders’ equity calculated in accordance with U.S. GAAP, and in excess of valuations that might traditionally be expected based on their operating performances, cash flows and net assets. Investors may therefore be unable to assess the value of the shares of the Combined Company’s Class A Common Stock or evaluate the risks of an investment in the Combined Company using traditional or commonly used enterprise valuation methods. We cannot predict how these dynamics may evolve over time, or whether or how long they may last. These market and industry factors may significantly harm the market price of the Combined Company’s Class A Common Stock, regardless of the Combined Company’s actual operating performance.
The Combined Company’s CRO acquisition strategy exposes it to various risks associated with CRO.
The Combined Company’s CRO acquisition strategy exposes it to various risks associated with CRO, including, but not limited to, the following:
CRO is a highly volatile asset. The trading price of CRO significantly fluctuated during 2024 and 2025, for example, CRO has traded has traded below $0.08 per CRO and above $0.37 per CRO on the Crypto.com Exchange in the 12 months preceding August 31, 2025, and between approximately $0.07 and $0.21 per CRO in 2024 on the Crypto.com Exchange. Volatility may continue in the future and historical trends could reverse dramatically. See “ The Combined Company’s operating results, revenues and expenses may significantly fluctuate, including due to the highly volatile nature of CRO, which could have an adverse effect on the market price of the Combined Company’s Class A Common Stock .” See also “ The Combined Company may suffer losses due to abrupt and erratic market movements .”
The Combined Company’s CRO holdings may significantly impact its financial results and in turn may impact the market price of the Combined Company’s Class A Common Stock. If the Combined Company continues to increase the Combined Company’s overall holdings of CRO relative to the other parts of its business in the future, its CRO holdings will have an even greater impact on our financial results and the market price of the Combined Company’s Class A Common Stock. The Combined Company intends to purchase additional CRO and increase the Combined Company’s overall holdings of CRO in the future.
The concentration of the Combined Company’s CRO holdings limits the risk mitigation that it could take advantage of by purchasing a more diversified portfolio of treasury assets, and the absence of diversification enhances the risks inherent in its CRO acquisition strategy. See “ The Combined Company’s operating results, revenues and expenses may significantly fluctuate, including due to the highly volatile nature of CRO, which could have an adverse effect on the market price of the Combined Company’s Class A Common Stock .” See also “ The Combined Company may suffer losses due to abrupt and erratic market movements. ”
The Combined Company’s CRO acquisition strategy has not been tested by it to date. While certain issuers have operating histories that involve a digital asset acquisition strategy that may be comparable to the CRO acquisition strategy the Combined Company intends to execute, these have not been tested over an extended period of time or under different market conditions. We expect that the Combined Company will continuously examine the risks and rewards of the Combined Company’s CRO acquisition strategy. For example, although we believe CRO, due to its fixed supply, has the potential to serve as a hedge against inflation in the long term, the short-term price of CRO declined in recent periods during which the inflation rate increased and governance proposals may result in changes to the CRO supply. Some investors and other market participants may disagree with the Combined Company’s CRO acquisition
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strategy or actions it undertakes to implement such strategy. If CRO prices were to decrease or the Combined Company’s CRO acquisition strategy otherwise proves unsuccessful, its financial condition, results of operations and the market price of the Combined Company’s Class A Common Stock may be materially adversely impacted. See also “ A significant decrease in the market value of the Combined Company’s CRO holdings or the trading of the Combined Company’s Class A Common Stock at a discount to the value of its CRO holdings could adversely affect its ability to satisfy its financial obligations, which in turn could negatively impact the Combined Company’s ability to execute its business strategy .”
The Combined Company’s CRO acquisition strategy will expose it to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes the inability or refusal of a counterparty to perform for any reason, including because of a deterioration in the counterparty’s financial condition and liquidity. Custodians, or other counterparties might fail to perform in accordance with the terms of future agreements with them, which could result in a loss of CRO, a loss of the opportunity to generate funds, or other losses. Although the Combined Company will implement various measures that are designed to mitigate the Combined Company’s counterparty risks, including by storing substantially all of the CRO in custody accounts at U.S.-based custodians that service institutions and negotiating contractual arrangements intended to establish that its property interest in custodially held CRO is not subject to claims of its custodians’ creditors, applicable law is not fully developed with respect to the holding of digital assets in custodial accounts. While all of the Combined Company’s custodians are expected to be subject to regulatory regimes intended to protect customers in the event of a custodial , receivership or similar proceeding, no assurance can be provided that its custodially held CRO will not become part of the custodian’s estate if one or more of its custodians enters , receivership or similar proceedings. If the Combined Company’s custodially held CRO were nevertheless considered to be the property of its custodians’ estates in the event that any such custodians were to enter , receivership or similar proceedings, the Combined Company could be treated as a general unsecured creditor of such custodians, inhibiting its ability to exercise ownership rights with respect to such CRO and this may ultimately result in the of the value related to some or all of such CRO. Even if the Combined Company is to prevent the Combined Company’s CRO from being considered the property of a custodian’s estate as part of an proceeding, it is possible that it would still be or may otherwise experience in accessing the Combined Company’s CRO held by the affected custodian during the pendency of the proceedings. Any such outcome could have a material effect on the Combined Company’s financial condition and the market price of the Combined Company’s Class A Common Stock.
The Combined Company’s primary counterparty risk with respect to its CRO is expected to be custodian performance obligations under the custody arrangements it will enter into. Additionally, if it pursues any strategies to create income streams or otherwise generate funds using the Combined Company’s CRO holdings, it would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodians with which the Combined Company custody substantially all of its CRO, could have a material adverse effect on its business, prospects, financial condition and operating results. See “ The Combined Company will face risks relating to the custody of its CRO, including the loss or destruction of private keys required to access the Combined Company’s CRO and cyberattacks or other data loss relating to its CRO. If the Combined Company or its third-party service providers, including Crypto.com Custody, experience a security breach or cyberattack and unauthorized parties obtain access to the Combined Company’s CRO, or if the Combined Company’s private keys are or , or other similar circumstances or events occur, including the ability to reverse engineer private keys, the Combined Company may some or all of its CRO and the Combined Company’s financial condition and results of operations could be materially affected .”
The broader digital assets industry is subject to counterparty risks, which could adversely impact the adoption rate, price and use of CRO. For example, a series of high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, BlockFi Lending, Core Scientific, FTX Trading, Alameda Research and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Silicon Valley Bank, Signature Bank and Silvergate Bank, the potential of SEC enforcement actions, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlements of lawsuits by the New York Attorney General against Galaxy Digital Holdings, Genesis Global Capital, Genesis’ parent company Digital Currency Group, Inc., and former partner Gemini Trust Company, had highlighted the counterparty risks applicable to owning and transacting in digital assets. , , and other events may impact the Combined Company’s access to CRO and could impact the adoption rate and use of CRO. Additional , , , regulatory enforcement actions or other events involving participants in the digital assets industry in the future may further impact the adoption rate, price and use of CRO, limit the availability to the Combined Company of financing collateralized by CRO or create or additional counterparty risks.
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The broader digital assets industry, including the technology associated with digital assets, the rate of adoption and development of and use cases for, digital assets, market perception of digital assets and the legal, regulatory, and accounting treatment of digital assets are constantly developing and changing, and there may be additional risks in the future that are not possible to predict. See “ CRO and other digital assets are novel assets, which will expose the Combined Company to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Combined Company’s financial position, operations and prospects .”
A significant decrease in the market value of the Combined Company’s CRO holdings or the trading of the Combined Company’s Class A Common Stock at a discount to the value of its CRO holdings could adversely affect its ability to satisfy its financial obligations, which in turn could negatively impact the Combined Company’s ability to execute its business strategy.
As part of the Combined Company’s CRO strategy, it may incur or continue to incur additional indebtedness and other fixed charges. If the Combined Company’s businesses do not generate cash flow in future periods sufficient to satisfy its financial obligations, including its debt and other financial obligations, it intends to fund its obligations using cash flow generated by equity or debt financings. The Combined Company’s ability to obtain equity or debt financing may in turn depend on, among other factors, the value of its CRO holdings, the value of the Combined Company’s Class A Common Stock relative to the value of its CRO holdings, investor sentiment and the general public perception of CRO, volatility in cryptocurrency markets generally, its strategy and its value proposition. Accordingly, a significant decline in the market value of its CRO holdings or a negative shift in these other factors may create liquidity and credit risks, as such a decline or such shifts may adversely impact its ability to secure sufficient equity or debt financing to satisfy its financial obligations, including its debt and other financial obligations. These risks could materialize at times when CRO is trading below CRO’s carrying value on the Combined Company’s most recent balance sheet or below its cost basis. Additionally, shares of the Combined Company’s Class A Common Stock may trade at a discount to the underlying value of the Combined Company’s CRO holdings, which could result in investors seeking alternative means of exposure to CRO. As CRO will constitute a substantial part of the Combined Company’s balance sheet, if it is to generate revenue from its anticipated CRO-related activities or secure equity or debt financing in a timely manner, on terms, or at all, it may be required to sell CRO to these obligations. Any such sale of CRO may have a material effect on the Combined Company’s operating results and financial condition, and could its ability to secure additional equity or debt financing in the future. The Combined Company’s to secure additional equity or debt financing in a timely manner, on terms or at all, or to sell its CRO in amounts and at prices sufficient to its financial obligations, including its debt service obligations, could cause it to under such obligations. Any on the Combined Company’s indebtedness may have a material effect on its financial condition and ability to execute its business strategy.
The Combined Company’s CRO holdings will be less liquid than its cash and cash equivalents and may not be able to serve as a source of liquidity for the Combined Company.
A substantial part of the Combined Company’s assets will be CRO. Historically, the CRO markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, the Combined Company may not be able to sell the Combined Company’s CRO at favorable prices or at all. For example, a number of digital assets trading venues temporarily halted deposits and withdrawals in 2022. As a result, the Combined Company’s CRO holdings may not be able to serve as a source of liquidity for it to the same extent as cash and cash equivalents. Further, CRO held by custodians, including the Combined Company’s custodians, does not the same protections as are available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, the Combined Company may be to enter into term loans, bonds or other capital raising transactions collateralized by the Combined Company’s unencumbered CRO or otherwise generate funds using its CRO holdings, including in particular during times of market or when the price of CRO has significantly. If it is to sell the Combined Company’s CRO, enter into additional capital raising transactions using unencumbered CRO as collateral, or otherwise generate funds using the Combined Company’s CRO holdings, or if it is to sell its CRO at a significant , in order to meet its debt obligations, or its working capital requirements, our business and financial condition could be impacted.
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CRO may be subject to dilution.
As of March 31, 2026, CRO has a fixed total supply of 100 billion CRO. The CRO tokens are distributed over time according to a defined tokenomics plan, which includes allocations for ecosystem development, community incentives and team reserves. Rewards for validators and delegators on the Cronos POS Chain layer are paid from these allocated pools, not from newly minted tokens. There is no assurance that proposals for issuing new CRO will be managed in a manner that maintains scarcity or long-term value, and any increase in the supply introduces significant uncertainty regarding future dilution, which could adversely affect the Combined Company’s business, operating results and financial condition.
The Combined Company will operate in a highly competitive environment and will compete against companies and other entities with similar strategies, including, in the future, companies with significant CRO holdings and ETFs and ETPs for CRO and other digital assets, and the Combined Company’s business, operating results and financial condition may be adversely affected if the Combined Company is unable to compete effectively.
The digital assets industry is highly innovative, rapidly evolving and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future. The Combined Company will compete against a number of companies operating both within the United States and abroad, and both those that focus on traditional financial services and those that focus on digital asset-based services. The Combined Company’s main sources of competition, both now and in the future, fall into the following categories:
traditional financial firms that may enter the CRO ecosystem and offer overlapping features targeted at the Combined Company’s future customers;
financial technology providers that do not focus on CRO and may attempt to position themselves as a safer alternative to the Combined Company’s future products, services and activities;
companies with significant CRO holdings;
companies focused on the CRO ecosystem, some of whom choose to operate outside of local rules and regulations or in jurisdictions with less stringent local rules and regulations and are potentially able to more quickly adapt to trends and to develop new CRO-based products and services due to a different standard of regulatory scrutiny; and
the emergence or growth of digital assets other than CRO may have a material adverse effect on the Combined Company’s financial condition and the numerous alternative digital assets and many entities, including consortiums and financial institutions, which are researching and investing resources into private or permissioned blockchain platforms or digital assets that use proof-of-work mining like the Bitcoin network, a proof-of-stake model such as Ethereum or emerging variations of the foregoing consensus mechanisms.
If the Combined Company is unable to compete successfully, or if competing successfully requires it to take costly actions in response to the actions of the Combined Company’s competitors, its business, operating results and financial condition could be adversely affected.
The range of options to gain exposure to CRO may expand in the future. If investors choose to gain such exposure through anticipated ETPs, companies with significant CRO holdings or other similar strategies, rather than shares of the Combined Company’s Class A Common Stock, the Combined Company’s business, operating results and financial condition may be adversely affected.
Investors may view the Combined Company’s Class A Common Stock as an alternative to an investment in an ETP, and choose to purchase shares of a potential spot CRO ETP, for which registration statements have been filed with the SEC, instead of the Combined Company’s Class A Common Stock. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to CRO that is generally not subject to federal income tax at the entity level as the Combined Company may be, or the other risks that may affect other parts of the Combined Company’s business. Additionally, unlike potential spot CRO ETPs, we expect the Combined Company (i) to use CRO reserves per share and CRO generation per share to measure its performance and will not seek for its shares of the Combined Company’s Class A Common Stock to passively track the value of the underlying CRO the Combined Company holds before payment of expenses and liabilities, (ii) will not benefit from various exemptions and relief under the Exchange Act, including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) to be a Florida corporation rather than a statutory trust, and will not operate pursuant to a trust agreement that would require it to pursue one or more stated investment objectives and (iv) will
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not be required to provide daily transparency as to its CRO holdings or its daily net asset value. Furthermore, recommendations by broker-dealers to buy, hold or sell complex products and non-traditional ETPs, or an investment strategy involving such products, may be subject to additional or heightened scrutiny that would not be applicable to broker-dealers making recommendations with respect to the Combined Company’s Class A Common Stock. Based on how the Combined Company is viewed in the market relative to ETPs, and other vehicles which may, in the future, offer economic exposure to CRO, such as CRO futures ETFs, leveraged CRO futures ETFs and similar vehicles offered on international exchanges, any premium or discount in the Combined Company’s Class A Common Stock relative to the value of our CRO holdings may increase or decrease in different market conditions.
As a result of the foregoing factors, availability of spot ETPs for CRO and other digital assets could have a material adverse effect on the market price of the Combined Company’s Class A Common Stock.
The Combined Company may suffer losses due to abrupt and erratic market movements.
The cryptocurrency market, including the CRO market has been characterized by significant volatility and unexpected price movements, and has previously experienced significant declines. Cryptocurrencies, including CRO, may become more volatile and less liquid in a very short period of time. In addition, “altcoins,” a term used to describe cryptocurrencies other than Bitcoin, have historically been susceptible to greater market volatility than Bitcoin or the aggregate cryptocurrency market due to lower market liquidity, smaller market capitalization, and high, sentiment-driven, speculative trading. Accordingly, as an “altcoin,” CRO may be more susceptible to market volatility and unexpected price movements than Bitcoin or the aggregate cryptocurrency market. As previously discussed in this section, a series of recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry have highlighted the counterparty risks applicable to owning and transacting in cryptocurrency and other digital assets. See “ The Combined Company’s operating results, revenues and expenses may significantly fluctuate, including due to the highly nature of CRO, which could have an effect on the market price of the Combined Company’s Class A Common Stock .”
These bankruptcies, closures, liquidations and other events have created significant volatility in the markets for cryptocurrency generally. Additional bankruptcies, closures, liquidations, regulatory enforcement actions or other events involving participants in the digital assets industry in the future could result in market prices being subject to erratic and abrupt market movement, which could harm the Combined Company’s business. Further, because there is no centralized authority which determines the price of CRO, pricing often differs between centralized exchanges and also peer-to-peer DeFi transactions; centralized exchanges allow users to deposit their digital assets to platforms that serve as intermediaries for buyers and sellers whereas decentralized exchanges allow users to make peer-to-peer cryptocurrency trades while maintaining control of their private keys. When some exchanges are viewed as higher risk, that price differential can widen as traders attempt to exploit these differences. in the price of CRO, as well as the of a standard price, could lead consumers to see CRO as an asset. In addition, if the Combined Company were to attempt to monetize the CRO it holds on the Combined Company’s balance sheet, such price could lead to trading , impacting its financial position.
The trading volume of CRO typically increases during periods of extreme volatility. For example, in the days following the U.S. federal elections in November 2024, the price of CRO rose sharply from approximately $0.07 on November 4, 2024, to approximately $0.21 on November 11, 2024, and volumes increased from approximately $5.43 million to approximately $748.28 million during that time period according to aggregate data from U.S. exchange markets collected by CoinMarketCap. Such volume increases can lead to extreme pressures on trading platforms and infrastructure that can lead to inadvertent suspension of services across parts of the platforms or the entire platforms, and the Combined Company may experience outages. Outages can lead to increased service expense, can cause reputational damage, result in inquiries and actions by regulators, and can lead to other damages for which it may be responsible, any of which could harm the Combined Company’s business.
The emergence or growth of other digital assets, including those with significant private or public sector backing, including by governments, consortiums or financial institutions, could have a negative impact on the price of CRO and adversely affect the Combined Company’s business.
As a result of the Combined Company’s CRO acquisition strategy, a substantial part of its assets will be concentrated in its CRO holdings. Accordingly, the emergence or growth of digital assets other than CRO may have a material adverse effect on the Combined Company’s financial condition. There are numerous alternative digital assets and many entities, including consortiums and financial institutions, are researching and investing resources into private or permissioned blockchain platforms or digital assets that use
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proof-of-work mining like the Bitcoin network, a proof-of-stake model such as Ethereum or emerging variations of the foregoing consensus mechanisms.
Additionally, central banks in some countries have started to introduce digital forms of legal tender. For example, China’s central bank digital currency project was made available to consumers in January 2022, and governments have been discussing the potential creation of new central bank digital currencies. Whether or not they incorporate blockchain or similar technology, central bank digital currencies, as legal tender in the issuing jurisdiction, could also compete with, or replace, CRO and other digital assets as a medium of exchange or store of value. As a result, the emergence or growth of these or other digital assets could cause the market price of CRO to decrease, which could have a material adverse effect on the Combined Company’s business, prospects, financial condition and operating results.
The Combined Company will rely on Crypto.com, which will have an indirect controlling interest in the Combined Company, for certain administrative and operational services.
The Combined Company will rely on Crypto.com to provide certain administrative and operational services, as agreed between the parties, pursuant to the terms of the administrative services agreement to be entered into by and between the Combined Company and Crypto.com concurrently with the closing of the Business Combination (the “Services Agreement”). Crypto.com may have interests that are not aligned with the Combined Company’s interests or the interests of its other shareholders and which could affect Crypto.com’s performance of services to the Combined Company.
In the event of a default under or termination of the Services Agreements and/or certain of the services thereunder, the Combined Company may be unable to contract with substitute service providers on similar terms, in a timely fashion, or at all, and the costs of substituting service providers may be substantial. In addition, a substitute service provider may not be able to provide the same level of services due to a lack of pre-existing knowledge or synergies. Any termination of the Combined Company’s relationship with Crypto.com, or decrease in provision of services by Crypto.com, and any delay in appointing or finding a suitable replacement provider, if one exists, could adversely and negatively impact its business.
The Cronos network and its native digital asset, CRO is a relatively new technological innovation with a limited operating history.
CRO has a relatively limited history of existence and operations compared to traditional commodities. There is a limited established performance record for the price of CRO and, in turn, a limited basis for evaluating an investment in CRO. Although past performance is not necessarily indicative of future result, if CRO had a more established history, such history might (or might not) provide investors with more information on which to evaluate an investment in the Combined Company.
CRO has a fixed total supply of 100 billion CRO as of March 31, 2026. The Cronos network, like other blockchain platforms, faces risks related to the fixed supply and price volatility of its native token, CRO, which could adversely affect the value of the Combined Company’s holdings and, consequently, investor returns. Additionally, the ability of the Cronos network to scale effectively with expanding use cases remains uncertain; any failure to accommodate increased transaction volume or to maintain network security could negatively impact the network’s utility and the market perception of CRO, thereby posing further risks to investors.
Digital assets may have concentrated ownership and large sales or distributions by holders of such digital assets, or any ability to participate in or otherwise influence a digital asset’s underlying network, could have an adverse effect on the market price of such digital asset.
A significant number of CRO may be concentrated in relatively few wallets. Additionally, a significant portion of CRO tokens will be held in wallets controlled by the Combined Company. Any decision by the Combined Company or other holder of a significant amount of CRO to sell, transfer, or otherwise dispose of a substantial amount CRO could materially and adversely affect the liquidity and market price of CRO. Moreover, it is possible that other persons or entities control multiple wallets that collectively hold a significant number of CRO, even if they individually only hold a small amount, and it is possible that some of these wallets are controlled by the same person or entity. As a result of this concentration of ownership, large sales or distributions by such holders could have an adverse effect on the market price of CRO.
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Changes in the governance of a digital asset network may not receive sufficient support from users and validators, which may negatively affect that digital asset network’s ability to grow and respond to challenges.
The governance of decentralized networks, such as the Cronos network, is voluntary, decentralized and based on open participation by validators, delegators and community contributors. As a result, there may be a lack of consensus or clarity on the governance of any particular decentralized digital asset network, which may stymie such network’s utility and ability to grow and face challenges. For example, the Cronos network does not have a central authority that unilaterally determines or enforces network-wide decisions. Instead, protocol upgrades and parameter changes are implemented through on-chain proposals and validator voting, with outcomes determined by stake-weighted consensus. If a significant majority of users and validators adopt amendments to a decentralized network based on the proposals of such core developers or holders, such network will be subject to new protocols that may adversely affect the value of the relevant digital asset.
As a result of the foregoing, it may be difficult to find solutions or marshal sufficient effort to overcome any future problems, especially long-term problems, on digital asset networks.
CRO is created and transmitted through the operations of the Cronos POS chain, a decentralized network of computers running software built on the Cosmos SDK. If the Cronos network is disrupted or encounters any unanticipated difficulties, the value of CRO could be negatively impacted.
If the Cronos POS chain is disrupted or encounters any unanticipated difficulties, then the processing of transactions on the Cronos POS chain may be disrupted, which in turn may prevent the Combined Company from depositing or withdrawing CRO from its accounts with its custodian or otherwise effecting CRO transactions. Such disruptions could include, for example: the price volatility of CRO; the insolvency, business failure, interruption, default, failure to perform, security breach, or other problems of participants, custodians, or others; the closing of CRO trading platforms due to fraud, failures, security , or otherwise; or network or congestion, power , or other or affecting the Cronos network.
In addition, although CRO cannot be mined, digital asset validating operations can consume significant amounts of electricity, which may have a negative environmental impact and give rise to public opinion against allowing, or government regulations restricting, the use of electricity for validating operations. Additionally, validators may be forced to cease operations during an electricity shortage or power outage.
Congestion or delay in the Cronos network may delay purchases or sales of CRO by the Combined Company.
In an effort to increase the volume of transactions that can be processed on a given digital asset network, many digital assets are being upgraded with various features to increase the speed and throughput of digital asset transactions. Increased transaction volume could result in delays in the recording of transactions due to congestion in the Cronos network. Moreover, unforeseen system failures, disruptions in operations, or poor connectivity may also result in delays in the recording of transactions on the Cronos network. Any delay in the Cronos network could affect the Combined Company’s ability to buy or sell CRO at an advantageous price resulting in decreased confidence in the Cronos network. Over the longer term, delays in confirming transactions could reduce the attractiveness to merchants and other commercial parties as a means of payment. As a result, the Cronos network and the value of the Combined Company’s Class A Common Stock could be adversely affected.
Validators may suffer losses due to staking, which could make the Cronos network less attractive.
Validation on the Cronos POS chain requires CRO to be deposited (i.e., “staked”) to activate a Cronos validator node. Only the top 100 validators by delegation on the Cronos POS chain are considered active and are eligible to receive staking rewards. If the Combined Company’s delegation to its validators is insufficient to be eligible for staking rewards, the Combined Company’s business, operating results and financial condition may be adversely affected. Further, as staking activity increases on the Cronos POS chain, the yield generated from staking rewards will decline over time. If the Cronos POS chain source code or protocol fail to behave as expected, suffer cybersecurity attacks or hacks, experience security issues, or encounter other problems, such staked assets may be irretrievably lost. In addition, the Cronos POS chain dictate requirements for participation in validation activity, and may impose penalties, such as “slashing,” if the relevant activities are not performed in-line with protocol determined validator operating requirements as encoded to the underlying blockchain, such as if the validator acts on the network, “double signs” any transactions, or experience extended . If validators’ staked CRO are slashed by the Cronos POS chain, their assets may be burnt by the network, resulting
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in losses to them. Any cybersecurity attacks, security issues, hacks, penalties, slashing events, or other problems could damage validators’ willingness to participate in validation, discourage existing and future validators from serving as such, and adversely impact the Cronos POS chain’s adoption or the price of CRO. Any disruption of validation on the Cronos POS chain, or any other layer within the network, could interfere with network operations and cause the Cronos network to be less attractive to users and application developers than competing blockchain networks, which could cause the price of CRO to decrease.
A disruption of the Internet may affect Cronos network operations, which may adversely affect the CRO industry and an investment in the Combined Company.
The Cronos network relies on the Internet. A significant disruption of Internet connectivity could disrupt the Cronos network’s functionality and operations until the disruption in the Internet is resolved. A disruption in the Internet could adversely affect an investment in the Combined Company or the ability of the Combined Company to operate. In particular, some variants of digital assets have experienced a number of denial-of-service attacks, which have led to temporary delays in block creation and digital asset transfers. Moreover, it is possible that as CRO increases in value, it may become a bigger target for hackers and subject to more frequent hacking and denial-of-service attacks.
Digital assets are also susceptible to border gateway protocol hijacking (“BGP hijacking”). Such an attack can be a very effective way for an attacker to intercept traffic enroute to a legitimate destination. BGP hijacking impacts the way different nodes are connected to one another to isolate portions of them from the remainder of the network, which could lead to a risk of the network allowing double-spending and other security issues. If BGP hijacking occurs on the Cronos network, participants may lose faith in the security of CRO, which could affect CRO’s value and consequently the value of the Combined Company’s Class A Common Stock
Any future attacks that impact the ability to transfer CRO could have a material adverse effect on the price of CRO and the value of an investment in the Combined Company’s Class A Common Stock.
The Combined Company will face risks relating to the custody of its CRO, including the loss or destruction of private keys required to access the Combined Company’s CRO and cyberattacks or other data loss relating to its CRO. If the Combined Company or its third-party service providers, including Crypto.com Custody, experience a security breach or cyberattack and unauthorized parties obtain access to the Combined Company’s CRO, or if the Combined Company’s private keys are lost or destroyed, or other similar circumstances or events occur, including the ability to reverse engineer private keys, the Combined Company may lose some or all of its CRO and the Combined Company’s financial condition and results of operations could be materially adversely affected.
The Combined Company will hold the Combined Company’s CRO with a regulated custodian that has duties to safeguard its private keys. Generally, custodial services contracts do not restrict the ability to reallocate digital assets among custodians. However, all of the CRO that it will own will initially be held in custody accounts at Foris DAX Trust Company, LLC, a New Hampshire-chartered trust company (“Crypto.com Custody”), a digital asset custodian servicing institution. In light of the significant amount of CRO the Combined Company will hold, it may seek to engage additional custodians to achieve a greater degree of diversification in the custody of the Combined Company’s CRO as the extent of potential risk of loss is dependent, in part, on the degree of diversification. If there is a decrease in the availability of digital asset custodians that it believes can safely custody the Combined Company’s CRO, for example, due to regulatory developments or enforcement actions that cause custodians to discontinue or limit their services in the United States, it may need to enter into agreements that are less favorable or take other measures to custody the Combined Company’s CRO, and its ability to seek a greater degree of diversification in the use of custodial services could be materially affected.
Crypto.com Custody maintains crime and specie insurance coverage, which is intended to cover the loss of client assets held in cold storage, including coverage of potential incidents involving physical loss, theft or damage, as well as coverage for potential incidents of crime or third-party theft, subject to the terms and conditions of such coverage. The insurance maintained by Crypto.com Custody is shared among all of their customers, is not specific to the Combined Company, and there can be no guarantee that such insurance will be available or sufficient to protect the Combined Company from losses with respect to the Combined Company’s CRO holdings.
Insurance to cover losses of the Combined Company’s future CRO holdings will likely only cover a small fraction of the value of the entirety of the CRO holdings, and there can be no guarantee that such insurance may be obtained or maintained as part of the custodial services it will have or that such coverage will cover losses with respect to the Combined Company’s CRO. Moreover, the
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Combined Company’s use of custodians exposes it to the risk that the CRO its custodians will hold on its behalf could be subject to insolvency proceedings and the Combined Company could be treated as a general unsecured creditor of the custodian, inhibiting its ability to exercise ownership rights with respect to such CRO. Any loss associated with such insolvency proceedings is unlikely to be covered by any insurance coverage the Combined Company will maintain related to the Combined Company’s CRO.
CRO is controllable only by the possessor of both the unique public key and private key(s) relating to the local or online digital wallet in which the CRO is held. While the Cronos network ledger requires a public key relating to a digital wallet to be published when used in a transaction, private keys must be safeguarded and kept private in order to prevent a third party from accessing the CRO held in such wallet. To the extent the private key(s) for a digital wallet are lost, destroyed, or otherwise compromised and no backup of the private key(s) is accessible, neither the Combined Company nor the Combined Company’s custodians will be able to access the CRO held in the related digital wallet. Furthermore, the Combined Company cannot provide assurance that the Combined Company’s digital wallets, nor the digital wallets of its custodians held on its behalf, will not be compromised as a result of a cyberattack. The Cronos network, as well as other digital assets and blockchain technologies, have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities.
Security breaches and cyberattacks are of particular concern with respect to the Combined Company’s CRO. Blockchain-based cryptocurrencies and the entities that provide services to participants in the Cronos ecosystem have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading Ltd. digital asset exchange and reportedly stole over $400 million in digital assets from customers. In2024, hackers stole an estimated total of $2.2 billion in digital assets from cryptocurrency platforms. In February 2025, $1.5 billion of digital assets was from a single cryptocurrency exchange, Bybit, operated by Bybit Fintech Limited. A security or could result in:
a partial or total loss of the Combined Company’s CRO in a manner that may not be covered by insurance or the liability provisions of the custody agreements with the custodians who hold the Combined Company’s CRO;
harm to the Combined Company’s reputation and brand;
improper disclosure of data and violations of applicable data privacy and other laws; or
significant regulatory scrutiny, investigations, fines, penalties and other legal, regulatory, contractual and financial exposure.
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether the Combined Company is directly impacted, could lead to a general loss of confidence in the broader Cronos ecosystem or in the use of the Cronos network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to CRO, are increasing in frequency, persistence and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on the Combined Company’s systems or those of its third-party service providers or partners. The Combined Company may experience breaches of the Combined Company’s security measures due to human error, malfeasance, insider threats, system or or other . In particular, parties may attempt, to access to the Combined Company’s systems and facilities, as well as those of its partners and third-party service providers, through various means, such as hacking, social engineering, phishing and . can come from a variety of sources, including hackers, hacktivists, state-sponsored intrusions, industrial espionage and insiders. In addition, certain types of attacks could the Combined Company even if the Combined Company’s systems are left undisturbed. For example, certain are designed to remain dormant or undetectable, sometimes for extended periods of time or until launched a target and the Combined Company may not be to implement adequate preventative measures. The risk of could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas , or other future , including potential proliferation of malware into systems unrelated to such . Any future of the Combined Company’s operations or those of others in the CRO industry, including third-party services on which it relies, could materially and affect its business.
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Due to the nature of private keys, transactions involving CRO are irrevocable and stolen or incorrectly transferred CRO may be irretrievable. As a result, any incorrectly executed CRO transactions could adversely affect an investment in the Combined Company.
Transactions involving CRO are typically not reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been signed with private keys, verified and recorded in a block that is added to the Cronos network, an incorrect transfer of CRO, or a theft of CRO generally will not be reversible and the Combined Company may not be capable of obtaining compensation for any such transfer or theft. Although the Combined Company’s transfers of CRO will regularly be made to or from the Combined Company’s accounts with its custodians, it is possible that, through computer or human error, or through theft or criminal action, the Combined Company’s CRO could be transferred from its accounts at its custodians in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts. To the extent that the Combined Company is unable to successfully seek redress for such error or theft, such loss could affect the value of the Combined Company’s Class A Common Stock.
The custody of the Combined Company’s CRO is handled by its custodians, and the transfer of CRO to and from liquidity providers normally takes place through its custodians’ clearing services and is directed by an administrator and transfer agent. the Combined Company has evaluated the procedures and internal controls of its custodians to safeguard the Combined Company’s CRO holdings, as well as the procedures and internal controls of its administrator. However, it is possible that, through computer or human error, or through theft or criminal action, the Combined Company’s CRO could be transferred from its accounts at its custodians in incorrect amounts or to unauthorized third parties, or to incorrect destination addresses on the Cronos network.
Alternatively, if the custodians’ internal procedures and controls are inadequate to safeguard the Combined Company’s CRO holdings, and the Combined Company’s private key(s) is (are) lost, destroyed or otherwise compromised and no backup of the private key(s) is(are) accessible, the Combined Company will be unable to access its CRO, which could adversely affect an investment in the Combined Company’s Class A Common Stock. In addition, if the Combined Company’s private key(s) is (are) misappropriated and its CRO holdings are stolen, including from or by its custodians, the Combined Company could lose some or all of its CRO holdings, which could adversely affect the value of the Combined Company’s Class A Common Stock.
Such events have occurred in connection with digital assets in the past. For example, in September 2014, the Chinese digital asset exchange Huobi announced that it had sent approximately 900 Bitcoin and 8,000 Litecoin (worth approximately $400,000 at the prevailing market prices at the time) to the wrong customers. To the extent that the Combined Company is unable to seek a corrective transaction with such third party or is incapable of identifying the third party which has received the Combined Company’s CRO through error or theft, the Combined Company will be unable to revert or otherwise recover incorrectly transferred CRO. the Combined Company will also be unable to convert or recover its CRO transferred to uncontrolled accounts. To the extent that the Combined Company is unable to seek redress for such error or theft, such loss could affect the value of the Combined Company’s Class A Common Stock.
The Combined Company’s limited insurance protection exposes it and its shareholders to the risk of loss of its CRO for which no person is liable.
We do not expect the Combined Company to maintain insurance coverage for the Combined Company’s CRO holdings, which will be held in custody by its custodians. The Combined Company’s future custodians may maintain a certain insurance coverage of such types and amounts as they assert to be commercially reasonable for their custodial services provided under its custody agreements with them, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft. However, such insurance coverage may be insufficient to protect it against all losses of the Combined Company’s CRO holdings held in custody with its custodians, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity. Therefore, a loss may be suffered with respect to its CRO that is not covered by insurance and for which no person is liable in , which could affect the Combined Company’s operations and, consequently, an investment in us.
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Accounting standards will cause the carrying value of the Combined Company’s CRO holdings as prepared in accordance with U.S. GAAP to be reported at a significant discount relative to the market value of CRO, which could materially adversely affect its financial position, operations and prospects.
A substantial portion of the Combined Company’s assets will be CRO, and the Combined Company generally intends to hold CRO for the long term. We expect that the Combined Company will use the CRO price as reported on the principal market to determine the initial carrying value of the Combined Company’s CRO holdings, its CRO reserves per share and its CRO generation per share. However, for financial statement purposes, the Combined Company will report its CRO as intangible assets at cost under ASC 350. ASC 350 requires that intangible assets be assessed for impairment. Therefore, in the event that the cost basis of the CRO is greater than the market price for CRO, the Combined Company will recognize an impairment loss for the difference between the cost and the lowest price per CRO reported during the period on the principal market.
At the closing of the Business Combination, the Combined Company expects to hold 6,313,000,212 CRO, which represents approximately 16.9% of the total CRO in circulation as of November 18, 2025. As of November 18, 2025, the 24-hour trading volume of CRO was $16.02 million, and 18.85% of that total 24-hour trading volume occurred on the Crypto.com Exchange, to which the Combined Company will not have access. Due to the size of the Combined Company’s CRO holdings and CRO’s relatively limited trading volume, it may not be able to efficiently liquidate or sell its CRO at favorable prices or at all. As a result, we expect that the fair value of the Combined Company’s CRO holdings, as presented in the Combined Company’s financial statements prepared in accordance with U.S. GAAP, will be reported at a significant discount relative to the prevailing market value of CRO on its primary trading markets. Any deviation between the prevailing market price of its CRO holdings and the carrying value of its CRO holdings as prepared in accordance with U.S. GAAP and reported on the Combined Company’s financial statements could adversely affect its business, operating results, financial condition and ability to acquire CRO in the future and result in a of investor confidence and a in the price of the Combined Company’s Class A Common Stock. See the section entitled “ Unaudited Pro Forma Condensed Financial Information .”
CRO and other digital assets are novel assets, which will expose the Combined Company to significant legal, commercial, regulatory and technical uncertainty, which could materially adversely affect the Combined Company’s financial position, operations and prospects.
CRO and other forms of digital assets are relatively novel and have been the source of much regulatory uncertainty, resulting in differing definitional outcomes without a single unifying statement, which subjects them to significant uncertainty that could adversely impact their price.
CRO and other digital assets are viewed differently by different regulatory and standards setting organizations globally as well as in the United States on the federal and state levels. Certain governments have prohibited certain digital asset activities or have severely curtailed the use of digital assets by prohibiting the acceptance of payment in CRO and other digital assets for consumer transactions and barring banking institutions from accepting deposits of digital assets. Other nations, however, allow digital assets to be used and traded without restriction. In some jurisdictions, such as in the United States, digital assets are subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. There is a risk that relevant authorities in any jurisdiction may impose more onerous regulation on CRO, for example banning its use, regulating its operation, or otherwise changing its regulatory treatment. The application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that may introduce a cost of compliance, or have a material impact on the Combined Company’s business model, and therefore its financial performance and shareholder returns, and/or adversely affects the price of CRO. The U.S. federal government, states, regulatory agencies and foreign countries have recently enacted and may also enact additional new laws, regulations and guidance, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of CRO, the ability of individuals or institutions such as the Combined Company to own or transfer CRO, and/or the competitive landscape for the Combined Company’s products and activities. For example:
On January 23, 2025, President Trump signed an Executive Order to promote the growth and use of digital assets, blockchain technology and related technologies across all sectors of the economy. Among other things, the Executive Order established a working group comprised of representatives from key federal agencies, tasked with developing a federal regulatory framework for digital assets and evaluating measures that can be taken to provide regulatory clarity and certainty built on technology-neutral regulations for individuals and firms involved in digital assets, including through
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well-defined jurisdictional regulatory boundaries. The Executive Order also instructed the U.S. Department of Treasury, the SEC, and other relevant agencies to identify regulations, guidance, documents, orders and other items affecting the digital asset sector and submit recommendations for what should be rescinded, modified or, to the extent applicable, adopted into regulations. Additionally, it revoked President Biden’s prior Executive Order from March 9, 2022, relating to cryptocurrencies, and all policies, directives and guidance issued pursuant to that Executive Order, including the Department of the Treasury’s framework for international engagement on digital assets issued on July 7, 2022 and the White House framework for digital asset development released on September 16, 2022. The establishment of a new working group within the National Economic Council to propose a federal regulatory framework for digital assets could lead to significant changes in market structure, oversight, consumer protection and risk management. The evolving regulatory environment may pose challenges to the Combined Company’s operations, particularly if new regulations introduce additional compliance costs or restrict certain activities.
There have also been several bills introduced in Congress that propose to establish additional regulation and oversight of the digital asset market. For example, with respect to stablecoins, on July 17, 2025, the U.S. Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (“GENIUS Act”), which was signed into law by President Donald Trump on July 18, 2025. The GENIUS Act introduces the first federal regulatory framework for payment stablecoins, addressing consumer protection, financial stability, national security and anti-money laundering compliance, and establishes prudential requirements for the issuance, reserve backing and supervision of U.S.-dollar-pegged stablecoins. However, it is not yet in effect and certain provisions depend on final implementing regulations, which are to be issued by the primary federal stablecoin regulators. Additionally, the regulatory treatment of fiat-backed stablecoins across other jurisdictions remains uncertain. Further, the U.S. House of Representatives passed the Digital Asset Market Clarity Act (the “CLARITY Act”) in July 2025; the CLARITY Act, which is currently awaiting U.S. Senate approval, which would split jurisdiction of oversight on digital assets between the Commodity Futures Trading Commission (“CFTC”), overseeing “digital commodities,” and the SEC, overseeing “restricted digital assets”; the bill also seeks to resolve regulatory ambiguity regarding the meaning of “security” and “commodity.” Additionally, the CLARITY Act amends the Commodities Exchange Act of 1936, as amended (the “CEA”) to give the CFTC an expanded role in overseeing spot digital assets markets by providing it with primarily regulatory oversight authority over digital spot commodities. If additional legislation is enacted, the Combined Company may be subject to further regulatory requirements and restrictions. This may new costs for it and the Combined Company’s management may have to devote increased time and attention to regulatory matters or change aspects of its business.
Increased regulation may also result in limitations on the use cases of CRO. In addition, regulatory developments may require the Combined Company to comply with certain existing and new regulatory regimes, such as if any of the Combined Company’s activities cause it to be deemed a “money service business” under the regulations promulgated by the Financial Crimes Enforcement Network of the United States under the authority of the U.S. Bank Secrecy Act, including those that would require us to implement certain anti-money laundering programs, submit certain reports to Financial Crimes Enforcement Network of the United States and maintain certain records.
The U.S. federal banking agencies have revoked prior guidance that restricted the ability of financial institutions to engage in digital asset related activities. On March 7, 2025, the Office of the Comptroller of the Currency (“OCC”) issued a letter rescinding its previous guidance that required national banks and federal savings associations to receive prior written non-objection before engaging in crypto asset-related activities, and reaffirmed these institutions are permitted to provide crypto asset custody, hold stablecoin reserves and use distributed ledger and stablecoins to engage in payment activities. On March 28, 2025, the Federal Deposit Insurance Corporation (“FDIC”) issued a letter rescinding a previous letter from 2022 that required prior notification from FDIC-supervised institutions that wanted to engage in crypto-related activities, and confirmed that such institutions may engage in certain permissible digital assets-related activities, if they adequately manage the associated risks (including market and liquidity, operational and cybersecurity and anti-money laundering risks). On April 24, 2025, the Board of Governors of the Federal Reserve System of the United States (“Board of Governors of the Federal Reserve”) announced that it had withdrawn previous guidance that required state member banks to provide advance notification and, in certain cases, obtain nonobjections to engage in certain crypto asset and dollar-token activities. In July 2025, the OCC, the Board of Governors of the Federal Reserve, and the FDIC issued a statement for banking organizations regarding the safekeeping of digital assets, which focused on how existing laws, regulations and risk management principles apply to such activities, and signaled additional in the increasing regulatory clarity for digital assets by key financial regulators in the United States. As a result of these regulatory changes, competition on the offering of certain of the Combined Company’s products and activities may increase, potentially impacting its revenue, as well as the market price of CRO and in turn may affect the market price of the Combined Company’s Class A Common Stock. On May 7, 2025, the OCC issued a letter confirming that national banks and federal savings associations
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may provide and outsource cryptocurrency custody and execution services on behalf of customers. See also “ The Combined Company will operate in a highly competitive environment and will compete against companies and other entities with similar strategies, including, in the future, companies with significant CRO holdings and ETFs and ETPs for CRO and other digital assets, and the Combined Company’s business, operating results and financial condition may be adversely affected if the Combined Company is unable to compete effectively .”
The U.S. federal banking agencies have enhanced the supervision of novel activities conducted by banking organizations, especially following the failures of Silicon Valley Bank, Signature Bank and Silvergate Bank in March 2023, which were entities perceived as integral to the digital asset ecosystem, causing a number of digital asset industry participants to struggle in finding banks willing to work with them. Reports have also suggested that U.S. regulatory agencies, including the Department of the Treasury, may have advised financial institutions to approach crypto-related clients with caution. While some policymakers and industry participants have argued that this activity constituted a coordinated effort to limit banking access to crypto companies, regulators have not publicly confirmed such an initiative. Congressional hearings continue to explore the extent to which government influence may have contributed to banking challenges for crypto businesses. While recent regulatory developments suggest a more measured approach to crypto-related banking services, as discussed above, and shifts on risk management practices signaling that debanking of digital asset industry participants without individualized risk assessments would not be supported, there is no guarantee that similar measures will not be reintroduced in the future. If banking restrictions tighten due to a shift in U.S. regulatory priorities, the digital asset ecosystem could face in securing banking relationships, which could impact digital asset liquidity, market , operational security and institutional adoption, all of which could affect the digital assets market and therefore the value of digital assets.
On September 8, 2022, the White House Office of Science and Technology Policy issued a report in coordination with other federal agencies relating to the climate and energy implications of digital assets in the United States. Among its finding are that digital assets are energy intensive and drive significant environmental impacts, and the report recommends further study of the environmental impact of digital assets and the development of environmental performance regulations for digital asset miners, which may include limiting or eliminating digital assets that use high energy intensity consensus mechanisms. In addition to the United States, other governments or governmental bodies globally have introduced or are contemplating environmental and energy legislative and regulatory changes in response to the increasing focus on power consumption required to operate large-scale data centers. A changing legislative environment could create economic and regulatory uncertainty for the Combined Company’s business because the industries in which the Combined Company operate, with their high energy demand, could become targets for future environmental and energy regulations.
On April 14, 2023, the SEC re-opened the comment period for its proposal to amend the definition of “exchange” under Exchange Act Rule 3b-16 to encompass trading and communication protocol systems for digital asset securities and trading systems that use distributed ledger or blockchain technology, including both so-called “centralized” and “decentralized” trading systems. On June 12, 2025 the SEC issued a notice to withdraw this proposal. If the SEC seeks to adopt a similar proposal in the future, the new definition would have a sweeping impact on digital asset trading venues and other digital asset industry participants.
On January 21, 2025, the SEC announced that then-Acting SEC Chairman Mark Uyeda “launched a crypto task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets.” The task force is focused on helping the SEC “draw clear regulatory lines, provide realistic paths to registration, craft sensible disclosure frameworks and deploy enforcement resources judiciously.” While the SEC has formed the crypto task force to provide clarity on the application of the federal securities laws to the crypto asset market and to recommend practical policy measures that aim to foster innovation and protect investors, the task force has only recently begun. Additionally, on April 4, 2025, the SEC issued a statement concluding that “covered stablecoins” do not involve the offer or sale of securities within the meaning of the Securities Act or Exchange Act. While it provided a definition of what is a “covered stablecoin,” it is still unclear how this determination would affect non-covered stablecoins, and how it would interact with other proposed bills and regulations proposed by other agencies.
On April 8, 2025, CFTC Acting Chairman Caroline Pham directed CFTC Staff, pursuant to Executive Order 14219, to deprioritize actions involving violations of registration requirements under the Commodity Exchange Act unless there is evidence that the non-registrant knew of the registration requirement and violated it willfully. The CFTC’s deprioritization of such enforcement actions, including against unregistered intermediaries who offer derivatives trading on crypto assets, could add risk to the digital asset ecosystem.
In July 2025, supported by the current U.S. presidential administration, the SEC unveiled “Project Crypto,” an SEC initiative to develop a flexible regulatory framework to accommodate cryptocurrencies and blockchain-based trading. Key components of “Project Crypto” are to, among other things, (i) provide clarity on crypto asset classification and offerings,
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(ii) facilitate tokenized securities and DeFi integration, (iii) facilitate custody of crypto assets for market intermediaries and multiple business lines, (iv) develop formal rules proposals under “Project Crypto” while using interpretative or exemptive relief where possible and (iv) consider a potential “innovation exemption” to allow firms to deploy novel business models and technologies without full compliance with existing regulations upon meeting certain conditions.
In August 2025, the Division of Corporation Finance of the SEC issued a statement providing interpretative clarity on the application of federal securities laws to certain liquid staking activities involving crypto assets. “Liquid staking” refers to a process in which holders of crypto assets deposit their assets with a third-party protocol staking service provider and receive newly minted crypto assets in return. In this statement, the SEC’s view is that “liquid staking activities” do not involve the offer and sale of securities within the meaning of Section 2(a)(1) of the Securities Act or Section 3(a)(10) of the Exchange Act. Accordingly, it is the SEC’s view that participants in liquid staking activities do not need to register with the SEC transactions under the Securities Act, or fall within one of the Securities Act’s exemptions from registration in connection with these liquid staking activities. The SEC also stated that it does not consider “staking receipt tokens” as securities, as they function as receipts evidencing ownership of the deposited crypto assets, which themselves are not securities.
In August 2025, the CFTC launched its Listed Spot Crypto Trading Initiative, which aims to establish a framework for retail trading of leveraged, margined, or financed spot crypto asset contracts (“Retail Crypto Contracts”) on CFTC-registered designated contract markets (“DCMs”). The initiative would utilize existing authority under the CEA, which requires that retail trading of commodities with leverage, margin, or financing must be conducted on DCMs. The CFTC is exploring how to implement such a framework using current regulatory powers. While not final, the initiative may contribute to wider adoption of digital assets by clarifying how existing regulated venues could be used for Retail Crypto Contracts.
The European Union’s Markets in Crypto Assets Regulation (“MiCA”), a comprehensive digital asset regulatory framework for the issuance and provision of services in relation to digital assets, like CRO, became effective in June 2023, with various requirements phasing into effect through 2024. MiCA regulates the authorization requirement for and supervision of crypto asset service providers, as well as crypto asset issuers, offerors and persons seeking admission to trading of crypto assets in the European Union. In addition, MiCA also requires the European Commission (i) to provide a report on the environmental impact of crypto assets and (ii) based upon such report, introduce measures that might be warranted to mitigate the adverse impacts on the environment of technologies employed in markets in crypto assets like the consensus mechanisms such as mandatory minimum sustainability standards for consensus mechanisms.
In November 2023, the SEC filed a complaint against Kraken, alleging, among other claims, that Kraken’s crypto trading platform was operating as an unregistered securities exchange, broker, dealer and clearing agency, which the SEC agreed to dismiss on March 3, 2025. Additionally, individual states have the ability to file similar lawsuits on the grounds of violations of state securities laws. For example, the Oregon state attorney general filed a lawsuit against Coinbase, Inc. in April 2025, for alleged violations of Oregon state securities law, and there have been similar claims against other digital asset industry participants at a state level.
Firms engaging in crypto asset activities in the UK must currently be registered with the Financial Conduct Authority (the “FCA”) under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (“MLRs”), and are subject to various requirements and obligations as a result. The marketing of crypto assets is also restricted and may only be conducted by firms that are authorized by the FCA or registered under the MLRs. The FCA has also introduced rules prohibiting the marketing and sale of derivatives and exchange-traded notes that reference certain types of crypto assets to retail customers in the UK, although it now plans to remove the ban on the marketing and sale of exchange-traded notes. The UK regulatory framework for crypto assets continues to evolve rapidly, and firms operating in this space face an increasingly complex and restrictive compliance landscape. The FSMA 2023 established a framework to bring certain crypto asset activities, including issuance and trading, within the UK’s financial regulatory perimeter. Detailed rules relating to the regime are still under consultation by His Majesty’s Treasury and the FCA. In April 2025, His Majesty’s Treasury published draft legislation to bring a wide range of crypto asset activities within the scope of the UK’s regulatory perimeter, including operating a crypto asset trading venue, providing custody services and dealing in crypto assets. The FCA is also consulting on various elements of its forthcoming crypto asset regime, including in respect of the issuance of stablecoins, the custody of crypto assets and prudential requirements for crypto asset businesses. The final rules are expected to come into in phases from 2025 into 2026.
In June 2023, the SEC filed a complaint against Coinbase, Inc. charging it with operating as an unregistered securities exchange, broker and clearing agency, and for the unregistered offer and sale of securities in connection with its staking-as-a-service program. Recently, in February 2025, the SEC announced the filing of a joint stipulation with Coinbase, Inc and Coinbase to dismiss the civil enforcement action against their crypto platform.
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In November 2023, Binance Holdings Ltd. and its then chief executive officer reached a settlement with the U.S. Department of Justice, the CFTC, the U.S. Department of Treasury’s Office of Foreign Asset Control, and the Financial Crimes Enforcement Network to resolve a multi-year investigation by the agencies and a civil suit brought by the CFTC, pursuant to which Binance Holdings Ltd. agreed to, among other things, pay $4.3 billion in penalties across the four agencies and to discontinue its operations in the United States; and
In China, the People’s Bank of China and the National Development and Reform Commission have outlawed cryptocurrency mining and declared all cryptocurrency transactions illegal within the country. Other jurisdictions, including Egypt, Morocco and the Dominican Republic have also made the use of certain digital assets illegal. If the use of CRO is made illegal in other jurisdictions, particularly where CRO is currently traded in heavy volumes, the available market for CRO may contract. Additionally, if another government with considerable economic power were to ban digital assets or related activities, this could have further impact on the price of CRO. As a result, the markets and opportunities discussed herein may not reflect the markets and opportunities available to the Combined Company in the future.
While the current U.S. presidential administration has expressed support regarding the development and use of digital assets and the U.S. recently enacted the GENIUS Act, the specific regulatory frameworks, including the potential adoption of the CLARITY Act, are still to be developed. The exact timeline and impact of these efforts on the Combined Company’s business is uncertain, and there is uncertainty regarding enforcement actions by several U.S. agencies involving digital asset issuers and trading platforms. Additionally, it is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC or other regulators, or the impact of any such additional authorities, including the authority that Congress has already granted to the banking agencies under the GENIUS Act. It is also not possible to predict how additional legislation, regulation or other form of regulatory or supervisory oversight - such as the implementing regulations under the GENIUS Act or any Senate amendments to the CLARITY Act - might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally and CRO specifically. We cannot be certain as to how future regulatory developments will impact the treatment of CRO under the law, and ongoing and future regulation and regulatory actions could significantly restrict or eliminate the market for or uses of CRO and materially and adversely impact the Combined Company’s business. If the Combined Company to comply with such additional regulatory and registration requirements, it may seek to certain of the Combined Company’s operations or be to , and other governmental action. Such circumstances could have a material effect on the Combined Company’s ability to continue as a going or to pursue its business model at all, which could have a material effect on its business, prospects or operations. The consequences of increased regulation of digital assets and digital asset activities could affect the market price of CRO and any other digital assets the Combined Company may hold or expect to hold at such time and in turn affect the market price of the Combined Company’s Class A Common Stock.
Moreover, the risks of engaging in a CRO acquisition strategy are relatively novel and have created, and could continue to create, complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The novelty of CRO may increase the risk of employee or service provider misconduct or error, which may adversely impact the business of the Combined Company. Employee or service provider misconduct or error could subject the Combined Company to legal liability, financial losses and regulatory sanctions and could seriously harm the Combined Company’s reputation and negatively affect its business. Such misconduct could include engaging in improper or unauthorized transactions or activities, failing to supervise other employees or service providers, improperly using confidential information, as well as improper trading activity. Employee or service provider could the Combined Company to the risk of material even if the are detected. Moreover, the risk of employee or service provider or may be even for novel CRO products, services and activities which the Combined Company may offer or undertake in the future. It is not always possible to , and the precautions the Combined Company take to prevent and detect this activity may not be in all cases. If the Combined Company were found to have not met the Combined Company’s regulatory oversight and compliance and other obligations, it could be subject to regulatory sanctions, financial , restrictions on its activities for to properly identify, monitor and respond to potentially activity and its reputation. The Combined Company’s employees, or any contractors and agents it may contract with, could also commit that subject it to financial for , as well as regulatory actions, or result in financial liability. Further, by regulatory or authorities of trading activities could affect the Combined Company’s brand and reputation.
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The growth of the digital assets industry in general, and the use and acceptance of CRO in particular, may also impact the price of CRO and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of CRO may depend, for instance, on public familiarity with digital assets, ease of buying, accessing or gaining exposure to CRO, institutional demand for CRO as an investment asset, the participation of traditional financial institutions in the digital assets industry, consumer demand for CRO as a means of payment and the availability and popularity of alternatives to CRO. Even if growth in CRO adoption occurs in the near or medium-term, there is no assurance that CRO usage will continue to grow over the long-term. In addition, private actors that are wary of CRO or the regulatory concerns associated with CRO have in the past taken, and may in the future take, further actions that may have an adverse effect on the Combined Company’s business or the market price of the Combined Company’s Class A Common Stock.
Because CRO has no physical existence beyond the record of transactions on the Cronos network, a variety of technical factors related to the Cronos network could also impact the price of CRO. For example, malicious attacks by validators and advances in digital computing, algebraic geometry and quantum computing could undercut the integrity of the Cronos network and negatively affect the price of CRO. The liquidity of CRO may also be reduced and damage to the public perception of CRO may occur, if financial institutions were to deny or limit banking services to businesses that hold CRO, provide CRO-related services or accept CRO as payment, which could also decrease the price of CRO. Liquidity of CRO may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for CRO and other digital assets.
The regulatory environment for digital assets in the United States and globally remains highly uncertain and is evolving rapidly. U.S. policymakers are only beginning to define a comprehensive regulatory framework for digital assets. As a result, the Combined Company may face challenges in adapting to proposed or newly enacted laws and regulations, which could materially and adversely affect its business, financial condition and operations.
As crypto assets have grown in both popularity and market size, various U.S. federal, state and local and foreign governmental organizations, as well as consumer agencies and public advocacy groups, have increasingly scrutinized the operations of crypto networks, users and platforms, with a focus on how crypto assets can be used to launder the proceeds of illegal activities and fund criminal or terrorist enterprises. In addition, the safety and soundness of platforms and other service providers that hold crypto assets for users have drawn regulatory and public attention. These concerns have led to calls for heightened regulatory oversight, and new laws and regulations.
Unlike traditional financial institutions, which have cultivated long-standing relationships with policymakers and regulators, participants in the cryptoeconomy are relatively new to the U.S. legislative and regulatory landscape. While engagement with policymakers and regulators has begun, it is still at a relatively nascent stage and may be insufficient to influence future legislation and regulation. As a result, new laws and regulations may be proposed and adopted in the United States and internationally, or existing laws and regulations may be interpreted in new ways, that adversely affect the cryptoeconomy or crypto asset platforms. Consequently, the Combined Company may be disproportionately impacted by such developments, potentially restricting its ability to operate or innovate. Additionally, any future political activities to further the Combined Company’s mission may be perceived unfavorably by investors and the public and have an adverse impact on the Combined Company’s brand and reputation.
As also noted above, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illicit activities, fund criminal or terrorist activities, or circumvent sanctions regimes, including those sanctions imposed in response to ongoing war between Russia and Ukraine. If the Combined Company is found to have purchased any of the Combined Company’s CRO from bad actors that have used CRO to launder money or persons subject to sanctions, it may be subject to regulatory proceedings and any further transactions or dealings in CRO by it may be restricted or prohibited.
Additional laws, guidance and policies may be issued by domestic and foreign regulators following the bankruptcy of FTX Trading Ltd., one of the world’s largest cryptocurrency exchanges, in November 2022, which has been widely cited as a catalyst for increased regulatory and enforcement focus on the digital assets industry and certain market participants and practices. Increased enforcement activity and changes in the regulatory environment, including changing interpretations and the implementation of new or varying regulatory requirements by the government or any new legislation affecting CRO, as well as enforcement actions involving or impacting the Combined Company’s trading venues, counterparties and custodians, may impose significant compliance and other costs on the Combined Company, significantly limit its ability to hold and transact in CRO or materially reduce the value of the Combined Company’s CRO holdings.
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CRO’s status as a product that may be offered and sold as a “security” in any relevant jurisdiction, as well as the status of CRO-related products and activities in general, is subject to uncertainty, and if the Combined Company is unable to properly characterize such products or activities, the Combined Company may be subject to regulatory scrutiny, inquiries, investigations, fines and other penalties, which may adversely affect the Combined Company’s business, operating results and financial condition.
The SEC and its staff have taken the position that a range of crypto assets, products, services and activities fall within the definition of an investment contract that is offered or sold as a “security” under the U.S. federal securities laws. The legal test for determining whether any given crypto asset, product or service that is offered and sold is an investment contract was set forth in the 1946 U.S. Supreme Court case SEC v. W.J. Howey Co. and requires a highly complex, fact-driven analysis. Accordingly, whether any given crypto asset, product or service that would be ultimately determined to be offered and sold as a security is uncertain and difficult to predict notwithstanding the conclusions of the SEC or any conclusions the Combined Company may draw based on the Combined Company’s risk-based assessment regarding the likelihood that a particular crypto asset, product or service could be deemed to be offered and sold as a “security” or “securities offering” under applicable laws. It is also possible that a change in the governing administration or the appointment of new SEC commissioners could substantially impact the approach to enforcement by the SEC and its staff.
Public statements made by previous senior officials at the SEC suggest that the SEC does not intend to take the position that CRO (as currently offered and sold) is a “security” under the U.S. federal securities laws. As of the date of this quarterly report, with the exception of certain centrally issued digital assets that have received “no-action” letters from the SEC staff, CRO is expected to be considered a crypto asset which senior officials at the SEC are unlikely to consider a “security.” However, such statements are not official policy statements by the SEC and reflect only the speakers’ views, which are not binding on the SEC or any other agency or court and cannot be generalized to any other crypto asset. In addition, the SEC and courts have taken the position that a crypto asset that is not itself a security can be offered and sold in securities transactions, which carry many of the same regulatory risks and consequences summarized above. For example, the SEC has taken the position that yield, lending products, services or protocols can constitute the offer and sale of security even if the underlying crypto asset is not a security.
Any enforcement action by the SEC or any international or state securities regulator asserting that CRO is a “security,” or a court decision to that effect, would be expected to have an immediate material adverse impact on the trading value of CRO, as well as the Combined Company’s business. This is because the business models behind most crypto assets are incompatible with regulations applying to transactions in securities. If a crypto asset is determined or asserted to be a “security,” it is likely to become difficult or impossible for the crypto asset to be traded, cleared or custodied in the United States and elsewhere through the same channels used by non-security crypto assets, which in addition to materially and adversely affecting the trading value of the crypto asset is likely to significantly impact its liquidity and market participants’ ability to convert the crypto asset into U.S. dollars and other currencies.
Several foreign jurisdictions have taken a broad-based approach to classifying crypto assets, products and services that are being offered or sold as “securities,” while other foreign jurisdictions have adopted a narrower approach. As a result, certain crypto assets, products or services, including those relating to CRO, may be determined to be offered and sold as a “security” under the laws of some jurisdictions but not others. Various foreign jurisdictions may, in the future, adopt additional laws, regulations or directives that affect the characterization of crypto assets, products or services that are offered or sold as “securities.”
The classification of a crypto asset, product or service that is offered and sold as a security under applicable law has wide-ranging implications for the regulatory obligations that flow from the offer, sale, trading and clearing, as applicable, of such assets, products or services. For example, a crypto asset, product or service that is offered and sold as a security in the United States may generally only be offered or sold in the United States pursuant to a registration statement filed with the SEC or in an offering that qualifies for an exemption from registration. Persons that effect transactions in crypto assets, products or services that are offered or sold as securities in the United States may be subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and sellers to trade crypto assets that are offered or sold as securities in the United States are generally subject to registration as national securities exchanges, or must qualify for an exemption, such as by being operated by a registered broker-dealer as an alternative trading system (“ATS”) in compliance with rules for ATSs. Persons facilitating clearing and settlement of securities may be subject to registration with the SEC as a clearing agency. Foreign jurisdictions may have similar licensing, registration and qualification requirements.
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In its initial business activities, which will constitute actively accumulating CRO, establishing and operating a Cronos validator node and undertaking staking activities, the Combined Company does not plan to offer or sell CRO as “investment contracts” or otherwise as a “security.” the Combined Company is not registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange or ATS (or foreign equivalents), and we believe that CRO in itself or as a result of the manner in which the Combined Company intends to purchase or sell CRO in the Combined Company’s business activities, is not a security (including based on prior statements by a number of SEC senior officials). However, statements, settlements and enforcement actions are not rules or regulations of the SEC and are not binding on the SEC. Regardless of public statements made by senior officials at the SEC and the Combined Company’s conclusions, the Combined Company could in the future be subject to legal or regulatory action in the event the SEC or a state or a foreign regulatory authority were to assert, or a court were to determine, that either CRO itself or a product, service or activity that the Combined Company may offer, sell, or engage in the future related to CRO could be viewed a “security” under applicable laws. There can be no assurance that the Combined Company will properly characterize over time any given CRO product or service that is offered and sold as a security or non-security, or that the SEC, foreign regulatory authority or a court having final determinative authority on the topic, if the was presented to it, would agree with the Combined Company’s assessment. We expect the Combined Company’s risk assessment policies and procedures to continuously evolve to take into account case law, legislative developments, facts and developments in technology.
If an applicable regulatory authority or a court, in either case having final determinative authority on the topic, were to determine that a product or service that is offered or sold by the Combined Company in the future is a security, the Combined Company would not be able to offer such product or service until it is able to do so in a legally compliant manner. A determination by the SEC, a state or foreign regulatory authority, or a court that a product or service that is offered or sold constitutes a security may result in it ceasing to offer that product or service, and may also result in it determining that it is advisable to cease offering products and services or engaging in certain activities entirely, that have similar characteristics to the product or service that was alleged or determined to be a security. Alternatively, the Combined Company may determine to continue to offer certain future products or services even if the SEC or another regulator alleges that the product or service is offered or sold as a security, pending a final judicial determination as to that product or service’s proper characterization, and the fact that the Combined Company waited for a final judicial determination would generally not or sanctions us for the Combined Company’s having previously made that product or service available without registering that product or service with the SEC. As such, the Combined Company could be subject to judicial or administrative sanctions for to offer or sell the product or service in compliance with the registration requirements, or for acting as a broker, dealer or national securities exchange without appropriate registration. Such an action could result in , and desist orders, as well as civil monetary , and , liability, and reputational . Additionally, the SEC has brought and may in the future bring enforcement actions other cryptoeconomy participants and their product offerings and services that may cause the Combined Company to modify or a product offering or service. If the Combined Company were to modify or any future product offering or service for any reason, the Combined Company’s decision may be with users, may reduce the Combined Company’s ability to attract and retain customers (especially if similar products or services continue to be offered by our competitors), and may affect its business, operating results and financial condition.
Regulatory changes classifying CRO as a “security” could lead to the Combined Company’s classification as an “investment company” under the Investment Company Act and could adversely affect the market price of CRO and the market price of shares of the Combined Company’s Class A Common Stock.
While senior SEC officials have stated their view that most crypto assets are not “securities” for purposes of the U.S. federal securities laws, a contrary determination by the SEC could lead to the Combined Company’s classification as an “investment company” under the Investment Company Act, which would subject it to significant additional regulatory controls that could have a material adverse effect on its business and operations and may also require the Combined Company to substantially change the manner in which it conducts its business.
In addition, if CRO is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of CRO and in turn adversely affect the market price of shares of the Combined Company’s Class A Common Stock. For additional information on the additional requirements, the Combined Company would be required to meet if it were determined to be an investment company, see “ If the Combined Company is deemed to be an investment company under the Investment Company Act, it may be required to institute burdensome compliance requirements and the Combined Company’s activities may be restricted, which may make it difficult for it to complete the Business Combination .”
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The Combined Company will not be subject to the same legal and regulatory obligations, including certain compliance and reporting obligations intended to protect investors, that apply to investment companies such as mutual funds and ETFs, or to obligations applicable to investment advisers.
Mutual funds, ETFs and their directors and management are subject to extensive regulation as “investment companies” and “investment advisers” under U.S. federal and state law; this regulation is intended for the benefit and protection of investors.
We believe we are currently not subject to and, following the consummation of the Business Combination, the Combined Company will not be subject to, and do not otherwise voluntarily comply with, these laws and regulations. Consequently, shareholders of the Combined Company do not have the regulatory protections provided to shareholders in registered and regulated investment companies, which, for example, require investment companies to have a certain percentage of disinterested directors and regulate the relationship between the investment company and certain of its affiliates. Further, we do not believe that the Combined Company is a commodity pool for purposes of the Commodity Exchange Act. Consequently, shareholders will not have the regulatory protections provided to shareholders in Commodity Exchange Act-regulated instruments or commodity pools.
This means, among other things, that the execution of or changes to the Combined Company’s CRO acquisition and management strategy, its use of leverage, the manner in which its CRO is custodied, its ability to engage in transactions with affiliated parties and its operating and investment activities generally are not subject to the extensive legal and regulatory requirements and prohibitions that apply to investment companies and investment advisers. For example, although a significant change to the Combined Company’s CRO acquisition strategy would require the approval of the Combined Company Board, no shareholder or regulatory approval would be necessary. Consequently, the Combined Company Board has broad discretion over the investment, leverage and cash management policies it authorizes, whether in respect of the Combined Company’s CRO holdings or other activities the Combined Company may pursue, and has the power to change its current policies, including its strategy of acquiring and holding CRO.
The Combined Company will be subject to laws, regulations, and executive orders regarding economic and trade sanctions, anti-bribery, anti-money laundering (“AML”), and counter-terrorism financing that could impair the Combined Company’s ability to compete in international markets or subject it to criminal or civil liability if the Combined Company violates them. As the Combined Company continues to expand and localize its international activities, its obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions will increase and the Combined Company may be subject to investigations and enforcement actions by U.S. and non-U.S. regulators and governmental authorities.
As the Combined Company expands and localizes its international activities, it will become increasingly obligated to comply with the laws, rules, regulations, policies, and legal interpretations both of the jurisdictions in which it will operate and those into which it will offer services on a cross-border basis. Laws regulating financial services, the internet, mobile technologies, digital assets, and related technologies outside the United States often impose different, more specific, or even conflicting obligations, as well as broader liability.
The Combined Company will be required to comply with applicable U.S. economic and trade sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), as well as similar requirements in other jurisdictions. The OFAC regulations and requirements generally restrict dealings by persons subject to U.S. jurisdiction with certain countries, or subnational territories that are the target of comprehensive sanctions, which currently are Cuba, Iran, and North Korea, as well as Crimea, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic regions of Ukraine. In addition, OFAC restricts dealings by persons subject to U.S. jurisdiction with specific individuals and entities that are the subject of targeted sanctions, including persons identified on blocked persons lists.
The Combined Company will also be subject to various AML and counter-terrorism financing laws and regulations around the world that prohibit, among other things, the Combined Company’s involvement in transferring the proceeds of criminal activities. In the United States, many of the Combined Company’s activities will be subject to AML laws and regulations, including the Bank Secrecy Act of 1970 (the “BSA”) and other similar laws and regulations. The BSA, among other things, requires money transmitters to develop and implement risk-based AML programs; to report large cash transactions and suspicious activity; and, in some cases, to collect and maintain information about customers who use their services and maintain other transaction records. Regulators in the United States and globally continue to increase their scrutiny of compliance with these obligations, which may require it to further revise or expand the Combined Company’s compliance program, including the procedures the Combined Company uses to verify the identity of its customers and to monitor transactions on its system, which would include payments to persons outside the United States. Regulators regularly
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reexamine the transaction volume thresholds at which it must obtain and keep applicable records or verify identities of customers. Any change in such thresholds could result in greater costs for compliance. The Combined Company employs various manual and automated ways to detect potential employee or third-party misconduct. Examples of these programs are a whistleblower policy and security controls that monitor suspicious activity. For the Combined Company’s service providers, its risk management framework requires it to perform risk-based due diligence on service providers, such as AML screening. The Combined Company will also require annual AML and security training for all employees to help the Combined Company’s employees identify and detect misconduct proactively. The Combined Company’s efforts to detect and monitor such transactions for compliance with law may require significant costs, and may not ultimately detect or deter all such transactions. The Combined Company also could be subject to potentially significant fines, penalties, inquiries, audits, investigations, enforcement actions, and and civil liability if regulators or third-party auditors identify gaps in its AML program that are not sufficiently remediated, or if the Combined Company’s AML program is found to the BSA.
Despite the Combined Company’s efforts to comply with applicable laws and regulations, there can be no guarantee that regulators and/or law enforcement will view these measures as compliant with the BSA or U.S. sanctions laws and regulations. If regulators and/or law enforcement find that the Combined Company have violated the BSA or U.S. sanctions laws and regulations, or it is otherwise the subject of government investigations for alleged violations of the BSA or U.S. sanctions laws and regulations, such investigations and alleged violations could result in negative consequences for us, including costs related to government investigations, financial penalties, and harm to the Combined Company’s reputation. The impact on it related to these matters could be substantial. Although at the closing of the Business Combination the Combined Company intends to implement controls and screening tools designed to prevent activity, there is no guarantee that it will not provide the Combined Company’s products and services to individuals, entities, or governments in of the BSA or U.S. sanctions laws and regulations.
Regulators worldwide frequently study each other’s approaches to the regulation of the blockchain technology and digital assets. Consequently, developments in any jurisdiction may influence other jurisdictions. Further, new developments in one jurisdiction may be extended to additional services and other jurisdictions. As a result, the risks created by any new law or regulation in one jurisdiction are magnified by the potential that they may be replicated in another jurisdiction, which in turn would affect the Combined Company’s business across multiple jurisdictions and/or across its services and products. Conversely, if regulations diverge worldwide, the Combined Company may face difficulty adjusting the Combined Company’s products, services, and other aspects of its business with the same effect. These risks are heightened as the Combined Company faces increased competitive pressure from other similarly situated businesses that engage in regulatory arbitrage to avoid the compliance costs associated with regulatory changes.
The Combined Company may operate the Combined Company’s business in foreign countries where companies often engage in business practices that are prohibited by the U.S. and other jurisdictions’ regulations applicable to us. The Combined Company will be subject to anti-corruption laws and regulations, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”) and other laws that prohibit the making or offering of improper payments to foreign government officials and political figures, including anti-bribery provisions enforced by the U.S. Department of Justice and the SEC. The FCPA, for example, prohibits U.S. persons and entities from making improper payments or offers of payments to foreign governments and their officials and political parties by the United States and other business entities for the purpose of obtaining or retaining business. At the closing of the Business Combination, the Combined Company intends to adopt policies, procedures, systems, and controls designed to identify and address potentially impermissible transactions under such laws and regulations. However, there can be no assurance that all of the Combined Company’s employees, consultants, and agents-including those that may be based in or from countries where practices that U.S. or other laws may be customary-will not take actions in of the Combined Company’s policies, for which it may be ultimately responsible.
The complexity of U.S. federal and state and international regulatory and enforcement regimes, coupled with the global scope of the Combined Company’s operations and the evolving global regulatory environment, could result in a single event prompting a large number of overlapping investigations and proceedings by multiple government authorities in different jurisdictions. Furthermore, due to the uncertain application of existing laws and regulations, it may be that, despite the Combined Company’s regulatory and legal analysis concluding that certain products and services are currently unregulated or fit within a particular category of regulatory activities, such products or services may indeed be subject to financial regulation, licensing, or authorization obligations that it has not obtained or with which it has not complied. As a result, the Combined Company is at a heightened risk of enforcement action, litigation, and regulatory and legal scrutiny, which could lead to sanctions, cease-and-desist orders, or other penalties and censures. Any of the foregoing could, individually or in the aggregate, have a material adverse effect on the Combined Company’s business, results of operations, financial condition, and prospects.
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Due to the unregulated nature and lack of transparency surrounding the operations of many CRO trading venues, CRO trading venues may experience greater fraud, security failures or regulatory or operational problems than trading venues for more established asset classes, which may result in a loss of confidence in CRO trading venues and adversely affect the value of the Combined Company’s CRO holdings.
CRO trading venues are relatively new and, in many cases, unregulated. Furthermore, there are many CRO trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in CRO trading venues, including prominent exchanges that handle a significant volume of CRO trading and/or are subject to regulatory oversight, in the event one or more CRO trading venues cease or pause for a prolonged period the trading of CRO or other digital assets, or experience fraud, significant volumes of withdrawal, security failures or operational problems.
The SEC has also brought actions against individuals and digital asset market participants alleging such persons artificially increased trading volumes in certain digital assets through wash trades, or repeated buying and selling of the same assets in fictitious transactions to manipulate their underlying trading price. Any actual or perceived false trading in the CRO market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of the Combined Company’s CRO. Negative perception, a lack of stability in the broader CRO markets and the closure, temporary shutdown or operational disruption of CRO trading venues, lending institutions, institutional investors, validators, custodians or other major participants in the Cronos ecosystem, due to , business , cybersecurity events, government-mandated regulation, , or for any other reason, may result in a in confidence in CRO and the broader Cronos ecosystem and in the price of CRO. For example, in 2022, each of Celsius Network, Voyager Digital, Three Arrows Capital, FTX Trading Ltd., and BlockFi filed for , following which the market prices of Bitcoin and other digital assets significantly . The SEC also as part of its June 5, 2023, that Binance Holdings Ltd. committed strategic and targeted “wash trading” through its affiliates to inflate the volume of certain digital assets traded on its exchange. In addition, in June 2023, the SEC announced enforcement actions Coinbase, Inc., and Binance Holdings Ltd., two providers of large trading venues for digital assets, which similarly was followed by a decrease in the market price of Bitcoin and other digital assets. These were followed in November 2023, by an SEC enforcement action Kraken, another large trading venue for digital assets. While the current U.S. presidential administration has these enforcement actions, it is uncertain when or whether new enforcement actions may be brought. The price of the Combined Company’s Class A Common Stock may be affected by the value of the Combined Company’s CRO holdings and the of a major participant in the Cronos ecosystem could have a material effect on the market price of the Combined Company’s Class A Common Stock.
The Combined Company’s compliance and risk management methods might not be effective and may result in outcomes that could adversely affect the Combined Company’s reputation, operating results and financial condition.
The Combined Company’s ability to comply with applicable complex and evolving laws, regulations and rules will be largely dependent on the establishment, maintenance and scaling of its compliance, internal audit and reporting systems, as well as its ability to attract and retain qualified compliance and other risk management personnel. We cannot assure you that the Combined Company’s policies and procedures will always be effective or that the Combined Company will always be successful in monitoring or evaluating the risks to which it may be exposed in all market environments or against all types of risks, including unidentified or unanticipated risks. The Combined Company’s risk management policies and procedures are expected to rely on a combination of technical and human controls and supervision that are subject to error and failure. Some of the Combined Company’s methods for managing risk are discretionary by nature and are based on internally developed controls and observed historical market behavior, and also involve reliance on standard industry practices. Accordingly, in the future, the Combined Company may identify gaps in such policies and procedures or existing gaps may become higher risk, and may require significant resources and management attention. The Combined Company’s risk management policies and procedures also may not prevent due to technical if its testing and quality control practices are not in . In addition, the Combined Company may elect to adjust the Combined Company’s risk management policies and procedures to allow for an increase in risk tolerance, which could it to the risk of .
Any potential regulators who may have jurisdiction over us, including in the future, may periodically review the Combined Company’s compliance program, including its policies and procedures, and with applicable law. The Combined Company may from time to time receive examination reports citing violations of applicable law and inadequacies in existing compliance programs requiring it to enhance certain practices with respect to the Combined Company’s practices or compliance program, including due diligence, training, monitoring, reporting and recordkeeping. If the Combined Company fails to comply with these, or do not adequately remediate
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certain findings, regulators and financial institution partners could take a variety of actions that could impair the Combined Company’s ability to conduct its business, including, but not limited to, delaying, denying, withdrawing or conditioning approval of certain products, services and activities. In addition, regulators have broad enforcement powers to censure, fine, issue cease and desist orders, that may prohibit it from engaging in some of the Combined Company’s business activities, or revoke any licenses it may obtain in the future. The Combined Company face significant intervention by regulatory authorities, including extensive auditing and surveillance activities, and will continue to face the risk of significant intervention by regulatory authorities and potential future financial institution partners in the future. In the case of non-compliance or alleged non-compliance, it could be subject to investigations and proceedings that may result in substantial penalties or civil lawsuits, including by customers, for damages, which can be a significant to it or the Combined Company’s financial institution partner(s). Any of these outcomes would affect the Combined Company’s reputation and brand and its business, operating results and financial condition. Some of these outcomes could affect the Combined Company’s ability to conduct its business.
We expect the Combined Company to engage in other CRO-related activities, including participating in staking activities and operating a validator node, all of which are subject to regulation. The Combined Company has not previously engaged in these business lines and it may be unable to implement our business plan, including, without limitation, due to operational challenges, significant competition and regulation.
The Combined Company may engage in other CRO-related activities, which may be subject to regulation. The Combined Company have not previously engaged in these CRO related activities and it may be unable to implement the Combined Company’s business plan, including, without limitation, due to operational challenges, significant competition and regulation. The Combined Company may also incur indebtedness or enter into other financial instruments in the future that may be collateralized by the Combined Company’s CRO holdings or pursue other strategies to create income streams or otherwise generate funds using its CRO holdings. These offerings are expected to be highly regulated, any failure to obtain or maintain necessary money transmission, banking services and/or virtual currency business activity registrations and licenses, or comply with any applicable laws, rules and regulations could adversely affect the Combined Company’s ability to offer these services. See “CRO’s status as a product that may be offered and sold as a “security” in any relevant jurisdiction, as well as the status of CRO-related products and activities in general, is subject to uncertainty, and if the Combined Company is unable to properly characterize such products or activities, the Combined Company may be subject to regulatory , inquiries, , and other , which may affect the Combined Company’s business, operating results and financial condition.” Regulators and payment processors have historically taken actions relating to access to banking services. Heightened by regulators could be to the Combined Company’s long-term strategy and to comply with regulators during and after its engagement in such activities could its brand, reputation, business, operating results and financial condition.
Further, the Combined Company has not previously engaged in such CRO-related products or activities, and it may be unable to implement a business strategy to successfully deliver these services. We cannot guarantee the Combined Company’s success to deliver these services. However, if the Combined Company fails to keep pace with rapid industry changes to provide new and innovative products and services, and are unable to offer such financial services to generate revenue, this could adversely impact the Combined Company’s business, operating results and financial condition. The further development and acceptance of cryptocurrency networks and other cryptocurrencies financial services, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to predict and evaluate. Conversely, the slowing or stopping of the development or acceptance of digital asset systems may also adversely affect the Combined Company’s ability to implement this business strategy.
Even if the Combined Company is able to expand the Combined Company’s operations to include additional CRO-related products, services or activities, we cannot guarantee that it will convince future customers to use these products or services, or that any future activities would be fruitful. If the Combined Company’s future customers decrease their level of engagement with its products, services and platform, its business, operating results and financial condition may be significantly harmed.
The Combined Company may be unable to recognize the economic benefit of a “fork” or an “airdrop,” which could adversely impact an investment in CRO.
The primary digital asset to be held by the Combined Company will be CRO.
From time to time, the Combined Company may come into possession of, acquire, or otherwise establish dominion and control over, digital assets or other assets or rights, or be entitled to acquire any of the foregoing, incidental to the Combined Company’s
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ownership of CRO and that arise without any action of the Combined Company (“Incidental Rights,” and such digital assets, other assets and rights “IR Virtual Currency”). Incidental Rights can arise in a number of ways, including a fork in the Cronos network or an airdrop to holders of CRO (each described below). The Combined Company may elect not to take advantage of such Incidental Rights, or may be unable to do so, or may irrevocably abandon the Incidental Rights or IR Virtual Currency, even if this may be economically detrimental to the Combined Company.
Network Forks.
CRO, along with many other digital assets, are open-source projects. As a result, any individual can propose modifications or improvements through one or more software upgrades that could alter the protocol layer of the Cronos network. In most cases, when a modification is proposed, a substantial majority of users and validators consent to the modification, especially if the new version would be incompatible with the then-current version. However, when a substantial majority of users and validators do not consent to the proposed modified version, the result is a “hard fork” with two incompatible networks and two incompatible digital assets. In other words, two incompatible networks would then exist: (1) one network running the pre-modified software and (2) another network running the modified software. The effect of such a fork would be the existence of two versions of the network running in parallel, yet lacking interchangeability. This is in contrast to a “soft fork,” or a proposed modification to the software governing the network that results in a post-update network that is compatible with the network as it existed prior to the update, because it restricts the network operations that can be performed after the update.
Forks can occur for other reasons as well. For example, after a significant security breach, stakeholders on the network could elect to “fork” the network to its state before the hack, effectively reversing the hack. A fork could also be introduced unintentionally through a software bug or network activity.
Significant forks are typically announced several months in advance. The circumstances of each fork are unique, and their relative significance varies. It is possible that a particular fork may result in a significant disruption to CRO and, potentially, may result in broader market disruption should pricing become difficult following the fork. It is not possible to predict with accuracy the impact that any anticipated fork could have or for how long any resulting disruption may exist.
Forks may have a detrimental effect on the value of CRO, including by negatively affecting cryptocurrency allocations or by failing to capture of the full value of the newly-forked CRO if it is excluded from the CROUSD_RR index. Forks can also introduce new security risks. For example, forks may result in “replay attacks,” or attacks in which transactions from one network were rebroadcast to nefarious effect on the other network. For example, when the Ethereum and Ethereum Classic networks split in July 2016 due to a permanent hard fork (resulting in two different versions of the Ethereum blockchain), replay attacks, in which transactions from one network were rebroadcast to nefarious effect on the other network, plagued Ethereum exchanges through at least October 2016. An Ethereum exchange announced in July 2016 that it had lost 40,000 Ethereum Classic, worth about $100,000 at that time, as a result of replay attacks.
A hard fork may adversely affect the price of CRO at the time of announcement or adoption. For example, the announcement of a hard fork could lead to increased demand for the pre-fork digital asset, in anticipation that ownership of the pre-fork digital asset would entitle holders to a new digital asset following the fork. The increased demand for the pre-fork digital asset may cause the price of the digital asset to rise. After the hard fork, it is possible the aggregate price of the two versions of the digital asset running in parallel would be less than the price of the digital asset immediately prior to the fork. While the Combined Company will determine which network is generally accepted as the Cronos network and should therefore be considered the appropriate network for the Combined Company’s purposes, there is no guarantee that the Combined Company will choose the network and the associated digital asset that is ultimately the most valuable fork. Either of these events could therefore adversely impact the value of the shares of the Combined Company’s Class A Common Stock.
If CRO were to fork into two digital assets, the Combined Company may hold, in addition to its existing CRO balance, a right to claim an equivalent amount of the new “forked” asset following the hard fork. However, the CROUSD_RR index does not track forks involving CRO. The holder of CRO has no discretion in a hard fork; it merely has the right to claim the new CRO on a pro rata basis while it continues to hold the same number of CRO.
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Crypto.com Custody, which will be the custodian of the Combined Company’s CRO, retains the right, in its sole discretion, to determine whether or not to support (or cease supporting) a forked network. The outcome of such decisions by Crypto.com Custody may impact the price of the Combined Company’s Class A Common Stock.
Airdrops.
Owners of CRO may also become subject to an “airdrop.” In an airdrop, the promoters of a different digital asset, typically one that is newly launched, will send that digital asset to the wallet of holders of an existing digital asset for no charge. Airdrops are not always announced and while in some cases the wallet owner needs to take a step to “claim” the new digital asset, in other cases, the wallet owner possesses the new digital asset without taking any actions. For example, in March 2017, the promoters of Stellar Lumens announced that anyone that owned Bitcoin as of June 26, 2017, could claim, until August 27, 2017, a certain amount of Stellar Lumens. Airdrops are not included in the CROUSD_RR index under its current methodology. the Combined Company may or may not participate in airdrops.
If the Combined Company notifies Crypto.com Custody in writing of an upcoming airdrop, it may, among other actions, elect to: (i) custody the airdropped digital asset for an additional fee or (ii) not pursue obtaining the airdropped digital assets. The outcome of such decisions by Crypto.com Custody may impact the price of the Combined Company’s Class A Common Stock.
In the ordinary course of business managing its CRO holdings as a CRO treasury company, the Combined Company may purchase CRO through spot markets which may be exposed to fraud and market manipulation, including through front running and wash trading, which may adversely affect the value of the shares of the Combined Company’s Class A Common Stock.
The blockchain infrastructure could be used by certain market participants to exploit arbitrage opportunities through schemes such as front-running, spoofing, pump-and-dump and fraud across different systems, platforms or geographic locations. As a result of reduced oversight, these schemes may be more prevalent in digital asset markets than in the general market for financial products.
The SEC has identified possible sources of fraud and manipulation in the digital asset markets generally, including, among others (1) “wash trading”; (2) persons with a dominant position in a digital asset manipulating the digital asset’s pricing; (3) hacking of the digital asset’s network and trading platforms; (4) malicious control of the digital asset network; (5) trading based on material, non-public information (for example, plans of market participants to significantly increase or decrease their holdings in the digital assets, new sources of demand for the digital asset, etc.) or based on the dissemination of false and misleading information; (6) manipulative activity involving purported “stablecoins”; and (7) fraud and manipulation at digital asset trading platforms. The effect of potential market manipulation, front-running, wash-trading, and other fraudulent or trading practices may inflate the volumes actually present in the digital asset markets and/or cause in price, which could affect the Combined Company or cause to its shareholders.
In the ordinary course of business managing its CRO holdings as a CRO treasury company, the Combined Company may purchase CRO through spot markets. Over the past several years, some digital asset trading platforms and spot markets have been closed or faced issues due to fraud and manipulative activity, business failure or security breaches. In many of these instances, the customers of such digital asset trading platforms and spot markets were not compensated or made whole for the partial or complete losses of their account balances in such digital asset trading platforms.
For instance, in 2022, there were reports claiming that more than half of Bitcoin trading volume on digital asset exchanges was fake. Such reports alleged that certain overseas exchanges have displayed suspicious trading activity suggestive of a variety of manipulative or fraudulent practices. Other academics and market observers have put forth evidence to support claims that manipulative trading activity has occurred on certain Bitcoin exchanges. For example, in a 2017 paper titled “Price Manipulation in the Bitcoin Ecosystem” sponsored by the Interdisciplinary Cyber Research Center at Tel Aviv University, a group of researchers used publicly available trading data, as well as leaked transaction data from a 2014 Mt. Gox security breach, to identify and analyze the impact of “suspicious trading activity” on Mt. Gox between February and November 2013, which, according to the authors, caused the price of Bitcoin to increase from around $150 to more than $1,000 over a two-month period. In August 2017, it was reported that a trader or group of traders nicknamed “Spoofy” was placing large orders on Bitfinex without actually executing them, presumably in order to influence other investors into buying or selling by creating a appearance that demand existed in the market. In December 2017, an anonymous blogger (publishing under the pseudonym Bitfinex’d) cited publicly available trading data to support his or her claim that a trading bot nicknamed “Picasso” was pursuing a paint-the-tape-style strategy by buying and selling Bitcoin
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and Bitcoin cash between affiliated accounts in order to create the appearance of substantial trading activity and thereby influence the price of such assets.
The potential consequences of a spot market’s failure or failure to prevent market manipulation could adversely affect the value of the shares of the Combined Company’s Class A Common Stock. Any market abuse, and a loss of investor confidence in CRO, may adversely impact pricing trends in CRO markets broadly, as well as an investment in shares of the Combined Company’s Class A Common Stock.
The price of CRO on available spot markets may be exposed to wash trading.
Spot markets on which CRO trades, through which the Combined Company may purchase CRO, may be susceptible to wash trading. Wash trading occurs when offsetting trades are entered into for other than bona fide reasons, such as the desire to inflate reported trading volumes. Wash trading may be motivated by non-economic reasons, such as a desire for increased visibility on popular websites that monitor markets for digital assets so as to improve their attractiveness to investors who look for maximum liquidity, or it may be motivated by the ability to attract listing fees from token issuers who seek the most liquid and high-volume exchanges on which to list their coins. Results of wash trading may include unexpected obstacles to trade and erroneous investment decisions based on false information.
Even in the United States, there have been allegations of wash trading even on regulated venues. Any actual or perceived false trading in the digital asset exchange market, and any other fraudulent or manipulative acts and practices, could adversely affect the value of CRO and/or negatively affect the market perception of CRO.
To the extent that wash trading either occurs or appears to occur in spot markets on which CRO trades, investors may develop negative perceptions about CRO and the digital assets industry more broadly, which could adversely impact the price CRO and, therefore, the price of shares of the Combined Company’s Class A Common Stock. Wash trading also may place more legitimate digital asset exchanges at a relative competitive disadvantage.
The price of CRO on available spot markets may be exposed to front-running.
Spot markets on which CRO trades, through which the Combined Company may purchase CRO, may be susceptible to “front-running,” which refers to the process when someone uses technology or market advantage to get prior knowledge of upcoming transactions. Front-running is a frequent activity on centralized as well as decentralized exchanges. By using bots functioning on a millisecond-scale timeframe, bad actors are able to take advantage of the forthcoming price movement and make economic gains at the cost of those who had introduced these transactions. The objective of a front runner is to buy a chunk of tokens at a low price and later sell them at a higher price while simultaneously exiting the position. Front-running happens via manipulations of gas prices or timestamps, also known as slow matching. To extent that front-running occurs, it may result in investor frustrations and concerns as to the price integrity of digital asset exchanges and digital assets more generally.
If the digital asset award or transaction fees for recording transactions on the Cronos network are not sufficiently high to incentivize validators may demand high transaction fees, which could negatively impact the value of CRO and the value of the Combined Company’s Class A Common Stock.
During the course of the block validation processes, validators can exercise the discretion to select which transactions to include within a block and in what order to include these transactions. Beyond the standard block reward and transaction fees, validators have the ability to extract what is known as Maximal Extractable Value (“MEV”) by strategically choosing, reordering, or excluding certain transactions during block production in return for increased transaction fees or other forms of revenue for such validators. In blockchain networks that facilitate DeFi protocols in particular, such as the Cronos EVM layer, users may attempt to gain an advantage over other users by offering additional fees to validators for effecting the order or inclusions of transactions within a block. Certain software solutions, such as MEV Boost by Flashbots, have been developed which facilitate validators and other parties in the ecosystem in capturing MEV. The presence of MEV may incentivize associated practices such as sandwich attacks or front running that can have negative repercussions on DeFi users. A “sandwich attack” is executed by placing two transactions around a large, detected transaction to capitalize on the expected price impact. For instance, a market participant might identify a sizable transaction within the mempool that will significantly alter an asset’s price on a decentralized exchange. The participant could then, for example, orchestrate a transaction bundle: one transaction to acquire the asset prior to the detected transaction, followed by the large transaction itself, and a final
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transaction to sell the asset after the market price has increased due to the large transaction’s execution. Such transaction bundles can be submitted to validators through mechanisms like MEV-Boost, with validators receiving a share of the profits as an incentive to include the specific transaction bundle in the block. In the context of MEV, “front running” is said to occur when a user spots a transaction in the publicly visible so-called memory pool (“mempool”) of pending but unexecuted transactions awaiting validation, and then pays a high transaction fee to a validator to have their transaction executed on a priority basis in a manner designed to profit from the pending but unexecuted transaction that is still in the mempool. MEV may also compromise the predictability of transaction execution, which may deter usage of the network as a whole. Although based on widely available information given that transactions in the mempool are publicly visible, any potential perception of MEV as unfair manipulation may also discourage users and other stakeholders from engaging with DeFi protocols, the Cronos EVM layer, or the Cronos network in general. In addition, it’s possible regulators or legislators could enact rules that restrict practices associated with MEV, which could diminish the of the Cronos network among users and validators. Any of these or other outcomes related to MEV may affect the value of CRO and the value of the Combined Company’s Class A Common Stock.
CRO is susceptible to various types of malicious attacks, including a “33%” attack or a “>66%” attack, and such an attack, even temporarily, could adversely impact the price of CRO and the value of shares of the Combined Company’s Class A Common Stock.
Digital asset networks, including the Cronos network, are subject to control by entities that capture a majority of the network’s computational power. If a single validator, or coordinated group of validators, were to control more than one-third of the total staked CRO, they could disrupt the consensus process by halting block finalization, known as a “33%” attack, they could engage in harmful acts that could threaten the integrity of the network. If a validator or colluding group were to control more than two-thirds of the total staked CRO, known as a “>66%” attack, they could reach consensus unilaterally and manipulate the Cronos network. Such an attack could undermine trust in the Cronos network’s security and finality guarantees. The Cronos proof-of-authority consensus mechanism requires a 2/3 supermajority of validators by staked CRO to finalize transactions and produce new blocks. If an attacker were to obtain 2/3 of the total staked CRO, such attacker could reverse completed transactions, approve or reject transactions solely for their own benefit, or modify the ordering of transactions. This might allow these actors to “double-spend” its own tokens (i.e., spend the same tokens in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control. To the extent that such actors did not yield its control of the processing power on the Cronos network or the network community did not the blocks as , reversing any changes made to the Cronos network may not be possible.
Further, a malicious actor could create a flood of transactions in order to slow down confirmations of transactions on the Cronos network or other digital asset networks. For example, in August 2020, the Ethereum Classic Network was the target of two double-spend attacks by an unknown actor or actors that gained more than 50% of the processing power of the Ethereum Classic Network. The attack resulted in reorganizations of the Ethereum Classic Blockchain that allowed the attacker or attackers to reverse previously recorded transactions in excess of $5 million and $1 million.
For example, in May 2019, the Bitcoin Cash network experienced a 51% attack when two large mining pools reversed a series of transactions in order to stop an unknown miner from taking advantage of a flaw in a recent Bitcoin Cash protocol upgrade. Although this particular attack was arguably benevolent, the fact that such coordinated activity was able to occur may negatively impact perceptions of the Bitcoin Cash network. Although the two attacks described above took place on proof-of-work-based networks, it is possible that a similar attack may occur on the Cronos network, which could negatively impact the value of CRO and the value of the shares of the Combined Company’s Class A Common Stock.
Although there are no known reports of malicious activity on, or control of, the Cronos network, if groups of coordinating or connected CRO holders that together have more than 66% of outstanding CRO were to stake that CRO and run validators, they could exert authority over the validation of CRO transactions. This risk is heightened if over 66% of the validating power on the network falls within the jurisdiction of a single governmental authority. If network participants, including the core developers and the administrators of validating pools, do not act to ensure greater decentralization of CRO, the feasibility of a malicious actor obtaining control of the validating power on the Cronos network will increase, which may adversely affect the value CRO and the value of the shares of the Combined Company’s Class A Common Stock.
A malicious actor may also obtain control over the Cronos network through its influence over core developers by gaining direct control over a core developer or an otherwise influential programmer. To the extent that users and validators accept amendments to the source code proposed by the controlled core developer, other core developers do not counter such amendments, and such amendments
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enable the malicious exploitation of the Cronos network, the risk that a malicious actor may be able to obtain control of the Cronos network in this manner exists. Moreover, it is possible that a group of that together control more than 66% of outstanding CRO are in fact part of the initial or core developer group, or are otherwise influential members of the Cronos community. To the extent that the initial or existing core developer groups also control more than the relevant thresholds of outstanding CRO, as some believe, the risk of and arising from this particular group of users obtaining control of the validating power on the Cronos network will be even greater and, should this materialize, it may adversely affect the value of the shares of the Combined Company’s Class A Common Stock.
If any of these exploitations or attacks occur, it could result in a loss of public confidence in CRO and a decline in the value of CRO and, as a result, adversely impact the Combined Company’s Class A Common Stock.
Although the Combined Company will have relevant due diligence procedures at the closing of the Business Combination regarding AML and know-your-customer (“KYC”), these procedures may fail to prevent illegal transactions, which could subject the Combined Company to criminal and civil liabilities and impact the value of shares of the Combined Company’s Class A Common Stock.
Although transaction details of peer-to-peer transactions are recorded on the Cronos network, a buyer or seller of digital assets on a peer-to-peer basis directly on the Cronos network may never know to whom the public key belongs or the true identity of the party with whom it is transacting. Public key addresses are randomized sequences of alphanumeric characters that, standing alone, do not provide sufficient information to identify users. In addition, certain technologies may obscure the origin or chain of custody of digital assets. The opaque nature of the market poses asset verification challenges for market participants, regulators and auditors and gives rise to an increased risk of manipulation and fraud, including the potential for Ponzi schemes, bucket shops and pump and dump schemes. Digital assets have in the past been used to facilitate illicit activities. If a digital asset was used to facilitate illicit activities, businesses that facilitate transactions in such digital assets could be at increased risk of potential criminal or civil lawsuits, or of having banking or other services cut off, and such digital asset could be removed from digital asset exchanges. Any of the aforementioned occurrences could affect the price of the relevant digital asset, the of the respective blockchain network and an investment in the Combined Company’s Class A Common Stock. If the Combined Company were to transact with a sanctioned entity, it would be at risk of potential or civil lawsuits or liability.
The Combined Company aims to take measures with the objective of reducing illicit financing risks in connection with the Combined Company’s activities. However, illicit financing risks are present in the digital asset markets, including markets for CRO. There can be no assurance that the measures employed by the Combined Company will prove successful in reducing illicit financing risks, and the Combined Company will be subject to the complex illicit financing risks and vulnerabilities present in the digital asset markets. If such risks eventuate, the Combined Company could face civil or criminal liability, fines, penalties, or other punishments, be subject to investigation, have the Combined Company’s assets frozen, lose access to banking services or services provided by other service providers, or suffer to their operations, any of which could affect the Combined Company’s ability to operate or cause in value of the shares of the Combined Company’s Class A Common Stock.
At the closing of the Business Combination, the Combined Company will have adopted and implemented policies and procedures that are designed to ensure that the Combined Company does not violate applicable AML and sanctions laws and regulations and to comply with any applicable KYC laws and regulations. Despite these policies and procedures expected to be implemented at Closing, such measures may not fully mitigate the occurrence of impact of such risks. The Combined Company aims to only interact with known authorized third party service providers with respect to whom it has engaged in a due diligence process to ensure a thorough KYC process, such as Crypto.com Custody.
Crypto.com Custody has adopted and implemented an anti-money laundering and sanctions compliance program, which provides additional protections to ensure that the Combined Company does not transact with a sanctioned party. Notably, Crypto.com Custody performs Know-Your-Transaction (“KYT”) screening using blockchain analytic tools, screening systems, and in-house built systems to identify, detect, and mitigate the risk of transacting with a sanctioned or other unlawful actor. Pursuant to Crypto.com Custody’s KYT programs, any CRO that is delivered to the Combined Company’s custody account will undergo screening to ensure that the origins of that CRO are not illicit.
There is no guarantee that such procedures will always be effective. If third parties have inadequate policies, procedures and controls for complying with applicable anti-money laundering and applicable sanctions laws or the Combined Company’s diligence is ineffective, violations of such laws could result, which could result in regulatory liability for the Combined Company under such laws,
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including governmental fines, penalties, and other punishments, as well as potential liability to or cessation of services by Crypto.com Custody. Any of the foregoing could impact the value of the Combined Company’s Class A Common Stock or negatively affect the Combined Company’s ability to operate.
Any name change and any associated rebranding initiative of CRO may not be favorably received by the digital asset community, which could negatively impact the value of CRO and the value of the Combined Company’s Class A Common Stock.
From time to time, digital assets may undergo name changes and associated rebranding initiatives. For example, in 2022, CRO was rebranded to Cronos to better align itself with the decentralized and growing Cronos network, Bitcoin Cash may sometimes be referred to as Bitcoin ABC in an effort to differentiate itself from any Bitcoin Cash hard forks, such as Bitcoin Satoshi’s Vision, and in the third quarter of 2018, the team behind ZEN rebranded and changed the name of ZenCash to “Horizen.” We cannot predict the impact of any name change and any associated rebranding initiative on CRO. After a name change and an associated rebranding initiative, a digital asset may not be able to achieve or maintain brand name recognition or status that is comparable to the recognition and status previously enjoyed by such digital asset. The failure of any name change and any associated rebranding initiative by a digital asset may result in such digital asset not realizing some or all of the anticipated benefits contemplated by the name change and associated rebranding initiative, and could negatively impact the value of CRO and the value of the Combined Company’s Class A Common Stock.
Risks Related to Being a Public Company
The market price of the Combined Company’s Class A Common Stock may be volatile and decline materially as a result of volatility in CRO or the digital asset markets generally, or for other reasons.
The trading price of the Combined Company’s Class A Common Stock following consummation of the Business Combination is likely to be volatile. The stock market has recently experienced and in the future may experience extreme volatility. This volatility has often been unrelated or disproportionate to the operating performance of particular companies. Shareholders may not be able to resell their shares of the Combined Company’s Class A Common Stock at an attractive price due to a number of factors such as the following:
the Combined Company’s operating and financial performance and prospects;
risk of the Combined Company’s credit rating being downgraded;
the Combined Company’s quarterly or annual earnings or those of other companies in its industry compared to market expectations;
conditions that impact demand for the Combined Company’s future products and/or services;
future announcements concerning the Combined Company’s business, its customers’ businesses or its competitors’ businesses;
the public’s reaction to the Combined Company’s press releases or other public announcements and filings with the SEC;
the market’s reaction to the Combined Company’s reduced disclosure and other requirements as a result of being an “emerging growth company” under the JOBS Act;
the size of the Combined Company’s public float;
volatility in CRO, the Combined Company’s principal asset;
the control by Crypto.com Sub over the Combined Company, which results in the Combined Company being expected to qualify as a “controlled company” under securities exchange rules, and may create conflicts of interest between the Combined Company and Crypto.com Sub;
coverage by or changes in financial estimates by securities analysts or failure to meet their expectations;
market and industry perception of the Combined Company’s success, or lack thereof, in pursuing its strategy;
strategic actions by the Combined Company or its competitors, such as acquisitions or restructurings;
changes in laws or regulations which adversely affect the Combined Company’s industry or the Combined Company;
privacy and data protection laws, privacy or data breaches, or the loss of data;
changes in the Combined Company’s accounting standards, policies, guidance, interpretations or principles;
changes in the Combined Company’s senior management or key personnel;
issuances, exchanges or sales, or expected issuances, exchanges or sales of the Combined Company’s Class A Common Stock;
changes in the Combined Company’s dividend policy;
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the lack of voting rights;
failure by the Combined Company to comply with regulatory requirements, including those related to governance and control requirements in particular jurisdictions, international sanctions or a change in regulations or enforcement policies that adversely affects the Combined Company’s operations;
adverse resolution of new or pending investigation, regulatory action or litigation against the Combined Company; and
changes in general market, economic and political conditions in the United States and other global economies or financial markets, including those resulting from inflation and related monetary policy in response to inflation, natural disasters, terrorist attacks, acts of war and responses to such events.
Broad market and industry factors may materially reduce the market price of the Combined Company’s Class A Common Stock, regardless of the Combined Company’s operating performance. In addition, price volatility may be greater if the public float and trading volume of the Combined Company’s Class A Common Stock is low. As a result, shareholders may suffer a loss on their investments.
The Combined Company’s share price may be exposed to additional risks because the Combined Company’s business will change through a “de-SPAC” transaction. There has been increased focus by government agencies on such transactions, and we expect that increased focus to continue. The Combined Company may be subject to increased scrutiny by the SEC and other government agencies on holders of the Combined Company securities as a result, which could adversely affect the price of the Combined Company’s Class A Common Stock.
A substantial part of the Combined Company’s assets following the consummation of the Business Combination will be its CRO holdings and cash and cash equivalents from the proceeds of the Business Combination. Although the Combined Company is expected to have certain other operations, the Combined Company will depend on such retained cash and cash equivalents to pay its debts and other obligations.
Upon consummation of the Business Combination, a substantial part of the Combined Company’s assets will be its CRO holdings and cash and cash equivalents from the proceeds of the Business Combination. While the Combined Company plans to generate revenue through its accumulation and active management of its CRO holdings, its establishment and operation of a Cronos validator node and undertaking staking activities, these business strategies are subject to risks as described in this section. The Combined Company’s ability to pay taxes and operating expenses, as well as its debt service obligations in the future, if any, will be largely dependent upon the financial results and cash flows resulting from its business strategies. There can be no assurance that the Combined Company will generate sufficient cash flow from its products, services, activities and other business strategies or that applicable law and contractual restrictions, including negative covenants under any debt instruments, if applicable, will permit the sale of CRO that secures then-outstanding notes in order to fund working capital needs. The Combined Company may default on contractual obligations or have to borrow additional funds. In the event that the Combined Company is required to borrow additional funds, it could adversely affect the Combined Company’s liquidity and subject it to additional restrictions imposed by lenders. If the Combined Company enters into additional financing or other agreements in the future, the Combined Company cannot make assurances that these agreements will be on terms or that they will not restrict the distribution of dividends or other payments to shareholders.
The Combined Company’s ability to timely raise capital in the future may be limited, or may be unavailable on acceptable terms, if at all. The Combined Company’s failure to raise capital when needed could harm its business, operating results and financial condition.
The Combined Company cannot be certain if it will generate sufficient cash through accumulation and active management of its CRO holdings, its establishment and operation of a Cronos validator node and undertaking staking activities to fund future operations or growth of its business. Additional financing may not be available on favorable terms, if at all. If adequate funds are not available on acceptable terms, the Combined Company may be unable to invest in future growth opportunities, which could harm the Combined Company’s business, operating results and financial condition. The Combined Company may from time to time issue debt in order to further its CRO acquisition strategy. If the Combined Company incurs additional debt, the debt holders could also have rights senior to holders of the Combined Company’s Class A Common Stock to make claims on the Combined Company’s assets. The terms of any debt could restrict the Combined Company’s operations, including its ability to pay dividends on the Combined Company’s Class A Common Stock. As a result, the Combined Company shareholders bear the risk of future issuances of debt securities reducing the value of the Combined Company’s Class A Common Stock.
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The issuance of additional shares or convertible securities by the Combined Company could make it difficult for another company to acquire the Combined Company, may dilute the ownership of the Combined Company shareholders and could adversely affect the price of the Combined Company’s Class A Common Stock.
The Combined Company may obtain additional financing and may issue additional shares and/or offer debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity and/or shares of preferred stock. Issuing additional shares of the Combined Company’s Class A Common Stock, other equity securities, and/or securities convertible into equity may dilute the economic and voting rights of the Combined Company’s existing shareholders, reduce the market price of outstanding shares of the Combined Company’s Class A Common Stock, or both. Securities convertible into equity could be subject to adjustments in the conversion ratio, pursuant to which certain events may increase the number of equity securities issuable upon conversion. Shares of preferred stock could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could further limit the Combined Company’s ability to pay dividends to the holders of the Combined Company’s Class A Common Stock. The potential issuance of additional securities may delay or prevent a change in control of the Combined Company, discourage bids for its securities at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of its securities, including the Combined Company’s Class A Common Stock. The Combined Company’s decision to issue securities in any future offering will depend on market conditions and other factors beyond its control, which may affect the amount, timing or nature of its future offerings. As a result, holders of the Combined Company’s Class A Common Stock bear the risk that the Combined Company’s future offerings and exercise of any options under any stock option plans that the Combined Company may implement may reduce the market price of the Combined Company’s Class A Common Stock and dilute their percentage ownership.
Future resales of the Combined Company’s Class A Common Stock after the consummation of the Business Combination may cause the market price of the Combined Company’s securities to drop significantly, even if the Combined Company’s business is doing well.
After the consummation of the Business Combination and subject to certain exceptions, the Combined Company’s Class A Common Stock held or acquired by the Sponsor, the Sellers and certain other parties will be locked-up and subject to transfer restrictions, as described below, subject to certain exceptions.
However, following the expiration of such lock-up, the Sponsor and the Sellers will not be restricted from selling the Combined Company’s Class A Common Stock held by them, other than by applicable securities laws. Upon completion of the Business Combination and assuming that none of our Class A Ordinary Shares are redeemed in connection with the Business Combination and based on the other assumptions included elsewhere in this proxy statement/prospectus, the Sellers and the Sponsor will collectively beneficially own approximately 88.08% of the outstanding shares of the Combined Company’s Common Stock at Closing. Assuming a maximum redemption of 17,250,000 of our Class A Ordinary Shares in connection with the Business Combination, and based on the other assumptions included elsewhere in this proxy statement/prospectus, in the aggregate, the ownership of the Sponsor and the Sellers would rise to 99.90% of the outstanding shares of the Combined Company’s Common Stock at Closing. These scenarios assume that no shares of the Combined Company’s Class A Common Stock are issued and outstanding under the Combined Company’s proposed equity incentive plan (the “Equity Incentive Plan”).
At the closing of the proposed Business Combination, the Sponsor, TMTG, Crypto.com Sub, the Company and certain other holders named therein will amend and restate the existing registration rights agreement dated June 26, 2025 between the Sponsor and the Company (the “Amended and Restated Registration Rights Agreement”). Pursuant to the Amended and Restated Registration Rights Agreement, the Combined Company will agree to register for resale, pursuant to Rule 415 under the Securities Act, shares of the Combined Company’s Class A Common Stock that are held by the Sponsor, the Sellers and certain other parties. Pursuant to the Amended and Restated Registration Rights Agreement, certain of the parties thereto will have customary registration rights, including demand and piggy-back rights, subject to certain requirements and customary conditions. We estimate that up to an aggregate of 121,041,877 shares of the Combined Company’s Class A Common Stock will be subject to registration rights pursuant to the Amended and Restated Registration Rights Agreement immediately following the Closing, representing approximately 82% of the total issued and outstanding shares of the Combined Company’s Class A Common Stock following the consummation of the Business Combination, excluding the impact of the Exercise Warrants and the second and third Earnout Warrants and assuming, among other things, that neither the Company nor the Combined Company enter into an additional financing arrangements after the date hereof and prior to , that none of our existing shareholders exercise redemption rights with respect to their public shares upon consummation of the Business Combination, that there are no Company shareholders, that the Sellers consummate their respective contributions
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to us as and when required under the Contribution Agreements, that all our Units are immediately exchanged into shares of the Combined Company’s Class A Common Stock, that the closing price of our Class A Ordinary Shares is $10.00, and that no shares of the Combined Company’s Class A Common Stock are issued pursuant to the Equity Incentive Plan. As restrictions on resale end and registration statements (filed after the Closing to provide for the resale of such shares from time to time) are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in the market price of the Combined Company’s Class A Common Stock and the market price of the Combined Company’s Class A Common Stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.
The Combined Company will incur significant costs post-Business Combination as a result of being a public company, including additional legal, accounting, insurance and other expenses, as well as costs associated with public company reporting requirements.
The Combined Company will incur significant legal, accounting, insurance and other expenses, including costs associated with public company reporting requirements following the consummation of the Business Combination. The Combined Company will incur significant costs associated with complying with the requirements of the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and related rules implemented by the SEC and Nasdaq, or any other national securities exchange on which it may list its securities. The Combined Company expects these laws and regulations to increase its legal and financial compliance costs following the consummation of the Business Combination and to render some activities more time-consuming and costly, although the Combined Company is currently unable to estimate these costs with any degree of certainty. The Combined Company is expected to need to hire additional employees following the consummation of the Business Combination or engage outside consultants to comply with these requirements, which will increase its post-Business Combination costs and expenses. These laws and regulations could make it more difficult or costly for the Combined Company to obtain certain types of insurance, including directors’ and officers’ liability insurance, and the Combined Company may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. These laws and regulations could also make it more for the Combined Company to attract and retain qualified persons to serve on the Combined Company Board or board committees or as executive officers. Furthermore, if the Combined Company is to its obligations as a public company, it could be subject to of its the Combined Company’s Class A Common Stock, , sanctions and other regulatory action and potentially civil .
The Combined Company’s management team is expected to have limited experience managing and operating a U.S. public company.
Certain members of the Combined Company’s management team are expected to have limited experience managing and operating a U.S. publicly traded company, interacting with U.S. public company investors, and complying with the increasingly complex laws pertaining to U.S. public companies. Being a U.S. public company subjects the Combined Company to significant regulatory oversight and reporting obligations under the U.S. federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from the Combined Company’s senior management and could divert their attention away from the day-to-day management of its business. the Combined Company may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of U.S. public companies. The development and implementation of the standards and controls necessary for the Combined Company to achieve the level of accounting standards required of a public company may require costs greater than expected. To support its operations as a U.S. public company, the Combined Company plans to recruit additional qualified employees or external consultants with relevant experience, which will increase its operating costs in future periods. Should any of these factors materialize, the Combined Company’s business, financial condition and results of operations could be affected.
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If the Combined Company is unable to maintain an effective system of internal controls and compliances, its business and reputation could be adversely affected.
The Combined Company plans to manage regulatory compliance by monitoring and evaluating its internal controls to ensure that it is in compliance with all relevant statutory and regulatory requirements, there can be no assurance that deficiencies in its internal controls and compliances will not arise, or that it will be able to implement, and continue to maintain, adequate measures to rectify or mitigate any such deficiencies in its internal controls, in a timely manner or at all. The Combined Company cannot assure that there will be no instances of inadvertent non-compliance with statutory requirements, which may subject it to regulatory action, including monetary penalties, which may adversely affect its business and reputation. See also “ The Combined Company’s compliance and risk management methods might not be effective and may result in outcomes that could adversely affect the Combined Company’s reputation, operating results and financial condition .”
The Combined Company’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that will be applicable to it following consummation of the Business Combination could have a material adverse effect on its business, financial condition, results of operations, cash flow and prospects.
Section 404 of the Sarbanes-Oxley Act will require the Combined Company to evaluate the effectiveness of its internal control over financial reporting as of the end of each fiscal year, including a management report assessing the effectiveness of its internal control over financial reporting beginning with its first Annual Report on Form 10-K for the year in which the Business Combination is consummated. Additionally, once the Combined Company ceases to be an emerging growth company, its independent registered accounting firm will also be required to attest to the effectiveness of its internal control over financial reporting in each Annual Report on Form 10-K to be filed with the SEC. The Combined Company may in the future identify material weaknesses or significant deficiencies that it may be unable to remedy before the requisite deadline for those reports. The Combined Company’s ability to comply with the annual internal control reporting requirements will depend on the effectiveness of its financial reporting and data systems and controls across its company. The Combined Company expects these systems and controls to involve significant expenditures and to become increasingly complex as its business grows. To effectively manage this complexity, the Combined Company will need to continue to improve its operational, financial and management controls and its reporting systems and procedures. Any or or any to implement required new or controls, or encountered in the implementation or operation of these controls, could its operating results and cause it to to meet its financial reporting obligations or result in material in its financial statements, which could affect the Combined Company’s business and reduce the market price of the Combined Company’s Class A Common Stock.
The Combined Company will be an “emerging growth company.” The reduced public company reporting requirements applicable to emerging growth companies may make the Combined Company’s Class A Common Stock less attractive to investors.
The Combined Company will qualify as an “emerging growth company,” as defined in the JOBS Act. While the Combined Company remains an emerging growth company, it will be permitted to and plans to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These provisions include: (i) an exemption from compliance with the auditor attestation requirement in the assessment of the Combined Company’s internal control over financial reporting pursuant to Section 404 of Sarbanes-Oxley, (ii) not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, (iii) reduced disclosure obligations regarding executive compensation arrangements in the Combined Company’s periodic reports, registration statements and proxy statements, and (iv) exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, the information the Combined Company provides will be different than the information that is available with respect to other public companies that are not emerging growth companies.
In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as the Combined Company is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable.
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The Combined Company cannot predict whether investors will find the Combined Company’s Class A Common Stock less attractive if it relies on these exemptions. If some investors find the Combined Company’s Class A Common Stock less attractive as a result, there may be a less active trading market for the Combined Company’s Class A Common Stock. The market price of the Combined Company’s Class A Common Stock may be more volatile.
The Combined Company expects to remain an emerging growth company until the earlier of (i) the last day of the fiscal year (1) following the fifth anniversary of the closing of the Business Combination, (2) in which the Combined Company has total annual gross revenue of at least $1.235 billion, or (3) in which the Combined Company is deemed to be a large accelerated filer, which means the market value of the Combined Company’s common equity that is held by non-affiliates equaled or exceeded $700 million as of the end of that year’s second fiscal quarter, and (ii) the date on which the Combined Company has issued more than $1 billion in non-convertible debt securities during the prior three-year period.
If securities or industry analysts do not publish research or reports about the Combined Company’s business or publish negative reports, the market price of the Combined Company’s Class A Common Stock could decline.
The trading market for the Combined Company’s Class A Common Stock will be influenced by the research and reports that industry or securities analysts publish about the Combined Company, the Combined Company’s business. The Combined Company may be unable or slow to attract research coverage and if one or more analysts cease coverage of the Combined Company, the price and trading volume of the Combined Company’s securities would likely be negatively impacted. If any of the analysts that may cover the Combined Company change their recommendation regarding the Combined Company’s securities adversely, or provide more favorable relative recommendations about the Combined Company’s competitors, the price of the Combined Company’s securities would likely decline. If any analyst that may cover the Combined Company ceases covering the Combined Company or fails to regularly publish reports on the Combined Company, it could lose visibility in the financial markets, which could cause the price or trading volume of the Combined Company’s securities to . If one or more of the analysts who cover the Combined Company the Combined Company’s Class A Common Stock or if the Combined Company’s reporting results do not meet their expectations, the market price of the Combined Company’s Class A Common Stock could . Moreover, the market price of the Combined Company’s Class A Common Stock may after the Business Combination if the Combined Company does not the perceived benefits of the Business Combination as rapidly or to the extent anticipated by financial analysts, or the effect of the Business Combination on the Combined Company’s financial results is not consistent with the expectations of financial analysts. Accordingly, holders of the Combined Company’s Class A Common Stock following the consummation of the Business Combination may experience a as a result of a in the market price of the Combined Company’s Class A Common Stock. In addition, a in the market price of the Combined Company’s Class A Common Stock following the consummation of the Business Combination could affect the Combined Company’s ability to issue additional securities and to obtain additional financing in the future.
The Combined Company may be subject to material litigation, including individual and class action lawsuits, as well as investigations and enforcement actions by regulators and governmental authorities. These matters are often expensive and time consuming, and, if resolved adversely, could harm the Combined Company’s business, financial condition and operating results.
The Combined Company may from time to time become subject to claims, arbitrations, individual and class action lawsuits with respect to a variety of matters, including employment, consumer protection, advertising and securities. In addition, the Combined Company may from time to time become subject to, government and regulatory investigations, inquiries, actions or requests, other proceedings and enforcement actions alleging violations of laws, rules and regulations, both foreign and domestic. The scope, determination and impact of claims, lawsuits, government and regulatory investigations, enforcement actions, disputes and proceedings to which the Combined Company is subject cannot be predicted with certainty, and may result in:
substantial payments to satisfy judgments, fines or penalties;
substantial outside counsel, advisor and consultant fees and costs;
substantial administrative costs, including arbitration fees;
additional compliance and licensure requirements;
loss or non-renewal of then-existing licenses or authorizations, or prohibition from or delays in obtaining additional licenses or authorizations, required for the Combined Company’s business;
loss of productivity and high demands on employee time;
criminal sanctions or consent decrees;
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termination of certain employees, including members of the Combined Company’s executive team;
barring of certain employees from participating in the Combined Company’s business in whole or in part;
orders that restrict the Combined Company’s business or prevent it from offering certain products or services;
changes to the Combined Company’s business model and practices;
an inability to deliver on the Combined Company’s strategy;
delays to planned transactions, product launches or improvements; and
damage to the Combined Company’s brand and reputation.
Regardless of the outcome, any such matters can have an adverse impact, which may be material, on the Combined Company’s business, operating results or financial condition because of legal costs, diversion of management resources, reputational damage and other factors.
The proposed bylaws for the Combined Company include an exclusive forum provision, which could limit a shareholder’s ability to obtain a favorable judicial forum for disputes with the Combined Company or its directors, officers or other employees.
The proposed bylaws for the Combined Company (the “Proposed Bylaws”) provide that unless the Combined Company consents in writing to the selection of an alternative forum, the sole and exclusive forum for any dispute, controversy, or claim that qualifies as an Internal Corporate Claim under Section 607.0208(4) of the Florida Business Corporation Act (the “FBCA”) and that cannot be required to be arbitrated under Section 607.0208(3) of the FBCA must be brought exclusively in a federal court located in Miami-Dade County, Florida, (or, if such court does not have jurisdiction, any Florida state court located in Miami-Dade County). Any (i) other dispute, controversy, or claim arising out of or relating to the proposed articles of incorporation for the Combined Company (the “Proposed Articles of Incorporation”) or the Proposed Bylaws, or any breach, termination, or the validity thereof, (ii) dispute, controversy, or claim arising out of the purchase or sale of a security brought under the laws of the United States, including the Securities Act, the Exchange Act, or the Trust Indenture Act, and any claim accompanying any such claim, and (iii) other , , or claim arising out of the purchase or sale of a security brought under any statute, common law, or regulation of any state or the United States, or any agency thereof, including, in each case, the applicable rules and regulations promulgated thereunder, and any claim accompanying any such claim (each a “”), are subject to separate arbitration provisions as detailed in the Bylaws and Articles of Incorporation and must be submitted to confidential, binding and final arbitration as provided in those separate arbitration provisions; provided, however, that any action (w) to compel arbitration, (x) to any of the arbitrator’s jurisdiction or the existence, scope or validity of this arbitration agreement or the arbitrability of any claim, (y) for interim or provisional remedies in aid of arbitration, and (z) with respect to any for which it has been determined that the arbitration of such is , or unenforceable, must further be brought in a federal court located in Miami-Dade County, Florida, (or, if such court does not have jurisdiction, any Florida state court located in Miami-Dade County) notwithstanding and without limiting the validity, legality or enforceability of this agreement to arbitrate in any other action or .
The exclusive forum provision in the Proposed Bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Combined Company or the Combined Company’s directors, officers, employees or agents, or could result in increased costs for a shareholder to bring a claim, particularly if they do not reside in or near Florida, both of which may discourage the filing of lawsuits with respect to such claims. Alternatively, if a court were to find the exclusive forum provision contained in the Proposed Bylaws to be inapplicable or unenforceable in an action, the Combined Company may incur additional costs associated with resolving such actions in other jurisdictions, which could adversely affect the Combined Company’s business, operating results and financial condition.
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Risks Related to Ownership of the Combined Company Common Stock
Following the Business Combination
The Sellers whose interests may conflict with yours, can exercise significant influence over the Combined Company. The concentrated ownership of the Combined Company’s Common Stock may prevent you and other shareholders from influencing significant decisions and may prevent or discourage unsolicited acquisition proposals or offers for the Combined Company’s Common Stock, and that may adversely affect the trading price of the Combined Company’s Class A Common Stock.
Upon the closing of the Business Combination, the Sellers will beneficially own a significant portion of the Combined Company’s Common Stock. Further, each share of the Combined Company’s Class B Common Stock will have the right to one hundred (100) votes per share and all shares of the Combined Company’s Class B Common Stock will be owned by Crypto.com Sub 1 . For so long as Crypto.com Sub holds a significant portion of the voting interests of the Combined Company through its ownership of the Combined Company’s Class B Common Stock, it will have the ability to significantly influence decision-making with respect to the Combined Company’s business direction and policies.
The shares of the Combined Company’s Class B Common Stock will convert to shares of the Combined Company’s Class A Common Stock on a one-to-one basis, upon written notice or any transfer of shares of the Combined Company’s Class A Common Stock by Crypto.com Sub to any third party (other than its affiliates). Transfers of shares of the Combined Company’s Class A Common Stock held by the Sellers and the Sponsor will be subject to the provisions of the Lock-Up Agreements, pursuant to which the Sellers and the Sponsor will agree not to, subject to certain exceptions, transfer their shares of the Combined Company’s Class A Common Stock until the earlier of (i) the 12-month period ending on the first anniversary of the closing of the Business Combination and (ii) the date on which the Combined Company consummates a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the closing of the Business Combination which results in all of the Combined Company’s shareholders having the right to exchange their shares of the Combined Company’s stock for cash, securities or other property.
The Sellers are also entitled to board designation rights and Crypto.com Sub has the exclusive right to designate and appoint the Chief Executive Officer of the Combined Company. Matters over which the Sellers may individually, directly or indirectly, exercise significant influence following the closing of the Business Combination include: (i) the election of the directors on the Combined Company Board and, in the case of Crypto.com Sub, the appointment of the Combined Company’s Chief Executive Officer; (ii) business combinations and other merger transactions requiring shareholder approval, including proposed transactions that would result in the Combined Company’s shareholders receiving a premium price for their shares; (iii) amendments to the Combined Company’s organizational documents, and (iv) increases or decreases in the size of the Combined Company Board. Such concentrated control may prevent or discourage unsolicited acquisition proposals or offers for the Combined Company’s Class A Common Stock that you may feel are in your best interest as one of the Combined Company’s shareholders. As a result, such concentrated control may adversely affect the market price of the Combined Company’s Class A Common Stock.
Crypto.com Sub, through its voting control of the Combined Company, is in a position to control actions that require shareholder approval and may make decisions that are adverse to other shareholders.
At closing of the Business Combination, Crypto.com Sub will own all of the outstanding the Combined Company’s Class B Common Stock. As a result, Crypto.com Sub will have the ability to exercise control over certain decisions requiring shareholder approval, including the election of directors, amendments to the Combined Company’s organizational documents and approval of significant corporate transactions, such as a merger or other sale of the Combined Company or its assets. In addition, the Combined Company Board will consist of three persons designated by Crypto.com Sub and one person designated by TMTG, although three of them will be required to qualify as independent directors under Nasdaq Rules. Accordingly, Crypto.com Sub will have significant influence over the Combined Company and the Combined Company’s decisions, including the appointment of management and any other action requiring a vote of the Combined Company Board. In addition, this concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Combined Company and may negatively affect the market price of the Combined Company’s Class A Common Stock.
1 Update with correct defined term once drafted
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At closing of the Business Combination, holders of the Combined Company’s Class A Common Stock have the right to one (1) vote per share. The shares of the Combined Company’s Class B Common Stock will convert to shares of the Combined Company’s Class A Common Stock on a one-to-one basis, upon written notice or any transfer of shares of the Combined Company’s Class A Common Stock by Crypto.com Sub to any third party (other than its affiliates). Transfers of the Combined Company’s Class A Common Stock will be subject to the provisions of the Lock-Up Agreements that the Combined Company will enter into at closing of the Business Combination, pursuant to which the Sponsor, the Sellers and certain other parties thereto will agree not to, subject to certain exceptions, transfer their shares of the Combined Company’s Class A Common Stock until the earlier of (i) the one-year anniversary of the closing of the Business Combination and (ii) the date on which the Combined Company consummates a liquidation, merger, capital stock exchange, reorganization or other similar transaction after the closing of the Business Combination which results in all of the Combined Company’s shareholders having the right to exchange their shares of the Combined Company’s Common Stock for cash, securities or other property.
Securities of companies formed through business combinations involving SPACs such as the Combined Company may experience a material decline in price relative to the share price of the SPACs prior to such transaction.
The Company issued Class A Ordinary Shares for $10.00 per share upon the closing of our Initial Public Offering. As with other SPACs, each Public Share issued in our Initial Public Offering carries a right to have such share redeemed for a pro rata portion of the proceeds held in the Trust Account prior to the closing of the Business Combination. As of December 31, 2025, the redemption price per Public Share was approximately $10.22, which is the approximate redemption amount per Public Share based on the Trust Account balance as of December 31, 2025. Following the closing of the Business Combination, the shares of the Combined Company’s Class A Common Stock outstanding will no longer have any such redemption right and may be dependent upon the fundamental value of the Combined Company, as well as other relevant factors such as market conditions and trading multiples, and, similar to the securities of some other companies formed through mergers with SPACs in recent years, may be significantly less than $10.00 per share.
Volatility in the Combined Company’s share price could subject the Combined Company to securities class action litigation.
The market price of the shares of the Combined Company’s Class A Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. The Combined Company may be the target of this type of litigation and investigations. Securities litigation against the Combined Company could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm the Combined Company’s business.
Since the completion of our Initial Public Offering, there has been a precipitous drop in the market values of companies formed through business combinations involving SPACs. Accordingly, securities of companies such as the Combined Company may be more volatile than other securities and may involve special risks.
Since the completion of our Initial Public Offering, there has been a precipitous drop in the market values of companies formed through business combinations involving SPACs like ours. These include inflationary pressures, increases in interest rates and other adverse economic and market forces have contributed to these drops in market value for SPACs. As a result, the Public Shares are subject to potential downward pressures, which may result in high levels of exercises of redemptions rights, reducing the cash available from the Trust Account. If there are substantial redemptions by shareholders of the Company in connection with the Business Combination, there will be a lower public float of the Combined Company’s Class A Common Stock following the closing of the Business Combination, which may cause volatility in the price of the Combined Company’s securities and adversely impact its ability to secure financing following the closing of the Business Combination.
Currently, there is no public market for the shares of the Combined Company’s Class A Common Stock. Shareholders of the Company cannot be sure about whether the shares of the Combined Company’s Class A Common Stock will develop an active trading market or whether the Combined Company will be able to maintain the listing of the Combined Company’s Class A Common Stock in the future even if the Combined Company is successful in listing the Combined Company’s Class A Common Stock on Nasdaq or any other national securities exchange, which could limit investors’ ability to make transactions in shares of the Combined Company’s Class A Common Stock and subject the Combined Company to additional trading restrictions.
In connection with the Business Combination, each outstanding Company Class A Ordinary Share (including the Company’s Class A Ordinary Shares issued upon conversion of the Company’s Class B Ordinary Shares) and each of outstanding Company Class
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B Ordinary Share will be converted automatically into one share of the Combined Company’s Class A Common Stock. Pursuant to the terms of the Business Combination Agreement, the Combined Company shall issue either the Combined Company’s Class A Common Stock or the Combined Company’s Class B Common Stock to certain of the Parties in accordance with the terms of the Business Combination Agreement. Prior to this transaction, the Combined Company has not issued any securities in the U.S. markets or elsewhere nor has there been extensive information about it, its businesses or its operations publicly available. The Company and the Combined Company have agreed to cause the shares of the Combined Company’s Class A Common Stock to be issued in connection with the Business Combination to be approved for listing on Nasdaq, or any other national securities exchange, prior to the effective time of the Business Combination. We cannot assure shareholders of the Company that the Combined Company will be able to meet the initial listing requirements. However, the Combined Company may be unsuccessful in listing the Combined Company’s Class A Common Stock on Nasdaq, or any other national securities exchange, and even if successful, the Combined Company may be unable to maintain the listing of the Combined Company’s Class A Common Stock in the future. A listing also does not ensure that a market for the shares of the Combined Company’s Class A Common Stock will develop or the price at which the shares will trade. No assurance can be provided as to the demand for or trading price of the shares of the Combined Company’s Class A Common Stock following the of the Business Combination and the shares of the Combined Company’s Class A Common Stock may trade at a price less than the current market price of the Company’s Class A Ordinary Shares.
If the Combined Company fails to meet the initial listing requirements and Nasdaq or another national securities exchange does not list its shares of the Combined Company’s Common Stock on its exchange, none of the parties to the Business Combination Agreement would be required to consummate the Business Combination. In the event that all such parties elected to waive this condition, and the Business Combination will be consummated without shares of the Combined Company’s Common Stock being listed on Nasdaq or on another national securities exchange, the Combined Company could face significant material adverse consequences, including:
a limited availability of market quotations for shares of the Combined Company’s Common Stock;
reduced liquidity for shares of the Combined Company’s Common Stock;
to the extent that the Combined Company does not qualify for any of the other penny stock exemptions from under the applicable provisions of Rule 3a51-1 under the Exchange Act, a determination that shares of the Combined Company’s Common Stock are “penny stocks” which will require brokers trading in shares of the Combined Company’s Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for shares of the Combined Company’s Common Stock;
a limited amount of news and analyst coverage; and
a decreased ability to issue additional securities or obtain additional financing in the future.
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If shares of the Combined Company’s Class A Common Stock are not listed on Nasdaq or another national securities exchange, such shares would not qualify as covered securities and the Combined Company would be subject to regulation in each state in which the Combined Company offers its shares of the Combined Company’s Class A Common Stock because states are not preempted from regulating the sale of securities that are not covered securities.
Even if the Combined Company is successful in listing the Combined Company’s Class A Common Stock and developing a public market, there may not be enough liquidity in such market to enable the Combined Company shareholders to sell their shares of the Combined Company’s Class A Common Stock. If a public market for the shares of the Combined Company’s Class A Common Stock does not develop, investors may not be able to re-sell their shares of the Combined Company’s Class A Common Stock, rendering their shares illiquid and possibly resulting in a complete loss of their investment. The Combined Company cannot predict the extent to which investor interest in the Combined Company will lead to the development of an active, liquid trading market. The trading price of and demand for the shares of the Combined Company’s Class A Common Stock following the consummation of the Business Combination and the development and continued existence of a market and favorable price for the shares of the Combined Company’s Class A Common Stock will depend on a number of conditions, including the development of a market following, including by analysts and other investment professionals, the businesses, operations, results and prospects of the Combined Company, general market and economic conditions, governmental actions, regulatory considerations, legal proceedings and developments or other factors. These and other factors may the development of a liquid market and the ability of investors to sell shares at an price. These factors also could cause the market price and demand for shares of the Combined Company’s Class A Common Stock to fluctuate substantially, which may limit or prevent investors from readily selling their shares and may otherwise affect the price and liquidity of the
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shares of the Combined Company’s Class A Common Stock. Many of these factors and conditions are beyond the control of the Combined Company or shareholders of the Combined Company.
Reports published by analysts, including projections in those reports that differ from the Combined Company’s actual results, could adversely affect the price and trading volume of the Combined Company’s Common Stock.
The Combined Company’s management currently expects that securities research analysts will establish and publish their own periodic projections for its business. These projections may vary widely and may not accurately predict the results the Combined Company actually achieves. The Combined Company’s share price may decline if its actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on the Combined Company downgrades its stock or publishes inaccurate or unfavorable research about its business, its share price could decline. If one or more of these analysts ceases coverage of the Combined Company or fails to publish reports on it regularly, its share price or trading volume could decline. While the Combined Company’s management expects research analyst coverage, if no analysts commence coverage of the Combined Company, the trading price and volume for the Combined Company’s Common Stock could be adversely affected.
The Combined Company may or may not pay cash dividends in the foreseeable future.
Any decision to declare and pay dividends in the future will be made at the discretion of the Combined Company Board and will depend on, among other things, applicable law, regulations, restrictions, the Combined Company’s and the Company’s respective results of operations, financial condition, cash requirements, contractual restrictions, the future projects and plans of the Combined Company and the Company and other factors that the Combined Company Board may deem relevant. As a result, capital appreciation, if any, of the Combined Company’s Common Stock will be an investor’s sole source of gain for the foreseeable future.
The Combined Company expects to qualify as a controlled company under applicable securities exchange rules and expects to avail itself of applicable exemptions from the corporate governance requirements thereof.
The Combined Company expects to qualify as a “controlled company” as defined under the Nasdaq Rules, or any other national securities exchange on which its shares may be listed, since the Sellers will together beneficially own more than 50% of our total voting power. For so long as the Combined Company remains a controlled company under this definition, it is also permitted to elect to rely on certain exemptions from corporate governance rules. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements. For example, controlled companies:
are not required to have a board that is composed of a majority of “independent directors,” as defined under Nasdaq Rules;
are not required to have a compensation committee that is composed entirely of independent directors; and
are not required to have director nominations be made, or recommended to the full board of directors, by its independent directors or by a nominations committee that is composed entirely of independent directors.
Risks Related to Taxation
Unrealized fair value gains on the Combined Company’s CRO holdings could cause it to become subject to the corporate alternative minimum tax under the Inflation Reduction Act of 2022.
The U.S. enacted the Inflation Reduction Act of 2022 (“IRA”) in August 2022. Unless an exemption applies, the IRA imposes a 15% corporate alternative minimum tax (“CAMT”) on a corporation with respect to an initial tax year and subsequent tax years, if the average annual adjusted financial statement income for any consecutive three-tax-year period preceding the initial tax year exceeds $1 billion. On September 12, 2024, the Department of Treasury and the IRS issued proposed regulations with respect to the application of CAMT.
Additionally, the Combined Company is required to adopt ASU 2023-08, under which CRO holdings must be measured at fair value in the Combined Company’s statement of financial position, with gains and losses from changes in the fair value of the Combined Company’s CRO recognized in net income each reporting period. When determining whether it is subject to CAMT and when calculating any related tax liability for an applicable tax year, the proposed regulations provide that, among other adjustments, its adjusted financial statement income must include any unrealized gains or losses reported in the applicable tax year.
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Accordingly, as a result of the enactment of the IRA and the Combined Company’s adoption of ASU 2023-08, the Combined Company may be subject to CAMT in the 2026 taxable year and beyond. If the Combined Company becomes subject to CAMT, it could result in a material tax obligation that it would need to satisfy in cash, which could materially affect its financial results, including its earnings and cash flow, and its financial condition.
The treatment of digital currency for U.S. federal income tax purposes is uncertain.
Due to the new and evolving nature of digital currencies and the absence of comprehensive guidance with respect to digital currencies, many significant aspects of the U.S. federal income tax treatment of digital currency are uncertain.
In 2014, the Internal Revenue Service (“IRS”) released a notice (the “Notice”) discussing certain aspects of “convertible virtual currency” (that is, digital currency that has an equivalent value in fiat currency or that acts as a substitute for fiat currency) for U.S. federal income tax purposes and, in particular, stating that such digital currency (i) is “property,” (ii) is not “currency” for purposes of the rules relating to foreign currency gain or loss and (iii) may be held as a capital asset. In 2019, the IRS released a revenue ruling and a set of “Frequently Asked Questions” (the “Ruling & FAQs”) that provide some additional guidance, including guidance to the effect that, under certain circumstances, hard forks of digital currencies are taxable events giving rise to ordinary income and guidance with respect to the determination of the tax basis of digital currency. However, the Notice and the Ruling & FAQs do not address other significant aspects of the U.S. federal income tax treatment of digital currencies. Moreover, although the Ruling & FAQs address the treatment of hard forks, there continues to be uncertainty with respect to the timing and amount of the income inclusions.
Future developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S. federal income tax purposes. For example, the Notice addresses only digital currency that is “convertible virtual currency,” and it is conceivable that, as a result of a fork, airdrop or similar occurrence, the Combined Company will hold certain types of digital currency that are not within the scope of the Notice.
There can be no assurance that the IRS will not alter its position with respect to digital currencies in the future or that a court would uphold the treatment set forth in the Notice and the Ruling & FAQs. It is also unclear what additional guidance on the treatment of digital currencies for U.S. federal income tax purposes may be issued in the future. Any future guidance on the treatment of digital currencies for U.S. federal income tax purposes could increase the expenses of the Combined Company and could have an adverse effect on the prices of digital currencies, including on the price of CRO in the digital asset markets. As a result, any such future guidance could have an adverse effect on the value of the shares of the Combined Company’s Common Stock.
To the extent that the Combined Company has tax liability, the Combined Company may not have sufficient cash to pay such U.S. federal income taxes and may be required to sell its CRO or other assets or find other sources of cash.
A 1% U.S. federal excise tax may be imposed on us in connection with our redemptions of our shares in
connection with redemptions pursuant to the Business Combination.
Pursuant to the Inflation Reduction Act of 2022, commencing in 2023, a 1% U.S. federal excise tax is imposed on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations (each, a “covered corporation”). The excise tax is imposed on the repurchasing corporation and not on its shareholders. The U.S. Department of the Treasury (the “Treasury Department”) has authority to promulgate regulations and provide other guidance regarding the excise tax. In December 2022, the Treasury Department issued Notice 2023-2, indicating its intention to propose such regulations and issuing certain interim rules on which taxpayers may rely. In April 2024, the Treasury issued proposed regulations on which taxpayers may rely until final Treasury regulations addressing the Excise Tax are published, which generally adopt (but in some respects expand or modify) the rules and guidance set forth in the earlier notice. Taxpayers may rely on these proposed regulations until final regulations are issued. Although such notice and proposed Treasury regulations clarify certain other aspects of the Excise Tax remain unclear (including its application and operation with respect to SPACs), and the applicable rules are subject to change in Final Treasury Regulations.
Because the Company is a Cayman Islands exempted company and its securities trade on the Nasdaq, the Company is a “covered corporation” for purposes of the excise tax. Because the application for the excise tax is not entirely clear, any redemption or other repurchase effected by the Company in connection with the Business Combination may be subject to the excise tax. The extent to which we would be subject to the excise tax in connection with a redemption would depend on a number of factors, including: (i)
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whether the redemption is treated as a repurchase of stock for purposes of the excise tax, (ii) the fair market value of the redemptions, (iii) the nature and amount of any private investment in public equity issuances, (iv) the nature and amount of the equity issued by us in connection with the Business Combination, including the shares issued to Crypto.com and TMTG shareholders in the Business Combination (or otherwise issued by the Company not in connection with the Business Combination but within the same taxable year of the redemption treated as a repurchase of stock), and (v) the content of any proposed or final regulations and other guidance from the Treasury Department. The excise tax is imposed on the repurchasing corporation and not on its shareholders. The amount of the excise tax is equal to 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. Any excise tax payable by us in connection with a redemption could affect our ability to complete the Business Combination.
Risks Related to the Business Combination and the Combined Company
If the perceived benefits of the proposed Business Combination do not meet the expectations of investors or securities analysts, the market price of our Class A Ordinary Shares could decline before the closing of the Business Combination, and the market price of the Combined Company’s securities could decline after closing.
Investor and analyst expectations may change over time. If perceived strategic, financial or operational benefits do not meet market expectations, our shares could decline prior to closing. The market value of our Class A Ordinary Shares at the time of the closing may differ significantly from the price on the date we executed the Business Combination Agreement, the date of this Annual Report, or any future shareholder meeting. Following the closing, the Combined Company’s Class A Common Stock price may fluctuate significantly due to factors including actual performance versus expectations, redemption levels and public float, trading liquidity, announcements or analyst reports, market conditions (including volatility on Nasdaq), and sentiment toward companies perceived as comparable or exposed to the Cronos ecosystem. Fluctuations in the price of Combined Company’s Class A Common Stock could contribute to the loss of all or part of your investment. Any of the factors listed below could have a material adverse effect on your investment, and the Company’s Class A Ordinary Shares before the closing of the Business Combination (or Combined Company’s Class A Common Stock after the of the Business Combination) may trade at a price significantly below the price you paid for it. In such circumstances, the trading price of the Company’s Class A Ordinary Shares before the (or Combined Company’s Class A Common Stock after the of the Business Combination) may not recover and may experience a further .
Broad market and industry factors may materially harm the market price of Combined Company’s Class A Common Stock after the closing of the Business Combination, irrespective of the Combined Company’s operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of Combined Company’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies, notably in the Cronos financial services industry, which investors perceive to be similar to Combined Company, could depress the Combined Company’s stock price regardless of its business, prospects, financial conditions or results of operations. A decline in the market price for Combined Company’s Class A Common Stock also could adversely affect Combined Company’s ability to issue additional securities and Combined Company’s ability to obtain additional financing in the future.
Nasdaq may not list the Combined Company’s Class A Common Stock following the closing of the Business Combination, which could limit investors’ ability to trade those securities and subject them to additional trading restrictions.
In connection with the proposed Business Combination, we intend to seek approval to list the Combined Company’s Class A Common Stock on Nasdaq or another national securities exchange. Any such listing is subject to the Combined Company’s satisfaction of the applicable initial listing standards, which include, among other things, meeting minimum thresholds for the number of round lot holders, publicly held shares, market value and share price. We may be unable to satisfy these initial listing requirements at closing. Exchange listing is a condition to close under the transaction agreements, but the parties could agree to waive that condition. Further, even if the Combined Company’s securities are approved for listing, there can be no assurance that the Combined Company will be able to maintain such listing after closing. If the initial listing requirements are not met and the parties waive the related condition to closing, significant adverse consequences could result, including limited availability of market quotations for the Combined Company’s securities, reduced trading activity and liquidity for the Combined Company’s securities, news and analyst coverage for the Combined Company, decreased ability to issue additional securities or obtain financing on terms, and of “covered security” status under the National Securities Markets Act of 1996, a federal statute that or pre-empts the states
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from regulating the sale of certain securities, which could subject offers and sales of the Combined Company’s securities to state “blue sky” regulation.
Legal proceedings related to the proposed Business Combination, the outcomes of which are uncertain, could delay or prevent completion of the transaction and result in significant costs.
Transactions of this type are frequently the subject of securities class actions, derivative actions and other litigation alleging, among other things, that proxy/registration statements or other disclosure documents include false or misleading statements or omit material information. Even if any such claims lack merit, responding to or defending litigation or regulatory proceedings could be costly, time-consuming and divert management’s attention and resources. Adverse rulings or settlements could result in monetary damages or other remedies. An injunction or other court order could delay or prevent the Business Combination from being completed or from being completed within the expected timeframe. such lawsuits could require the Company and/or the Combined Company to incur significant costs and draw management’s attention away from the Business Combination. In addition, any such proceedings, whether commenced before or after , could affect our liquidity and financial condition prior to and, if at , could affect the Combined Company’s business, financial condition, results of operations and cash flows. Such legal proceedings could or prevent the Business Combination from becoming within the agreed-upon timeframe.
Subsequent to the consummation of the Business Combination, the Combined Company may be required to take write downs or write offs, restructuring and impairment or other charges that could negatively affect its financial condition, results of operations and share price.
Although we have conducted due diligence on the assets to be acquired or contributed in the Business Combination, we cannot assure you that such diligence has surfaced all material issues, that all material issues could be identified through customary diligence, or that other factors will not later arise. As a result, following the Business Combination, the Combined Company may be required to write down or write off assets, restructure operations, or incur impairment or other charges, which could result in reported losses. Even if certain risks were identified in diligence, unexpected risks may arise and previously known risks may materialize in ways not consistent with our analysis. While such charges may be non-cash and may not immediately impact liquidity, the fact that the Combined Company reports charges of this nature could contribute to negative market perceptions of the Combined Company or its securities. Accordingly, shareholders who remain investors following the Business Combination could experience a decline in the value of their shares, and there may be limited or no remedies for such loss.
We will incur significant transaction and transition costs in connection with the Business Combination .
We have incurred and expect to continue to incur significant, non-recurring costs in connection with consummating the Business Combination and preparing for public company operations following the Business Combination. We may also incur additional costs to retain key personnel. All expenses incurred in connection with the Business Combination Agreement and the Business Combination, including legal, accounting, consulting, investment banking and other fees and expenses, will be for the account of the party incurring such costs. These costs could be higher than expected and could adversely affect our cash position prior to closing and, if incurred or continuing thereafter, could adversely affect the Combined Company’s results of operations and cash flows.
Future resales of the Combined Company’s securities may cause the market price of such securities to decline, even if the Combined Company’s business is performing well.
Sales of securities into the public market after the proposed Business Combination - whether by us, by transaction counterparties who receive securities as consideration, by our Sponsor or other existing holders, or pursuant to registration rights - or the perception that such sales could occur, could adversely affect the market price of the Combined Company’s securities. These sales, or the market’s expectation of them, could also make it more difficult or less favorable for the Combined Company to raise additional equity capital in the future at times and prices it deems appropriate.
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The Combined Company may issue additional shares or other equity securities without your approval, which would dilute your ownership interest and may depress the market price of the Combined Company’s Class A Common Stock.
Pursuant to the Combined Company’s Equity Incentive Plan, following the consummation of the Business Combination, the Combined Company may issue stock, which amount will automatically increase annually and may further be subject to increase. The Combined Company may also issue additional shares of the Combined Company Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances.
The issuance of additional shares or other equity securities of equal or senior rank would have the following effects:
existing shareholders’ proportionate ownership interest in the Combined Company will decrease;
the amount of cash available per share, including for payment of dividends in the future, may decrease;
the relative voting strength of each share of previously outstanding common stock may be diminished; and
the market price of the Combined Company’s Class A Common Stock may decline.
Fluctuations in operating results, quarter to quarter earnings and other factors, including incidents involving
customers and negative media coverage, may result in significant decreases in the price of Combined Company’s Class A Common Stock.
The stock markets experience volatility that is often unrelated to operating performance. These broad market fluctuations may adversely affect the trading price of Combined Company’s Class A Common Stock, and, as a result, there may be significant volatility in the market price of Combined Company’s Class A Common Stock. Separately, if the Combined Company is unable to achieve profitability in line with investor expectations, the market price of Combined Company’s Class A Common Stock will likely decline when it becomes apparent that the market expectations may not be realized. In addition to operating results, many economic and seasonal factors outside of the Combined Company’s control could have an adverse effect on the price of Combined Company’s Class A Common Stock and increase fluctuations in its results. These factors include certain of the risks discussed herein, operating results of other companies in the same industry, changes in financial estimates or recommendations of securities analysts, speculation in the press or investment community, negative media coverage or risk of proceedings or government , change in government regulation, foreign currency fluctuations and uncertainty in tax policies, the possible effects of war, terrorist and other hostilities, other factors affecting general conditions in the economy or the financial markets or other developments affecting the Cronos financial services industry.
An active market for the Combined Company’s securities may not develop, which would adversely affect the liquidity and price of Combined Company’s securities.
The price of Combined Company’s securities may vary significantly due to factors specific to Combined Company as well as to general market or economic conditions. Furthermore, an active trading market for Combined Company’s securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.
Claims for indemnification by the Combined Company’s directors and officers may reduce its available funds to satisfy successful third-party claims against the Combined Company and may reduce the amount of money available to the Combined Company.
The Proposed Organizational Documents will provide that the Combined Company will indemnify its directors and officers, in each case to the fullest extent permitted by Florida law.
In addition, as permitted by Section 0850 of the FBCA, the amended and restated bylaws and its indemnification agreements that it will enter into with its directors and officers will provide that:
the Combined Company will indemnify its directors and officers for serving the Combined Company in those capacities or for serving other business enterprises at its request, to the fullest extent permitted by Florida law. Florida law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably
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believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;
the Combined Company may, in its discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;
the Combined Company will be required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification;
the Combined Company will not be obligated pursuant to its amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against the Combined Company or its other indemnitees, except with respect to proceedings authorized by its board of directors or brought to enforce a right to indemnification;
the rights conferred in the amended and restated bylaws are not exclusive, and the Combined Company is authorized to enter into indemnification agreements with its directors, officers, employees and agents and to obtain insurance to indemnify such persons; and
the Combined Company may not retroactively amend its bylaw provisions to reduce its indemnification obligations to directors, officers, employees and agents.
The Combined Company will be deemed to be an “emerging growth company” and, as a result of the reduced disclosure and governance requirements applicable to emerging growth companies, the Combined Company’s Class A Common Stock may be less attractive to investors.
The Combined Company will qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act, as of the closing of the Business Combination. As such, the Combined Company will be eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including, but not limited to, (a) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (b) reduced disclosure obligations regarding executive compensation in the Combined Company’s periodic reports and proxy statements and (c) exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. As a result, the Combined Company’s shareholders may not have access to certain information they may deem important. The Combined Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of shares of the Combined Company’s Common Stock that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) December 31, 2030, which is the last day of the fiscal year following the fifth anniversary of the date of the first sale of Ordinary Shares in our Initial Public Offering. We cannot predict whether investors will find the Combined Company’s securities less because it will rely on these exemptions. If some investors find the Combined Company’s securities less as a result of its reliance on these exemptions, the trading prices of the Combined Company’s securities may be lower than they otherwise would be, there may be a less active trading market for the Combined Company’s securities and the trading prices of the Combined Company’s securities may be more .
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Combined Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
As an emerging growth company, the Combined Company may also take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain an assessment of the effectiveness of the Combined Company’s internal controls over financial reporting from its independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure
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obligations regarding executive compensation in its periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find the Combined Company’s shares of common stock less attractive because it will rely on these exemptions. If some investors find the Combined Company’s shares of common stock less attractive as a result, there may be a less active market for its shares of common stock and its share price may be more volatile.
Anti-takeover provisions contained in the Combined Company’s Proposed Articles of Incorporation and Proposed Bylaws, as well as provisions of Florida law, could impair a takeover attempt.
The Proposed Articles of Incorporation and Proposed Bylaws for the Combined Company contain provisions that could have the effect of delaying or preventing changes in control or changes in the Combined Company’s management without the consent of the Combined Company’s board of directors. These provisions include:
no cumulative voting in the election of directors, which limits the ability of minority shareholders to elect director candidates;
the exclusive right of the Combined Company’s board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director with or without cause by shareholders, which prevents shareholders from being able to fill vacancies on the Combined Company’s board of directors;
the ability of the Combined Company’s board of directors to determine whether to issue shares of the Combined Company’s preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without shareholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
a prohibition on shareholder action by written consent following the Voting Threshold Date, which forces shareholder action to be taken at an annual or special meeting of the Combined Company’s shareholders; in this context, the “Voting Threshold Date” means the first date and time, occurring at or after 5:00 p.m. New York City time, on which the outstanding shares of the Combined Company’s Class B Common Stock cease to represent at least fifty percent (50%) of the total voting power of the outstanding shares of capital stock of Combined Company then entitled to vote generally in the election of directors;
the requirement that a special meeting of shareholders may be called only by the chairperson of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of the Combined Company’s shareholders to force consideration of a proposal or to take action, including the removal of directors;
limiting the liability of, and providing indemnification to, the Combined Company’s directors and officers;
controlling the procedures for the conduct and scheduling of shareholder meetings;
providing for a staggered board, in which the members of the board of directors are divided into three classes to serve for a period of three years from the date of their respective appointment or election;
granting the ability to remove directors (i) with or without cause prior to the Voting Threshold Date, and (ii) only for cause from and after the Voting Threshold Date, in each case by the affirmative vote of a majority of the voting power of the outstanding shares of the Combined Company’s Common Stock entitled to vote thereon;
requiring the affirmative vote of at least 66 2 ∕ 3 % of the voting power of the outstanding shares of the Combined Company’s capital stock entitled to vote generally in the election of directors, voting together as a single class, to amend the Proposed Bylaws or ARTICLE V, ARTICLE VI, ARTICLE VII, ARTICLE VIII, and ARTICLE X of the Proposed Articles of Incorporation; and
advance notice procedures that shareholders must comply with in order to nominate candidates to the Combined Company’s Board or to propose matters to be acted upon at a shareholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Combined Company’s.
These provisions, alone or together, could delay hostile takeovers and changes in control of the Combined Company or changes in the Combined Company’s Board and the Combined Company’s management.
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Risks Related to the Combined Company Being a Public Company
The price of the Combined Company’s Class A Common Stock may fluctuate significantly following the Business Combination and you could lose all or part of your investment as a result.
The market price of Combined Company’s Class A Common Stock may be volatile. The stock market in general, and the market for technology companies in particular, have experienced volatility that has often been unrelated to the operating performance or prospects of particular companies. As a result of this volatility, you could lose all or part of your investment.
In recent years, the stock market in general has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of the Combined Company’s Class A Common Stock, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading markets for Combined Company’s Class A Common Stock shortly following the closing of the Business Combination. Following periods of such volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of the Combined Company’s Class A Common Stock, the Combined Company may become the target of securities litigation in the future. Securities litigation could result in substantial costs and divert management’s attention and resources from the Combined Company’s business. The realization of any of the above risks or any of a broad range of other risks, including those described in this “ Risk Factors ” section, could have a dramatic and material impact on the market price of the Combined Company’s Common Stock following the Business Combination.
The Combined Company will incur increased costs as a result of operating as a public company, and the Combined Company’s management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, the Combined Company will incur significant legal, accounting, and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the listing requirements of Nasdaq, and other applicable securities rules and regulations impose various requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. We expect that the Combined Company will need to hire additional accounting, finance, and other personnel in connection with the Combined Company’s efforts to comply with the requirements of being, a public company, and the Combined Company’s management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. These requirements will increase the Combined Company’s legal and financial compliance costs and will make some activities more time-consuming and costly. For example, the Combined Company expects that the rules and regulations applicable to it as a public company may make it more difficult and more expensive for it to obtain director and officer liability insurance, which could make it more difficult for it to attract and retain qualified members of the Combined Company’s Board of Directors. These rules and regulations are often subject to varying interpretations, in many cases due to their of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
The Combined Company may issue additional shares of the Combined Company’s Common Stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.
The Combined Company may issue additional shares of the Combined Company’s Common Stock or other equity securities of equal or senior rank in the future in connection with, among other things, raising additional capital, future acquisitions, repayment of outstanding indebtedness, or awards under the Combined Company’s Equity Incentive Plan, without shareholder approval, in a number of circumstances. The Combined Company may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by the investors in the Business Combination, and investors purchasing shares or other securities in the future could have rights superior to existing shareholders. The price per share at which the additional shares or securities convertible or exchangeable into public shares, will be sold in future transactions may be higher or lower than the price per share paid by investors during the Business Combination.
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If securities or industry analysts do not publish research or reports about the Combined Company’s business, if they adversely change their recommendation regarding the Combined Company’s Class A Common Stock or if the Combined Company’s results of operations do not meet their expectations, including projections in those reports that differ from its actual results, its share price and trading volume could decline.
The trading market for the Combined Company’s Class A Common Stock will be influenced by the research and reports that industry or securities analysts publish about us or the Combined Company’s business. We do not have and the Combined Company will not have any control over these analysts. Securities and industry analysts do not currently, and may never, publish research on the Combined Company.
If no securities or industry analysts commence coverage of the Combined Company, the trading price of the Combined Company’s Class A Common Stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, and one or more of these analysts cease coverage of the Combined Company or fail to publish reports on it regularly, the Combined Company could lose visibility in the financial markets, which in turn could cause the price of the Combined Company’s common stock or trading volume to decline. Moreover, if one or more of the analysts who cover it publish negative reports, downgrade the Combined Company’s stock, or if its results of operations do not meet their expectations, the price of the Combined Company’s Class A Common Stock could decline. Securities research analysts may establish and publish their own periodic projections for the Combined Company following consummation of the Business Combination. These projections may vary widely and may not accurately predict the results the Combined Company actually achieves. The Combined Company’s share price may if its actual results do not match the projections of these securities research analysts.
The Combined Company’s business and operations could be negatively affected if it becomes subject to any securities litigation or shareholder activism, which could cause the Combined Company to incur significant expense, hinder execution of business and growth strategy and impact its stock price.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations, has been increasing recently. Volatility in the stock price of the Combined Company’s Class A Common Stock or other reasons may in the future cause it to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and the board of directors’ attention and resources from the Combined Company’s business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to the Combined Company’s future, adversely affect its relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, the Combined Company may be required to incur significant legal fees and other expenses related to any securities and activist shareholder matters. Further, its stock price could be subject to significant fluctuation or otherwise be affected by the events, risks and uncertainties of any securities and shareholder activism.
Risks Related to the Company’s Business and the Business Combination
Our Sponsor, officers and directors have agreed to vote in favor of the Business Combination, regardless of how the Public Shareholders vote.
Our Sponsor, officers and directors have agreed to vote their Ordinary Shares owned by them in favor of the Business Combination, including their Class B Ordinary Shares and any Public Shares purchased after our Initial Public Offering (including in open market and privately negotiated transactions). As of the December 31, 2025, the Sponsor, and certain of the officers and directors collectively beneficially own an aggregate of approximately 25.9% of the outstanding Ordinary Shares. Accordingly, it is more likely that the necessary shareholder approval will be received than would be the case if such persons agreed to vote their Ordinary Shares in accordance with the majority of the votes cast by the Public Shareholders.
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The Company may not be able to consummate an initial business combination within the required time period, in which case it would cease all operations except for the purpose of winding up and it would redeem the Public Shares and liquidate, in which case the Public Shareholders may only receive $10.05 per share, or less than such amount in certain circumstances, and the Public Warrants will expire worthless.
The Amended and Restated Memorandum and Articles of Association provide that the Company must complete an initial business combination by the Deadline Date. For purposes of this 10-K, the “Deadline Date” shall be 24 months from the consummation of our Initial Public Offering, or such later date as may be approved in accordance with our Amended and Restated Memorandum and Articles of Association. The Company may not be able to complete an initial business combination by such date. If the Company has not consummated the initial business combination prior to the Deadline Date, it will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, subject to lawfully available funds therefor, redeem 100% of the Public Shares at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining shareholders and the Company’s board of directors, dissolve and , subject in each case to its obligations under Cayman Islands law to provide for of creditors and the requirements of other applicable law, in which case its Public Shareholders may only receive $10.05 per share, or less than such amount in certain circumstances, and the Public Warrants will expire . In certain circumstances, the Public Shareholders may receive less than $10.05 per share on the redemption of their shares.
At the closing of the Business Combination, the trading price per share value of Combined Company’s Class A Common Stock may be less than the per share value of the Trust Account.
The consideration structure for the Business Combination contemplates that shares of Combined Company’s Class A Common Stock are valued at $10.22 per share (based upon the amount of cash held in the Trust Account as of December 31, 2025), although, the cash backed value per share of Combined Company’s Class A Common Stock following the Business Combination is expected to be substantially less than $10.22 per share. The cash held in the Trust Account as of December 31, 2025 was $176,338,275. Accordingly, the Company’s Public Shareholders who do not exercise redemption rights will receive shares of Combined Company’s Class A Common Stock that will have a value ascribed to them by their trading price as of two business days prior to the Meeting, which may be substantially less than the amount they would have received upon exercise of redemption rights. The shares of most companies that are the result of a recently completed business combination between a special purpose acquisition company and an operating company have traded at prices substantially below $10.00 per share. As such Public Shareholders who do not exercise redemption right may hold securities that never obtain a value equal to or exceeding the per share value of the Trust Account.
Warrants will become exercisable for the Combined Company’s Class A Common Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders.
Outstanding Company Warrants to purchase an aggregate of 5,867,240 shares of the Combined Company’s Class A Common Stock will become exercisable 30 days after the completion of the Business Combination. Each whole warrant will entitle the holder thereof to purchase one share of the Combined Company’s Class A Common Stock at a price of $11.50 per whole share, subject to adjustment. Warrants may be exercised only for a whole number of shares of the Combined Company’s Class A Common Stock. To the extent such warrants are exercised, additional shares of the Combined Company’s Class A Common Stock will be issued, which will result in dilution to the then existing holders of the Combined Company’s Common Stock and an increase in the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of the Combined Company’s Class A Common Stock.
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Because the market price of the Company’s Class A Common Stock will fluctuate the Company cannot be sure of the value of the consideration they will receive in the Business Combination.
The Business Combination consideration that the Company’s shareholders will receive is primarily a fixed number of shares of the Company’s Class A Common Stock; it is not a number of shares with a particular fixed market value. “The Company’s Class A Common Stock” shall refer to the Company’s Class A common stock, par value $0.0001 per share, during the interim period following the Company’s continuation and domestication from a Cayman Islands exempted company to a Florida corporation and prior to the consummation of the Business Combination. The market value of the Company’s Class A Common Stock at the closing of the Business Combination may vary significantly from the respective value of the Company’s Class A Ordinary Shares on the date the Business Combination Agreement was executed. Because the Business Combination consideration will not be adjusted to reflect any changes in the market value of shares of the Company’s Class A Common Stock, the market value of the shares of the Company’s Class A Common Stock issued in connection with the Business Combination may be higher or lower than the values of those shares on earlier dates. Accordingly, at the time of providing written consent to the Business Combination Proposal, Crypto.com and TMTG shareholders will not know or be able to calculate the market value of the shares of the Company’s Class A Common Stock they would receive upon the completion of the Business Combination. Stock price changes may result from a variety of factors, including changes in the business, operations or prospects of the Company, regulatory considerations and general business, market, industry or economic conditions. Many of these factors are outside of the control of the Company.
Neither the Company nor its shareholders will have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total indemnification in the event that any of the representations and warranties made by Crypto.com and Crypto.com Sub or TMTG in the Business Combination Agreement ultimately proves to be inaccurate or incorrect.
The representations and warranties made by Crypto.com and Crypto.com Sub, TMTG and the Company to each other in the Business Combination Agreement will not survive the consummation of the Business Combination. As a result, the Company and its shareholders will not have the protection of any indemnification, escrow, price adjustment or other provisions that allow for a post-closing adjustment to be made to the total Business Combination Consideration if any representation or warranty made by Crypto.com or TMTG in the Business Combination Agreement proves to be inaccurate or incorrect. Accordingly, to the extent such representations or warranties are incorrect, the Company would have no indemnification claim with respect thereto and its financial condition or results of operations could be adversely affected.
The consummation of the Business Combination is subject to a number of conditions and if those conditions are not satisfied or waived, the Business Combination Agreement may be terminated in accordance with its terms and the Business Combination may not be completed.
The Business Combination Agreement is subject to a number of conditions which must be fulfilled in order to complete the Business Combination. Those conditions include: (a) approval of the Business Combination and related agreements and transactions by the respective shareholders of the Company, (b) the absence of any order or law enjoining, prohibiting or making illegal the consummation of the Business Combination, (c) effectiveness of the Registration Statement on Form S-4 filed in connection with the Business Combination, (d) receipt of approval for listing on Nasdaq the shares of the Combined Company’s Class A Common Stock to be issued in connection with the Business Combination, (e) receipt of consents with respect to antitrust laws and the expiration of any attendant waiting periods, and (f) certain other conditions, as more fully described in the Business Combination Agreement. The completion of the Business Combination is not assured and is subject to risks, including the risk that the foregoing conditions are not timely satisfied.
In addition, the parties can mutually decide to terminate the Business Combination Agreement any time, before or after shareholder approval, or the Company, Crypto.com or TMTG may elect to terminate the Business Combination Agreement in certain other circumstances. If the Business Combination is not completed, the Company could be subject to several risks, including:
the parties may be liable for damages to one another under the terms and conditions of the Business Combination Agreement;
negative reactions from the financial markets, including declines in the price of the Company’s Class A Ordinary Shares due to the fact that current prices reflect a market assumption that the Business Combination will be completed;
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the attention of our management will have been diverted to the Business Combination rather than the pursuit of other opportunities in respect of an initial business combination; and
we will have a limited period of time, if any, to complete an alternative initial business combination and we may not be as attractive to potential alternative partners to an initial business combination if we are unable to complete the Business Combination.
We may waive one or more of the conditions to the Business Combination.
We may agree to waive, in whole or in part, some of the conditions to our obligations to complete the Business Combination, to the extent permitted by the Memorandum and Articles of Association and applicable laws. For example, it is a condition to our obligations to close the Business Combination that certain of Crypto.com or TMTG’s representations and warranties are true and correct in all material respects as of the Closing Date. However, if our board of directors determines that it is in our shareholders’ best interest to waive any such breach, then the board may elect to waive that condition and close the Business Combination. We are not able to waive the condition that our shareholders approve the Business Combination.
The exercise of the Company’s directors’ and officers’ discretion in agreeing to changes or permitted waivers in the terms of the Business Combination may result in a conflict of interest when determining whether such changes to the terms of the Business Combination or waivers of conditions are appropriate and in the best interests of the Company’s Shareholders.
In the period leading up to the closing of the Business Combination, events may occur that, pursuant to the Business Combination Agreement, would require the Company to agree to amend the Business Combination Agreement, to consent to certain actions taken by Crypto.com or TMTG or to waive rights that the Company is entitled to under the Business Combination Agreement. Such events could arise because of changes in the course of Crypto.com or TMTG’s businesses, a request by Crypto.com or TMTG to undertake actions that would otherwise be prohibited by the terms of the Business Combination Agreement or the occurrence of other events that would have a material adverse effect on Crypto.com or TMTG’s businesses and would entitle the Company to terminate the Business Combination Agreement. In any of such circumstances, it would be at the Company’s discretion, acting through the Company’s Board, to grant its consent or waive those rights. For example, the Company could agree to waive the closing condition related to no material adverse effect having occurred with respect to Crypto.com or TMTG between the date of the Business Combination Agreement and the Closing. If the Company were to waive this condition and proceed to of the Business Combination, the price of the Combined Company’s Class A Common Stock could be materially .
The existence of the financial and personal interests of the directors described herein may result in a conflict of interest on the part of one or more of the directors between what he, she or they may believe is best for the Company and what he, she or they may believe is best for himself, herself or themselves in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, the Company does not believe there will be any material changes or waivers that the Company’s directors and officers would be likely to make after the mailing of this proxy statement/prospectus. The Company will circulate a supplemental or amended proxy statement/prospectus if changes to the terms of the Business Combination are required prior to the shareholder vote to approve Business Combination Agreement and Business Combination and those changes would have a material impact on the Company’s shareholders.
The Company’s ability to successfully effect the Business Combination and the Combined Company’s ability to successfully operate the business thereafter will be largely dependent upon the efforts of certain key personnel. The loss of such key personnel could negatively impact the operations and financial results of the combined business.
The Company’s ability to successfully effect the Business Combination and the Combined Company’s ability to successfully operate the business following the Closing is dependent upon the efforts of certain key personnel. Although the Company expects key personnel to remain with Crypto.com and TMTG following the Business Combination, there can be no assurance that they will do so. It is possible that Crypto.com, TMTG or the Combined Company will lose some key personnel, the loss of which could negatively impact the operations and profitability of TMGCS.
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The Company’s Public Shareholders will not have any rights or interests in funds from the Trust Account, except under certain limited circumstances. To liquidate their investment, therefore, The Company’s Public Shareholders may be forced to sell their Public Shares or Public Warrants, potentially at a loss.
The Company’s Public Shareholders will be entitled to receive funds from the Trust Account only upon the earliest to occur of: (i) the Company’s completion of an initial business combination, and then only in connection with those the Company’s Class A Ordinary Shares that such the Public Shareholders properly elected to redeem, subject to the limitations described herein, (ii) the redemption of any Public Shares properly submitted in connection with a shareholder vote to amend the Memorandum and Articles of Association (A) to modify the substance or timing of the Company’s obligation to redeem 100% of the Public Shares if the Company does not complete an initial business combination by the Deadline Date or (B) with respect to any other material provisions of the Memorandum and Articles of Association relating to shareholders’ rights or pre-initial business combination activity and (iii) the redemption of the Public Shares if the Company is unable to complete an initial business combination by the Deadline Date, subject to applicable law and as further described herein. In no other circumstances will a Public Shareholder have any right or interest of any kind in the Trust Account. Holders of Public Warrants will not have any right to the proceeds held in the Trust Account with respect to the Public Warrants. Accordingly, to liquidate their investment, Public Shareholders may be forced to sell their Public Shares or Public Warrants, potentially at a .
The Company may not have sufficient funds to satisfy indemnification claims of its directors and executive officers.
The Company has agreed to indemnify its officers and directors to the fullest extent permitted by law.
However, the Company’s officers and directors have agreed to waive any right, title, interest or claim of any kind in or to any monies in the Trust Account. Accordingly, any indemnification provided will be able to be satisfied by the Company only if (i) the Company has sufficient funds outside of the Trust Account or (ii) the Company consummates an initial business combination. The Company’s obligation to indemnify its officers and directors may discourage shareholders from bringing a lawsuit against its officers or directors for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against the Company’s officers and directors, even though such an action, if successful, might otherwise benefit the Company and its shareholders. Furthermore, a shareholder’s investment may be adversely affected to the extent the Company pays the costs of settlement and damage awards its officers and directors pursuant to these indemnification provisions.
If, after the Company distributes the proceeds in the Trust Account to the Public Shareholders, it files a bankruptcy petition or an involuntary bankruptcy petition is filed against the Company that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the Company and the Company’s Board may be exposed to claims of punitive damages.
If, after the Company distributes the proceeds in the Trust Account to its shareholders, it files a bankruptcy petition or an involuntary bankruptcy petition is filed against the Company that is not dismissed, any distributions received by the Company’s shareholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by the Company’s shareholders. In addition, the Company Board may be viewed as having breached its fiduciary duty to its creditors and/or having acted in bad faith, thereby exposing itself and the Company to claims of punitive damages, by paying the Company’s shareholders from the Trust Account prior to addressing the of creditors.
If, before distributing the proceeds in the Trust Account to the Public Shareholders, the Company files a bankruptcy petition or an involuntary bankruptcy petition is filed against the Company that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of the Company’s shareholders and the per-share amount that would otherwise be received by the Company’s shareholders in connection with the Company’s liquidation may be reduced.
If, before distributing the proceeds in the Trust Account to the Public Shareholders, the Company files a bankruptcy petition or an involuntary bankruptcy petition is filed against the Company that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in the Company’s bankruptcy estate and subject to the claims of third parties with priority over the claims of the Company’s shareholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise have been received by the Company’s shareholders in connection with the Company’s liquidation would be reduced.
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The Sponsor and the Company’s officers and directors have potential conflicts of interest in recommending that shareholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement/prospectus.
When considering the Company’s Board’s recommendation that the Company’s shareholders vote in favor of the approval of the Business Combination Proposal, the Company’s shareholders should be aware that Sponsor and certain of the Company’s executive officers and directors have interests in the Business Combination that may be different from or in addition to (and which may conflict with) the interests of the Company’s other shareholders. These interests include:
the beneficial ownership of the Sponsor and certain current and former members of the Company’s Board and officers of an aggregate of 5,750,000 of the Company Class B Ordinary Shares and 351,825 Private Placement Units, which securities were acquired for an aggregate investment of $3,543,250 at the time of the Company’s formation and the IPO respectively and will become worthless if the Company does not complete a business combination by the Deadline Date, as such shareholders have waived any redemption right with respect to those shares. Furthermore, if the Business Combination is consummated, the Sponsor would receive a Forced Exercise Warrant exercisable for 2,000,000 shares of the Company’s Class A Common Stock upon the occurrence of certain conditions. After giving effect to the Business Combination, the Sponsor and certain current and former members of the Company’s Board and officers would own up to an aggregate of 11,219,100 shares of the Company’s Class A Common Stock. Such shares have an aggregate market value of approximately $251 million, based on the closing price of the Company’s Class A Ordinary Shares of $10.66 on the Nasdaq Global Market on September 30, 2025;
the continued indemnification of current directors and officers of the Company and the continuation of directors’ and officers’ liability insurance after the Business Combination;
the fact that the Sponsor, and the officers and directors of the Company will be reimbursed for out-of-pocket expenses incurred in connection with activities on the Company’s behalf, such as identifying potential target businesses and performing due diligence on suitable business combinations;
the fact that TMTG’s Chief Executive Officer, Devin Nunes, will serve as directors on the Combined Company’s board of directors after the closing of the Business Combination;
the fact that the Combined Company intends to grant awards under the Equity Incentive Plan to the officers and directors of TMGCS following the the closing of the Business Combination; and
the fact that the Sponsor, and current and former officers and directors of the Company will lose their entire investment in the Company if an initial business combination is not completed.
These interests may influence the Company’s directors in making their recommendation that you vote in favor of the Business Combination Proposal, and the transactions contemplated thereby. These interests were considered by the Company’s Board when it approved the Business Combination.
The Company may amend the terms of the Public Warrants in a manner that may be ad-verse to holders of Public Warrants with the approval by the holders of at least a majority of the then outstanding Public Warrants or for amendments necessary for the warrants to be classified as equity. As a result, the exercise price of the Public Warrants could be increased, the exercise period could be shortened and the number of shares of the Company’s Class A Common Stock purchasable upon exercise of a Public Warrant could be decreased, all without your approval.
The Public Warrants were issued in registered form under the Warrant Agreement between Continental Stock Transfer & Trust Company, N.A., as warrant agent, and the Company. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that adversely affects the interests of the registered holders of Public Warrants. Accordingly, the Company may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although the Company’s ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the Public Warrants, convert the Public Warrants into cash or stock, shorten the exercise period or decrease the number of shares of the Company’s Class A Common Stock purchasable upon exercise of a Public Warrant.
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The Company may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.
The Company has the ability to redeem all, but not less than all, outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of the Company’s Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date on which the Company gives proper notice of such redemption, provided that on the date the Company gives notice of redemption and during the entire period thereafter until the time the Company redeems the Public Warrants, it has an effective registration statement under the Securities Act covering the shares of the Company Class A Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available. If and when the Public Warrants become redeemable, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, the Company may redeem the Public Warrants as set forth above even if the holders are otherwise unable to exercise the Public Warrants. Redemption of the outstanding Public Warrants could you: (i) to exercise your Public Warrants and pay the exercise price therefor at a time when it may be for you to do so, (ii) to sell your Public Warrants at the then-current market price when you might otherwise wish to hold your Public Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your Public Warrants.
The Amended and Restated Memorandum and Articles of Association and the Proposed Articles of Incorporation require, to the fullest extent permitted by law, that derivative actions brought in the Company’s or the Combined Company’s name, as applicable, against their respective directors, officers, other employees, shareholders or shareholders for breach of fiduciary duty and other similar actions may be brought only in the courts of the Cayman Islands or federal courts located in Miami-Dade County, Florida, respectively.
The Proposed Articles of Incorporation require, to the fullest extent permitted by law, that any dispute, controversy, or claim that is an Internal Corporate Claim, including derivative actions brought in the Combined Company’s name, against its directors, officers, other employees, or shareholders for breach of fiduciary duty and other similar actions, may be brought only in the federal courts located in Miami-Dade County, Florida, or, if such federal courts lack jurisdiction, in the Florida state courts located in Miami-Dade County. Any person or entity holding any of the Combined Company securities shall be deemed to have notice of and consented to the forum provisions in the Proposed Articles of Incorporation. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Combined Company, or any of its directors, officers, other employees or shareholders, which may discourage lawsuits with respect to such claims, although its shareholders will not be deemed to have waived their compliance with federal securities laws (including, but not limited to, the Securities Act) and the rules and regulations thereunder. However, there is no assurance that a court would enforce the choice of forum provision contained in the Proposed Articles of Incorporation. If a court were to find such provision to be inapplicable or unenforceable in an action, the Combined Company, may incur additional costs associated with resolving such action in other jurisdictions, which could its business, operating results and financial condition.
The Amended and Restated Memorandum and Articles of Association state that the courts of the Cayman Islands shall have exclusive jurisdiction over any claim or dispute arising out of or in connection with the Amended and Restated Memorandum and Articles of Association or otherwise related in any way to each member’s shareholding in the Company, including any derivative action or proceeding brought on behalf of the Company. Pursuant to the Amended and Restated Memorandum and Articles of Association, each shareholder submits to the exclusive jurisdiction of the courts of the Cayman Islands. This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or any of its directors, officers, other employees or shareholders, which may discourage lawsuits with respect to such claims, although its shareholders will not be deemed to have waived their compliance with federal securities laws (including, but not limited to, the Securities Act) and the rules and regulations thereunder. However, there is no assurance that a court would enforce the choice of forum provision contained in the Amended and Memorandum and Articles of Association. If a court were to find such provision to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could its business, operating results and financial condition.
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The Proposed Organizational Documents include mandatory arbitration provisions, which follow different procedures than in-court litigation and may be more restrictive to shareholders asserting claims than in-court litigation.
The Proposed Organizational Documents provide that except for any dispute, controversy, or claim that is an Internal Corporate Claim, as defined in Section 607.0208(4) of the FBCA, and that cannot be required to be arbitrated, any other dispute, controversy, or claim that is a Dispute arising out of or relating to the Proposed Organizational Documents or the purchase or sale of any security of the Combined Company, and any claim accompanying any such claim, shall be submitted to binding and final arbitration governed by the Federal Arbitration Act and seated in the State of Florida in Miami-Dade County, unless another seat is agreed to by the Combined Company, in its sole discretion. As a result, except with respect to (i) Internal Corporate Claims, (ii) any Dispute for which it has been determined that the arbitration of such Dispute is invalid, illegal or unenforceable, and (iii) and requests for orders in aid of arbitration or interim relief that are consistent with the requirement to arbitrate, our shareholders will not be to pursue in state or federal court us, including with respect to arising under the federal securities laws, and instead, will be required to pursue such through a final and binding arbitration proceeding.
The Proposed Organizational Documents provide that such mandatory arbitration proceedings shall be administered by JAMS in accordance with its Comprehensive Arbitration Rules and Procedures, as modified in the Proposed Organizational Documents. These procedures may result in materially limited rights for our shareholders as compared to litigation in a federal or state court. For example, arbitration in accordance with these procedures does not include the opportunity for a jury trial, document discovery is limited, arbitration hearings are not open to the public, witness depositions are not typically permitted and arbitrators may have different qualifications or experiences than judges. In addition, unless agreed to by the Combined Company, in its sole discretion, the mandatory arbitration provisions in the Proposed Organizational Documents contemplate that arbitration may not be brought in a representative capacity or on behalf of a class of our shareholders, which is different from, and may be less favorable to shareholders than, representative or class action litigation in courts.
Any person or entity purchasing or otherwise acquiring any interest in any security of the Combined Company shall be deemed to have notice of and consented to the mandatory arbitration provisions of the Proposed Organizational Documents. By agreeing to the mandatory arbitration provisions of the Proposed Organizational Documents, the Combined Company’s shareholders will not be deemed to have waived the Combined Company’s compliance with the federal securities laws and the rules and regulations thereunder.
We believe the mandatory arbitration provisions in the Proposed Organizational Documents are enforceable under both federal and state law, including with respect to federal securities laws claims; however, there is uncertainty as to their enforceability, particularly for federal securities law claims, and it is possible that they may ultimately be determined to be unenforceable. While the FBCA prohibits mandatory arbitration of Internal Corporate Claims (and Section 607.0208(4) of the FBCA does set forth certain categories of claims that constitute Internal Corporate Claims), there is limited judicial interpretation of this statutory provision and the ultimate scope of the statutory prohibition. Furthermore, the arbitrability of stockholder security class action cases has not been tested in the courts, despite the SEC’s recent Release No. 33-11389 and 34-103988, which approves such clauses in the context of acceleration of registration statements of issuers. If a court were to find the mandatory arbitration provisions contained in the Proposed Organizational Documents to be unenforceable in a Dispute, the Combined Company may incur additional costs associated with resolving such Dispute, which could affect the Combined Company’s business, operating results and financial condition.
The mandatory arbitration provisions of our Proposed Organizational Documents could result in increased costs for a shareholder to bring a claim and may discourage our shareholders from bringing, and attorneys from agreeing to represent our shareholders in, Disputes against us, as compared to litigation in a federal or state court. For example, the mandatory arbitration provisions provide the arbitrator power to award the prevailing party its attorneys’ costs and arbitration fees reasonably incurred in the arbitration. Moreover, certain institutional investors and proxy advisory firms may express dissatisfaction with these provisions. The inclusion of mandatory arbitration provisions may make our securities less attractive to certain investors who may view such provisions as harmful to both investors and companies by limiting investor rights to recover losses on a class-wide basis and by inducing the potential for numerous, time-consuming and costly individual arbitrations. This could reduce demand for our securities, negatively impact the market for our securities, and affect the price and liquidity of our securities.
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If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the Combined Company, its business, or its market, or if they change their recommendations regarding the Combined Company’s securities adversely, the price and trading volume of the Combined Company’s securities could decline.
The trading market for the Combined Company’s securities will be influenced by the research and reports that industry or securities analysts may publish about the Combined Company, its business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on the Combined Company. If no securities or industry analysts commence coverage of the Combined Company, the Combined Company’s share price and trading volume would likely be negatively impacted. If any of the analysts who may cover the Combined Company change their recommendation regarding the Combined Company’s Common Stock adversely, or provide more favorable relative recommendations about the Combined Company’s competitors, the price of shares of the Combined Company’s Common Stock would likely decline. If any analyst who may cover the Combined Company were to cease coverage of the Combined Company or fail to regularly publish reports on it, the Combined Company could lose visibility in the financial markets, which in turn could cause its share price or trading volume to decline.
Changes to laws or regulations or in how such laws or regulations are interpreted or applied, or a failure to comply with any laws, regulations, interpretations or applications, may adversely affect our business, including our ability to negotiate and complete our initial business combination, including the proposed Business Combination.
We are subject to the laws and regulations, and interpretations and applications of such laws and regulations, of national, regional, state and local governments in both the Cayman Islands and the United States. In particular, we are required to comply with certain SEC and other legal and regulatory requirements, and our consummation of an initial business combination may be contingent upon our ability to comply with certain laws, regulations, interpretations and applications and any post-business combination company may be subject to additional laws, regulations, interpretations and applications. Compliance with, and monitoring of, the foregoing may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination. A failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business, including our ability to negotiate and complete an initial business combination.
On January 24, 2024, the SEC adopted new rules relating to, among other items, disclosures in business combination transactions involving SPACs and private operating companies; the financial statement requirements applicable to transactions involving shell companies; the use of projections in SEC filings in connection with proposed business combination transactions; the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act. These rules may materially increase the costs and time required to negotiate and complete an initial business combination and could potentially impair our ability to complete an initial business combination.
If we are deemed to be an investment company under the Investment Company Act, we may be required to institute burdensome compliance requirements and our activities may be restricted, which may make it difficult for us to complete the Business Combination.
If we are deemed to be an investment company under the Investment Company Act, our activities may be restricted, including:
restrictions on the nature of our investments; and
restrictions on the issuance of securities;
each of which may make it difficult for us to complete the Business Combination.
In order not to be regulated as an investment company under the Investment Company Act, unless we can qualify for an exclusion, we must ensure that we are engaged primarily in a business other than investing, reinvesting or trading of securities and that our activities do not include investing, reinvesting, owning, holding or trading “investment securities” constituting more than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. The Company’s business is to identify and complete an initial business combination and thereafter to operate the post-transaction business or assets for the long term.
The Company does not believe that its principal activities will subject us to the Investment Company Act. To this end, the proceeds held in the Trust Account may only be invested in United States “government securities” within the meaning of Section 2(a)(16)
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of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations. By restricting the investment of the proceeds to these instruments, and by having a business plan targeted at acquiring and growing businesses for the long term (rather than on buying and selling businesses in the manner of a merchant bank or private equity fund), we intend to avoid being deemed an “investment company” within the meaning of the Investment Company Act. Our securities are not intended for persons who are seeking a return on investments in government securities or investment securities. The Trust Account is intended as a holding place for funds pending the earliest to occur of: (i) the completion of our primary business objective, which is a business combination; (ii) the redemption of any public shares properly submitted in connection with a shareholder vote to amend our amended and restated certificate of incorporation to modify the substance or timing of our obligation to provide for the redemption of our public shares in connection with an initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination within the Completion Window; and (iii) absent a business combination, our return of the funds held in the Trust Account to our Public Shareholders as part of our redemption of the public shares. If we do not invest the proceeds as discussed above, we may be deemed to be subject to the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory would require additional expenses for which we have not allotted funds and may our ability to consummate our initial business combination. If we are to complete our initial business combination, our Public Shareholders may receive only approximately $10.16 per share on the of our Trust Account and our warrants will expire . In certain circumstances, our Public Shareholders may receive less than $10.16 per share on the redemption of their shares.
Risks Related to Redemptions
If a shareholder fails to receive notice of the Company’s offer to redeem the Public Shares in connection with the Business Combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.
The Company will comply with proxy rules when conducting redemptions in connection with the Business Combination. Despite the Company’s compliance with these rules, if a shareholder fails to receive the Company’s proxy materials, such shareholder may not become aware of the opportunity to redeem its shares. In addition, proxy materials that the Company furnishes to the Public Shareholders in connection with the Business Combination will describe the various procedures that must be complied with in order to validly redeem Public Shares. In the event that a shareholder fails to comply with these or any other procedures, its shares may not be redeemed.
The Company does not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for the Company to complete the Business Combination with which a substantial majority of the Company’s shareholders do not agree.
We may be able to consummate a business combination even though a substantial number of our Public Shareholders do not agree with the transaction and have redeemed their Public Shares. However, in no event will we redeem our Public Shares in an amount that would cause our net tangible assets to be less than $5,000,001 upon consummation of the Business Combination, and the amount that we redeem may be further limited by the terms and conditions of our initial business combination. In such case, we would not proceed with the redemption of our Public Shares and the Business Combination.
If we are unable to consummate our initial business combination, Public Shareholders may be forced to wait until after the Deadline Date before redemption from the Trust Account.
If we are unable to consummate our initial business combination by the Deadline Date, we will distribute the aggregate amount then on deposit in the Trust Account (less up to $100,000 of the net interest to pay dissolution expenses and which interest shall be net of taxes payable), pro rata to Public Shareholders by way of redemption and cease all operations except for the purposes of winding up of our affairs, as further described in this proxy statement/prospectus. Any redemption of Public Shareholders from the Trust Account shall be affected automatically by function of our Amended and Restated Memorandum and Articles of Association prior to any voluntary winding up. If we are required to wind-up, liquidate the Trust Account and distribute such amount therein, pro rata, to the Public Shareholders, as part of any liquidation process, such winding up, liquidation and distribution must comply with the applicable provisions of Cayman Islands law. In that case, investors may be forced to wait beyond the Deadline Date, before the redemption proceeds of the Trust Account become available to them, and they receive the return of their pro rata portion of the proceeds from the Trust Account. We have no obligation to return funds to investors prior to the date of our redemption or unless we consummate our initial business combination prior thereto and only then in cases where investors have sought to redeem their Public
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Shares. Only upon our redemption or any liquidation will Public Shareholders be entitled to distributions if we are unable to complete our initial business combination.
If a shareholder or a “group” of shareholders are deemed to hold in excess of 15% of the Company’s issued and outstanding Class A Ordinary Shares, such shareholder or group will lose the ability to redeem all such shares in excess of 15% of the Company’s issued and outstanding Class A Ordinary Shares.
The Memorandum and Articles of Association provides that a Public Shareholder, individually or together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from seeking redemption rights with respect to an aggregate of more than 15% of the Company’s Class A Ordinary Shares sold in the IPO without the Company’s prior written consent. The inability of a shareholder to redeem an aggregate of more than 15% of the Company’s Class A Ordinary Shares sold in the IPO will reduce its influence over the Company’s ability to consummate its initial business combination and such shareholder could suffer a material loss on its investment in the Company if it sells, in open market transactions, the Public Shares held in excess of 15% of the total Public Shares issued.
If third parties bring claims against the Company, the proceeds held in the Trust Account could be reduced and the per- share redemption amount received by shareholders may be less than $10.05 per share.
Our placing of funds in the Trust Account may not protect those funds from third-party claims against the Company. Although the Company has sought to have all vendors, service providers, prospective target businesses and other entities with which it does business (except its independent registered accounting firm) execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of the Public Shareholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim the Company’s assets, including the funds held in the Trust Account. If any third party to execute an agreement waiving such to the monies held in the Trust Account, the Company’s management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more to the Company than any alternative. If we do not obtain a waiver from a third party, we will obtain the written consent of the Sponsor before entering into an agreement with such third party.
Examples of possible instances where the Company may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with the Company and will not seek recourse against the Trust Account for any reason. Upon redemption of the Public Shares, if the Company is unable to complete its initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with its initial business combination, the Company will be required to provide for payment of claims of creditors that were not waived that may be brought against the Company within the 10 years following redemption. Accordingly, the per-share redemption amount received by Public Shareholders could be less than the $10.05 per share initially held in the Trust Account due to of such creditors. Pursuant to a written agreement, the Sponsor has agreed that it will be liable to us if and to the extent any by a third party for services rendered or products sold to us, or a prospective target business with which we discussed entering into a transaction agreement, reduce the amounts in the Trust Account to below $10.05 per share except as to any by a third party who executed a waiver of rights to seek access to the Trust Account and except as to any under our indemnity of the underwriter of the IPO certain liabilities, including liabilities under the Securities Act. Moreover, if an executed waiver is deemed to be unenforceable a third party, the Sponsor will not be responsible to the extent of any liability for such third party . We have not independently verified whether the Sponsor has sufficient funds to its indemnity obligations, we have not asked the Sponsor to reserve for such indemnification obligations and we believe that its only assets are securities of our company. Therefore, we cannot you that it would be to these obligations.
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The Company’s directors may decide not to enforce the indemnification obligations of the Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to the Public Shareholders.
In the event that the proceeds in the Trust Account are reduced below $10.05 per Public Share and the Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against the Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against the Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our Public Shareholders may be reduced below $10.05 per share.
Our Shareholders may be held liable for claims by third parties against the Company to the extent of distributions received by them upon redemption of their shares.
If the Company is forced to enter into an insolvent liquidation, any distributions received by our Shareholders could be viewed as an unlawful payment if it was proved that immediately following the date on which the distribution was made, the Company was unable to pay its debts as they fall due in the ordinary course of business. As a result, a liquidator could seek to recover all amounts received by its shareholders. Furthermore, members of the Company’s Board may be viewed as having breached their fiduciary duties to the Company or the Company’s creditors and/or may have acted in bad faith, and thereby exposing themselves and the Company to claims, by paying public shareholders from the Trust Account prior to addressing the claims of creditors. The Company cannot assure you that claims will not be brought it for these reasons. The Company and its directors and officers who and authorized or permitted any distribution to be paid out of the Company’s share premium account while it was to pay its debts as they fall due in the ordinary course of business would be of an and may be liable to a fine of approximately fifteen thousand dollars and for five years in the Cayman Islands.
There is no guarantee that a shareholder’s decision whether to redeem their Class A Ordinary Shares for a pro rata portion of the Trust Account will put the shareholder in a better future economic position.
We can give no assurance as to the price at which a shareholder may be able to sell its Public Shares in the future following the completion of the Business Combination or any alternative business combination. Certain events following the consummation of any initial business combination, including the Business Combination, may cause an increase in our share price, and may result in a lower value realized now than a shareholder of the Company might realize in the future had the shareholder redeemed their shares. Similarly, if a shareholder does not redeem their shares, the shareholder will bear the risk of ownership of the Public Shares after the consummation of any initial business combination, including the Business Combination, and there can be no assurance that a shareholder can sell its shares in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A shareholder should consult the shareholder’s tax and/or financial advisor for assistance on how this may affect his, her or its individual situation.
The foregoing risks and additional risks relating to the proposed Business Combination will be described in the registration statement on Form S-4/proxy statement to be filed in connection with the Business Combination, which may be updated in subsequent filings. Additionally, you should carefully consider the factors discussed in the Risk Factors section of the final prospectus in connection with the Initial Public Offering filed with the SEC on June 30, 2025.
There is substantial doubt about our ability to continue as a “going concern” and therefore we may need to raise additional capital which could be convertible into securities upon the closing of our initial business combination.
In connection with our assessment of going concern considerations under applicable accounting standards, which raise substantial doubt about our ability to continue as a going concern through approximately one year from the date the financial statements included elsewhere in this Report were issued, management has determined that we may need to raise for additional financing in the form of convertible notes to provide us with additional working capital to enable us to complete our initial Business Combination. Any such convertible notes would be convertible at the option of the holding into Working Capital Units (as such term is defined below) at a price of $10.00 per unit, which may be at a price less than the then-current trading price of the aggregate securities that are a constituent part of such Working Capital Units.
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