As filed with the Securities and Exchange Commission on January 29, 2024.

Registration No. 333-273623

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 5

TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Triller Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		7370		92-2499621
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

7119 West Sunset Boulevard Suite 782

Los Angeles, CA 90046

(310) 400-2674

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

 

 

Bobby Sarnevesht

Chief Executive Officer

Prem Parameswaran

Chief Financial Officer

7119 West Sunset Boulevard Suite 782

Los Angeles, CA 90046

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

 

 

Copies to:

 

Benjamin K. Marsh Goodwin Procter LLP The New York Times Building 620 Eighth Ave New York, NY 10018 (212) 813-8800		David Peinsipp Peter Byrne Kristin VanderPas Cooley LLP 3 Embarcadero Center 20th Floor San Francisco, CA 94111 (415) 693-2000

 

 

Approximate date of commencement of proposed sale to the public: as soon as

practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

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

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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

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

 

 

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

 

 

 

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

 

Subject to Completion, Dated      , 2024

PRELIMINARY PROSPECTUS

    Shares

 

 

Triller Corp.

Series A Common Stock

 

 

This prospectus relates to the registration of the resale of up to     shares of our Series A common stock by our stockholders identified in this prospectus (the “Registered Stockholders”). Unlike an initial public offering, the resale by the Registered Stockholders is not being underwritten by any investment bank. The Registered Stockholders may, or may not, elect to sell their shares of our Series A common stock covered by this prospectus, as and to the extent they may determine. Such sales, if any, will be made through ordinary brokerage transactions on the New York Stock Exchange (“NYSE”). See “Plan of Distribution” for additional information. We will not receive any proceeds from the sale of shares of Series A common stock by the Registered Stockholders. After giving effect to the Reorganization (as defined herein), the Registered Stockholders will hold approximately  % of our outstanding capital stock, with our directors and executive officers and their affiliates holding approximately  % (and approximately  % of these shares subject to the lock-up agreement described below).

No public market for our Series A common stock currently exists. For more information, see “Sale Price History of Our Capital Stock.” The listing of our Series A common stock on the NYSE without underwriters is a method for commencing public trading in shares of our Series A common stock, and consequently, the trading volume and price of shares of our Series A common stock may be more volatile than if shares of our Series A common stock were initially listed in connection with an underwritten initial public offering.

Based on information provided by the NYSE, the opening trading price of our Series A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers. Based on such orders, the designated market maker will determine an opening price for our Series A common stock in consultation with our financial advisors pursuant to applicable NYSE rules. For more information, see “Plan of Distribution.”

We will have one class of authorized common stock consisting of two series: Series A common stock offered hereby and Series B common stock. The rights of the holders of Series A common stock and Series B common stock will be identical, except with respect to voting, conversion and transfer rights. Each share of Series A common stock entitles its holder to one vote on all matters presented to our stockholders generally. Each share of Series B common stock entitles its holder to ten votes on all matters presented to our stockholders generally and each share of Series B common stock also possesses certain special approval rights. Each share of Series B common stock may be converted at any time into one share of Series A common stock, and will automatically convert into one share of Series A common stock upon sale or transfer thereof, subject to certain exceptions. In addition, all shares of Series B common stock will automatically convert into shares of Series A common stock (i) if the voting power of all outstanding shares of Series B common stock comes to represent less than 10% of the combined voting power of all shares of outstanding common stock or (ii) with the vote of 80% of the then outstanding Series B common stock. We will also have authorized and outstanding shares of Series A-1 preferred stock and undesignated preferred stock that will have rights and preferences with respect to dividends and other distributions that are senior to our common stock. A majority of the outstanding shares of Series A-1 preferred stock will have certain special approval rights, including, among others, approval of liquidation events, the payment of dividends, certain sales or dispositions, loans above $10 million or sales of material technology or intellectual property. For more information, see “Description of Capital Stock.”

Upon the completion of the Reorganization, Proxima Media, LLC (“Proxima Media”) and Bobby Sarnevesht, our founding partners, together with entities and trusts they or their immediate family members or affiliates control, will own approximately 24.1% of the outstanding shares of our common stock, representing 62.4% of our total voting power. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of the NYSE and we expect to elect not to comply with certain corporate governance requirements of the NYSE. In addition, our founders and their related entities and trusts will be able to exercise significant voting influence over fundamental and significant corporate matters and transactions. As Registered Stockholders, subject to the lock-up agreement described herein, our founders and their related entities and trusts may, from time to time, sell shares of Series A common stock, which could impact their voting influence and our status as a “controlled company” within the meaning of the corporate governance standards of the NYSE. See Risk Factors—“Risks Related to Our Proposed Direct Listing and the Ownership of Our Series A Common Stock” and “Principal and Registered Stockholders” for additional information.

We intend to apply to list our Series A common stock on NYSE under the symbol “ILLR.” We expect our Series A common stock to begin trading on NYSE on or about      , 2024.

A   -for-    reverse stock split (the “Reverse Stock Split”) of the outstanding capital stock became effective concurrently with the Reorganization on     , 2024. See “The Reverse Stock Split”.

We are an “emerging growth company” and a “smaller reporting company” under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and for future filings.

 

 

See “Risk Factors” beginning on page 27 to read about factors you should consider before buying shares of our Series A common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

Prospectus dated      , 2024.

TABLE OF CONTENTS

 

		Page
About this Prospectus			ii
Prospectus Summary			1
Summary Consolidated Financial and Operating Information			23
Risk Factors			27
Cautionary Note Regarding Forward-Looking Statements			117
Use of Proceeds			119
Dividend Policy			120
Capitalization			121
The Reorganization			124
The Reverse Stock Split			126
Unaudited Pro Forma Condensed Consolidated Financial Information			127
Management’s Discussion and Analysis of Financial Condition and Results of Operations			137
Business			173
Management			202
Executive Compensation			208
Certain Relationships and Related Party Transactions			213
Principal and Registered Stockholders			222
Description of Capital Stock			226
Shares Eligible for Future Sale			235
Sale Price History of Our Capital Stock			238
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders of Our Series A Common Stock			239
Plan of Distribution			244
Legal Matters			246
Experts			246
Where You Can Find More Information			247
Index To Consolidated Financial Statements			F-1

You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission (the “SEC”). Neither we nor any of the Registered Stockholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared or that have been prepared on our behalf or to which we have referred you. Neither we nor any of the Registered Stockholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The Registered Stockholders are offering to sell, and seeking offers to buy, shares of their Series A common stock, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date, regardless of the time of delivery of this prospectus or of any sale of our Series A common stock. Our business, financial condition, and results of operations may have changed since such date.

Through and including     , 2024 (the 25th day after the listing date of our Series A common stock), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. For investors outside the United States: Neither we nor any of the Registered Stockholders have done anything that would permit the use or possession or distribution of this prospectus or any related free writing prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the listing of the shares of our Series A common stock by the Registered Stockholders and the distribution of this prospectus outside the United States.

Use of Non-GAAP Financial Measures

In addition to results of operations determined in accordance with general accounting principles in the United States (“GAAP”), we believe that Adjusted EBITDA, which is a non-GAAP financial measure, is useful in evaluating our operational and financial performance. We use this non-GAAP financial measure to evaluate our ongoing operations and for internal planning, budgeting and forecasting purposes. We believe that non-GAAP financial information may be helpful to investors in assessing our operating performance and comparing our performance with competitors and other comparable companies, which may present similar non-GAAP financial measures to investors. Our non-GAAP measure has limitations as an analytical tool and should not be considered in isolation, or as an alternative to, or a substitute for our GAAP measures. Adjusted EBITDA is defined as net loss, adjusted for depreciation and amortization, interest expense, income tax benefit, unit-based compensation expenses transaction-related costs, discontinued operations, (gain) loss on remeasurement of warrant liabilities, loss on measurement of commercial milestone payments and non-recurring litigation expense. Some of these limitations include that our computation of this non-GAAP measure may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate these measures in the same fashion. We endeavor to compensate for the limitation of the non-GAAP measure presented by also providing the most directly comparable GAAP measure and a description of the reconciling items and adjustments to derive the non-GAAP measure.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures” for a reconciliation of Adjusted EBITDA to net loss.

Trademarks and Brand Names

This prospectus includes our trademarks and trade and brand names such as “Triller,” “Triller Fight Club,” “TrillerFest,” “Verzuz” and “TrillerTV” and associated logos, which are protected under applicable intellectual property laws and are our property. This prospectus may also contain trademarks, trade names, and service marks of other companies, or other names of third parties, which are the property of their respective owners. Solely for convenience, trademarks, trade names, and service marks referred to in this prospectus may appear without the ^®, ^™ or SM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted under applicable law, our rights or the right of the applicable licensor to these trademarks, trade names and service marks. We do not intend our use or display of other parties’ trademarks, trade names or service marks, or other names to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.

Market and Industry Data

This prospectus includes estimates regarding market and industry data that we prepared based on our management’s estimates, together with information obtained from independent industry and research organizations, publicly available resources and other third-party sources. Our management’s estimates are derived from publicly available information released by independent industry analysts and certain third-party studies, as well as data from our internal research. Although we are responsible for all of the disclosure contained in this prospectus, and we believe the market position, market opportunity, market size, and other information included in this prospectus is based on reliable sources, such information is inherently imprecise and the industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors.

Projections, assumptions and estimates of the present or future, as applicable, performance of the industry in which we operate and our future performance are necessarily subject to uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by our management.

 

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ABOUT THIS PROSPECTUS

Triller Corp., the registrant whose name appears on the cover of this registration statement of which this prospectus forms a part, is a Delaware corporation. Triller Corp. was formed for the purpose of completing a direct listing. All of our business operations to date have been conducted through Triller Hold Co LLC and its consolidated subsidiaries. In connection with this listing, Triller Hold Co LLC will be merged with and into a wholly-owned subsidiary of Triller Corp. through a series of reorganizational transactions that are described under “The Reorganization” (collectively, the “Reorganization”).

This prospectus is a part of a registration statement on Form S-1 that we filed with the SEC using a “shelf” registration or continuous offering process. Under this shelf process, the Registered Stockholders may, from time to time, sell share of Series A common stock covered by this prospectus in the manner described in the section titled “Plan of Distribution.” Additionally, we may provide a prospectus supplement to add information to, or update or change information contained in, this prospectus, including the section titled “Plan of Distribution.” You may obtain this information without charge by following the instructions under the section titled “Where You Can Find More Information” appearing elsewhere in this prospectus. You should read this prospectus and any prospectus supplement before deciding to invest in our Series A common stock.

Except as otherwise indicated, all information in this prospectus assumes the consummation of the following transactions, which we refer to within this prospectus as the “Listing-related Transactions”:

 

•

prior to the consummation of the Reorganization, the receipt by Triller Hold Co LLC of additional advances totaling $17.2 million under a 7.5% PIK convertible promissory note issued to Capital Truth Holdings, Ltd. in the aggregate principal amount of up to $30 million and warrants to purchase 4,231,311 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of a 7.5% PIK convertible promissory note in the aggregate principal amount of $27.5 million and warrants to purchase 3,526,093 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01 to Sabeera Triller 1 LLC;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of a 7.5% PIK convertible promissory note in the aggregate principal amount of $0.1 million and warrants to purchase 9,076 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01 to Sabeera Triller 2 LLC;

 

•

prior to the consummation of the Reorganization, the cancellation of each promissory note and redemption of Series AA-1 preferred units held by an investor in exchange for 7.5% PIK convertible promissory notes in the aggregate principal amount of $15.8 million and warrants to purchase 2,418,898 Class B common units with a weighted average exercise price of $0.01;

 

•

prior to the consummation of the Reorganization, the conversion of convertible promissory notes with an aggregate balance of $150.6 million, including the aforementioned issuances, into 17,330,922 Class B common units of Triller Hold Co LLC, which is a condition to the consummation of the Reorganization;

 

•

prior to the consummation of the Reorganization, the cashless “net” exercise of 11,635,868 outstanding warrants to purchase Class A common units of Triller Hold Co LLC resulting in the issuance of 10,471,392 Class A common units of Triller Hold Co LLC and 132,508,279 outstanding warrants to purchase Class B common units of Triller Hold Co LLC resulting in the issuance of 73,185,601 Class B common units of Triller Hold Co LLC, all of which is a condition to the consummation of the Reorganization;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of 398,147 Series AA-1 preferred units, pursuant to agreements entered into between Triller Hold Co LLC and the recipients of such units;

 

ii

•

prior to the consummation of the Reorganization, and prior to the effectiveness of the registration statement of which this prospectus forms a part the issuance by Triller Hold Co LLC of 3,000,000 Class B common units, pursuant to agreements entered into between Triller Hold Co LLC and the recipients of such units;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of 155,146 Class B common units to an investor upon an exercise of warrants at an exercise price of $0.01;

 

•

the consummation of the Reorganization, in which:

 

•

prior to the effectiveness of the listing of the Company’s Series A common stock on the NYSE, Triller Reorg Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, will merge with and into Triller Hold Co LLC, with Triller Hold Co LLC surviving the merger as a direct, wholly owned subsidiary of the Company;

 

•

the Company’s certificate of incorporation will be amended and restated to, among other things, authorize one class of common stock consisting of two series, Series A common stock and Series B common stock, and one series of preferred stock, Series A-1, having the terms and rights described in “Description of Capital Stock”;

 

•

each common and preferred unit of Triller Hold Co LLC outstanding as of immediately prior to the closing will be canceled and converted the right to receive into one share of common stock or preferred stock of Triller Corp., with Series A-1 preferred units being converted into the right to receive shares of Series A-1 preferred stock, Series AA-1 preferred units, Class A common units, Class B common units, restricted Class B common units and Class C-1 common units being converted into the right to receive shares of Series A common stock and Class C-2 common units being converted into shares of Series B common stock;

 

•

all issued and outstanding service provider units of Triller Hold Co LLC will be canceled and converted into the right to receive 9,740,879 shares of Series A common stock; and

 

•

options to purchase 10,807,859 Class B Common units of Triller Hold Co LLC with a weighted average exercise price per unit of $8.02 will be assumed by the Company and converted into options to purchase 10,807,859 shares of Series A common stock with a weighted average exercise price per share of $8.02.

In addition, the information in this prospectus assumes transaction costs associated with this listing in the amount of $9.5 million.

The numbers of shares of outstanding capital stock after the Reorganization excludes:

 

•

warrants to be issued to our financial advisor, Clear Street LLC, to purchase shares of our Series A common stock at an exercise price equal to the closing bid price of our Series A common stock on the date our Series A common stock commences trading on the NYSE, which such warrants shall have an aggregate value at the time of issuance equal $2.0 million;

 

•

warrants, which may be issued by us in our sole discretion to our financial advisor, Clear Street LLC, to purchase shares of our Series A common stock at an exercise price equal to the closing bid price of our Series A common stock on the date our Series A common stock commences trading on the NYSE, which such warrants have an aggregate value of $0.5 million, at the time of issuance;

 

•

8,016,368 shares of Series A common stock issuable to Total Formation, Inc. and its affiliates that may be issued upon the exercise of warrants with a weighted average exercise price of $2.11 per share;

 

•

37,702,230 shares of Series A common stock issuable upon conversion of issued and outstanding or reserved shares of Series A-1 preferred stock, which will remain outstanding following the

 

iii

completion of the reorganization and this listing (based on an assumed conversion price of $2.72) which conversion prices may be adjusted as described under “Description of Capital Stock—Preferred Stock”;

 

•

120,000,000 shares of Series A common stock reserved for issuance pursuant to 10,807,859 outstanding stock options with a weighted average exercise price per share of $8.02 and future awards that may be granted pursuant to our 2024 Plan (as defined herein);

 

•

shares of our Series A common stock available for future issuance under our 2024 Plan, as well as any future increases, including annual automatic evergreen increases, in the number of shares of Series A common stock reserved for issuance thereunder in accordance with the terms of such plan; and

 

•

shares of Series A common stock that may be issued to existing shareholders pursuant to antidilution clauses in certain of the Company’s agreements previously entered into for business acquisitions and subscription agreements for the sale of common units.

As used in this prospectus, unless the context requires otherwise, “we,” “us,” “our,” the “Company,” “Triller,” and similar references refer, prior to the Reorganization, to Triller Hold Co LLC together with its consolidated subsidiaries, and from and after the Reorganization, to Triller Corp. together with its consolidated subsidiaries.

Except as disclosed in the prospectus, the consolidated financial statements and summary historical consolidated financial data and other historical financial information included in this prospectus are those of Triller Hold Co LLC and its subsidiaries and do not give effect to the Reorganization.

 

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RISK FACTORS

Investing in our Series A common stock involves a high degree of risk. Before deciding to invest in our Series A common stock, you should carefully consider the risks and uncertainties described below, together with all of the other information in this prospectus, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The occurrence of any of the events described below could harm our business, operating results and financial condition. In such an event, the market price of our Series A common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business, operating results and financial condition. See “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Our Business

We have a limited operating history and experience fluctuations in our results of operations due to the nature of our business and a number of factors, which makes it difficult to forecast our revenue and evaluate our business and future prospects.

Our ability to forecast our future results of operations and plan for and model future growth is limited. We have a limited operating history which makes it difficult to predict our results of operations. In addition, our results of operations may fluctuate from quarter to quarter as a result of the nature of our business and a number of factors, many of which are outside of our control and may be difficult to predict. For example, we host Events under our BKFC offerings which may lead to outsized revenue for one quarter compared to other quarters. Some additional factors that affect our results include, but are not limited to:

 

•

the level of demand for our Technology Platform and Events;

 

•

our ability to retain existing or add new Creators and Brands;

 

•

our ability to successfully integrate companies and assets we have acquired and in the future may acquire into our business;

 

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the timing and success of new features, integrations, capabilities and enhancements by us to our products or by our competitors to their products;

 

•

changes in the competitive landscape of our market;

 

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our ability to achieve widespread acceptance and use of our Technology Platform;

 

•

errors in our forecasting of the demand for our Triller app, Technology Platform offerings and Events, which could lead to lower revenue, increased costs or both;

 

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the amount and timing of operating expenses and capital expenditures, as well as entry into operating leases, that we may incur to maintain and expand our business and operations and to remain competitive;

 

•

the timing of expenses and recognition of revenue;

 

•

security breaches, technical difficulties or interruptions to our Technology Platform resulting in service level agreement credits;

 

•

adverse litigation judgments, other dispute-related settlement payments or other litigation-related costs;

 

•

regulatory fines;

 

•

changes in, and continuing uncertainty in relation to, the legislative or regulatory environment;

 

•

legal and regulatory compliance costs in new and existing markets;

 

•

the number of new employees added and employee turnover;

 

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•

the timing of the grant or vesting or settlement of equity awards to employees, directors or consultants;

 

•

the timing of the conversion of our outstanding convertible securities or when our outstanding debt may become due or payable;

 

•

the availability of content for licensing for use by Creators on our Technology Platform;

 

•

pricing pressure as a result of competition or otherwise;

 

•

costs and timing of expenses related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs; and

 

•

general economic conditions in either domestic or international markets, including geopolitical uncertainty and instability.

Any one or more of the factors above may result in significant fluctuations in our quarterly results of operations. You should not rely on our past results as an indicator of our future performance. The variability and unpredictability of our quarterly results of operations or other operating metrics could result in our failure to meet our expectations or those of analysts that cover us or investors with respect to revenue or other key metrics for a particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our Series A common stock could fall, and we could face costly lawsuits, including securities class action suits.

In addition, there has been historically a high failure rate among early-stage companies. Early-stage companies face a number of risks, including, among others, the ability to effectively implement a growth strategy, counter and respond to actions by competitors, maintain adequate control of expenses and achieve market acceptance. Our future performance will depend upon a number of factors, including our ability to successfully implement, launch, and achieve market acceptance of our Technology Platform and offerings to anticipate and manage the risks associated therewith. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries, such as the risks and uncertainties described herein. We cannot assure you that we will successfully address any of these factors, and our failure to do so could have a material adverse effect on our business, financial condition, results of operations and future prospects.

Our historical annual revenue growth may not be indicative of our future revenue growth. Our historical revenue growth also makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

Our revenue was $47.7 million and $26.4 million for the fiscal years ended December 31, 2022 and 2021, respectively, and $33.6 million and $35.0 million for the nine months ended September 30, 2023 and September 30, 2022, respectively. You should not rely on our historical annual revenue as an indication of our future performance. Our annual revenue growth rate may decline in the future as a result of a variety of factors, including the maturation of our business. Overall growth of our revenue depends on several factors, including:

 

•

changes in our industry landscape, including changes in regulations and the actions of competitors and changes in consumer preferences and behaviors;

 

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the strength of our Technology Platform, including our suite of Creator offerings and our Events and event-related services;

 

•

our ability to identify attractive opportunities to enhance existing businesses or grow our portfolio of assets;

 

•

macroeconomic conditions, including changes in corporate spending and discretionary consumer spending;

 

•

our ability to produce and/or distribute premier events throughout the year, including our BKFC Events and TrillerTV programming; and

 

•

our ability to invest in growth while driving long-term profitability.

 

28

We may not successfully accomplish any of these objectives, or such changes may not be favorable to us, and, as a result, it is difficult for us to forecast our future results of operations. If the assumptions that we use to plan our business are incorrect or change in reaction to changes in our market, or if we are unable to maintain revenue growth, our stock price could be volatile, it may be difficult to achieve and maintain profitability, and our business, financial condition and results of operations may be adversely affected. The adverse effect on our results of operations resulting from a failure to achieve our revenue expectations may be particularly acute because of the significant research, development, marketing, sales and other expenses we expect to incur.

We have incurred losses each year since our inception, we expect our operating expenses to increase, and we may not become profitable in the future.

We have incurred losses each year since our inception, including $131.2 million in the nine months period ended September 30, 2023 and $143.5 million for the fiscal year ended December 31, 2022. In addition, as of September 30, 2023, we had cash and cash equivalents of $1.0 million, a working capital deficit of $235.2 million, and an accumulated deficit of $1,388.6 million. Moreover, our operating expenses have generally increased over time and we are subject to outstanding litigation which may result in additional costs. For example, judgment has been entered against us following litigation with Universal Music Publishing Group in connection with a payment dispute, and with other parties, and we are obligated to make settlement payments which may have a material impact on our financial condition and results of operations. See “Business—Legal Proceedings” for additional information. We have also previously been behind in paying rent on our lease obligations. Although we have reduced our operating expenses in recent periods to conserve cash, as we resume our focus on expanding our business, entering industry verticals, and expanding the breadth of our operations, upgrading our infrastructure, hiring additional employees, expanding into new markets and investing in research and development and sales and marketing, including expanding our sales organization, leasing more real estate to accommodate our anticipated future growth, and incurring costs associated with general administration, including expenses related to being a public company, and potential settlement and earnout payment obligations, we expect that our costs of revenue and operating expenses will continue to increase for the foreseeable future. Earnout payments include the obligation to issue approximately $8.0 million of our Series B common stock if certain of our subsidiaries achieve specified earnout thresholds relating to revenue. The key factors affecting our businesses include:

 

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our ability to grow our revenue in future periods, despite recent period-over-period declines;

 

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our ability to attract and retain Brands, Creators and users and maintain their satisfaction;

 

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the pace of rolling out new offerings or updating existing ones by us or our competitors;

 

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the amount and timing of operating costs and capital expenditures relating to our business operations and expansion;

 

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seasonal trends in internet or social media platforms use;

 

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our ability to maintain marketplace recognition of the brand and our offerings such as BKFC and TrillerTV, and to capitalize on our recent offerings;

 

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our ability to successfully integrate past and future acquisitions;

 

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global market and economic conditions, unemployment levels, fuel prices, interest rates, changes in tax rates and tax laws that impact companies or individuals and inflation;

 

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our use of stock-based compensation;

 

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our ability to sustain our growth and expand globally;

 

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price competition in the industry; and

 

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regulatory and other risks associated from our operations in the U.S. and abroad.

To the extent we are successful in increasing our Brand, Creator and user base, we may also incur increased losses because the costs associated with acquiring and growing a user base and with research and development

 

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are generally incurred upfront, while our revenues derived from monetizing that consumer base may occur over a longer period of time. We may not be able to increase our revenue at a rate sufficient to offset increases in our costs of revenue and operating expenses in the near term or at all, which would prevent us from achieving or maintaining profitability. Any failure by us to achieve, and then sustain or increase, profitability on a consistent basis could adversely affect our business, financial condition and results of operations.

We have an unproven and evolving business model and can provide no assurance that we will generate significant revenues or operating profit.

Our current business model is unproven and evolving and the scale and profit potential, if any, is unknown at this time. Our management has spent significant time developing and refining our business model in an effort to increase revenue and gain market share. For example, in 2022, we refocused our business model in an effort to refine the ways in which we generate revenue, as we determined that, at that time, the Triller app would not be a revenue generating business model. We intend to further refine our revenue model, including through our plan to implement a program designed to utilize the Triller App in a manner that allows us to monetize our existing user base and through a proposed launch of a sales and marketing program, among others. To date our efforts to create a profitable business model have not succeeded and there is no guarantee that we will achieve scale or profitability. We are subject to all of the risks inherent in the creation of a new business. Our ability to achieve scale and profitability is dependent, among other things, the success of our refocus of our business in 2022 and recent proposed changes to our revenue model, our ability to retain or add new users, Creators and Brands to our Technology Platform, our ability to gain acceptance of our Technology Platform and on our ability to successfully integrate companies we have acquired and in the future may acquire into our business.

We may not be able to generate sufficient cash flow to meet our current and any future debt service and other obligations, including amounts owed pursuant to new and ongoing litigation matters, due to future events and events beyond our control.

Our ability to generate cash flows from operations, to make payments on or refinance our current debt or any potential future indebtedness and to fund working capital needs and planned capital expenditures will depend on our future financial performance and our ability to generate cash and access capital in the future. While our independent public accountant has concluded that there is not a substantial doubt about our ability to continue as a going concern within one year after the balance sheet date, this analysis was based on a number of assumptions that may prove to be incorrect. Our ability to continue to operate our business without substantial doubt regarding our ability to operate as a going concern depends on these assumptions proving to be correct and there can be no assurances that our accountants will not conclude that we will be able to continue to operate our business without substantial doubt regarding our ability to operate as a going concern in the future. The analysis also assumes sufficient liquidity of counterparties to various financing arrangements and our ability to draw on these arrangements in the future. For example, we have entered into Subscription Agreements, dated April 7, 2023, as amended, with each of Sabeera Triller 1 LLC and Sabeera Triller 2 LLC pursuant to which we are entitled to draw down from time to time, at our option and in our sole discretion, up to a maximum aggregate amount of $200.0 million of gross proceeds in exchange for 7.5% PIK convertible notes in the aggregate principal amounts equal to 110% of the sum of all draws and 100% of the sum of all draws, respectively. We anticipate utilizing approximately $25.0 million available to us under the Sabeera Convertible Promissory Notes. The convertible notes will mature 180 days after their respective initial issuances, at which point we would be required to issue securities in settlement of the notes. As of the date of this prospectus we have utilized $0.7 million of the amounts available to us under these Sabeera facilities. We have also entered into Standby Equity Purchase Agreement (the “SEPA”) with YA II PN LTD. (“Yorkville”), whereby, we can sell shares of our Series A common stock in an aggregate amount up to $500.0 million, subject to certain conditions being met, within 36 months from the date of our listing on NYSE.

Our future financial performance and access to capital will be affected by a range of economic, financial, competitive, business, and other factors that we cannot control, such as general economic, legislative, regulatory and financial conditions in our industry, the economy generally, interest rates, inflation, and other risks described in this Risk Factors section that may affect our business and results of operations. A significant reduction in

 

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operating cash flows resulting from changes in economic, legislative or regulatory conditions, increased competition or other events beyond our control could increase the need for additional or alternative sources of liquidity and could have a material adverse effect on our business, financial condition, results of operations, prospects and our ability to service our current and future potential debt and other obligations. In addition, we may not be able to raise or access capital on acceptable terms in the future, if at all, and our existing agreements that provide for future capital may not be adequate to fund our future needs.

If we are unable to service our current and any future potential indebtedness or to fund our other liquidity needs, we may be forced to adopt an alternative strategy that may include actions such as further reducing our operating expenditures, including research and development and sales and marketing expenses, reducing or delaying capital expenditures, selling assets, restructuring, or refinancing such indebtedness, seeking additional equity or debt capital, which may not be available on favorable terms or at all, or any combination of the foregoing, which may be onerous or highly dilutive. Reducing or delaying capital expenditures or selling assets could delay future cash flows. Additionally, if we raise debt, it would increase our interest expense, leverage and operating and financial costs. We cannot assure you that any of these alternative strategies could be affected on satisfactory terms, if at all, or that they would yield sufficient funds to make required payments on future potential indebtedness or to fund our other liquidity needs. In addition, the terms of future debt agreements may restrict us from adopting any of these alternatives. We cannot assure you that our business will generate sufficient cash flows from operations or that future borrowings or capital raises will be available in an amount sufficient to enable us to pay such future potential indebtedness or to fund our other liquidity needs. In addition, under the terms of the Second Settlement and Payment Agreement, dated September 22, 2022, with the founders of Verzuz, we agreed in connection with the issuance of the 7.5% convertible promissory notes that at least 25% of the net proceeds (after the deduction of reasonable and customary expenses, which shall not exceed 8% of gross proceeds) of each of our completed capital raising transactions will be paid to the Verzuz founders. Although the executed Second Settlement and Payment Agreement contemplates that the obligation to pay Verzuz 25% of capital raised applies to all capital raised, we believe the agreement was intended to cover equity capital raises only and, as a result, do not believe we have triggered the obligation to pay any amounts to Verzuz based on the debt capital we have raised since the execution of the Second Settlement and Payment Agreement. We are also obligated to make payments to Sony Music Entertainment pursuant to the Confidential Settlement Agreement dated July 21, 2023. See “Business—Legal Proceedings.” Our ability to raise additional funding, whether or not secured, could be limited in the future by a number of other factors, including, but not limited to, whether we are able to comply with applicable covenants governing our outstanding indebtedness, the strength of the financial markets, global market conditions such as inflationary pressures and interest rate fluctuations, our recovery and financial performance, the recovery and performance of our industry in general and the size, scope and timing of our financial needs. For further information, please read “Management’s Discussion and Analysis of Financial Condition and Results of Solutions—Results of Operations—Liquidity and capital resources” for additional information.

If for any reason we are unable to meet our current or future potential debt service and repayment obligations, we may be in default under the terms of the agreements governing such indebtedness, repayment, settlement and other obligations, which could allow our creditors at that time to declare such outstanding indebtedness or obligations to be due and payable. For example, we provided a continuing collateral interest in certain assets and future share purchase or similar agreements that we have entered into or may enter into in the future under a Security Agreement with Total Formation Inc. (“Total Formation”), dated December 31, 2022 (the “Security Agreement”). Pursuant to the Security Agreement, our lenders could compel us to apply all of our available cash to repay our borrowings. In addition, the lenders under our secured indebtedness could seek to foreclose on their collateral. Certain of our obligations include cross-default provisions, such that failure to make required payments or comply with other covenants in our agreements accelerate repayment of certain other obligations. If the amounts outstanding under such indebtedness were to be accelerated, or were the subject of foreclosure actions, our assets may not be sufficient to repay in full the money owed to the lenders or to our other debt holders or we may be unable to arrange for additional financing to repay our indebtedness or to make any accelerated payments which would materially harm our financial condition and liquidity.

 

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We have various financial obligations which have come due in the past six months and are coming due over the next twelve months and we may not be able to meet our cash obligations as those amounts come due.

As further detailed in our financial statements and elsewhere in this prospectus, we have various convertible financial obligations which have come due in the past six months and are coming due over the next twelve months, pursuant to which the holders thereof have the option to convert such obligations into equity securities of our company or be paid in cash at maturity. In the event these holders do not choose to convert such obligations into equity securities in our company and instead elect to receive cash in lieu of shares, we may not have sufficient cash on hand to satisfy these obligations or may be unable to meet our cash obligations as they become due, which would materially harm our financial condition and liquidity as well as our reputation.

We have a substantial amount of indebtedness, which could adversely affect its business, and we cannot be certain that additional financing will be available on reasonable terms when required, or at all.

As of September 30, 2023, we had an aggregate of $128.6 million of outstanding indebtedness, including $79.9 million of convertible note indebtedness, with the ability to borrow approximately $207.7 million more pursuant to the Sabeera 1 Note and Sabeera 2 Note (together, the “Sabeera Convertible Promissory Notes”) and Capital Truth Holdings, Ltd. note. Since September 30, 2023, we have utilized approximately $0.7 million available under the Sabeera Convertible Promissory Notes and borrowed approximately $14.9 million pursuant to certain debt arrangements. We anticipate utilizing approximately $25.0 million available to us under the Sabeera Convertible Promissory Notes.

If we cannot generate sufficient cash flow from operations to service this debt, or if we are unable to receive consent of the holders to convert their debt into equity, we may need to refinance this debt, dispose of assets or issue equity to obtain necessary funds.

This substantial amount of indebtedness could:

 

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require us to dedicate a substantial portion of its cash flow from operations to payments on its indebtedness, thereby reducing funds available for working capital, capital expenditures or other purposes;

 

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require us to refinance in order to accommodate the maturity of the term loans;

 

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increase our vulnerability to adverse economic and industry conditions, which could lead to a downgrade in its credit rating and may place it at a disadvantage compared to competitors who may have proportionally less indebtedness;

 

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increase our cost of borrowing and cause it to incur substantial fees from time to time in connection with debt amendments or refinancings; and

 

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limit our ability to obtain necessary additional financing for working capital, capital expenditures or other purposes in the future, plan for or react to changes in its business and the industries in which it operates, make future acquisitions or pursue other business opportunities, and react in an extended economic downturn.

Despite this substantial indebtedness, we may still have the ability to incur significantly more debt. The incurrence of additional debt could increase the risks associated with this substantial leverage, including our ability to service this indebtedness. The Federal Reserve has recently raised, and may in the future further raise, interest rates to combat the effects of recent high inflation. Increases in these rates may increase our interest expense. Although this increase did not materially impact our operations and business, further increases in interest rates and our interest expense may impact our ability to service its indebtedness, increase borrowing costs in the future and reduce our funds available for operations and other purposes. For further information, please read “Management Discussion and Analysis—Results of Operations—Interest Expense”.

The loss of a large customer could have an adverse effect on our business.

As of December 31, 2021, we had two customers that each comprised over 10% of consolidated accounts receivable, and collectively, comprised approximately 23.6% of consolidated accounts receivable. During the years

 

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ended December 31, 2022 and 2021, we had a single customer, All Elite Wrestling, a customer of TrillerTV, which accounted for approximately 16% and 17% of our consolidated revenue, respectively. Pursuant to our distribution agreement with AEW, TrillerTV holds a non-exclusive, non transferable right to distribute certain audiovisual programs that are owned or controlled by AEW on TrillerTV’s distribution platform within the US and UK. In consideration for such rights and pursuant to our distribution agreement, TrillerTV pays AEW a fixed percentage of all net revenues generated through the distribution of such media (which usually occur through pay-per-view sales). In addition, the distribution agreement grants TrillerTV the right to distribute and sell certain of AEW’s branded wrestling programs as a monthly subscription service via our distribution platforms outside of the United States, United Kingdom and other territories in return for a fixed percentage of all revenue collected by TrillerTV in connection therewith. The distribution agreement automatically renews for successive one year periods and may be terminated by either party upon the delivery of 30 days’ notice.

We manage our exposure to credit risk by performing ongoing evaluation of our customers’ credit worthiness and the amount of credit extended to them. Customers of this size may divert management’s attention from other operational matters and pull resources from other areas of the business, resulting in potential loss of revenue from other customers. The loss of, or significant curtailment of purchases by, any one or more of our larger customers could have a material adverse effect on our operating results.

Non-compliance with the objective and subjective criteria for the Paycheck Protection Program (“PPP”) loan could have a material adverse effect on our business.

On April 10, 2020, Triller Inc. received a PPP Loan from First Choice Bank, in the aggregate amount of $1,556,000, pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The PPP Loan, which was in the form of a note dated April 10, 2020 issued by First Choice Bank, which matured on April 13, 2022, and bore interest at a rate of 1% per annum, payable monthly commencing on the fifth calendar day of the seventh month following the date of first disbursement. The PPP Loan permitted prepayment by us at any time prior to maturity with no prepayment penalties. Funds from the PPP Loan could only be used for payroll costs, any payment of interest on a covered mortgage obligation, any payment on a covered rent obligation, or any covered utility incurred during the 8-week period beginning on the date of first disbursement of this loan. We used the entire PPP Loan amount for what it considered to be qualifying expenses, under the current guidance as promulgated by the Small Business Administration (the “SBA”). Under the terms of the PPP, certain amounts of the PPP Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The PPP Loan was forgiven by the First Choice Bank on July 28, 2021, but is currently being reviewed by the SBA. On January 11, 2024, we received a request for a production of documents and information from the SBA.

In order to apply for the PPP Loan, we were required to certify, among other things, that the current economic uncertainty made the PPP Loan request necessary to support our ongoing operations. If the SBA determines that we were ineligible to receive the PPP Loan or determines that we did not comply with requirements after receiving the PPP Loan, we may be required to repay the PPP Loan in its entirety and/or be subject to additional penalties and adverse publicity, which could have a material adverse effect on our business, results of operations, and financial condition.

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

As of September 30, 2023, we had goodwill of $234.1 million. A significant decline in our expected future cash flows, a significant adverse change in the business climate, slower economic growth or a significant and sustained decline in the price of our common stock, any or all of which could be materially impacted by many of the risk factors discussed herein, may necessitate our taking charges in the future related to the impairment of our goodwill. Future regulatory actions could also have a material impact on assessments of goodwill for impairment. If we were to conclude that a future write-down of our goodwill is necessary, we would record the appropriate charge, which could have a material adverse effect on our results of operations. We review our goodwill for impairment annually and at any time upon the occurrence of certain events or substantive changes in

 

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circumstances that indicate the carrying amount of goodwill may not be recoverable. If such goodwill or intangible assets are deemed to be impaired, an impairment loss equal to the amount by which the carrying amount exceeds the fair value of the assets would be recognized. Any impacts to our business, including macroeconomic conditions such as rising interest rates and fluctuations in markets, could result in impairments and significant charges to earnings.

We are not in compliance with the payment obligations of a significant number of our significant music licensing agreements and agreements with other vendors and counterparties.

We are not in compliance with the payment obligations of a significant number of our contracts with certain of our counterparties, including with respect to our music licenses, as a result of our inability to make certain fee payments required pursuant to such agreements or our failure to make such payments on time. In addition to being behind on payments to music licensing counterparties, we are overdue on payments to other parties and vendors, including but not limited to those providing us with engineering, marketing and legal services. As of September 30, 2023, these outstanding music licensing related payment obligations were $23.6 million. These amounts currently exceed our cash balance and we currently have obligations, such as the obligations pursuant to the Verzuz settlement agreement, that could impact our ability to obtain financing in the future. If we are not able to obtain sufficient financing to satisfy these obligations we may be unable to pay our obligations when they come due. We also have payments due to certain of our landlords at our rented facilities. This may further affect our ability to remain solvent and pay our obligations when they come due, including under existing litigation settlement obligations and new adverse judgments.

While we are currently working with our partners and counterparties and/or negotiating the terms of these various agreements, if we are unsuccessful in renegotiating these agreements or receiving waivers of the due date of payments required thereunder, our partners and vendors could terminate these agreements and require us to make these fee payments in their entirety. Further, if our music licensing partners terminate our agreements, we will also lose the right to include their content on our platform. Such counterparties have in the past and may in the future look to file litigation against us seeking such overdue payment, which could have an adverse effect on our business, financial condition, and results of operations.

We will require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

We have historically funded our operations through equity and convertible debt financings. We do not know when, or if, our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support our business, which we expect to require us to engage in equity and/or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to support our operations or invest in future growth opportunities, which could materially adversely affect our business, financial condition and results of operations.

In addition, adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, could adversely affect our business, financial condition and results of operations and we may not be able to access a portion of our existing cash, cash equivalents and investments due to market conditions. For example, on March 10, 2023, the Federal Deposit Insurance Corporation (“FDIC”), took control and was appointed receiver of Silicon Valley Bank (“SVB”). Similarly, on March 12, 2023, Signature Bank and Silvergate Capital Corp. were each swept into receivership. If the financial institutions with which we do business enter receivership or become insolvent in the future, there is no guarantee that we would be able to access our existing cash, cash equivalents and investments, that we would be able to maintain any required letters of credit or other credit support arrangements, or that we would be able to adequately fund our business for a prolonged period of time or at all, any of which could have a material adverse effect on our current and/or projected business operations and results of operations and financial condition.

 

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Inflation and rapid increases in interest rates have led to a decline in the trading value of previously issued government securities with interest rates below current market interest rates. Although the U.S. Department of Treasury, FDIC and Federal Reserve Board have announced a program to provide up to $25 billion of loans to financial institutions secured by certain of such government securities held by financial institutions to mitigate the risk of potential losses on the sale of such instruments, widespread demands for customer withdrawals or other liquidity needs of financial institutions for immediate liquidity may exceed the capacity of such program. Additionally, there is no guarantee that the U.S. Department of Treasury, FDIC and Federal Reserve Board will provide access to uninsured funds in the future in the event of the closure of other banks or financial institutions, or that they would do so in a timely fashion.

If we seek to raise equity or debt, we may have to seek consent of Total Formation. For so long as the convertible note issued to Total Formation (the “Total Formation Convertible Note”) is outstanding, under the terms of the Convertible Note Purchase Agreement, dated August 18, 2022 between us and Total Formation Inc., we are subject to various restrictive covenants, including the requirement to seek the prior consent of Total Formation in the event we, among other things, (i) make or permit any subsidiary to make any loan or advance in an aggregate principal amount in excess of $1,000,000 other than advances consistent with past practice to any company subsidiary or in the ordinary course of business; (ii) directly or indirectly create, incur, issue, assume, guarantee, suffer to exist or otherwise become directly or indirectly liable for any indebtedness subject to certain other exceptions and the requirement to notify Total Formation; (iii) directly or indirectly, create, incur, assume or suffer to exist any lien upon any property or assets of any kind; (iv) guarantee, directly or indirectly, or permit any subsidiary to guarantee, directly or indirectly, any indebtedness except for trade accounts arising in the ordinary course of business; (v) amend, alter or repeal any provision of our organizational documents in certain circumstances; and (vi) sell, issue or dispose of any equity interests in any of our subsidiaries subject to certain exceptions. We expect Total Formation to have similar rights for so long as they hold shares of our Series A-1 preferred stock.

If we incur debt, the debt holders would have rights senior to holders of Series A common stock to make claims on our assets, and the cost and terms of any debt could restrict our operations. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of equity and/or debt securities. As a result, our stockholders bear the risk of future issuances of equity and/or debt securities reducing the value of our Series A common stock and diluting their interests.

Our decision to issue securities or raise financing in the future will depend on numerous considerations, including factors beyond our control, and as a result we cannot predict or estimate the amount, timing or nature of any future issuances of debt or equity securities. In addition, if we incur additional financing or indebtedness it may result in dilution to shareholders, imposition of debt covenants and repayment obligations, or other restrictions that may adversely affect our business.

We may in the future be adversely affected by natural disasters, the physical effects of climate change, and other catastrophic events, and by man-made problems such as geo-political conflicts and events, including acts of war and terrorism, that could disrupt our business operations and adversely affect our financial condition and results of operations.

We have been, and may in the future be, adversely affected by significant natural disasters, the physical effects of climate change, or other catastrophic events, such as the COVID-19 pandemic, earthquakes, blizzards, tsunamis, hurricanes, droughts, fires, or floods, or other catastrophic events, such as terrorism, the military conflict involving Russia and Ukraine and economic sanctions imposed on Russia, extended outages of critical utilities, power loss, telecommunications failure, or any critical resource shortages affecting us, our users or partners. In the event of a natural disaster or other catastrophic event, we and our third-party providers may be unable to continue operations, may endure system interruptions, any of which could result in reputational harm, delays in development or interruptions of our Technology Platform, breaches of data security, and loss of critical data, all of which could have an adverse effect on our business, financial condition, and results of operations.

 

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In addition, although we are not directly impacted by the war between Russia and Ukraine, conflict in Ukraine has further disrupted trade, intensified problems in the global supply chain, and contributed to inflationary pressures. Financial markets around the world experienced volatility following the recent invasion of Ukraine by Russia. In response to the invasion, the United States, United Kingdom and EU, along with others, imposed significant new sanctions and export controls against Russia, Russian banks and certain Russian individuals and may implement additional sanctions or take further punitive actions in the future. The full economic and social impact of the sanctions imposed on Russia (as well as possible future punitive measures that may be implemented), as well as the counter measures imposed by Russia, in addition to the ongoing military conflict between Ukraine and Russia and related sanctions, which could conceivably expand into the surrounding region, remains uncertain; however, both the conflict and related sanctions have resulted and could continue to result in disruptions to trade, commerce, pricing stability, credit availability, supply chain continuity and reduced access to liquidity in both Europe and globally, and has introduced significant uncertainty into global markets. In particular, the ongoing Russia-Ukraine conflict and related sanctions has contributed to rapidly rising costs of living (driven largely by higher energy prices) in Europe and other advanced economies. Further, a weak or declining economy could strain our suppliers and manufacturers. As a result, our business and results of operations may be adversely affected by the ongoing conflict between Ukraine and Russia and related sanctions, particularly to the extent it escalates to involve additional countries, further economic sanctions or wider military conflict.

Generally, during times of war and other major conflicts, we, the third parties on which we rely, and our partners may be vulnerable to a heightened risk of cyberattacks, including retaliatory cyberattacks, that could seriously disrupt our business. We have experienced an increase in attempted cyberattacks on our products, systems, and networks, which we believe are related to the conflict. We may also face retaliatory attacks by governments, entities, or individuals who do not agree with our public expressions of support for Ukraine and our Ukrainian team members. Any such attack could cause disruption to our platform, systems, and networks, result in security breaches or data loss, damage our brand, or reduce demand for our services or advertising products. In addition, we may face significant costs (including legal and litigation costs) to prevent, correct, or remediate any such breaches. We may also be forced to expend additional resources monitoring our platform for evidence of disinformation or misuse in connection with the ongoing conflict.

Unfavorable macroeconomic conditions, including those caused by inflation or reductions in customers’ spending, could limit our ability to grow our business and negatively affect our results of operations.

Our business is also impacted by macroeconomic factors. General business and economic conditions that could affect our business, financial condition or results of operations include fluctuations in economic growth, debt and equity capital markets, liquidity of the global financial markets, access to our liquidity within the U.S. banking system, the availability and cost of credit, investor and consumer confidence, and the strength of the economies in which we, our manufacturers and our suppliers operate. Our products and services may be considered discretionary items for consumers. Factors affecting the level of consumer spending for such discretionary items include general economic conditions and other factors, such as consumer confidence in future economic conditions, recessionary forces, rising and fluctuating interest rates, the availability and cost of consumer credit, levels of unemployment and tax rates. In recent years, the United States and other significant economic markets have experienced cyclical downturns and worldwide economic conditions remain uncertain. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer discretionary spending also remain unpredictable and subject to reductions and, therefore, we cannot be sure the extent to which we may be affected by recessionary conditions. Unfavorable economic conditions may lead consumers to delay or reduce purchases of our products and consumer demand for our products may not grow as we expect. Our sensitivity to economic cycles and any related fluctuation in consumer demand for our products and services could materially adversely affect our business, financial condition, and results of operations. In addition, political instability or adverse political developments could harm our business, financial condition and results of operations.

In addition, market volatility, the high inflationary environment and economic uncertainty make it potentially very difficult for our customers, our Brands, Creators and us to accurately forecast and plan future business activities. During challenging economic times, Creators, Brands and users may have difficulty gaining timely access to sufficient credit or obtaining credit on reasonable terms and may face increased costs or other negative financial impacts, each of which could impair their ability to make timely payments to us and adversely affect our revenue. If that were to occur,

 

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our financial results could be harmed. Further, challenging economic conditions may impair the ability of our Creators, Brands and users partners to pay for the applications and services we offer, which may impact demand for our products. In addition, a weak or declining economy could also strain our suppliers and manufacturers, possibly resulting in supply disruption. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

Our financial performance in certain quarters and years may fluctuate and may not be indicative of, or comparable to, our financial performance in subsequent financial quarters or years due to economic conditions and operational factors.

Our business is impacted geopolitical events, the overall macro-economy, Brands’ marketing budgets and expenditures and other factors such as interest rates. For example, when Brands have higher marketing expenditures or budgets, which often correspond to broader economic factors, we benefit from these trends. In addition, we may generate less revenue during reporting periods that have fewer major public or civic engagement on social media, which would have otherwise generated marketing dollars, resulting in lower marketing spend by Brands. Our intention is to continue to diversify our client base such that any one of these factors or events would have a less significant impact on our overall revenue and operating results. If we are unsuccessful in diversifying our client base, we would continue to be subject to significant fluctuation in our annual and quarterly results, and this may materially adversely affect our business, financial condition, and results of operations.

Our recent acquisitions have caused us to grow rapidly, and we will need to continue to make changes to operate at our current size and scale. We have in the past faced and may in the future face, difficulty in integrating the operations of the businesses acquired in our recent transactions, and we may never realize the anticipated benefits and cost synergies from all of these transactions. If we are unable to manage our current operations or any future growth effectively, our business could be adversely affected.

Our recent acquisitions have caused us to grow rapidly, and we may need to continue to make changes to operate at our current size and scale. If we fail to realize the anticipated benefits and cost synergies from our recent acquisitions, or if we experience any unanticipated or unidentified effects in connection with these transactions, including write-offs of goodwill, accelerated amortization expenses of other intangible assets or any unanticipated disruptions with important third-party relationships, our business, financial condition and results of operations could be adversely affected. Moreover, our recent acquisitions involve risks and uncertainties including those associated with the integration of operations, financial reporting, technologies and personnel and the potential loss of key employees, customers or strategic partners. The integration of our acquired businesses has and will require significant time and resources. For example, we currently manually close the books across our various subsidiaries and business units, and manually consolidate and roll up such subsidiary financials into our consolidated financial statements. We do not currently utilize a consolidated ERP system to manage the closing of our books or the roll up of financials into our consolidated financials. This process creates a risk of errors, is time intensive and costly. See Risk Factors—“We have identified material weaknesses and significant deficiencies in our internal control over financial reporting. If our remediation of the material weaknesses and significant deficiencies is not effective, or if we experience additional material weaknesses or significant deficiencies in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.” We may not be able to manage the integration of acquired businesses successfully or achieve the strategic, financial or operating objectives of the acquisition or integration, any of which could adversely affect our business, results of operations or the value of our acquisitions, and these acquisitions may not be accretive to our earnings and may negatively impact our results of operations. If our operations continue to grow, we will be required, among other things, to upgrade our information systems and other processes and to obtain more space for our expanding administrative support and other personnel. Our continued growth could strain our resources, and we could experience operating difficulties, including difficulties in hiring, training and managing an increasing number of

 

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employees. These difficulties could result in the erosion of our brand image and reputation and could have an adverse effect on our business, financial condition, and operating results.

If we acquire, combine with or invest in other businesses, we will face risks inherent in such transactions.

We have in the past considered and will continue, from time to time, to consider, opportunistic strategic or transformative transactions, which could involve acquisitions, combinations or dispositions of businesses or assets, or strategic alliances or joint ventures with companies engaged in music entertainment, entertainment or other businesses. Any such combination could be material, be difficult to implement, disrupt our business or change our business profile, focus or strategy significantly.

We entered into multiple strategic alliances in the past and later recognized related impairment losses on investments and goodwill. We may incur debts in the future upon an acquisition or suffer losses related to impairment of these investments. We will continue to examine the merits, risks and feasibility of potential transactions, and expect to explore additional acquisition opportunities in the future. Such examination and exploration efforts, and any related discussions with third parties, may or may not lead to future acquisitions and investments. We may not be able to complete acquiring or investing transactions that we initiate. Our ability to grow through such acquisitions and investments will depend on many factors, including the availability of suitable acquisition candidates at an acceptable cost, our ability to reach agreement with acquisition candidates or investee companies on commercially reasonable terms, the availability of financing to complete transactions and our ability to obtain any required governmental approvals.

Any future transaction could involve numerous risks, including:

 

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potential disruption of our ongoing business and distraction of management;

 

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potential loss of Creators and Brands (e.g. musicians, athletes, and influencers);

 

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difficulty integrating the acquired businesses or segregating assets to be disposed of;

 

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exposure to unknown and/or contingent or other liabilities, including litigation arising in connection with the acquisition, disposition and/or against any businesses we may acquire;

 

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reputational or other damages to our business as a result of a failure to consummate such a transaction for, among other reasons, failure to gain antitrust approval;

 

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difficulty in realizing synergies between acquired businesses and our current businesses, including our ability to achieve the customer synergies that motivated the acquisition;

 

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acquired businesses having different users or customers than our current businesses, including resulting increased administrative burdens and need for additional personnel; and

 

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changing our business profile in ways that could have unintended consequences.

If we enter into significant transactions in the future, related accounting charges may affect our business, results of operations and financial condition, particularly in the case of any acquisitions. In addition, the financing of any significant acquisition may result in changes in our capital structure, including the incurrence of additional indebtedness, which may be substantial. Conversely, any material disposition could reduce our indebtedness or require the amendment or refinancing of our outstanding indebtedness or a portion thereof. We may not be successful in addressing these risks or any other problems encountered in connection with any strategic or transformative transactions. We cannot assure you that if we make any future acquisitions, investments, strategic alliances or joint ventures or enter into any business combination that they will be completed in a timely manner, or at all, that they will be structured or financed in a way that will enhance our creditworthiness or that they will meet our strategic objectives or otherwise be successful. We also may not be successful in implementing appropriate operational, financial and management systems and controls to achieve the benefits expected to result from these transactions. Failure to effectively manage any of these transactions could result in material increases in costs or reductions in expected revenues, or both. In addition, if any new business in which we invest or which we attempt to

 

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develop does not progress as planned, we may not recover the funds and resources we have expended and this could have a negative impact on our businesses or our company as a whole.

Investors may experience dilution pursuant to anti-dilution adjustments that may have been triggered pursuant to our existing agreements.

Certain of our agreements for business acquisitions and subscription agreements for the sale of our common units include antidilution provisions that require us to issue additional LLC units in certain circumstances, including in the event we issue shares in a subsequent financing transaction for consideration at a lower value per unit than the value the counterparty paid for their units. Through September 30, 2023, we completed certain financing transactions that may give effect to the antidilution clauses in several of our agreements. However, to date, we have not issued any additional units pending further evaluation of whether all requisite criteria were met to issue units pursuant to these antidilution provisions, including discussions with the counterparties to the contracts and approval by our Board of Directors. The number of additional LLC units that may be issued pursuant to the antidilution provisions in these agreements is not yet known at this. The issuance of any LLC units prior to the Reorganization, or the issuance of shares of our Series A common stock, subsequent to the Reorganization, pursuant to these antidilution provisions will dilute our stockholders. If we determine that we are not obligated to issue LLC units prior to the Reorganization, or shares of our Series A common stock subsequent to the Reorganization, but the counterparty disagrees with this determination, we may be subject to, and incur costs related to, litigation and disputes. Potential disputes relating to these antidilution provisions could harm our relationships with existing parties. Any of the foregoing outcomes could have a material adverse effect on our business, financial condition and results of operations, cash flows, and/or share price of our Series A common stock.

We are involved in lawsuits and other litigation matters that are expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, or results of operations.

We are involved in numerous lawsuits, many of which claim statutory damages and/or seek significant changes to our business operations, and we anticipate that we will continue to be involved in numerous lawsuits in the future. We have faced, currently face, and will continue to face additional lawsuits based on claims related to, among other things, advertising, privacy, security, content intellectual property infringement, employment or performance of services, activities on our Technology Platform, consumer protection, or product performance or other claims related to the use of consumer hardware and software, music used on our platform or related to our acquisitions. For example, we are currently the subject of various litigation proceedings, including a class action lawsuit alleging unpaid wages for production workers, a lawsuit to collect all fees due by Universal Music Publishing Group amongst other claims, a class action against one of our subsidiaries over the use of consumer personal identifying information and a lawsuit by two social media influencers claiming they are entitled to equity based on services, some of which are entering mediation and/or settlement discussions. We also received a demand letter on August 18, 2023, from Verzuz LLC asserting ownership over Verzuz copyrights and trademarks. The results of any such lawsuits, including, but not limited to those included in “Business—Legal Proceedings”, and claims cannot be predicted with certainty, and any negative outcome from any such lawsuits could result in payments of substantial monetary damages or fines, or undesirable changes to our products or business practices and harm our reputation, and accordingly our business, financial condition, or results of operations could be materially and adversely affected. See “Business—Legal Proceedings” and “Note 14—Commitments and Contingencies” of the consolidated financial statements included elsewhere in this prospectus for more information.

In addition, under the terms of the Second Settlement and Payment Agreement, dated September 22, 2022, with the founders of Verzuz, we agreed in connection with the issuance to the founders of Verzuz of the 7.5% convertible promissory notes that at least 25% of the net proceeds (after the deduction of reasonable and customary expenses, which shall not exceed 8% of gross proceeds) of each of our completed capital raising transactions will be paid to the Verzuz founders. As of the date of this prospectus, we owe approximately $37.0 million, plus interest, to the owners of Verzuz which is due and payable.

 

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There can be no assurances that a favorable final outcome will be obtained in all our cases, and defending any lawsuit is costly and can impose a significant burden on management and employees. Any litigation to which we are a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal or in payments of substantial monetary damages or fines, or we may decide to settle lawsuits on similarly unfavorable terms, which has occurred in the past and which could adversely affect our business, financial conditions, or results of operations.

Based on our cash on hand as of September 30, 2023 of $1.0 million, we do not have sufficient capital to satisfy our obligations under various settlement agreements as well as the active proceedings we are involved with. If these lawsuits are not resolved in our favor, we would not have enough cash on hand to meet these obligations unless we were able to raise additional capital in an amount sufficient to satisfy them. This may affect our ability to remain solvent and pay our obligations when they come due, including under existing litigation settlement obligations and new litigation adverse judgments.

In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because technology companies have experienced significant stock price volatility in recent years. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

Risks Related to Our Technology Platform and Features

Planned expansion of our operations into new products, services and technologies, including content categories, is inherently risky and may subject us to additional business, legal, financial and competitive risks.

We currently focus our operations on our AI powered Technology Platform, which provides content creation and distribution (Triller app, TrillerTV, Metaverz, Thuzio and Amplify.ai), fan engagement (Fangage, Julius and Amplify.ai) and targeted promotions and upsells (CrossHype) products and services across the digital platforms used by our Creators and Brands. Further expansion of our operations and our marketplace into additional products and services involves numerous risks and challenges, including potential new competition, increased capital requirements and increased marketing spend to achieve customer awareness of these new products and services. Growth into additional content, product and service areas may require changes to our existing business model and cost structure and modifications to our infrastructure and may expose us to new regulatory and legal risks, any of which may require expertise in areas in which we have little or no experience. There is no guarantee that we will be able to successfully expand our products and services into these areas.

Improper or illegal use of our Technology Platform could seriously harm our business and reputation.

We cannot be certain that the technologies that we have developed to repel spamming attacks will be able to eliminate all spam messages from our products. Spammers attempt to use our products to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make our products less user friendly. We do not currently have procedures or processes in place to accurately estimate the number of bots or spammers on our Technology Platform, but are actively working to prevent bots and spammers from engaging on our platform. Our actions to combat spam may also divert significant time and focus from improving our products. As a result of spamming activities, our users may use our products less or stop using them altogether, and result in continuing operational cost to us. We may also be subject to liability or claims related to such spamming activity. See Risk Factors—“Existing federal, state, and foreign laws regulate the senders of commercial emails and text messages and changes in privacy laws could adversely affect our ability to provide our services and could impact our results from operations or result in costs and fines.”

Similarly, terrorists, criminals, and other bad actors may use our Technology Platform to promote their goals and encourage users to engage in terror and other illegal activities. We expect that as more people use our Technology Platform, these bad actors will increasingly seek to misuse our products. Although we invest resources to combat these activities, including by suspending or terminating accounts we believe are violating our Terms of Service, we expect these bad actors will continue to seek ways to act inappropriately and illegally on our Technology Platform. Combating these bad actors requires our teams to divert significant time and focus

 

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from improving our products. In addition, we may not be able to control or stop our Technology Platform from becoming the preferred application of use by these bad actors, which may become public knowledge and seriously harm our reputation or lead to lawsuits or attention from regulators. If these activities increase on our Technology Platform, our reputation, user growth and user engagement, and operational cost structure could be seriously harmed.

We track certain performance metrics with internal tools and do not independently verify such metrics. Certain of our performance metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

We calculate Consumer Accounts using internal company data that has not been independently verified. These numbers are based on what we believe to be reasonable calculations for the applicable period of measurement, but there are inherent challenges in measuring Consumer Accounts. For example, while we endeavor to accurately capture our Consumer Accounts, from time to time certain bot and/or duplicate accounts are created and appear on our Technology Platform which may impact the number of Consumer Accounts. As a result, our reported Consumer Accounts may include bot and duplicative accounts, thereby overstating our actual Consumer Accounts. While we have recently undergone a robust process to purge as many of the duplicate and bot accounts as practical given our resources and we regularly monitor and review these figures and have put in place controls designed to prevent bot users and or duplicates, there can be no assurance that these controls will be effective in eliminating all bot or duplicate accounts. The inclusion of duplicate and/or bot accounts in the Consumer Accounts reported at any given time may lead to an inaccurate assessment of the total number of Consumer Accounts on our Technology Platform. If Creators, Brands and users do not perceive our metrics to be accurate representations, or if we discover material inaccuracies in our metrics, our reputation may be harmed and Creators, Brands and users may be less willing to utilize our Technology Platform or to allocate their budgets or resources to our products and services, which could negatively affect our business and operating results. In addition, if investors, analysts or customers do not believe our reported measures, such as Consumer Accounts, are sufficient or accurately reflect our business, we may receive negative publicity and our operating results may be adversely impacted.

If our efforts to attract Creators, users, consumers and Brands are not successful, our revenues will be adversely affected.

We generate revenue through Brands and consumers, with the majority of our revenue coming from Brands. To succeed, we must continue to attract and retain Creators, users and consumers who have traditionally engaged with internet and social media platforms such as Instagram, Snapchat and TikTok, as well as well as with video games, cable television, pay-per-view and video-on-demand services for entertainment. With additional Creators and consumers, we will attract more Brands which will improve our revenue. Our ability to attract and retain Creators and users and consumers and have them regularly engage with our Technology Platform depends in part on our ability to consistently provide our Creators, users and consumers a high-quality experience. We must also continue to attract and retain influential Creators such as celebrities, athletes, journalists, sports leagues and teams, media outlets and Brands to leverage our Technology Platform to disseminate content and interact and transact with their followers, and users and consumers. Typically, our agreements with Creators may be terminated by Creators at any time. If Creators and consumers in either category do not perceive our products to be of high quality, if we introduce new products or features that are not favorably received by them or if we fail to introduce products and features that they desire, we may not be able to attract or retain Creators and users and consumers. We also cannot guarantee that we will be able to continue to identify these Creators in the future. Additionally, throughout our history, Creators from time to time have stopped participating on our Technology Platform and in our Events for any number of reasons, and we cannot guarantee that we will be able to retain current Creators. Additionally, many of our Creators users and consumers originate from word-of-mouth and referrals from existing Creators users and consumers. If our efforts to satisfy our existing Creators, users and consumers are not successful, we may not be able to attract new Creators, users and consumers, and as a result, we may fail to attract or retain Brands and our revenue may be affected adversely.

 

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Our success depends on our ability to attract Brands to our Technology Platform and provide users and consumers with engaging content, which in part depends on Creator contributed content. If we or Creators, including influential Creators, such as celebrities, athletes, journalists, sports leagues and teams, media outlets and Brands, do not continue to contribute engaging content to our Technology Platform, our consumer growth, retention and engagement may decline. That, in turn, may impair our ability to maintain good relationships with Brands that utilize our Technology Platform or attract new Brands, which may seriously harm our business and financial performance.

Use of social media by our Creators, Brands and users may materially and adversely affect our reputation or subject us to fines or other penalties.

We integrate third-party social media platforms into our Technology Platform. For example, in addition to our own content on our website and Triller app, our Creators can share content on social-media platforms such as Facebook, Instagram, TikTok and Twitter. As laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by us, our employees, our network of Creators, our Brands, our users or third parties acting at our direction to abide by applicable laws and regulations in the use of these platforms and devices or otherwise could subject us to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on our business, financial condition and results of operations.

In addition, any use of social media for marketing may increase the burden on us to monitor compliance of such materials, and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations. For example, in some cases, the Federal Trade Commission (“FTC”) has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a material relationship between an influencer and an advertiser. While we ask Creators to comply with FTC regulations and our guidelines, we do not regularly monitor what our Creators post, and if we were held responsible for the content of their posts, we could be forced to alter our practices, which could have material adverse effect on our business, financial condition, and results of operations.

Negative commentary regarding us, our products or Creators or Brands, our users and other third parties who are affiliated with us may also be posted on social media platforms and may be adverse to our reputation or business. Creators with whom we maintain relationships could engage in behavior or use their platform to communicate directly with our users and consumers in a manner that reflects poorly on our brand and may be attributed to us or otherwise adversely affect us. It is not possible to prevent such behavior, and the precautions we take to detect this activity may not be effective in all cases. The harm may be immediate, without affording us an opportunity for redress or correction.

We may not be successful in our efforts to further monetize our Technology Platform, which may harm our business.

Our Technology Platform generates revenue through Brands and consumers, with most of our revenue generated from Brands through revenue sharing and service fee arrangements. When we enable the consumption of content by individuals in the form of Triller branded live Events, we create an ecosphere of content across our Technology Platform offerings and we also generate revenue in the form of live-event ticket sales, pay-per-view fees, subscriptions and merchandise sales. Our partnerships with high-profile Creators and Brands enable us to host live Events that receive massive viewership. As such, we are seeking to expand our relationships with Brands, our Creator and consumer base and increase the number of hours that consumers spend on our Technology Platform and the volume of content that is published across and from our Technology Platform in an effort to create additional revenue opportunities. We have made, and are continuing to make, significant investments to enable users, Brands, Creators, and advertisers to create compelling content and deliver advertising to our users.

Our ability to deliver more relevant content to our users and consumers and to increase our Technology Platform’s value to Brands and Creators depends on the collection of engagement data, which may be restricted

 

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or prevented by a number of factors. Consumers may decide to opt out or restrict some of our ability to collect personal data or to provide them with more relevant and sponsored content. Creators could refuse to allow us to collect data regarding engagement or refuse to implement mechanisms we request to ensure compliance with our legal obligations or technical requirements in some instances. If these possible scenarios occur to a large enough extent, we may not be able to achieve our expected growth in revenue or gross profit. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.

Further, we may not be successful in further monetizing our Technology Platform. Most of the revenue from our Technology Platform is generated from Brands through revenue sharing and service fee arrangements. Revenue share comes from advertising, premium content, Events, pay-per-view fees, subscription fees or merchandise sales that are transacted via our Technology Platform. As a result, our financial performance and ability to grow revenue could be seriously harmed if:

 

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we do not expand or retain our relationships with Brands and Creators;

 

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our reputation is harmed;

 

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there is a decline in our available content or a decrease in the perceived quantity, quality, usefulness or relevance of the content provided by us and our Creators;

 

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competitive developments result in our competitors possessing various competitive advantages, whether technological or otherwise;

 

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we do not adjust to changes to the industry landscape;

 

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we do not continue to invest in and strengthen our Technology Platform, including our suite of Creator offerings and our Events and Events-related services;

 

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we fail to identify attractive opportunities to enhance existing businesses or grow our portfolio of assets;

 

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we fail to continue to develop creative and entertaining programs and Events;

 

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macroeconomic conditions, including changes in corporate spending and discretionary consumer spending, divert Brand and consumer expenditures away from the markets we serve; and

 

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we fail to produce and/or distribute premier Events throughout the year, including BKFC and TrillerTV programming.

If we are unable to maintain adequate content on our Technology Platform, our business may be harmed.

We may fail to attract Creators that generate sufficient content hours on our Technology Platform and for our Brands. Our business model depends on our ability to connect our Brands with content Creators. If we are unable to grow and maintain spend from our Brands, either through revenue sharing relationships or fee sharing arrangements, our results of operations may be harmed.

We operate in a highly competitive industry, and we compete for Brands with other social media outlets and streaming services, as well as traditional media, such as radio, broadcast, cable and satellite TV and satellite and internet radio. We may not be successful in maintaining or improving the number of our Brand partners who utilize our Technology Platform for advertising, premium content, Events, pay-per-view fees, subscription fees or merchandise sales that are transacted via our Technology Platform.

Our competitors offer content and other platforms that may be more attractive to advertisers than our Technology Platform. If we are unable to increase our revenue by, among other things, continuing to improve our Technology Platform’s data to further optimize and measure our Brand partners’ campaigns, increase revenue from fee sharing arrangements or the completion of successful campaigns for our Brands, our business and our growth prospects may be harmed. We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.

 

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Our success and revenue growth are dependent on adding new Creators, users, consumers and Brands, effectively educating and training our existing Creators and Brands on how to make full use of our Technology Platform and increasing usage of our Technology Platform by our consumers.

Our success is dependent on regularly adding new Creators and Brands and increasing our consumers’ usage of our platform and we face competition from a variety of other domestic and foreign companies. We face competition from alternative providers of the entertainment, content, live Events and sports industries. Our contracts and relationships with Creators and Brands generally do not include long-term or exclusive obligations requiring them to use our platform or maintain or increase their use of our platform. Creators can also terminate their agreements with us for convenience.

Our Creators and Brands typically have relationships with numerous providers and can use both our platform and those of our competitors without incurring significant costs or disruption. Our Brands may also choose to decrease their use of revenue sharing and service fee arrangements. Accordingly, we must continually work to win new Brands and Creators and retain existing Brands and Creators, increase their usage of our platform and increase our users. Given the number of products on our Technology Platform, we may not be successful at educating and training Creators and Brands on how to use our platform and products in order for our Creators and Brands to get the most benefit from our Technology Platform and increase their usage. If these efforts are unsuccessful or Creators or Brands decide not to continue to maintain or increase their usage of our Technology Platform for any other reason, or if we fail to attract new Creators or Brands, our revenue could fail to grow or decline, which would materially and adversely harm our business, operating results and financial condition. Any increased competition, which may not be foreseeable, or our failure to adequately address any competitive factors, could result in reduced demand for our content, live Events, or brands, which could have an adverse effect on our business, financial condition, and results of operations. We cannot assure you that our Creators, Brands and consumers will continue to use and increase their spend on our platform or that we will be able to attract a sufficient number of new Creators, Brands, users and consumers to continue to grow our business and revenue. If Brands representing a significant portion of our business decide to materially reduce their use of our Technology Platform or cease using our Technology Platform altogether, our revenue could be significantly reduced, which could have a material adverse effect on our business, operating results and financial condition.

We generate substantially all of our revenue from Brands. If the content and services provided on our Technology Platform are not relevant to Brands, fail to attract new Brands or result in a loss of Brands using our Technology Platform, our growth may be adversely impacted.

We generate substantially all of our revenue from Brands through revenue sharing and service fee (including SaaS) arrangements. Revenue share comes from advertising, premium content, Events, pay-per-view fees, subscription fees or merchandise sales that are transacted via our Technology Platform. Service fees come from Brands that utilize our platform to reach consumers via a combination of campaign fees, sponsorship fees and transaction fees or SaaS fees, including monthly subscription fees. Even though we also generate revenue from consumers in the form of Creator-driven live-event ticket sales, pay-per-view fees, subscriptions and merchandise sales, we still expect to continue to generate substantially all our revenue from Brands for the foreseeable future.

Most Brands do not have long-term commitments with us, and our efforts to establish long-term commitments may not succeed. Because most Brands do not have long-term commitments with us, they may terminate their contracts and relationships with us and may instead pursue relationships with competitors. Since we do not have long-term contractual commitments with our Brand partners, maintaining and enhancing relationships with our Brand partners will require us to make substantial investments and these investments may not be successful.

The Brands with whom we partner vary from small businesses to well-known Fortune 500 companies. Due to our limited operating history, many Brands only recently started working with our Technology Platform

 

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solutions and spend a relatively small portion of their overall advertising budget with us In addition, some Brands may view some of our Technology Platform offerings as experimental and unproven or prefer certain of our products over others.

Furthermore, in April 2021, Apple issued an iOS update that imposes heightened restrictions on our access and use of user data by allowing users to more easily opt-out of tracking of activity across devices. Additionally, Google has announced that it will implement similar changes with respect to its Android operating system and major web browsers, like Firefox, Safari, and Chrome, have or plan to make similar changes as well. These changes have adversely affected our targeting, measurement, and optimization capabilities. This has resulted in, and in the future is likely to continue to result in, reduced demand for our Technology Platform products and could seriously harm our business. The longer-term impact of these changes on our industry, our competitors, our business, and the developers, partners, and advertisers within our community is uncertain, and depending on how we, our competitors, and the overall industry adjusts, and how our partners, advertisers, and users respond, our business could be seriously harmed. While we implement alternative solutions, we are subject to rules and standards set by the owners of such mobile operating systems which may be unclear, change, or be interpreted in a manner adverse to us and require us to halt or change our solutions, any of which could seriously harm our business.

We have made, and are continuing to make, investments to enable Creators and Brands to deliver relevant content to consumers on our Technology Platform. If we fail to continue to innovate and improve on our Technology Platform, our business may be harmed. New technologies, products and services are driving rapid changes in consumer behavior as consumers seek more control over when, where and how they consume content and access communications services. These technological advancements and changes in consumer behavior and/or our failure to effectively anticipate or adapt to such changes, could reduce our subscriber activations and increase our user churn rate, and could have a material adverse effect on our business, results of operations, financial condition and cash flow.

Moreover, we rely heavily on our ability to collect and disclose data and metrics to our Brands so we can attract new Brands and retain existing Brands. Any restriction or inability, whether by law, regulation, policy, or other reason, to collect and disclose data and metrics which our Brands find useful would impede our ability to attract and retain Brands. Regulators around the world are increasingly scrutinizing and regulating the collection, use, and sharing of personal data related to advertising, which could materially impact our revenue and seriously harm our business. For example, the European Union’s General Data Protection Regulation (“EU GDPR”) and the United Kingdom’s GDPR (“UK GDPR”) expanded the rights of individuals to control how their personal data is collected and processed, and placed restrictions on the use of personal data of younger minors. The processing of personal data for personalized advertising under EU GDPR and UK GDPR continues to be under increased scrutiny from European regulators, which includes ongoing regulatory action against large technology companies like ours, the outcomes of which may be uncertain and subject to appeal. The upcoming European Digital Services Act (“DSA”) which will go into effect in late 2023 or early 2024, prohibits targeted advertising to minors based on the profiling of personal information in the European Union. Other European legislative proposals and present laws and regulations may also apply to our or our advertisers’ activities and require significant operational changes to our business. For example, it is anticipated that the ePrivacy Regulation and national implementing laws will replace the current national laws implementing the ePrivacy Directive, which could have a material impact on the availability of data we rely on to improve and personalize our products and features. Outside of Europe, other laws further regulate behavioral, interest-based, or targeted advertising, making certain online advertising activities more difficult and subject to additional scrutiny. For example, in the United States, the California Consumer Privacy Act (“CCPA”) and the California Privacy Rights Act of 2020 (“CPRA”) (operative January 2023), place additional requirements on the handling of personal data for us, our partners, and our advertisers, such as granting California residents the right to opt-out of a company’s sharing of personal data for certain advertising purposes in exchange for money or other valuable consideration. Other states are considering similar legislation. Moreover, individuals are also becoming increasingly aware of and resistant to the collection, use, and sharing of personal data in connection with advertising. Individuals are

 

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becoming more aware of options related to consent and other options to opt-out of such data processing, including through media attention about privacy and data protection.

Further, we may experience media, legislative, or regulatory scrutiny of our actions or decisions regarding user privacy, encryption, content, advertising and other issues, which may materially adversely affect our reputation and our relationship with our Brands.

We believe that a positive reputation concerning our Technology Platform is important in attracting and retaining Brands. In addition, we may fail to respond expeditiously or appropriately to objectionable practices by Creators users, or consumers, or to otherwise address user concerns or suffer reputational harm, which could erode confidence in our Brand partners. To the extent the content we produce, distribute or otherwise make available is perceived as low quality, offensive, harmful or otherwise not compelling to consumers and Brands, our ability to establish and maintain a positive reputation may be adversely impacted and we may lose Brand relationships or fail to attract new Brands to our business. Similarly, other companies with similar technologies and platforms may fail to respond expeditiously or appropriately to objectionable practices on their respective platforms and may not otherwise address concerns from users, family members of those users, or the broader public audience. If such other companies suffer public ridicule or reputational harm, such negative views could erode confidence in our Brand partners.

Our user growth, engagement, and monetization on mobile devices depend upon effective operation with mobile operating systems, networks, technologies, products, and standards that we do not control.

There is no guarantee that popular mobile devices will continue to feature our products, or that mobile device users will continue to use our products rather than competing products. We are dependent on the interoperability of our products with popular mobile operating systems, networks, technologies, products, and standards that we do not control, such as the Android and iOS operating systems and mobile browsers. Changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, browser developers, or mobile carriers, or in the content or application of their terms of service or policies (which they have made in the past and continue to seek to implement) that degrade our products’ functionality, reduce or eliminate our ability to update or distribute our products, give preferential treatment to competitive products, limit our ability to deliver, target, or measure the effectiveness of ads, or charge fees related to the distribution of our products or our delivery of ads have in the past adversely affected, and could in the future adversely affect, the usage of our products and monetization on mobile devices. For example, Apple previously released an update to its Safari browser that limits the use of third-party cookies, which reduces our ability to provide the most relevant ads to our users and impacts monetization, and also released changes to iOS that limit our ability to target and measure ads effectively, while expanding their own advertising business. We expect that any similar changes to Apple’s, Google’s, or others’ browser or mobile platforms will further limit our ability to target and measure the effectiveness of ads and impact monetization. Additionally, in order to deliver high quality mobile products, it is important that our products work well with a range of mobile technologies, products, systems, networks, and standards that we do not control, and that we have good relationships with handset manufacturers, mobile carriers, and browser developers. We may not be successful in maintaining or developing relationships with key participants in the mobile ecosystem or in developing products that operate effectively with these technologies, products, systems, networks, or standards. In the event that it is more difficult for our users to access and use our products on their mobile devices, or if our users choose not to access or use our products on their mobile devices or use mobile products that do not offer access to our products, our user growth and user engagement could be harmed. From time to time, we may also take actions regarding the distribution of our products or the operation of our business based on what we believe to be in our long-term best interests. Such actions may adversely affect our users and our relationships with the operators of mobile operating systems, handset manufacturers, mobile carriers, browser developers, other business partners, or advertisers, and there is no assurance that these actions will result in the anticipated long-term benefits. In the event that our users are adversely affected by these actions or if our relationships with such third parties deteriorate, our user growth, engagement, and monetization could be adversely affected and our

 

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business could be harmed. We have in the past experienced challenges in operating with mobile operating systems, networks, technologies, products, and standards that we do not control, and any such occurrences in the future may negatively impact our user growth, engagement, and monetization on mobile devices, which may in turn materially and adversely affect our business and financial results.

Unfavorable media coverage has in the past and could in the future materially adversely affect our business, brand image or reputation.

We receive a high degree of media coverage. Unfavorable publicity and/or false media reports regarding us, our privacy practices, data security compromises or breaches, product changes, product quality, litigation or regulatory activity, including any intellectual property proceeding, or regarding the actions of our partners, our Creators, our Brands or consumers, our employees or other companies in our industry, has in the past and could in the future adversely affect our brand image or reputation. For example, there have been news articles discussing allegations against us for our nonpayment of fees, including articles discussing our litigation with Sony Music Entertainment and Universal Music Publishing Group, as well as Verzuz which may adversely affect our brand image or reputation. For more information, see discussion of the Sony Music Litigation under “Business—Legal Proceedings.”

If we fail to protect our brand image or reputation, we may experience material adverse effects to the size, demographics, engagement, and loyalty of our Creator and user base or Brand relationships, resulting in decreased revenue, fewer app installs (or increased app uninstalls), or slower user growth rates. In addition, if securities analysts or investors perceive any media coverage of us, or other companies with similar technologies and platforms, to be negative, the price of our Series A common stock may be materially adversely affected. Any of the foregoing could materially adversely affect our business, financial condition and results of operations.

Our market is competitive and dynamic. We face and will continue to face significant competition for Creators, Brands and consumers, which could result in reduced profit margins and loss of market share.

We face robust and rapidly evolving competition in all aspects of our business, including from companies that allow users to share and discover content and/or that enable Creators and Brands to use content platforms to reach customers, such as Apple, Alphabet (including Google and YouTube), Amazon, Snapchat, Facebook (including Instagram), ByteDance (including TikTok), ESPN+, BT Sport, Kayo Sports, Klaviyo and Showtime, among others.

We compete to attract, engage and retain users against current and potential competitors, both globally and in particular geographic regions where we operate. These competitive risks are heightened because some of our competitors have more extensive hardware, software, and service offerings, longer histories, larger user bases, increased brand recognition, more experience in the markets in which we compete and greater overall resources than us. These advantages enable them to devote more financial resources to technology, infrastructure, fulfillment and marketing, which in turn enables them to offer competitive services at little or no profit or even at a loss. For example, prominent, well-funded competitors like Apple, Google, and Amazon have a competitive advantage because they can leverage the substantially broader product offerings in their ecosystem to gain subscribers through bundled offers and to monetize users. Additionally, our current and future competitors have engaged and will continue to engage in mergers or acquisitions with each other to combine and leverage their broad audiences, content and capabilities.

Relatedly, we compete for users based on our presence and visibility as compared with other businesses and platforms that deliver audio and video content through the internet and connected devices. We face significant competition for users from companies promoting their own digital content online or through application stores, including large, well-funded, and seasoned participants in the digital media market.

We also face increasing competition because of new or emerging technologies and changes in market conditions. Our current and future competitors have introduced, and may continue to introduce, new ways of

 

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consuming or engaging with content, such as ByteDance, that cause our users, especially the younger demographic, to switch to another product, which would negatively affect our user retention, growth, and engagement. As the market for on-demand video on the internet and mobile and connected devices increases, new competitors, business models and solutions are likely to emerge. We believe that companies with a combination of technical expertise, brand recognition, financial resources and digital media experience pose a significant threat of developing competing on-demand distribution technologies.

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

Most of our competitors in this market have substantially greater financial and other resources, larger research and development staffs, and more experience and capabilities in developing, marketing and distributing products. Ongoing pricing pressure could result in significant price erosion, reduced profit margins and loss of market share, any of which could have a material adverse effect on our business, results of operations, financial position and liquidity. Large internet companies with strong brand recognition, such as TikTok, Facebook, Google, Amazon and Twitter, have significant numbers of sales personnel, substantial advertising inventory, proprietary advertising technology solutions and traffic that provide a significant competitive advantage and have a significant impact on pricing for reaching these user bases. Failure to compete successfully against our current or future competitors could result in the loss of current or potential advertisers, a reduced share of our advertisers’ overall marketing budget, the loss of existing or potential users, or diminished brand strength, which could adversely affect our pricing and margins, lower our revenue, increase our research and development and marketing expenses and prevent us from achieving or maintaining profitability.

Moreover, we compete with other forms of entertainment and leisure activities. While we monitor general market conditions, significant shifts in consumer demand that could materially alter public preferences for different forms of entertainment and leisure activities are difficult to predict. Failure to adequately identify and adapt to these competitive pressures could have a negative impact on our business.

Access to certain of our products depends on mobile app stores and other third parties such as data center service providers, hosted web service providers, internet transit providers and other communications systems service providers. If third parties such as the Apple App Store or Google Play Store adopt and enforce policies that limit, prohibit or eliminate our ability to distribute or update our applications through their stores, or increase the costs to do so, it could materially adversely affect our business, financial condition and results of operations.

Our products and services mainly depend on mobile application stores and the continued services and performance of other third parties such as data center service providers, third party computer systems, internet transit providers, and other communications systems and service providers. Our mobile applications are almost exclusively accessed through and depend on the Apple App Store and the Google Play Store. While our mobile applications are generally free to download from these stores, we offer our users the opportunity to purchase subscriptions and certain à la carte features through these applications. We determine the prices at which these subscriptions and features are sold, subject to approval by Apple or Google, as relevant. Purchases of these subscriptions and features via our mobile applications are mainly processed through the in-app payment systems provided by Apple and Google. We pay Apple and Google, as applicable, a meaningful share (up to 30%) of the revenue we receive from transactions processed through in-app payment systems (Google reduced its in-app purchase fees for subscription payments to 15% as of January 1, 2022). If the Apple App Store or the Google Play Store were to experience an outage, or if either decided to exit a market, many of our users may be unable to access our apps, which could materially adversely affect our business, financial condition and results of

 

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operations. Any deterioration in our relationships with these and other third-party suppliers, vendors, and business partners, or any adverse change in the terms and conditions governing these relationships, could have a negative impact on our business, financial condition, and results of operations.

Furthermore, application stores and other third party providers such as Apple and Google have broad discretion to make changes to their operating systems or payment services or change the manner in which their mobile operating systems function and their respective terms and conditions applicable to the distribution of our Technology Platform, including the amount of, and requirement to pay, certain fees associated with purchases required to be facilitated by such third parties through our applications, and to interpret their respective terms and conditions in ways that may limit, eliminate, or otherwise interfere with our products and services, our ability to distribute our Technology Platform through their stores, our ability to update our applications, including to make bug fixes or other feature updates or upgrades, the features we provide, the manner in which we market our in-app products and services, our ability to access native functionality or other aspects of mobile devices, and our ability to access information about our users that they collect. There can be no assurance that Apple or Google, or any other similar third party, will not limit, delay, eliminate, or otherwise interfere with the distribution of our Technology Platform, or that we will not be limited or prohibited from using certain current or prospective distribution or marketing channels in the future. To the extent any of them do so, our business, financial condition and results of operations could be materially adversely affected.

In addition, the websites and apps of our competitors may rank higher than offerings from our Technology Platform and our Triller app in search engines and or app stores, and/or our application may be difficult to locate in device application stores, which could draw potential users away from our service and toward those of our competitors. Device application stores often offer users the ability to browse applications by various criteria, such as the number of downloads in a given time period, the length of time since an application was released or updated, or the category in which the application is placed. If we are unable to compete successfully for users against other digital media providers by maintaining and increasing our presence, ease of use, and visibility and the amount of content streamed on our Technology Platform may fail to increase or may decline and our subscription fees and advertising sales may suffer.

In operating our Technology Platform, we may fail to launch new products or features according to our timetable, and our new products or features may not be commercially successful.

In order for our integrated global platform to succeed over time, we will need to license, acquire or develop new products or features that can generate additional revenue and further diversify our revenue sources. A number of factors, including technical difficulties, government approvals and licenses of intellectual property rights required for launching new products, lack of sufficient development personnel and other resources, and adverse developments in our relationship with the licensors of our new licensed products could result in delay in launching our new products. Therefore, we cannot assure you that we will be able to meet our timetable for new launches.

Additionally, our operations and revenues are affected by consumer tastes and entertainment trends, including consumer use of our Technology Platform and other applications such as TikTok, Instagram, Facebook, Netflix and YouTube, and various other social media apps and short- and long- form streaming services, as well as the market demand for live sports and music Events, user-generated content generally, and internet-based Brand engagement, each of which are unpredictable and may be affected by changes in the economic, social, cultural and political climate or global issues such as the recent COVID-19 pandemic. Changes in consumers’ tastes or perceptions of our Technology Platform, content or business partners, whether as a result of the economic, social, cultural or political climate or otherwise, could adversely affect our operating results. Our failure to avoid a negative perception among consumers or anticipate and respond to changes in consumer preferences, including in the form of content creation or distribution, could result in reduced demand for our services and content offerings or those of our partners and owned assets across our Technology Platform, which could have an adverse effect on our business, financial condition and results of operations.

 

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There are many factors that may adversely affect the popularity of our new products. For example, we may fail to anticipate and adapt to future technical trends and new business models, fail to satisfy consumer preferences and requirements, fail to effectively plan and organize marketing and promotion activities, fail to effectively detect and prevent programming errors or defects in the products, and fail to operate our new products at acceptable costs. We cannot assure you that our new products will gain market acceptance and become commercially successful. If we are not able to license, develop or acquire additional digital entertainment products that are commercially successful, our future revenues and profitability may decline.

The use of Automatic Content Recognition (“ACR”) technology to collect viewing behavior data is emerging and may not be successful.

The utilization of viewing behavior data collected using ACR technology to inform digital advertising and content delivery is an emerging industry, and future demand and market acceptance for this type of data is uncertain. If the market for the use of this data does not develop or develops more slowly than we expect, or if we are unable to successfully develop and monetize our Brands, Creators, or offerings off of the viewing behavior data we collect, our growth prospects may be harmed.

Payment methods used on our Technology Platform subject us to third party payment processing-related risks.

We accept payments from our users through a variety of methods, including online payments with credit cards and debit cards issued by major banks, payments made with gift cards processed by third-party providers and payment through third-party online payment platforms such as PayPal, Stripe, Afterpay, and Apple Pay. We also rely on third parties to provide payment processing services. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. We may also be subject to fraud and other illegal activities in connection with the various payment methods we offer, including online payment options and gift cards. Transactions on our Technology Platform and mobile applications are “card-not-present” transactions, so they present a greater risk of fraud. Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information. Requirements relating to consumer authentication and fraud detection with respect to online sales are complex. We may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay charge-back fees. Charge-backs result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying money transfer amount. If our charge-back rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions. In addition, we may be subject to additional fraud risk if third-party service providers or our employees fraudulently use consumer information for their own gain or facilitate the fraudulent use of such information. Overall, we may have little recourse if we process a criminally fraudulent transaction.

We or a third party may experience a data security breach involving credit card information and when this occurs, affected cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party’s customer base and the greater the number of credit card accounts impacted, the more likely it is that our users would be impacted by such a breach. To the extent our users are ever affected by such a breach experienced by us or a third party, affected users would need to be contacted to obtain new credit card information and process any pending transactions. It is likely that we would not be able to reach all affected users, and even if we could, some users’ new credit card information may not be obtained and some pending transactions may not be processed, which could materially adversely affect our business, financial condition and results of operations. Even if our users are not directly impacted by a given data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative payment methods that are not as convenient for us or restrict our ability to process payments without significant cost or user effort. Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher

 

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credit card-related costs and substantial remediation costs, or refusal by credit card processors to continue to process payments on our behalf, any of which could materially adversely affect our business, financial condition and results of operations.

We are subject to payment card association operating rules, certification requirements and various rules, regulations and requirements governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for us to comply. As our business changes, we may also be subject to different rules under existing standards, which may require new assessments that involve costs above what we currently pay for compliance. If we fail to comply with the rules or requirements of any provider of a payment method we accept, or if the volume of fraud in our transactions limits or terminates our rights to use payment methods we currently accept, or if a data breach occurs relating to our payment systems, among other things, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments from our consumers, process electronic funds transfers or facilitate other types of online payments, and our reputation and our business, financial condition and results of operations could be materially and adversely affected.

The validity, enforceability and scope of protection of intellectual property in internet-related industries are evolving, and therefore, uncertain. We may have to engage in litigation or other legal proceedings to enforce and protect our intellectual property rights, which could result in substantial costs and diversion of our resources, and have a material adverse effect on our business, financial condition and results of operations.

Our Technology Platform depends on the reliability of the network infrastructure and related services provided by ourselves and third parties, which is subject to physical, technological, security and other risks. We could suffer a loss of revenue and increased costs, exposure to significant liability, reputational harm and other serious negative consequences if we sustain damages, cyber-attacks or other data security breaches that disrupt our operations or result in the dissemination of proprietary or confidential information about us or our customers or other third parties.

The development and operation of our Technology Platform is subject to physical, technological, security and other risks which may result in interruption in service or reduced capacity. These risks include physical damage, power loss, telecommunications failure, capacity limitation, hardware or software failures or defects and breaches of physical and cybersecurity by computer viruses, system break-ins or otherwise. An increase in the volume of usage of our Technology Platform could strain the capacity of the software and hardware employed to prevent and identify such failures, breaches and attacks, which could result in slower response time or system failures. In particular, our industry has witnessed an increase in the number, intensity and sophistication of cybersecurity incidents caused by hackers and other malicious actors such as foreign governments, criminals, hacktivists, terrorists and insider threats. Hackers and other malicious actors may be able to penetrate our network security and misappropriate or compromise our confidential, sensitive, personal or proprietary information, or that of third parties, and engage in the unauthorized use or dissemination of such information. They may be able to create system disruptions, or cause shutdowns. Hackers and other malicious actors may be able to develop and deploy viruses, worms, ransomware and other malicious software programs that attack our products or otherwise exploit any security vulnerabilities of our systems. For example, in 2021 we experienced a dictionary attack that resulted in approximately 100 of our users’ accounts being taken over. In addition, sophisticated hardware and operating system software and applications that we procure from third parties may contain defects in design or manufacture, including “bugs,” cybersecurity vulnerabilities and other problems that could unexpectedly interfere with the operation or security of our systems. For example, in 2022, as a result of a bug introduced in the application, we estimated that potentially 504 accounts may have been compromised.

The occurrence of any of these events could result in interruptions, delays or cessation in service to users of our online services, which could have a material adverse effect on our business and results of operations. We may be required to expend significant capital or other resources to protect against the threat of security breaches and attacks or to alleviate problems caused by such actions, including the following:

 

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expenses to rectify the consequences of the damage, security breach or cyber-attack;

 

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liability for stolen assets or leaked information;

 

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costs of repairing damage to our systems;

 

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lost revenue and income resulting from any system downtime caused by such breach or attack;

 

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loss of competitive advantage if our proprietary information is obtained by competitors as a result of such breach or attack;

 

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increased costs of cyber security protection;

 

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costs of incentives we may be required to offer to our customers or business partners to retain their business; and

 

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damage to our reputation.

In addition, any compromise of security from a security breach or cyber-attack could deter customers or business partners from entering into transactions that involve providing confidential information to us. As a result, any compromise to the security of our systems could have a material adverse effect on our business, reputation, financial condition, and operating results.

While we have implemented industry-standard physical and cybersecurity measures, our network may still be vulnerable to unauthorized access, computer viruses, denial of service and other disruptive problems. We have experienced in the past, and may experience in the future, security breaches or attacks. There can be no assurance that any measures implemented will not be circumvented in the future.

Our business is also vulnerable to delays or interruptions due to our reliance on infrastructure and related services provided by third parties. End-users of our offerings depend on Internet Service Providers (“ISPs”) and our system infrastructure for access to the internet games and services we offer. Some of these services have experienced service outages in the past and could experience service outages, delays and other difficulties due to system failures, stability or interruption. We may lose Creators or consumers as a result of delays or interruption in service, including delays or interruptions relating to high volumes of traffic or technological problems, which may prevent the use of our Technology Platform for a period of time and could materially adversely affect our business, revenues, results of operations and financial condition.

In addition to all of the foregoing, in the event that our service agreements are terminated or expire with network infrastructure providers, we could experience interruptions in access to our Technology Platform as well as significant delays and additional expense in arranging for or creating new facilities or re-architecting our Technology Platform for deployment on a different network infrastructure service provider, which would adversely affect our business, financial condition and results of operations.

We may experience losses due to subscriber fraud and theft of service.

Subscribers may in the future obtain access to the subscription services on our Technology Platform without paying for service by unlawfully using our authorization codes, engaging in otherwise illegal activity or by submitting fraudulent credit card information. To date, no material losses from unauthorized credit card transactions and theft of service have occurred. We have implemented anti-fraud procedures in order to control losses relating to these practices, but these procedures may not be adequate to effectively limit all of our exposure in the future from fraud. If our procedures are not effective, consumer fraud and theft of service could significantly decrease our revenue and have a material adverse effect on our business, financial condition and operating results.

If TV streaming develops more slowly than we expect, our operating results and growth prospects could be harmed.

TV streaming is a continuously evolving, making it difficult to evaluate the prospects for our TV streaming offerings. The level of demand and market acceptance for our streaming offerings are subject to a high degree of

 

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uncertainty. We believe that the growth and success of our streaming offerings, such as Triller TV, and BKFC, will depend on the availability of quality content, the quality and reliability of new devices and technology and the cost for subscribers relative to other sources of content. These technologies, products and content offerings continue to emerge and evolve. Users, Creators or Brands may find TV streaming platforms to be less attractive than traditional TV, which would harm our business. If new technologies render the TV streaming market obsolete or we are unable to successfully compete with current and new competitors and technologies, our business may be harmed. The future growth of our business depends in part on the growth of TV streaming advertising, and on advertisers increasing spend on such advertising.

Changes to our existing products and apps, or the introduction of new products and brand names that we develop, could fail to attract or retain Creators users, consumers or Brand partners, or generate revenue and profits.

Our ability to retain, increase and engage our Creators, consumers or Brand partners and to increase our revenue depends heavily on our ability to continue to evolve our Technology Platform and to create successful new products and develop new brands for our Company, both independently and in conjunction with developers or other third parties. We may introduce significant changes to our existing products, or acquire or introduce new and unproven third-party products, and product extensions, including using technologies with which we have little or no prior development or operating experience. We have also invested, and expect to continue to invest, significant resources in growing our products to support increasing usage as well as new lines of business, new products, new product extensions and other initiatives to generate revenue. For example, we acquired Julius, which operates a marketplace that connects Brands with Creators with whom they may desire to partner. There is no guarantee that investing in new lines of business, new products, new product extensions and other initiatives will succeed. If our new or enhanced brands, products or product extensions fail to engage users, marketers, or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate sufficient revenue, operating margin or other value to justify our investments, and our business may be materially adversely affected.

We may also introduce new products, features or terms of service or policies, and seek to find new, effective ways to show our community new and existing products and alert them to events and meaningful opportunities to connect, that users do not like, which may negatively affect our reputation and usage of the offerings on our Technology Platform. New products may provide temporary increases in engagement that may ultimately fail to attract and retain users such that they may not produce the long-term benefits that we expect.

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

To remain competitive, we must continue to develop new features, capabilities and enhancements to our Technology Platform, including all of our services and technology offerings. This is particularly true as we further expand and diversify our capabilities to address additional markets. Maintaining adequate research and development resources, such as the appropriate personnel and development technology, to meet the demands of the market is essential. The development of new features, services, or products for our Technology Platform depends on a number of factors, including our ability to:

 

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spend our development budget efficiently or effectively on commercially successful and innovative technologies;

 

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realize the expected benefits of our strategy;

 

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develop products that are competitive in relation to our competitors;

 

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develop technology in a timely and cost-effective manner;

 

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anticipate user, Creator and Brand demand for an offering we are developing; and

 

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fund and recoup costs incurred.

If we are unable to develop features and capabilities internally due to certain constraints, such as employee turnover, lack of management ability or a lack of other research and development resources, which may be exacerbated by our current negative working capital and low cash balance, our business will be harmed. Moreover, research and development projects can be technically challenging and expensive. The nature of these research and development cycles may cause us to experience delays between the time we incur expenses associated with research and development and the time we are able to offer compelling features, capabilities, and enhancements and generate revenue, if any, from such investment. Additionally, anticipated demand for a feature, integration, capability or enhancement we are developing could decrease after the development cycle has commenced, and we would nonetheless be unable to avoid substantial costs associated with the development of any such feature, integration, capability or enhancement. If we expend a significant amount of resources on research and development and our efforts do not lead to the successful introduction or improvement of features, integrations and capabilities that are competitive, it would harm our business, results of operations, and financial condition.

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

In 2021, we launched subscription packages to bring our collection of virtual and live Events and other content in our library to paid subscribers. Our assessments are based on prior experience and market competition and may not be accurate and we could be underpricing or overpricing our subscription services, which may require us to continue to adjust our pricing packages and incorrect pricing could result in harm to our business. Furthermore, subscriber price sensitivity may vary by location, and as we expand into different countries, our pricing packages may not enable us to compete effectively in these countries. In addition, if our Technology Platform or services change, then we may need to, or we may choose to, revise our pricing. Such changes to our pricing model or our ability to efficiently price our Brand services offerings, digital and in-person event tickets, or content library could harm our business.

We must increase the scale and efficiency of our technology infrastructure to support our growth.

Our technology must scale to process the potential increased usage of our Technology Platform. We must continue to increase the capacity of our Technology Platform to support our high-volume strategy, to cope with increased data volumes, increased use by Creators, Brands and users and an increasing variety of advertising formats and platforms, and to maintain a stable service infrastructure and reliable service delivery. To the extent we are unable, for cost or other reasons, to effectively increase the capacity of our Technology Platform or support emerging advertising formats or services preferred by users, consumers, Creators and Brands, our revenue will suffer. We expect to continue to invest in our Technology Platform to meet increasing demand. Such investment may negatively affect our profitability and results of operations.

If there are interruptions or performance problems associated with the technology or infrastructure of our Technology Platform, including interruptions that impact our third-party service providers, users may experience service outages, new users may be reluctant to adopt our product offerings, users may leave our Technology Platform, and our reputation could be harmed.

Our business and continued growth rely, in part, on the ability of existing and potential users to access our Technology Platform without interruption or degradation of performance. Our products and systems rely on software and hardware that is highly technical and complex, and depend on the ability of such software and

 

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hardware to store, retrieve, process and manage immense amounts of data. We have in the past and may in the future experience disruptions, outages, and other performance problems with our technology due to factors such as infrastructure changes, introductions of new functionalities, human or software errors, capacity constraints, or attacks by malicious third parties.

Despite internal testing, particularly when first introduced or when new versions or enhancements are released, our software may contain serious errors or defects, security vulnerabilities, or software bugs that are difficult to detect and correct, which we may be unable to successfully correct in a timely manner or at all. In some instances, we may not be able to identify the cause or causes of these performance problems immediately or in short order. We may not be able to maintain the level of service uptime and performance required by customers, especially during peak usage times and as our user traffic and number of integrations increase. If our Technology Platform is unavailable or if users are unable to access these platforms within a reasonable amount of time (especially during live Events), or at all, our business would be harmed. Since users rely on our Technology Platform to create and share social media content and experience live event and other programming, any outage would negatively impact our brand, reputation and customer satisfaction, and could give rise to legal liability under our service level agreements with paid customers.

Moreover, we depend on services from various third parties to maintain our infrastructure, including cloud-based infrastructure services. We currently host our Technology Platform primarily using Amazon Web Services (“AWS”) and Google. Our operations depend on protecting the virtual cloud infrastructure hosted in AWS and Google by maintaining its configuration, architecture, features and interconnection specifications, as well as the information stored in these virtual data centers and which third-party internet service providers transmit. If a service provider fails to provide sufficient capacity to support us or otherwise experiences service outages, such failure could interrupt access to our Technology Platform by users and organizations, which could adversely affect their perception of our reliability and our revenue. Any disruptions in these services, including as a result of actions outside of our control, would significantly impact the continued performance of our Technology Platform. A prolonged AWS service disruption affecting our Technology Platform would negatively impact our ability to serve our consumers and partners, and could damage our reputation with current and potential consumers and partners, expose us to liability, cause us to lose consumers or partners or otherwise harm our business. We may also incur significant costs for using alternative equipment or taking other actions in preparation for, or in reaction to, events that damage the AWS services we use.

In the future, these services may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of these services could result in our decreased functionality until equivalent technology is either developed by us or, if available from another provider, is identified, obtained, and integrated into our infrastructure. We may also be unable to effectively address capacity constraints, upgrade our systems as needed, and continually develop our technology and network architecture to accommodate actual and anticipated changes in technology.

Our Technology Platform, services and technologies are vulnerable to malicious attacks and security breaches. Such attacks are of ever-increasing levels of sophistication and are made by groups and individuals with a wide range of motives and expertise, including organized criminal groups, and others. For example, in 2021 we experienced a dictionary attack that resulted in approximately 100 of our users’ accounts being taken over and, in 2022, as a result of a bug introduced in the application, we estimated that potentially 504 accounts may have been compromised. The techniques used to breach security safeguards evolve rapidly, and they may be difficult to detect for an extended period of time, and the measures we take to safeguard our technology may not adequately prevent such incidents.

While we have taken steps to protect our confidential and personal information and that of our users and other business relationships and have invested in information technology, there can be no assurance that our efforts will prevent service interruptions or security breaches in our systems or the unauthorized or inadvertent wrongful use or disclosure of such confidential information. Such incidents could adversely affect our business

 

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operations, reputation, and client relationships. Any such breach would require us to expend significant resources to mitigate the breach of security and to address matters related to any such breach, including the payment of fines. Although we maintain an insurance policy that covers data security, privacy liability, and cyber-attacks, our insurance may not be adequate to cover losses arising from breaches or attacks on our systems. We also may be required to notify regulators about any actual or perceived personal data breach as well as the individuals who are affected by the incident within strict time periods.

We are also in the process of integrating the technology of our acquired companies. The resulting size and diversity of our technology systems, as well as the systems of third-party vendors with whom we contract, increase the vulnerability of such systems to breakdowns and security breaches. In addition, we rely on technology at live Events, the failure or unavailability of which, for any significant period of time, could affect our business, our reputation and the success of our live Events. We also rely on technology to provide our digital offerings, live streaming and virtual Events, which may be vulnerable to hacking, denial of service attacks, human error and other unanticipated problems or events that could result in interruptions in our service and unauthorized access to, or alteration of, the content and data contained on our systems and those of our third- party vendors. Any significant interruption or failure of the technology upon which we rely, or any significant breach of security, could result in decreased performance and increased operating costs, adversely affecting our business, financial condition and results of operations. Implementation of changes in our technology may cost more or take longer than originally expected and may require more testing than initially anticipated. Any failure to update and enhance our technology in a timely and cost-effective manner could materially adversely affect our users’ experience with our various products and thereby negatively impact the demand for our products, and could increase our costs, either of which could materially adversely affect our business, financial condition and results of operations. Implementation of changes in our technology may cost more or take longer than originally expected and may require more testing than initially anticipated. Any failure to update and enhance our technology in a timely and cost-effective manner could materially adversely affect our users’ experience with our various products and thereby negatively impact the demand for our products, and could increase our costs, either of which could materially adversely affect our business, financial condition and results of operations.

In addition, the delivery of our products and services through our Technology Platform presents the potential for further vulnerabilities. For instance, we may be subject to boycotts, spam, spyware, ransomware, phishing and social engineering, viruses, worms, malware, DDOS attacks, password attacks, man-in-the-middle attacks, cybersquatting, impersonation of employees or officers, abuse of comments and message boards, fake reviews, doxing and swatting. While we have internal policies in place to protect against these vulnerabilities, we can make no assurances that it will not be adversely affected should one of these events occur. Additionally, there is an increased risk that we may experience cybersecurity-related events and other security challenges, as a result of our hybrid and remote employees and service providers working from non-corporate-managed networks.

Furthermore, our future success will depend on our ability to adapt to emerging technologies such as tokenization, new authentication technologies, such as blockchain technologies, artificial intelligence, machine learning, virtual and augmented reality, and cloud technologies. Additionally, our efforts to adapt to emerging technologies may not always be successful and we may not make appropriate investments in new technologies, which could materially adversely affect our business, financial condition and results of operations. For example, the use of AI and ML is becoming increasingly prevalent in our industry, and, although we intend to continue developing our Technology Platform’s AI and ML capabilities to meet the needs of our customers, we may be unable to accurately or efficiently integrate machine learning and artificial intelligence features or functionalities of the quality or type sought by our customers or offered by our competitors. These development efforts may also require significant engineering, sales, and marketing resources, all of which could require significant capital and management investment. If we are unable to enhance our Technology Platform and product offerings to keep pace with rapid technological and regulatory change, or if new technologies, including AI and ML solutions, emerge that are able to deliver competitive products at aggressive or alternative prices, more efficiently, more conveniently or more securely than our Technology Platform, demand for our Technology Platform and product offerings may decline, and our business, financial condition, and results of operations may be adversely affected.

 

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

If we are unable to ensure that our Technology Platform interoperates with a variety of software applications that are developed by others, including our partners, we may become less competitive and our results of operations may be harmed.

Our Technology Platform must integrate with a variety of network, hardware, and software platforms, and we need to continuously modify and enhance the platform to adapt to changes in hardware, software, networking, browser, and database technologies. In particular, we have developed our Technology Platform to be able to integrate with third-party applications, including the applications of our competitors as well as our partners, through the interaction of APIs. In general, we rely on the providers of such software systems to allow us access to their APIs to enable these integrations. We are typically subject to standard terms and conditions that govern the distribution, operation, and fees of such third-party systems and platforms which are subject to modification by such providers from time to time. Our business may be harmed if any provider of such platforms or systems:

 

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discontinues or limits our access to its software or APIs;

 

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

 

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changes how information is accessed by us or our users;

 

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establishes more favorable relationships with one or more of our competitors; or

 

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develops or otherwise favors its own competitive offerings over ours.

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

We have created mobile versions of our websites and the various offerings that comprise our Technology Platform to respond to the increasing number of people who access our products and services through mobile devices. If these mobile applications and websites do not perform well, our business may suffer. We are also dependent on third-party application stores (such as those managed by Apple and Google) that may prevent us from timely updating our product offerings, building new features, integrations, and capabilities, or charging for access. Certain of these third parties are now, and others may in the future become, competitors of us, and could stop allowing or supporting access to the platform or the apps that comprise the platform through their products, could allow access to the platform or such apps only at an unsustainable cost, or could make changes to the terms of access in order to make our Technology Platform and applications less desirable or harder to access, for competitive reasons. In addition, our Technology Platform and applications interoperate with servers, mobile devices, and software applications predominantly through the use of protocols, many of which are created and maintained by third parties. We therefore depend on the interoperability of our applications with such third-party services, mobile devices, and mobile operating systems, as well as cloud-enabled hardware, software, networking, browsers, database technologies, and protocols that we do not control. Any changes in such technologies that degrade the functionality of our apps or

 

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give preferential treatment to competitive services could adversely affect adoption and usage of our apps. Also, we may not be successful in developing or maintaining relationships with key participants in the mobile industry or in ensuring that our apps operate effectively with a range of operating systems, networks, devices, browsers, protocols and standards. If we are unable to effectively anticipate and manage these risks, or if it is difficult for users to access and use our apps, our business, results of operations and financial condition may be harmed.

We rely on software and services from other parties. Defects in, or the loss of access to, software or services from third parties could increase our costs and adversely affect the quality of our business.

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

We incorporate software and services from third parties into our Technology Platform, and our inability to maintain rights to such software and services would harm our business and results of operations.

We license patents, software, technology and procure services from third parties that we incorporate into or integrate with our Technology Platform. Some of the foregoing licenses and services are material and important to the functionality and operation of our Technology Platform and would be difficult to replace. For example, we license music and video editing technology from a third party licensor which is a material component of our Technology Platform. Some of our agreements with our licensors provide for a limited term. Although we have taken steps to protect our rights in certain technology, and identify alternatives where applicable, if we are unable to continue to license any of this intellectual property for any reason, our ability to develop and sell access to our Technology Platform containing such technology could be harmed. Similarly, if we are unable to license necessary intellectual property from third parties now, or in the future, on commercially reasonable terms or at all, we may be forced to acquire or develop alternative technology, which we may be unable to do in a commercially feasible manner, or at all, and we may be required to use alternative technology of lower quality or performance standards, which would adversely affect our business, financial condition and results of operations.

We also cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell access to our Technology Platform. In addition, many licenses are non-exclusive, and therefore our competitors may have access to the same technology licensed to us.

Certain of our products contain third-party open source software components, and failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.

Certain of our products contain components that are licensed under so-called “open source,” “free” or other similar licenses. Open source software is made available to the general public on an “as-is” basis under the terms of a non-negotiable license. We currently combine our proprietary software with open source software, but not in a manner that we believe requires the release of the source code of our proprietary software to the public. We do not plan to integrate our proprietary software with open source software in ways that would require the release of the source code of our proprietary software to the public. Although we have certain processes in place to monitor

 

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and manage our use of open source software to avoid subjecting our platform to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. or foreign courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to provide or distribute our platform.

Our use and distribution of open source software may entail greater risks than use of third-party commercial software. Open source licensors generally do not provide support, warranties, indemnification, or other contractual protections regarding infringement claims or the quality of the code. In addition, if we combine our proprietary software with open source software in a certain manner, we could, under certain open source licenses, be required to release to the public or remove the source code of our proprietary software. We may also face claims alleging noncompliance with open source license terms or infringement or misappropriation of proprietary software. These claims could result in litigation, require us to purchase a costly license or remove the software. In addition, if the license terms for open source software that we use change, we may be forced to re-engineer our solutions, incur additional costs or discontinue the sale of our offerings if re-engineering could not be accomplished on a timely basis or at all. Although we monitor our use of open source software to avoid subjecting our offerings to unintended conditions, we cannot assure you that our processes for monitoring and managing our use of open source software in our platform will be effective and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our offerings. We cannot guarantee that we have incorporated open source software in our software in a manner that will not subject us to liability or in a manner that is consistent with our current policies and procedures.

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

We enter into long-term contracts for both the acquisition and the distribution of media content, including contracts for the acquisition of content rights for sporting events and other programs. As these contracts expire, we must renew or renegotiate the contracts, and if we are unable to renew them on acceptable terms, we may lose content rights or distribution rights. Even if these contracts are renewed, the cost of obtaining content rights may increase (or increase at faster rates than our historical experience). Moreover, our ability to renew these contracts on favorable terms may be affected by consolidation in the market for content distribution and the entrance of new participants in the market for distribution of content on digital platforms. With respect to the acquisition of content rights, particularly sports content rights, the impact of these long-term contracts on our results over the term of the contracts depends on a number of factors, including the strength of advertising markets, subscription levels and rates for content, effectiveness of marketing efforts and the size of viewer audiences. There can be no assurance that revenues from content based on these rights will exceed the cost of the rights plus the other costs of producing and distributing the content.

Our ability to provide our subscribers with content also depends on content providers and other rights holders licensing rights, including distribution rights, to such content and certain related elements thereof, such as the public performance of music contained within the content we distribute. The license periods and the terms and conditions of such licenses vary, and we are currently operating outside the terms of some of our current licenses. If the content providers and other rights holders are not or are no longer willing or able to license us content upon terms acceptable to us, our ability to stream content to our subscribers may be adversely affected and/or our costs could increase. Because of these provisions as well as other actions we may take, content available through our service can be withdrawn on short notice. As competition increases, we have seen the cost of certain programming increase.

 

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Our business depends on our ability to send consumer engagement messages, including emails, SMS, and mobile and web notifications, and any significant disruption in service with our third-party providers or on mobile operating systems could result in a loss of customers or less effective consumer-brand engagement, which could harm our business, financial condition, and results of operations.

Our brand, reputation, and ability to attract new customers depend on the reliable performance of our technology infrastructure and content delivery. Our Technology Platform engages with consumers through emails, SMS and push notifications, and we depend on third-party services for delivery of such notifications. Any incident broadly affecting the interaction of third-party devices with our platform, including any delays or interruptions in these services that could cause delays to emails, SMS, or mobile and web notifications, could adversely affect our business. Similarly, cybersecurity events could result in a disruption to such third-party’s services, including regulatory investigations, reputational damage, and a loss of sales and customers, which could in turn impact our business. A prolonged disruption, cybersecurity event or any other negative event affecting a third-party service could lead to customer dissatisfaction and could in turn damage our reputation with current and potential customers, result in a breach under our agreements with our customers, and cause us to lose customers or otherwise harm our business, financial condition, and results of operations.

We depend in part on mobile operating systems and their respective infrastructures to send notifications through various applications that utilize our platform. As new email, mobile devices, and mobile and web platforms are released, existing email, mobile devices, and platforms may cease to support our platform or effectively roll out updates to our customers’ applications. Any changes in these systems or platforms that negatively impact the functionality of our platform could adversely affect our ability to interact with consumers in a timely and effective fashion, which could adversely affect our ability to retain and attract new customers. The parties that control the operating systems for mobile devices and mobile, web, and email platforms have no obligation to test the interoperability of new mobile devices or platforms with our platform, and third parties may produce new products that are incompatible with or not optimal for the operation of our platform. Additionally, in order to deliver high-quality consumer engagement, we need to ensure that our platform is designed to work effectively with a range of mobile technologies, systems, networks, and standards. If consumers choose to use products or platforms that do not support our platform, or if we do not ensure our platform can work effectively with such products or platforms, our business and growth could be harmed. We also may not be successful in developing or maintaining relationships with key participants in the email or mobile industries that permit such interoperability. If we are unable to adapt to changes in popular operating systems and platforms, we expect that our customer retention and customer growth would be adversely affected.

Our business may be adversely affected if our access to music rights is limited or delayed. The concentration of control of content by major music licensors means that even one entity, or a small number of entities working together, may unilaterally affect our access to music and other content. We depend upon third-party licenses for the use of music on our platform and in our content. An adverse change to, loss of, or claim that we do not hold necessary licenses may have an adverse effect on our business, operating results, and financial condition.

Music is an important element of the overall content that we make available on the Triller app. We rely on licensors that hold rights to sound recordings and musical compositions, over whom we have no control, for the music related content we make available on the Triller app. To secure the rights to use music in our content and on the Triller app, we enter into agreements to obtain licenses from rights holders such as performing rights organizations, record labels, music publishers, collecting societies, artists and songwriters, and other copyright owners (or their agents). We pay royalties to such parties or their agents around the world. We cannot guarantee that these parties will always choose to license to us.

The process of obtaining licenses involves identifying and negotiating with many rights holders, some of whom are unknown, or difficult to identify, or for whom we may have conflicting ownership information, and implicates a myriad of complex and evolving legal issues across many jurisdictions, including open questions of

 

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law as to when and whether particular licenses are needed with respect to the use of musical compositions and sound recordings.

The music industry is highly concentrated, which means that one or a small number of entities may, on their own, take actions that adversely affect our business. For example, the music rights licensed to us under our agreements with major record labels and major publishing companies are necessary for us to exploit the majority of music consumed on the Triller app. Our business may be adversely affected if our access to music is limited or delayed, or if any of the various rights to such music are no longer licensed to us, if our relationships deteriorate with one or more of these rights holders, or if they choose not to license to us for any other reason. Rights holders also may attempt to take advantage of their market power by seeking onerous financial terms from us. We may elect not to renew certain agreements with rights holders for any number of reasons, or we may decide to explore different licensing schemes or economic structures with certain or all rights holders. Artists and/or songwriters may object and may exert public or private pressure on rights holders to discontinue or to modify license terms, or we may elect to discontinue use of an artist or songwriter’s catalog based on a number of factors, including actual or perceived reputational damage. Additionally, there is a risk that aspiring rights holders, their agents, or legislative or regulatory bodies will create or attempt to create new rights that could require us to enter into new license agreements with, and pay royalties to, newly defined groups of rights holders, some of which may be difficult or impossible to identify.

Even if we are able to secure music rights from record labels, music publishers and other copyright owners, artists and/or artist groups may object and may exert public or private pressure on third parties to discontinue licensing rights to us, hold back content from us, or increase royalty rates. As a result, our ability to continue to license rights to music is subject to convincing a broad range of stakeholders of the value and quality of our service. In addition, our music licenses from record labels, music publishers and other copyright owners may not contemplate some of the features and content that we may wish to add to our service, or new service offerings or revenue models that we may wish to launch. To the extent that we are unable to license or continue to license a large amount of music rights or the music rights related to the music written or performed by certain popular artists, our business, operating results, and financial condition could be materially harmed.

With respect to musical compositions, in addition to obtaining the synchronization, distribution and reproduction rights, we also need to obtain public performance or communication to the public rights, and this needs to be accomplished on a territory basis. At times, while we may hold sufficient license rights for certain music in a territory such as the United States, it may be difficult to obtain the license for the same music rights from the applicable rights holders outside of such territory.

In the United States, public performance rights are typically obtained separately through intermediaries known as performing rights organizations (“PROs”) which (a) issue blanket licenses with copyright users for the public performance of musical compositions in their repertory, (b) collect royalties under those licenses, and (c) distribute such royalties to copyright owners. We have, or are in some instances in the process of obtaining licenses, for public performance of musical compositions in the United States, Canada, Mexico, Europe and other territories, through local collecting societies representing songwriters and publishers, and from certain publishers directly, or a combination thereof. The royalty rates available to us from the PROs today may not be available to us in the future. The royalty rates under licenses provided by American Society of Composers, Authors and Publishers (“ASCAP”) and Broadcast Music Inc. (“BMI”) currently are governed by consent decrees, which were issued by the U.S. Department of Justice in an effort to curb anti-competitive conduct. Removal of or changes to the terms or interpretation of these agreements could affect our ability to obtain licenses from these PROs on current and/or otherwise favorable terms, which could harm our business, operating results, and financial condition.

In other parts of the world, including in Canada and Europe, we have or are in some instances in the process of obtaining licenses for public performance of musical compositions through local collecting societies representing songwriters and publishers, and from certain publishers directly, or a combination thereof. Given the

 

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licensing landscape in other territories for public performance rights, we cannot guarantee that we will be able to finalize and enter into licensing agreements in such territories, or that our licenses with collecting societies and our direct licenses with publishers provide full coverage for all of the musical compositions we use in our service in the countries in which we operate, or that we may enter in the future. Publishers, songwriters, and other rights holders who choose not to be represented by major or independent publishing companies or collecting societies have, and could in the future, adversely impact our ability to secure licensing arrangements in connection with musical compositions that such rights holders own or control, and could increase the risk of liability for copyright infringement.

Although we expend significant resources to seek to comply with applicable contractual, statutory, regulatory, and judicial frameworks, we cannot guarantee that we currently hold, or will always hold, every necessary right to use all of the music that is used on our service now or that may be used in our products and services in the future, and we cannot assure you that we are not infringing or violating any third-party intellectual property rights, or that we will not do so in the future. For additional information, see “Risk Factor — Risks Related to Government Regulation and Our Intellectual Property.”

These challenges, and others concerning the licensing of music on our platform, may subject us to significant liability for copyright infringement, breach of contract, or other claims. For additional information, see “Business—Legal Proceedings.”

We are a party to many music license agreements that are complex and impose numerous obligations upon us that may make it difficult to operate our business, and a breach, or perceived breach, of such agreements could adversely affect our business, operating results, and financial condition.

Our license agreements are complex and impose numerous obligations on us, including obligations to, among other things:

 

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

 

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

 

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

 

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comply with certain marketing and advertising restrictions;

 

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grant the licensor the right to audit our compliance with the terms of such agreements; and

 

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comply with certain security and technical specifications.

Certain of our license agreements may also contain minimum guarantees or require that we make minimum guarantee or advance payments, which are not always tied to our number of users or stream counts for music used in our service. Accordingly, our ability to achieve and sustain profitability and operating leverage in part depends on our ability to increase our revenue through increased sales of subscriptions on terms that maintain an adequate gross margin. Our license agreements that contain minimum guarantees typically have terms of between one and three years, but our users may cancel their subscriptions at any time. We rely on estimates to forecast whether such minimum guarantees and advances against royalties could be recouped against our actual content costs incurred over the term of the license agreement. To the extent that our estimates underperform relative to our expectations, and our content costs do not exceed such minimum guarantees and advance payments, our margins may be adversely affected.

Some of our license agreements may also include so-called “most-favored nations” provisions, which require that certain terms (including material financial terms) are no less favorable than those provided to any

 

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similarly situated licensor. If agreements are amended or new agreements are entered into on more favorable terms, these most-favored nations provisions could cause our payment or other obligations to escalate substantially. Additionally, some of our license agreements require consent to undertake new business initiatives utilizing the licensed content (e.g., alternative distribution models), and without such consent, our ability to undertake new business initiatives may be limited and our competitive position could be impacted.

If we breach any obligations in any of our license agreements, or if we use content in ways that are found to exceed the scope of such agreements, we could be subject to monetary penalties or claims of infringement, and our rights under such agreements could be terminated. Furthermore, certain of our licenses are currently expired by their terms, and we are relying on ordinary course of dealing extensions with such licensors. Additionally, we are not current on payments under all of our licenses, which may increase the risk of litigation with certain of our licensors. We also run the risk of such licensors making copyright infringement claims against us, which could have a material adverse effect on our business, financial condition, and operating results.

In the past, we have entered into agreements that required us to make substantial payments to licensors to resolve instances of past use at the same time that we enter into go-forward licenses. These agreements may also include most-favored nations provisions. If triggered, these most favored nations provisions could cause our payments or other obligations under those agreements to escalate substantially. If we need to enter into additional similar agreements in the future, it could have a material adverse effect on our business, financial condition, and operating results.

We face risks, such as unforeseen costs and potential liability, in connection with content we produce, license, and distribute through our Technology Platform.

As a producer and distributor of content, we face potential liability for negligence, copyright and trademark infringement, claims for violation of the right of publicity or privacy, or other claims based on the nature and content of materials that we produce, license, and distribute, such as content from our live Events. We also may face potential liability for content used in promoting our Technology Platform and Events, including marketing materials or our community-related content. We may decide to remove content from our Technology Platform, not to place certain content on our Technology Platforms, or to discontinue or alter our production of certain types of content if we believe such content might not be well received by our consumers and partners or could be damaging to our brand and business.

To the extent we do not accurately anticipate costs or mitigate risks, including for content that we obtain but ultimately does not appear on or is removed from our Technology Platforms, or if we become liable for content we produce, license or distribute, our business may suffer. Litigation to defend these claims could be costly and the expenses and damages arising from any liability could harm our business and reputation. We may not be indemnified against claims or costs of these types and we cannot guarantee that we are adequately insured to indemnify us for all liability that may be imposed on us.

Risks Related to Our Live Events

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

Our business depends on discretionary consumer and corporate spending. Many factors related to discretionary consumer and corporate spending, including economic conditions affecting disposable consumer income such as inflation, including the current persistent inflationary environment, unemployment levels, fuel prices and prices for other goods and services, interest rates, including the current environment of rapidly rising interest rates, changes in tax rates, tax laws that impact companies or individuals, and inflation can significantly impact our operating results. Declines in advertising, sponsorship and other Brand partnership revenue can also be caused by the economic prospects of specific advertisers or industries, by increased competition for the leisure

 

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time of audiences and audience fragmentation, by the growing use of new technologies causing advertisers to alter their spending priorities based on these or other factors. In addition, Brands’ willingness to purchase advertising or to sponsor our live Events may be adversely affected by lower audience ratings for our programming content. While consumer and corporate spending may decline at any time for reasons beyond our control, such as economic recessions or other economic conditions, natural disasters, severe weather, pandemics such as the COVID-19 pandemic, wars, acts of terrorism, power loss, telecommunications failure or other catastrophic events, the risks associated with our businesses become more acute in periods of a slowing economy or recession, which may be accompanied by reductions in corporate sponsorship and advertising and decreases in attendance at live entertainment and sports events, among other things. There can be no assurance that consumer and corporate spending will not be adversely impacted by current economic conditions, or by any future deterioration in economic conditions, thereby possibly impacting our operating results and growth. A prolonged period of reduced consumer or corporate spending, as occurred during the COVID-19 pandemic, could have an adverse effect on our business, financial condition and results of operations.

Owning and managing certain Events for which we sell media and sponsorship rights and ticketing exposes us to greater financial risk than market participants who are not vertically integrated. If the live Events that we own and manage are not financially successful, our business could be adversely affected.

We act as a principal by owning and managing certain live Events for which we sell media and sponsorship rights and ticketing, such as BKFC. Organizing and operating a live event involves significant financial risks as we bear all or most event costs, including a significant amount of up-front costs. In addition, we typically book our live Events many months in advance of holding the event and often agree to pay various third parties fixed guaranteed amounts prior to receiving any related revenue. Accordingly, if a planned event fails to occur or there is any disruption in our ability to live stream or otherwise distribute an event, whether as a result of technical difficulties or otherwise, we could lose a substantial amount of these up-front costs, fail to generate anticipated revenue and be forced to issue refunds for media and sponsorship rights, advertising fees, and ticket sales. There can be no assurance that we will not suffer financial harm or adverse impacts to our business operations if we are required to cancel and/or reschedule any live Events. In addition, although we entered into Curation Agreements, dated January 27, 2021, with Swizz Beatz and Timbaland in connection with our acquisition of Verzuz that provided that Swizz Beatz and Timbaland would continue to provide services to Verzuz, those agreements have expired and we are not planning to enter into new agreements. There is no guarantee that Swizz Beatz and Timbaland will continue to be involved in Verzuz in the future which may impact the success of our Verzuz Events. If we are forced to postpone a planned Verzuz event, we would incur substantial additional costs associated with staging the event on a new date or in a new venue, may have reduced attendance and revenue, and may have to refund ticketing, pay-per-view and other fees. We could be compelled to cancel or postpone all or part of an event for many reasons, including poor weather, issues with obtaining permits or government regulation or performers failing to participate, as well as operational challenges caused by extraordinary incidents such as terrorist or other security incidents, mass-casualty incidents, natural disasters, public health concerns including pandemics such as the recent COVID-19 pandemic or similar events. Such incidents have been shown to cause a nationwide disruption of commercial and leisure activities. For example, in 2021 and 2022 we had to cancel a total of four Events due to key participants contracting COVID-19. These cancelations resulted in our being unable to recoup or avoid payment for various nonrefundable expenses we had paid and/or incurred in connection with such Events. We often have cancellation insurance policies in place to cover a portion of our losses if we are compelled to cancel an event, but our coverage may not be sufficient and is subject to deductibles. If the live Events that we own and manage are not financially successful, we could suffer an adverse effect on our business, financial condition and results of operations.

The failure to continue creating and partnering with those who create popular live events and pay-per-view programming could adversely impact our business.

The creation, marketing and distribution of our media entertainment programming, including our pay-per-view and digital live Events, is critical to our business and to our ability to generate revenues. A failure to continue developing or partnering with those who develop creative and entertaining programs and events would likely lead to a decline in the popularity of our brand of entertainment and would adversely affect our

 

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ability to generate revenues and could have a material adverse effect on our business, operating results and financial condition.

We may pay upfront expenses when planning live Events, entering into exclusive agreements for video series, or licensing rights to distribute and publicly perform music, and if these arrangements do not perform as we expect, our business, results of operations and financial condition may be harmed.

We may pay one-time, upfront non-recoupable or recoupable signing fees or advances to certain entertainers (e.g. musicians, athletes, and influencers) or event venues in order to produce high-quality live and virtual entertainment, or gain exclusive ticketing or streaming video rights. We may also pay upfront fees for access to song catalogs by music labels. If the party does not comply with the terms of the contract or perform an event, such fees are refundable to us. We pay these upfront fees based on the expectations to generate revenue on ticket sales, sponsorships, advertising and on-demand payments by users. We make the decision to make these payments based on our assessment of the past success of the entertainers, past event data, and other financial information. We include commercial and legal protections in our contracts that include upfront fees, such as requiring certain performance obligations, to mitigate the financial risk of making these payments. However, live and virtual Events may vary greatly from year-to-year and from event to event as a result of external factors, including event planning and budgeting commitments as well as other competing events, streaming platform commitments, etc. If our assumptions and expectations prove wrong, or a counterparty defaults, resulting in an unsuccessful event, our return on these signing fees will not be realized and our business and results of operations will be harmed.

Further, we have in the past, and may in the future, face legal claims from Creators or vendors who did not receive advanced payout payments, which may harm our business, results of operation and financial condition. We have in the past, and may in the future, also face legal claims from Creators who did not meet contractual minimums or other contractual provisions to receive payments, which may harm our business, results of operation or financial condition.

Participants and spectators in connection with our live entertainment and sports Events are subject to potential injuries and accidents, which could subject us to personal injury or other claims and increase our expenses (for which our insurance may not provide adequate coverage), as well as reduce attendance at our live entertainment and sports Events, causing a decrease in our revenue.

We hold numerous live Events each year. This schedule exposes our performers, athletes and our employees who are involved in the production of those Events to the risk of travel and performance-related accidents, the consequences of which are not fully covered by insurance. The physical nature of our Events exposes our performers and athletes to the risk of serious injury or death. There are inherent risks to participants and spectators involved with producing, attending or participating in live entertainment and sports events including the risk of an actual or threatened terrorist act, fire, explosion, protests, riots, and other safety or security issues, any one of which could result in injury or death to attendees and/or damage to the facilities at which such an event is hosted. Injuries and accidents may occur from time to time in the future, which could subject us to substantial claims and liabilities for injuries. Incidents in connection with our entertainment and sports Events at any of our venues or venues that we rent could also result in claims, reducing operating income or reducing attendance at our Events, causing a decrease in our revenues. There can be no assurance that the insurance we maintain will be adequate to cover any potential losses. The physical nature of many of our live sports Events exposes the athletes that participate to the risk of serious injury or death. For example, participants in BKFC do not wear any padding or gloves, which may result in increased numbers of injuries, including, among others, maxillofacial fractures and dental avulsions. These injuries could also include concussions or more serious injuries, and many sports leagues and organizations have been sued by athletes over alleged long-term neurocognitive impairment arising from concussions. Although the participants in certain of our live sports Events, as independent contractors, are responsible for maintaining their own health, disability and life insurance, we may seek coverage under our accident insurance policies or our general

 

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liability insurance policies, for injuries that athletes incur while competing. To the extent such injuries are not covered by our policies, we may self-insure medical costs for athletes for such injuries. Liability to us resulting from any death or serious injury, including concussions, sustained by athletes while competing, could adversely affect our business, financial condition, and operating results.

Our live Events will entail other risks inherent in public live events, including air and land travel interruption or accidents, the spread of illness, injuries resulting from building problems, equipment malfunction, terrorism or other violence, local labor strikes and other “force majeure” type events. If an event we host or in which we participate experiences an internet or power outage, the event may be delayed or canceled, and our reputation may be harmed. These circumstances could result in personal injuries or deaths, including to our employees and contractors, canceled Events and other disruptions to our business or result in liability to third parties. We cannot guarantee our insurance policies will provide us coverage for these incidents or that any coverage we obtain will be adequate to cover our liabilities. Moreover, if there were a public perception that the safety or security measures are inadequate at the Events we host, whether or not that is the case, it could result in reputational damage and a decline in future attendance at Events hosted by us. In addition, we stream a number of live Events every year, and if an event we host or participate in experiences an internet or power outage, the event may be delayed or canceled, and our reputation may be harmed and we may incur additional financial expense. The occurrence of any of these circumstances could adversely affect our business, financial condition, and results of operations.

A decline in the popularity of our brand of sports entertainment, including as a result of changes in the social and political climate, could adversely affect our business.

Our operations are affected by consumer tastes and entertainment trends, which are unpredictable and subject to change and may be affected by changes in the social and political climate. Some of live event programming is created to evoke a passionate response from consumers. For example, BKFC live Events may be negatively perceived by some parts of the public and negative events or publicity related to such Events may result in a decline in the popularity of such events.

A determination that independent contractors are employees could expose us to various liabilities and additional costs.

In certain states, notably California and New York, legislative changes have been enacted or are contemplated that draw into question our ability to treat performers and athletes as independent contractors in those states. The impact of these initiatives on us is unknown. If we are required to reclassify independent contractors as employees, we may incur additional costs and taxes which could adversely affect our business, financial condition, and results of operations.

Regulations that govern the status and classification of independent contractors are subject to changes and divergent interpretations by various authorities, which can create uncertainty and unpredictability for us. For example, in 2020 California passed a worker classification statute (“AB 5”), which effectively narrowed the definition of an independent contractor by requiring hiring entities to use a stricter test to determine a given worker’s classification. In addition, AB 5 places the burden of proof for classifying workers as independent contractors on hiring entities and provides enforcement powers to the state and certain cities. Legislative proposals concerning worker classification are being considered by various other states, including New York and New Jersey. Additionally, any requirement to reclassify independent contractors as employees may require us to significantly alter our existing business model or operations, including suspending or ceasing operations in impacted jurisdictions, increase our costs and impact our ability to add new talent and grow our business. For instance, existing talent may decide not to partner with us and new talent may not join given the loss of flexibility under an employment model. Any of the foregoing could have an adverse impact on our business, financial condition, and results of operations and our ability to achieve or maintain profitability. If ultimately required, worker’s compensation insurance for our talent or other aspects of their treatment as employees in those states could add expense to, or otherwise alter, our operations, which could affect our business, financial condition

 

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and/or results of operations. Liability to us resulting from any death or serious injury sustained by one of our performers or athletes while performing could adversely affect our business, financial condition and operating results and the price of our Series A common stock.

Our insurance may not be adequate.

We plan to hold numerous live Events each year. This schedule exposes our performers and our employees who are involved in the production of those Events to the risk of travel and performance-related accidents, the consequences of which may not be fully covered by insurance. The physical nature of our Events exposes our performers to the risk of serious injury or death. Although we have general liability insurance and umbrella insurance policies, and although our performers are responsible for obtaining their own health, disability and life insurance, we cannot assure you that the consequences of any accident or injury will be fully covered by insurance. Our liability resulting from any accident or injury not covered by our insurance could have a material adverse effect on our business, operating results and financial condition.

We may be prohibited from promoting and conducting our live Events if we do not comply with applicable regulations.

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

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

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

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

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

The sales cycle related to our live Events programming and the related revenue streams, which typically ranges from a single week to multiple months, may also cause us to experience a delay between increasing operating expenses and the generation of corresponding revenue, if any. Accordingly, we may be unable to prepare accurate internal financial forecasts or replace anticipated revenue that we do not receive as a result of delays arising from these factors, and our results of operations in future reporting periods may be below the

 

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expectations of investors. If we do not address these risks successfully, our results of operations could differ materially from our estimates and forecasts or the expectations of investors, causing our business to suffer and our Series A common stock price to decline.

We have no assurance that the substantial time and money spent on our sales efforts will generate significant revenue. If conditions in the marketplace, generally or with specific Brands, Creators or consumers, change negatively, it is possible that we will be unable to recover any of these expenses. Our sales efforts involve educating our Brands, Creators or consumers about the use, technical capabilities and benefits of our Technology Platform. Some of our Brands, Creators or consumers undertake an evaluation process that frequently involves not only our Technology Platform but also the offerings of our competitors. As a result, it is difficult to predict when we will obtain new Brands, Creators or consumers and begin generating revenue from these new Brands, Creators or consumers. Even if our sales efforts result in obtaining a new Brand, Creator or user, it may not sufficiently justify the expenses incurred to acquire the Brand, Creator or user and the related training support. As a result, we may not be able to add Brands, Creators or consumers, or generate revenue, as quickly as we may expect, which could harm our growth prospects.

Risks Related to Our AI Business

A significant slowdown in the growth of AI and AI-related markets could affect our business and earnings. Even if the market does grow, there is a possibility that we may not be able to grow at a similar pace.

AI and AI-related markets are still in their infancy in comparison to other widely used software types, it is unclear whether AI and AI-related markets will continue to grow. The success of our Technology Platform will depend on the willingness of Creators and Brands to increase their use of AI. If Creators and Brands do not perceive the benefits of AI products and services, then AI and AI-related markets could experience a significant slowdown in growth, which would dimmish the market for our Technology Platform and have a negative effect on our business, operating results, and financial condition. Additionally, if market growth falls short of our expectations we may not be able to adjust our Technology Platform quickly enough to maintain and grow our operations. Even if AI-related markets do grow, we may not be able to adjust our spending quickly enough to keep pace or grow at a similar or steady pace with such growth, and we may misjudge market and business trends, which would harm our business, operating results, and financial condition.

AI services and products developed by us may become obsolete due to fast growing technological innovations or the entry of competitors with more financial and brand power.

AI is a fast growing industry and we must successfully adapt and manage technological advances in AI and AI-related markets, as well as effectively compete with the emergence of additional competitors in the industry in order to maintain and grow our AI business and AI services. Thus, the success of our AI services and business depends in large part on our ability to keep pace with rapid technological changes in the development and implementation of AI products and services. For example, the development of groundbreaking technological innovations in AI, or innovations that would render AI obsolete, would harm our AI related business and make our AI services less durable. Further, the entry of competitors into the AI market that have more financial and brand power, could cause our share of the market to be significantly reduced thereby negatively affecting our business, operating results, and financial condition. For example, both Google and Microsoft have announced near term AI products and services. Any one of which may be a direct competitor with our Amplify conversation AI services. There is a risk that these or other competitors could cause significant disruptions to our AI business model, and that we will be unprepared to compete effectively.

Failure to attract and retain additional qualified personnel could prevent us from executing our business strategy and growth plans.

To execute our business strategy, we must attract and retain highly qualified personnel, including in the areas of AI and ML. Competition for executive officers, software developers, compliance and risk management

 

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personnel and other key employees in our industry and location is intense. We compete with many other companies for software developers with high levels of experience in designing, developing, and managing cloud-based software, as well as for skilled legal and compliance and risk operations professionals. Many of the companies with which we compete for experienced personnel have greater resources than we do and can frequently offer such personnel substantially greater compensation than we can offer. If we fail to identify, attract, develop and integrate new personnel, or fail to retain and motivate our current personnel, our growth prospects would be adversely affected.

The information that our AI learns may include highly confidential information. In the unlikely event of a leakage of such confidential information, our credibility may be negatively impacted, which may effect our business, operating results, and financial condition.

Our AI may come to learn sensitive and confidential information. When accumulating such information the risks of a data breach or inadvertent disclosure of such information is of paramount concern. The information our AI obtains may become released due to a hack or data breach by third-parties as well as accidently released by us. Any unauthorized disclosure of such information could damage our reputation, interrupt our operations, and may result in a violation of applicable laws. If such information is released, it could cause Creators and Brands to not trust our AI services and reduce the number of customers we attract. Further, if such a leak were to occur we may also have to cease our AI operations to install additional security measures to prevent the further occurrence of leaks, which may be time consuming and expensive. Accordingly, if there is a leak of sensitive or confidential information by our AI, whether as a result of third-parties, or caused by us, it would seriously harm our business, operating results, and financial condition.

Use of new and emerging AI applications, such as genAI content creation, may require additional investment and costs, and pose risks to our business and could subject us to legal liability.

Uncertainty around new and emerging AI applications, such as genAI content creation, may require additional investment in the development of proprietary datasets and ML models, development of new approaches and processes to provide attribution or remuneration to content creators and building systems that enable creatives to have greater control over the use of their work in the development of AI, which may be costly and could impact our profit margin. Developing, testing, and deploying AI systems may also increase the cost profile of our offerings due to the nature of the computing costs involved in such systems.

We may use generative AI tools in our business. GenAI is a broad label describing any type of AI that can produce new text, images, video, or audio clips. Technically, this type of AI learns patterns from training data and generates new, unique outputs with similar properties. GenAI tools producing content which can be indistinguishable from that generated by humans is a relatively novel development, with benefits, risks, and liabilities still unknown. Recent decisions of the U.S. Copyright Office suggest that we would not be able to claim copyright ownership in any source code, text, images, or other materials, which we develop through use of genAI tools, and the availability of such protections in other countries is unclear. As a result, we could have no remedy if third parties reused those same materials, or similar materials also generated by AI tools. We also face risks to any confidential or proprietary information of the Company which we may include in any prompts or inputs into any genAI tools, as the providers of the genAI tools may use these inputs or prompts to further train the tools. Not all providers offer an option to opt-out of such usage, and, even where we do opt-out, we cannot guarantee that the opt-out will be fully effective. In addition, we have little or no insight into the third-party content and materials used to train these genAI tools, or the extent of the original works which remain in the outputs. As a result, we may face claims from third parties claiming infringement of their intellectual property rights, or mandatory compliance with open source software or other license terms, with respect to software, or other materials or content we believed to be available for use, and not subject to license terms or other third party proprietary rights. We could also be subject to claims from the providers of the genAI tools, if we use any of the generated materials in a manner inconsistent with their terms of use. Any of these claims could result in legal proceedings and could require us to purchase a costly license, comply with the requirement of open source

 

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software license terms, or limit or cease using the implicated software, or other materials or content unless and until we can re-engineer such software, materials, or content to avoid infringement or change the use of, or remove, the implicated third party materials, which could reduce or eliminate the value of our technologies and services. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a material adverse effect on our business, results of operations, financial condition, and future prospects.

Risks Related to Government Regulation and Our Intellectual Property

We may be unable to protect our patents, trademarks and other intellectual property rights, and others may allege that we infringe upon their intellectual property rights.

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

Our intellectual property portfolio primarily consists of patents, patent applications, copyrights, registered and unregistered trademarks, trademark applications, domain names, know-how, and trade secrets. Our trademarks and other intellectual property rights are critical to our success and our competitive position. Our intellectual property rights may be challenged and invalidated by third parties and may not be strong enough to provide meaningful commercial competitive advantage. While we have been issued patents and have additional patent applications pending, there can be no assurance that our issued patents will not be limited in scope or invalidated, or that our patent applications will result in issued patents. We have not registered our intellectual property in all jurisdictions in which we operate or have plans to operate. If we fail to maintain our intellectual property, our competitors might be able to enter the market, which would harm our business.

Moreover, a portion of our intellectual property has been acquired from one or more third parties. While we have conducted diligence with respect to such acquisitions, because we did not participate in the development or prosecution of much of the acquired intellectual property, we cannot guarantee that our diligence efforts identified and/or remedied all issues related to such intellectual property, including potential ownership errors, potential errors during prosecution of such intellectual property, and potential encumbrances or issues arising through the acquisition that could limit our ability to enforce such intellectual property rights. In addition, in connection with our settlement of disputes related to our acquisition of Verzuz, under the terms of our Second Settlement and Payment Agreement, dated September 22, 2022, by and between Triller Hold Co LLC, Triller Inc. and the founders of Verzuz, we agreed to assign the intellectual property of Verzuz LLC and execute documents of transfer of such intellectual property in the event we did not make certain payments in the aggregate amount of approximately $9.0 million by January 31, 2023. We did not make such payments in full by January 31, 2023, and on August 18, 2023, we received a letter from the founders of Verzuz LLC asserting ownership over Verzuz copyrights and trademarks. Although we presently have no intention of executing documents of transfer and we maintain our continued ownership of all intellectual property purchased in the acquisition and intend to vigorously defend our ownership over such intellectual property, we may be compelled to transfer such intellectual property in the future, which could hurt our business prospects. As of the date of this prospectus, we owe approximately $37.0 million, plus interest, to the owners of Verzuz, which is due and payable. As of September 30, 2023, this amount significantly exceeds our cash balance of $1.0 million and we will have obligations that could impact our ability to obtain financing in the future. If we are unable to obtain sufficient financing to satisfy these obligations it will have a material adverse effect on our business and we may have to limit operations in a manner inconsistent with our development and growth plans, or we may be unable to remain solvent. Notwithstanding the foregoing, we have evaluated the range of possible future outcomes regarding Verzuz and the impact on our estimated future cashflows, and have determined that we do not believe the loss of this intellectual property would negatively impact our business and results of operations. We believe this to be the case due to integration challenges that occurred since the Verzuz acquisition closed. When we acquired Verzuz in 2021, we believed we were capable of converting the large following Verzuz had

 

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accumulated on social media into paying users and long term value contributors to our ecosystem. Our attempts to monetize Verzuz Events and convert users from “free” users to “paying” users proved to be more challenging than anticipated. As a result we have not produced a Verzuz event since July 2022. Therefore, Verzuz is not a material contributor to our revenue and only an insignificant number of Verzuz users have been included in our user base, business model or assumptions. However, we have determined that no impairment is required for the asset and that any contemplated outcome of the ongoing Verzuz negotiations will not have a material impact on our current financial statements. We continue to monitor and test for impairment on an ongoing basis. While Verzuz is not generating revenue or converting to paid users as we hoped, we still believe the brand name itself has value and in the future if we are unable to realize the full carried value, which we still believe to be achievable, we would then need to reassess. In addition, we are actively discussing with the founders of Verzuz a transaction involving the sale of Verzuz or the forgiveness of the debt associated with the Verzuz acquisition. Such discussion has included conversations regarding the intellectual property associated with Verzuz. There can be no assurance that such a transaction will be completed.

Further, policing unauthorized use and other violations of our intellectual property is difficult, particularly given our international scope, so we are susceptible to others infringing, diluting or misappropriating our intellectual property rights. If we are unable to maintain and protect our intellectual property rights adequately, we may lose an important advantage in the markets in which we compete. In particular, the laws of certain foreign countries do not protect intellectual property rights in the same manner as do the laws of the United States and, accordingly, our intellectual property is at greater risk in those countries even where we take steps to protect such intellectual property. For example, some license provisions protecting against unauthorized use, copying, transfer, and disclosure of our products, or certain aspects of our Technology Platform or products may be unenforceable under the laws of certain jurisdictions. Further, competitors, foreign governments, foreign government-backed actors, criminals, or other third parties may gain unauthorized access to our proprietary information and technology. Additionally, certain unauthorized use of our intellectual property may go undetected, or we may face legal or practical barriers to enforcing our legal rights even where unauthorized use is detected. We have not actively monitored trademark filings by third parties. The disclosure to, or independent development by, a competitor of any of our trade secrets, know-how or other technology not protected by a patent or other intellectual property system could materially reduce or eliminate any competitive advantage that we may have over such competitor. Additionally, failure to comply with applicable procedural, documentary, fee payment, foreign filing license and other similar requirements with the United States Patent and Trademark Office and various similar foreign governmental agencies could result in abandonment or lapse of the affected patent, trademark or application. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or designing around our technology and intellectual property or claiming that we infringe upon or misappropriate their technology and intellectual property.

The confidentiality and invention agreements we have entered into to protect our intellectual property rights may not have been properly entered into on every occasion with the applicable counterparty, and we cannot predict whether these agreements will be adequate to prevent infringement or misappropriation of these rights or be sufficient to ensure ownership of these rights, and such agreements can be difficult and costly to enforce or may not provide adequate remedies if violated. Further, we may not have entered into such agreements with all relevant parties. If we failed to enter into one of these agreements, or if the assignment language is found to be insufficient under applicable laws, it may not have effectively granted ownership of certain technology or other intellectual property to us. In such an event, there would be a risk that the applicable counterparty would not be available to (or would not be willing to) assist us in perfecting our ownership of the technology or intellectual property, or the counterparty may even assert ownership rights against us and make claims for fees, damages, or equitable relief with respect to such technology or intellectual property, which may have an adverse effect on our ability to utilize, perfect, or protect our proprietary rights over such technology and intellectual property. Such agreements may also be breached and trade secrets or confidential information may be willfully or unintentionally disclosed, including by employees who may leave our company and join our competitors, or our competitors or other parties may learn of the information in some other way. Any such infringement of our intellectual property rights would also likely result in our commitment of time and resources to protect these rights. We have engaged, and continue to engage, in litigation with parties that claim or misuse some of our intellectual property. We are involved in certain pending lawsuits relating primarily to the ownership of certain

 

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intellectual property rights. Similarly, we may infringe on others’ intellectual property rights. One or more adverse judgments with respect to these intellectual property rights could have a material adverse effect on our business, operating results and financial condition.

From time to time, in the ordinary course of our business, we have been and may become involved in administrative processes, including re-examination, inter partes review, interference, derivation opposition and/or cancellation proceedings with respect to some of our intellectual property or third-party intellectual property. Any such proceedings or other litigation or dispute involving the scope or enforceability of our intellectual property rights or any allegation that we infringe, misappropriate or dilute upon the intellectual property rights of others, regardless of the merit of these claims, could be costly and time-consuming and have in the past and may in the future lead to loss or narrowing of our intellectual property. If any infringement or other intellectual property claim made against us by any third party is successful, if we are required to indemnify a third party with respect to a claim, or if we are required to, or decide to, cease use of a brand or technology, rebrand or obtain non-infringing intellectual property (such as through a license), it could result in harm to our competitive position, delay introductions of enhancements to our platform, result in our substituting inferior or more costly technologies into our platform, or harm our reputation and brand, and could adversely affect our business and financial condition. We expect that the occurrence of infringement claims is likely to grow as the market for our Technology Platform and Events grows and as we introduce new and updated products and offerings. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources.

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

Lastly, in the event of a bankruptcy, our intellectual property licenses could be affected in numerous ways. A bankruptcy could result in us losing intellectual property rights. In particular, the United States Bankruptcy Code definition of intellectual property only includes trade secrets, patents and patent applications, copyrights, and mask works and does not include trademarks so in the event of our bankruptcy, we could lose rights to our trademarks.

We have been, and in the future may be, sued by third parties for alleged infringement of their proprietary rights.

There is considerable patent and other intellectual property development activity in our market, and litigation, based on allegations of infringement or other violations of intellectual property, is frequent in the music and social media industries. However, we may not be aware if our Technology Platform or technology is infringing, misappropriating, or otherwise violating third-party intellectual property rights, and such third parties may bring claims alleging such infringement, misappropriation, or violation. Because patent applications can take years to issue and are often afforded confidentiality for some period of time, there may currently be pending applications, unknown to us, that later result in issued patents that could cover our Technology Platform or technology and there is also a risk that we could adopt a technology without knowledge of a pending patent application, which technology would infringe a third-party patent once that patent is issued. Furthermore, it is common for individuals and groups to purchase patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. Our patent portfolio may provide little or no deterrence in a litigation with such non-practicing entities or other adverse patent owners that have no relevant solution revenue as we would not be able to assert our patents against such entities or individuals.

Our use of third-party content, including music content, software, and other intellectual property rights may be subject to claims of infringement or misappropriation. We cannot guarantee that our internally developed or acquired technologies and content do not or will not infringe the intellectual property rights of others. From time

 

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to time, our competitors or other third parties have in the past and may in the future claim that we are infringing upon or misappropriating their intellectual property rights, and we may be found to be infringing upon such rights. For example, we recently settled litigation brought by Sony Music Entertainment, Sony Music Entertainment US Latin LLC, Arista Records LLC, Provident Label Group LLC, Records Label, LLC, and Zomba Recording LLC (collectively, “Sony Music”), alleging claims for breach of contract relating to an agreement permitting the use of Sony Music’s content in user-created videos, copyright infringement, contributory copyright infringement, and vicarious copyright infringement (the “Sony Music Lawsuit”). For additional information, see “Business—Legal Proceedings.”

Many potential litigants, including some of our competitors and patent-holding companies, have the ability to dedicate substantial resources to assert their intellectual property rights and to defend claims that may be brought against them. Claims or litigation have caused in the past and could in the future cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our Technology Platform or services or using certain technologies, force us to implement expensive work-arounds, or impose other unfavorable terms. In addition, we may be required to license additional technology from third parties to develop and market new platform features, which may not be on commercially reasonable terms, or at all, and would adversely affect our ability to compete. Any license or settlement entered into as the result of claims or litigation may not provide us with sufficient rights to practice our Technology Platform. We have in the past and may in the future enter into patent license agreements as a result of third-party patent assertions. In the event that we do not comply with the requirements of a patent license agreement or fail to make required payments, we may be subject to breach of contract claims, which may subject us to monetary damages and loss of rights under the license agreement. We expect that the occurrence of infringement claims is likely to grow as the market for our Technology Platform and Events grows and as we introduce new and updated products and offerings. Accordingly, our exposure to damages resulting from infringement claims could increase and this could further exhaust our financial and management resources. Further, during the course of any litigation, we may make announcements regarding the results of hearings and motions, and other interim developments. If securities analysts and investors regard these announcements as negative, the market price of our Series A common stock may decline. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and require significant expenditures. Any of the foregoing could prevent us from competing effectively and could have an adverse effect on our business, financial condition, and operating results.

Moreover, our agreements with certain partners and certain vendors include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement pertaining to our products and technology. Some of these indemnity agreements provide for uncapped liability and some indemnity provisions survive termination or expiration of the applicable agreement. Any claim of infringement by a third party, even one without merit, whether against us or for which we are required to provide indemnification, could cause us to incur substantial costs defending against the claim, could distract our management from our business, and could require us to cease use of such intellectual property. Further, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential information during this type of litigation. Any dispute with a partner or vendor with respect to these intellectual property indemnification obligations could have adverse effects on our relationship with that counterparty and other potential partners or vendors, and harm our business and operating results. We may be required to make substantial payments for legal fees, settlement fees, damages, royalties, or other fees in connection with a claimant securing a judgment against us, we may be subject to an injunction or other restrictions that cause us to cease selling subscriptions to our platform, we may be subject to an injunction or other restrictions that cause us to rebrand or otherwise cease using certain trademarks in specified jurisdictions, or we may be required to redesign any allegedly infringing portion of our platform or we may agree to a settlement that prevents us from distributing our platform or a portion thereof, any of which could adversely affect our business, financial condition and results of operations. In addition, our insurance may not be adequate to indemnify us for all liability that may be imposed, or otherwise protect us from liabilities or damages, and any such coverage may not continue to be available to us on acceptable terms or at all.

 

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We may incur significant expenses to protect our intellectual property rights, and if we are unable to adequately protect our intellectual property rights, our competitive position could be harmed.

We regard our copyrights, service marks, trademarks, trade secrets, patents and other intellectual property as critical to our success. We rely on a combination of copyright and trademark laws, trade secret protection, confidentiality and non-disclosure agreements, and other contractual provisions to protect our proprietary software, trade secrets and similar intellectual property. We have patents, copyrights and trademarks in certain jurisdictions and may apply for further trademark and copyright registrations and additional patents, which may provide such protection in relevant jurisdictions. However, we cannot assure you that our efforts will prove to be sufficient or that third parties will not infringe upon or misappropriate our proprietary rights. Unauthorized use of the intellectual property, whether owned by or licensed to us, could adversely affect our business and reputation.

We may be subject to disputes or liabilities associated with content made available on our products and services.

We provide various products and services that enable Brands and Creators and other users to make content available on our service. For example, Creators or users can record and distribute their content and can upload profile images. These may subject us to claims of intellectual property infringement by third parties if such Brands and Creators or users do not obtain the appropriate authorizations from rights holders. In addition to intellectual property infringement, we have faced and will continue to face other claims relating to content that is published or made available through our products and services. These may include claims related to defamation, rights of publicity and privacy, and online safety. For example, we are dependent on those who provide content on our service complying with the terms and conditions of any license agreements with us, our end user license agreements, or commercial agreements we may enter into with certain Brands and Creators or users, which prohibit providing content that infringes the intellectual property or proprietary rights of third parties or is otherwise legally actionable pursuant to privacy and/or publicity rights, and other applicable laws, rules, and regulations. However, we cannot guarantee that the Brands and Creators and users who provide content on our service will comply with their obligations, and any failure of Brands and Creators and users to do so may materially impact our business, operating results, and financial condition.

We and other intermediate online service providers rely primarily on two sets of laws in the U.S., to shield us from legal liability with respect to user activity, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the advertisements posted, or the content provided by Brands, Creators or users. The Digital Millennium Copyright Act (“DMCA”) provides service providers a safe harbor from monetary damages for copyright infringement claims, provided that service providers comply with various requirements designed to stop or discourage infringement on their platforms by their users. Section 230 of the Communications Decency Act (“CDA”) protects providers of an interactive computer service from liability with respect to most types of content, including defamatory information, provided over their service by others, including users. Both the DMCA safe harbor and Section 230 of the CDA face regular calls for revision, including without limitation in a number of CDA reform bills currently being considered by legislators. Furthermore, recent litigation involving cloud hosting companies has created uncertainty with respect to the applicability of DMCA protections to companies that host substantial amounts of user content. For these reasons and others, now or in the future, the DMCA, CDA, and similar provisions may be interpreted as not applying to us or may provide us with incomplete or insufficient protection from claims. Changes in any such laws that shield us from liability could materially harm our business, operating results, and financial condition. In many, but not all, territories outside of the United States there are laws similar to the DMCA which exempt us from copyright infringement liability that may arise due to hosting user-uploaded materials. In some countries, particularly in Europe and the APAC region, these laws are being readjusted and new -at times burdensome -constraints are being imposed onto service providers. Although we have invested and continue to invest in systems and resources, which are intended to ensure that we are compliant with the requirements of U.S. and international laws relating to, among other things, materials that infringe on copyrights and contain other objectionable content, our systems may not be sufficient or we may unintentionally err and fail to comply with these laws and regulations which could expose us to claims, judgments, monetary liabilities and other remedies, and to

 

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limitations on our business practices which could materially adversely affect our business and financial results. For example, we entered into a settlement agreement relating to a lawsuit for copyright infringement whereby we agreed to pay Wixen $10.0 million in scheduled payments through September 2024 and approximately $5.5 million remains due. We currently do not have sufficient cash on hand to satisfy this obligation which could result in penalties under the settlement agreement. Although we do not currently have cash on hand to satisfy this obligation, we have access to certain facilities which we believe will help satisfy this obligation, including the up to $200.0 million available from the Sabeera Convertible Promissory Notes prior to this direct listing, of which we have drawn $0.7 million to date. We anticipate utilizing approximately $25.0 million available to us under the Sabeera Convertible Promissory Notes. In addition, we have entered into a $500.0 million SEPA with “Yorkville” which may provide further liquidity and working capital support following this direct listing, if applicable conditions are met. We believe that we will be able to satisfy all current and future commitments under the Wixen Settlement due to our access to liquidity and capital lines. However, if we are not able to obtain sufficient financing to satisfy these obligations it will have a material adverse effect on our business and we may have to limit operations in a manner inconsistent with our development and growth plans.

Given the large volume of content that various third parties make available on our Technology Platform, it is challenging for us to accurately verify the legitimacy of such content and review or moderate such content to ensure that it is otherwise in compliance with our policies, so inappropriate content may be posted or activities executed before we are able to take protective action, which could subject us to legal liability. Even if we comply with legal obligations to remove or disable content, we may continue to allow use of our products or services by individuals or entities who others find hostile, offensive, or inappropriate. The activities or content of our Creators, Brands or users may lead us to experience adverse political, business and reputational consequences, especially if such use is high profile. Conversely, actions we take in response to the activities of our Creators, Brands or users, up to and including banning them from using our products, services, or properties, may harm our brand and reputation. In addition to liability based on our activities in the United States, we may also be deemed subject to laws in other countries that may not have the same protections or that may impose more onerous obligations on us, which may impose additional liability or expense on us, including additional theories of intermediary liability.

In addition, Brands may not wish to associate with certain types of content and if we cannot reliably exclude their ads from certain types of content, our business relationships may also be negatively impacted. If we fail to build and maintain an effective system to moderate the content on our Technology Platform, our users, Creators, or Brands may lose trust in us, our reputation may be impaired, and our business may be adversely affected.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security, and our actual or perceived failure to comply with such obligations could harm our business, including regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse business consequences.

Since we process personal information and other sensitive data such as confidential business data, trade secrets, and intellectual property, from and about our Creators, Brands, users, employees, service providers, and other third parties, we are subject to general business regulations and laws, as well as regulations and laws specific to the internet, which may include laws and regulations related to user privacy, data protection, information security, consumer protection, payment processing, taxation, intellectual property, electronic contracts, internet access and content restrictions. Our handling of data is subject to a variety of laws and regulations, including regulation by various government agencies, including the FTC, and various state, local and foreign regulators. The U.S. federal and various state and foreign governments have adopted or proposed limitations on the collection, distribution, use and storage of personal data of individuals. Any failure or perceived failure by us to comply with privacy or security laws, policies, legal obligations or industry standards or any security incident that results in the unauthorized disclosure, release or transfer of personal data or other user data may result in governmental enforcement actions, litigation, fines and penalties and/or adverse publicity, and could cause our users to lose trust in us, which could have an adverse effect on our

 

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reputation and business. We cannot guarantee that we have been or will be fully compliant in every jurisdiction. Litigation and regulatory proceedings are inherently uncertain, and the laws and regulations governing issues such as privacy, payment processing, taxation and consumer protection related to the internet continue to develop.

As our service and others like us gain traction in international markets, governments are increasingly looking to introduce new or extend legacy regulations to these services. Laws and regulations concerning privacy, data protection and information security are evolving, and changes to such laws and regulations could require us to change features of our services, which may in turn reduce demand for our services. Our failure to comply with federal, state and international data privacy laws and regulations could harm our ability to successfully operate our business and pursue our business goals. For example, the CCPA, among other things, requires covered companies to provide disclosures to California consumers and afford such consumers the ability to opt-out of sales of personal data.

Additionally, broad consumer privacy laws have been enacted in a number of states including California. Colorado, Connecticut, Iowa, Utah and Virginia. For example, the Montana legislature voted to ban Tik Tok on April 14, 2023. Governor Greg Gianforte signed Senate Bill 419, which prohibits mobile application stores from offering TikTok within the state. The bill also makes it illegal for Tik Tok to operate within the state. It is not yet fully clear how these laws will be enforced and how certain of their requirements will be interpreted. The effects of these laws are potentially significant and may require us to modify our data collection or processing practices and policies and to incur substantial costs and expenses in an effort to comply and increase our potential exposure to regulatory enforcement and/or litigation.

The CCPA has prompted a number of proposals for new federal and state-level privacy legislation. Such proposed legislation, if enacted, may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment of resources in compliance programs, impact strategies and the availability of previously useful data and could result in increased compliance costs and/or changes in business practices and policies. At the federal level, there is a significant and potentially transformative bipartisan bill being debated.

Other federal and state laws restrict the use and protect the privacy and security of personally identifiable information. For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business and the cost of available tools to improve security and reduce vulnerabilities. In recent years, the FTC has paid increased attention to privacy and data security matters, and we expect them to continue to do so in the future.

The privacy of children’s personal data collected online is also becoming increasingly scrutinized both in the United States and internationally. For example, the United Kingdom’s Age Appropriate Design Code (“AADC”) and incoming Online Safety Bill, focuses on online safety and protection of children’s privacy online. A similar law, the California’s Age-Appropriate Design Code Act (“CAADCA”) was signed into law in California and goes into effect on July 1, 2024. The CAADCA implements into law certain principles taken from the AADC, among other things, and imposes substantial new obligations upon companies. Passage of the CAADCA and similar laws may further complicate compliance efforts and may increase legal risk and compliance costs for us and our third party partners. In the U.S., we may have obligations on the federal level under the Children’s Online Privacy Protection Act (“COPPA”). Despite our efforts, no assurances can be given that the measures we have taken to address COPPA requirements will be sufficient to completely avoid allegations of COPPA violations, any of which could expose us to significant liability, penalties, reputational harm and loss of revenue, among other things. Additionally, new laws and regulations are being considered in various jurisdictions to require the monitoring of user content or the verification of users’ identities and age such as a comprehensive new measure just signed into law in Utah.

 

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In addition, many foreign jurisdictions in which we do business, including the European Union and other jurisdictions have laws and regulations dealing with the collection and use of personal data obtained from their residents, which are more restrictive in certain respects than those in the U.S. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of personal data that identifies or may be used to identify an individual. We may be required to modify our policies, procedures, and data processing measures in order to address requirements under these or other privacy, data protection, or cyber security regimes, and may face claims, litigation, investigations, or other proceedings regarding them and may incur related liabilities, expenses, costs, and operational losses.

Within the European Union, legislators adopted the EU GDPR, which became effective in May 2018, and which imposes heightened obligations and risk upon our business and which may substantially increase the penalties to which we could be subject in the event of any non-compliance. Under the EU GDPR, parties are either controllers, which are decision-makers that exercise overall control over the purposes and means of data processing, whether alone or jointly with one or more other persons, or processors, who act on behalf of, and only on the instructions of, the relevant controller. In the provision of our services to our users, we generally act as a controller, which imposes significant compliance obligations on us under the EU GDPR. If we fail to satisfy these obligations, we may be subject to investigation or administrative fines from supervisory authorities or subject to individual claims that we failed to comply with the applicable provisions of EU GDPR. In addition, further to the United Kingdom’s exit from the European Union on January 31, 2020, the EU GDPR ceased to apply in the United Kingdom at the end of the transition period on December 31, 2020. In addition, we are also subject to data protection laws in the United Kingdom. The UK GDPR and the UK Data Protection Act 2018 set out the United Kingdom’s data protection regime, which is independent from but aligned to the European Union’s data protection regime. Non-compliance with the EU GDPR, or UK GDPR, may result in monetary penalties of up to €20 million (or £17.5 million under UK GDPR) or 4% of worldwide annual turnover, whichever is higher. Further, a wide variety of other potential enforcement powers are available to competent supervisory authorities in respect of potential and suspected violations of the EU GDPR, or UK GDPR, including audit and inspection rights, and powers to order temporary or permanent bans on all or some processing activities. The EU GDPR and UK GDPR also confer a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the EU GDPR and UK GDPR.

The EU GDPR also provides that European Economic Area (“EEA”) Member States may make their own further laws and regulations to introduce additional requirements (for example, related to the processing of “special categories of personal data,” as well as personal data related to criminal offenses or convictions) which adds to the complexity of processing personal data in or from the EEA or the United Kingdom. This may lead to greater divergence in the law that applies to the processing of personal data across the EEA and/or United Kingdom, compliance with which could limit our ability to collect and process data in the context of our EEA and/or United Kingdom operations, and/or could cause our compliance costs to increase, ultimately having an adverse impact on our business and harming our business and financial condition.

The EU GDPR also regulates cross-border transfers of personal data and requires transferee countries to have protections equivalent to protections available in the EU. The EU GDPR imposes strict rules on the transfer of personal data to countries outside the EEA, Switzerland or the United Kingdom, including the United States, in respect of which the European Commission or the United Kingdom government has not issued a so-called “adequacy decision” or “ adequacy regulation” (known as “third countries”), unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data. This includes putting in place the European Commission’s Standard Contractual Clauses (“SCCs”) for transfers outside of the EEA and a similar transfer mechanism for transfers of personal data outside of the United Kingdom, the International Data Transfer Agreement or Addendum (“IDTA”). Under both the EU GDPR and the UK GDPR, exporters are also required to assess the risk of the data transfer on a case-by-case basis, including conducting an analysis of the laws in the destination country. The SCCs had to be in place by December 27, 2022, whereas the IDTA must be implemented in all existing contracts by March 21, 2024. Finalizing the implementation of the updated SCCs and

 

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IDTA, and conducting the required risk assessments, may continue to necessitate significant contractual overhaul of our data transfer arrangements with users, sub-processors and vendors. On June 28, 2021, the European Commission published its decision recognizing the United Kingdom as having adequate laws to the protect the rights and freedoms of data subjects such that personal data may transfer to from the EU to the United Kingdom without an approved transfer mechanism. The decision is effective for four years and its continuing effect is dependent on United Kingdom and regulation on data privacy not diverging materially from the EU GDPR. The United Kingdom Government also confirmed that data transfers to the EU remain free flowing.

In addition, other European data protection laws require that affirmative opt-in consent is procured to the placement of cookies and similar tracking technologies on users’ devices (other than those that are “strictly necessary” to provide services requested by the user), including those used for analytics, personalization of experiences and advertising. These requirements may increase our exposure to regulatory enforcement actions, increase our compliance costs and reduce demand for our products. A new regulation proposed in the EU, which would apply across the EEA, known as the ePrivacy Regulation, if and when enacted, may further restrict the use of cookies and other online tracking technologies on which our products rely, as well as increase restrictions on the types of direct marketing campaigns that our platform enables. The final version of the ePrivacy Directive is likely to introduce regulatory enforcement powers akin to those available to supervisory authorities under the EU GDPR, including significant administrative fines and other penalties for non-compliance. Given the delay in finalizing the ePrivacy Regulation, certain regulators have issued guidance on the requirement to seek strict opt-in consent to all non-essential cookies and similar technologies and the requirement to increase the standard of transparency relating to use of cookies and similar technologies. We are likely to need to invest significantly in compliance with these types of new legislation in order to attract and maintain users in the EEA.

The global regulatory framework governing the collection, processing, storage, use and sharing of certain information, particularly financial and other personal data, is rapidly evolving and is likely to continue to be subject to uncertainty and varying interpretations. The proliferation of privacy and data protection laws has heightened risks and uncertainties concerning cross-border transfers of personal data and other data, which could impose significant compliance costs and expenses on our business, increase our potential exposure to regulatory enforcement and/or litigation, and have a negative effect on our existing business and on our ability to attract and retain new users.

We publicly post documentation regarding our practices concerning the collection, processing, use and disclosure of data. Although we endeavor to comply with our published policies and documentation, we may at times fail to do so or be alleged to have failed to do so. Any failure or perceived failure by us to comply with our privacy policies or any applicable privacy, security or data protection, information security or consumer-protection related laws, regulations, orders or industry standards could expose us to costly litigation, significant awards, fines or judgments, civil and/or criminal penalties or negative publicity, and could materially and adversely affect our business, financial condition and results of operations. The publication of our privacy policy and other documentation that provide promises and assurances about privacy and security can subject us to potential state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices, which could, individually or in the aggregate, materially and adversely affect our business, financial condition and results of operations.

We may in the future be, subject to enforcement actions, investigations, litigation, or other inquiries regarding our data privacy and security practices. Additionally, advocacy organizations have also filed complaints with data protection authorities against advertising technology companies, arguing that certain of these companies’ practices do not comply with the EU GDPR and/or the UK GDPR. It is possible that investigations or enforcement actions will involve our practices or practices similar to ours. If our privacy or data security measures fail to comply with current or future laws and regulations, we may be subject to claims, legal proceedings or other actions by individuals or governmental authorities based on privacy or data protection regulations and our commitments to users or others, as well as negative publicity and a potential loss of business. Moreover, if future laws and regulations limit our ability to process personal data, our costs could increase, and our business, results of operations and financial condition could be harmed. In addition, privacy advocates and

 

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industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which we must legally comply or that contractually apply to us. If we fail to follow these security standards even if no user information is compromised, we may incur significant fines, negative publicity and reputational damage or experience a significant increase in costs.

Because the interpretation and application of privacy and data protection laws, regulations and standards are uncertain and quickly changing, it is possible that these obligations may be interpreted and applied in manners that are, or are asserted to be, inconsistent with our practices. Preparing for and complying with these obligations requires significant resources. Further, adaptation of the digital advertising marketplace requires increasingly significant collaboration between participants in the market, such as content Creators, Brands and marketers. Failure of the industry to adapt to changes in data privacy and security obligations and user response to such changes could negatively impact inventory, data, and demand. We cannot control or predict the pace or effectiveness of such adaptation, and we cannot predict the impact such changes may have on our business. In addition, it may be necessary for us to fundamentally change our business activities, information technologies, systems, and practices, and to those of any third parties that process personal information on our behalf.

Although we endeavor to comply with all applicable data privacy and security obligations, we may at times fail or be perceived to have failed to do so. For example, our subsidiary, TrillerTV, is party to a class action over its use of consumer personal identifying information from Facebook. Moreover, despite our efforts, our customers, personnel or third parties upon whom we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture. For example, any failure by a third-party processor to comply with applicable law, regulations, or contractual obligations could result in adverse effects, including inability to operate our business and proceedings against us by governmental entities or others. Any inability, or perceived inability, to address or comply with applicable data privacy or security obligations could result in significant consequences, including, but not limited to, government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-related claims); additional reporting requirements and/or oversight; bans on processing personal information; and orders to destroy or not use personal information. Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; additional costs and liabilities; damage our reputation; reduction in sales and demand for our platform; and harm our business.

Moreover, as internet commerce and advertising continues to evolve, increasing regulation by federal, state and foreign regulatory authorities becomes more likely. For example, California’s Automatic Renewal Law requires companies to adhere to enhanced disclosure requirements when entering into automatically renewing contracts with consumers. Other states have enacted similar laws in recent years. As a result, a wave of consumer class action lawsuits has been brought against companies that offer online products and services on a subscription or recurring basis. Any failure, or perceived failure, by us to comply with any of these laws or regulations could result in damage to our reputation, lost business, and proceedings or actions against us by governmental entities or others, which could impact our operating results. As we improve our TV streaming platform, we may also be subject to new laws and regulations specific to such technologies.

If we fail to retain existing users or add new users, or if our users decrease their level of engagement with our products, our revenue, financial results, and business may be significantly harmed.

The size of our user base and our users’ level of engagement across our products are critical to our success. Our financial performance has been and will continue to be significantly determined by our success in adding, retaining, and engaging active users of our products that deliver ad impressions. We have experienced, and expect to continue to experience, fluctuations and declines in the size of our active user base in one or more markets from time to time, particularly in markets where we have achieved higher penetration rates. User growth and engagement are also impacted by a number of other factors, including competitive products and services, such as TikTok, that have reduced some users’ engagement with our products and services, as well as global and regional business, macroeconomic, and geopolitical conditions. For example, the COVID-19 pandemic led to

 

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increases and decreases in the size and engagement of our active user base from period to period at different points during the pandemic, and the resulting effects from the COVID-19 pandemic may continue to have a varied impact on the size and engagement of our active user base in the future. Any future declines in the size of our active user base may adversely impact our ability to deliver ad impressions and, in turn, our financial performance.

If people do not perceive our products to be useful, reliable, and trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency and duration of their engagement. A number of other social networking companies that achieved early popularity have since seen their active user bases or levels of engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our active user base or engagement levels. Our user engagement patterns have changed over time, and user engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factors can negatively affect user retention, growth, and engagement, including if:

 

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our products are subject to increased regulatory scrutiny or approvals, including from international privacy regulators (particularly in the EEA/UK), or there are changes in our products that are mandated or prompted by legislation, regulatory authorities, executive actions, or litigation, including settlements or consent decrees, that adversely affect the user experience;

 

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we are unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe, or are otherwise limited in our business operations, as a result of European regulators, courts, or legislative bodies determining that our reliance on Standard Contractual Clauses (“SCCs”) or other legal bases we rely upon to transfer user data from the European Union to the United States is invalid; and

 

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there is decreased engagement with our products, or failure to accept our terms of service, as part of privacy-focused changes that we have implemented or may implement in the future, whether voluntarily, in connection with the EU GDPR and/or the UK GDPR, the European Union’s ePrivacy Directive, CPRA, or other laws, regulations, or regulatory actions, or otherwise.

From time to time, certain of these factors have negatively affected user retention, growth, and engagement to varying degrees. If we are unable to maintain or increase our user base and user engagement, particularly for our significant revenue-generating Technology Platform, our revenue and financial results may be adversely affected. Any significant decrease in user retention, growth, or engagement could render our products less attractive to users, marketers, and developers, which is likely to have a material and adverse impact on our ability to deliver ad impressions and, accordingly, our revenue, business, financial condition, and results of operations. As the size of our active user base fluctuates in one or more markets from time to time, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization in order to grow revenue.

Existing federal, state, and foreign laws regulate the senders of commercial emails and text messages and changes in privacy laws could adversely affect our ability to provide our services and could impact our results from operations or result in costs and fines.

We may use a variety of direct marketing techniques to promote our business, including email marketing, telemarketing and marketing conducted via SMS and MMS messages. In the United States, these activities are regulated by laws such as the Controlling the Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act of 2003, the Telephone Consumer Protection Act (“TCPA”) and various state laws and regulations governing telephone solicitation and text message marketing.

The CAN-SPAM Act, among other things, obligates the sender of commercial emails to provide recipients with the ability to opt out of receiving future commercial emails from the sender. The ability of message recipients to opt out of receiving commercial emails may minimize the effectiveness of our marketing efforts. In addition, certain foreign jurisdictions, such as Australia, Canada, the United Kingdom, and the European Union,

 

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have enacted laws that regulate sending email, and some of these laws are more restrictive than U.S. laws. For example, some foreign laws prohibit sending commercial email unless the recipient has provided the sender advance consent to receive such email, or in other words has “opted-in”. A requirement that recipients opt into, or the ability of recipients to opt out of, receiving commercial emails may minimize the effectiveness of our marketing efforts. Any failure by us to comply fully with the CAN-SPAM Act or other laws governing our commercial email programs may subject us to substantial fines and penalties.

Similarly, the TCPA is a U.S. federal statute that protects consumers from unwanted telephone calls, faxes and text messages. TCPA violations can result in significant financial penalties for businesses including civil forfeiture penalties or criminal fines imposed by the Federal Communications Commission (“FCC”) and statutory damages liability through consumer lawsuits brought by private plaintiffs or public enforcement actions brought by state attorneys general or other consumer protection authorities.

Numerous class-action suits under federal and state laws have been filed in recent years against companies that conduct telemarketing and texting campaigns, with many resulting in multi-million-dollar judgments or settlements. While we strive to comply with all laws applicable to our marketing operations, courts, the FCC, and other enforcement authorities may disagree with our interpretations of such laws and subject us to penalties, statutory damages and other liability for noncompliance. Determination by a court or regulatory agency that our operations violate the TCPA or other marketing laws could require us to terminate some portions of our business, and could have material adverse effect on our business, operating results, and financial condition. Even an unsuccessful legal challenge of our marketing activities could result in adverse publicity and could require a costly response from us.

Moreover, many states have enacted telemarketing and text message marketing laws and regulations that are even more proscriptive than the TCPA and that pose additional litigation and regulatory enforcement risks. For example, Florida, Washington, and Oklahoma have enacted statutes that are in many respects more restrictive than the TCPA. Other U.S. states may pass similar (or possibly more burdensome) laws in the future that may erode our ability to effectively market our services via telephone solicitation or text messaging and expose us to currently unforeseen liability. The TCPA and other laws governing our marketing activities are also subject to frequent amendment, as well as to reinterpretation by courts and regulators, and any future amendments or interpretations could adversely affect the continuing effectiveness of our marketing efforts and could force changes in our marketing strategies. We may not be able to respond to such developments with adequate alternative marketing strategies and, as result, any such developments could have an adverse effect on our business, operating results, and financial condition.

If our or our users’ security measures are compromised or unauthorized access to our data (including that of our users or other sensitive or confidential information) is otherwise obtained, our Technology Platform may be perceived as not being secure, our users may be harmed and may curtail or cease their use of our Technology Platform, our reputation may be damaged and we may incur significant liabilities.

Our operations involve the storage and transmission of data of users of our platform, including personally identifiable information and sensitive information of the company. Security incidents could result in unauthorized access to, loss of or unauthorized disclosure of this information, litigation, indemnity obligations and other possible liabilities, as well as negative publicity, which could damage our reputation, impair our sales and harm our users and our business.

Our products and services involve the collection, storage, processing, and transmission of a large amount of data. Cyber-attacks and other malicious internet-based activity continue to increase generally, and platforms that maintain data such as the data we maintain have been targeted by such attacks. If our security measures are compromised as a result of third-party action, employee or user error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability. If third parties with whom we work, such as vendors or developers, violate

 

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applicable laws, our security policies or our acceptable use policy, such violations may also put our users’ information at risk and could in turn have an adverse effect on our business. In addition, if the security measures of our users are compromised, even without any actual compromise of our own systems, we may face negative publicity or reputational harm if our users or anyone else incorrectly attributes the blame for such security breaches to us or our systems. We may be unable to anticipate or prevent techniques used to obtain unauthorized access or to sabotage systems because they change frequently and generally are not detected until after an incident has occurred. As we increase our user base and our brand becomes more widely known and recognized, we may become more of a target for third parties seeking to compromise our security systems or gain unauthorized access to our users’ data. Any failure to prevent or mitigate security breaches and improper access to or disclosure of our data or user data, including personal information, content, or payment information from users, or information from marketers, could result in the loss, modification, disclosure, destruction, or other misuse of such data, which could harm our business and reputation and diminish our competitive position. In addition, computer malware, viruses, social engineering (such as spear phishing attacks), scraping, and general hacking continue to be prevalent in our industry, have occurred on our systems in the past, and will occur on our systems in the future.

Cyber-attacks, denial-of-service attacks, ransomware attacks, business email compromises, computer malware, viruses, and social engineering (including phishing) are prevalent in our industry. Our internal computer systems and those of our current and any future strategic collaborators, vendors, and other contractors or consultants are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, cybersecurity threats, terrorism, war and telecommunication and electrical failures. Cyber incidents have been increasing in sophistication and frequency and can include third parties gaining access to employee or user data using stolen or inferred credentials, computer malware, viruses, spamming, phishing attacks, ransomware, card skimming code, and other deliberate attacks and attempts to gain unauthorized access. The techniques used to sabotage or to obtain unauthorized access to our Technology Platform, systems, networks, or physical facilities in which data is stored or through which data is transmitted change frequently, and we may be unable to implement adequate preventative measures or stop security breaches while they are occurring. Because the techniques used by computer programmers who may attempt to penetrate and sabotage our network security or our website change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. Additionally, during the recent COVID-19 pandemic, and potentially beyond as remote work and resource access expand, there is an increased risk that we may experience cybersecurity-related events such as COVID-19 themed phishing attacks, exploitation of any cybersecurity flaws that may exist, an increase in the number cybersecurity threats or attacks, and other security challenges as a result of most of our employees and our service providers continuing to work remotely from non-corporate managed networks. We have previously been, and may in the future become, the target of cyber-attacks by third parties seeking unauthorized access to our or our users’ data or to disrupt our operations or ability to provide our services.

We also rely on third-party service providers and technologies to operate critical business systems to process confidential and personal information in a variety of contexts. In addition, some of our developers or other partners, such as those that help us measure the effectiveness of ads, may receive or store information provided by us or by our users through mobile or web applications integrated with our products. We provide limited information to such third parties based on the scope of services provided to us. Our ability to monitor these third parties’ cybersecurity practices is limited. These third-party providers and technologies may not have adequate measures in place, and could experience or cause a security incident that compromises the confidentiality, integrity or availability of the systems or technologies they provide to us or the information they process on our behalf. While we have taken steps designed to protect the proprietary, regulated, sensitive, confidential and personal information in our control, our security measures or those of the third parties on which we rely may not be effective against current or future security risks and threats. If these third parties or developers fail to adopt or adhere to adequate data security practices, or in the event of a breach of their networks, our data or our users’ data may be improperly accessed, used, or disclosed. Additionally, we do not currently maintain company-wide policies and procedures with respect to such risks, instead relying on our individual business units to implement the appropriate policies and procedures that each such business unit

 

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believes necessary. Such approach may be less effective than implementing global policies across all business units.

If we or one of our trusted third parties were to experience a cyberattack leading to interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions. Moreover, enforcing a claim that a party illegally disclosed or misappropriated a trade secret are difficult, expensive, time-consuming, and the outcome is unpredictable. In addition, effective trade secret protection may not be available in every country in which our products are available or where we have employees or independent contractors as some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be disclosed to or independently developed by a competitor or other third party, our competitive position would be materially and adversely harmed. These cyber-attacks could be carried out by threat actors of all types (including but not limited to nation states, organized crime, other criminal enterprises, individual actors and/or advanced persistent threat groups). In addition, we may experience intrusions on our physical premises by any of these threat actors. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and our competitive position could be harmed. Any breach, loss, or compromise of personal data may also subject us to civil fines and penalties, or claims for damages either under the EU GDPR and relevant member state law in the European Union, other foreign laws, and other relevant state and federal privacy laws in the United States.

Many governments have enacted laws requiring companies to notify individuals of data security incidents or unauthorized transfers involving certain types of personal data Security compromises experienced by our competitors, by our users or by us may lead to public disclosures, which may lead to widespread negative publicity. For example, in July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents they experience and to disclose on an annual basis material information regarding their cybersecurity risk management, strategy, and governance. Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode user confidence in the effectiveness of our security measures, negatively impact our ability to attract new users, cause existing users to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.

There can be no assurance that any limitations of liability provisions in our contracts for a security breach would be enforceable or adequate or would otherwise protect us from any such liabilities or damages with respect to any particular claim. We also cannot be sure that our existing general liability insurance coverage and coverage for errors or omissions will continue to be available on acceptable terms or will be available in sufficient amounts to cover one or more large claims, or that the insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, financial condition and operating results.

For example, our subsidiary, TrillerTV, is party to a class action over its use of consumer personal identifying information from Facebook. Any such inquiries could subject us to substantial fines and costs, require us to change our business practices, divert resources and the attention of management from our business, or adversely affect our business.

We face uncertainties associated with international markets.

Our production of live Events overseas subjects us to the risks involved in foreign travel, local regulations, including regulations requiring us to obtain visas for our performers, and political instability inherent in varying degrees in those markets. In addition, the licensing of our television and branded merchandise in international

 

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markets exposes us to some degree of currency risk. These risks could adversely affect our operating results and impair our ability to pursue our business strategy as it relates to international markets.

A material portion of our revenue is generated outside of the United States.

Approximately 23.2% of our revenue for the fiscal year ended December 31, 2022 was generated outside of the United States. The majority of the 23.2% of our revenue for the fiscal year ended 2022 generated outside of the United States was derived from the United Kingdom, Australia and Canada. Global political uncertainty poses risks of volatility in global markets, which could negatively affect our operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. dealers, end customers, employees or prospective employees, all of which could adversely affect our business, sales, hiring and employee retention. Implications related to our non-U.S. sales may negatively impact our financial operating results. These implications include foreign currency effects, tariffs, customs duties, inflation, difficulties in enforcing agreements and collecting receivables through foreign legal systems, compliance with international laws, treaties and regulations, unexpected changes in regulatory or tax environments, disruptions in supply or distribution, dependence on foreign personnel and various employee work agreements, foreign governmental action, as well as economic and social instability. In addition, there may unfavorable tax law changes.

As a result of our operations in international markets, we are subject to risks associated with the legislative, judicial, accounting, taxation, regulatory, political and economic risks and conditions specific to such markets.

We provide our Technology Platform in certain jurisdictions abroad through brands and businesses that we own and operate, including Asia, Latin America, Europe and Africa, and we expect to continue to expand our international presence. We face, and expect to continue to face, additional risks in the case of our existing and future international operations, including:

 

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

 

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

 

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limitations on the enforcement of intellectual property rights;

 

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enhanced difficulties of integrating any foreign acquisitions;

 

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enhanced difficulties in reviewing content on our Technology Platform;

 

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

 

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adverse tax consequences;

 

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fluctuations in currency exchange rates and compliance with currency controls;

 

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

 

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limitations on technology infrastructure;

 

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variability in venue security standards and accepted practices; and

 

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

 

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Failure to expand internationally and manage the complexity of international operations could harm our business, financial condition, and results of operations. In addition, we may be subject to additional liabilities associated with the content on our Technology Platform due to content regulation which may vary based on our international operations. See Risk Factors—“We may be subject to disputes or liabilities associated with content made available on our products and services.”

Additionally, if we fail to adequately prevent fraudulent credit card transactions, we may face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card-related costs and substantial remediation costs, or refusal by credit card processors to continue to process payments on our behalf, any of which could materially adversely affect our business, financial condition and results of operations.

We are subject to extensive U.S. and foreign government regulations, and our failure to comply with these regulations could adversely affect our business.

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

 

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

 

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health, safety and sanitation requirements;

 

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the service of food and alcoholic beverages;

 

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

 

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

 

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compliance with applicable antitrust and fair competition laws;

 

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compliance with applicable international trade controls, such as import, export control, and economic and trade sanctions laws and regulations, that may limit or restrict our ability to do business with specific individuals or entities or in specific countries or territories;

 

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

 

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marketing activities;

 

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licensing laws for athlete agents;

 

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licensing laws for the promotion and operation of boxing events;

 

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environmental protection regulations;

 

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

 

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

 

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tax laws; and

 

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

 

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

In the United States and certain foreign jurisdictions, we may have direct and indirect interactions with government agencies and state-affiliated entities in the ordinary course of our business. In particular, athletic commissions and other applicable regulatory agencies require us to obtain licenses for promoters, medical clearances, licenses for athletes, or permits for Events in order for us to promote and conduct our live Events and productions. In the event that we fail to comply with the regulations of a particular jurisdiction, including the laws and regulations that apply to dealings with or involving government agencies, state-affiliated entities and their officials (such as anti-corruption laws), whether through our acts or omissions or those of third parties, we may be prohibited from promoting and conducting our live Events and productions in the relevant jurisdictions or become subject to investigations or enforcement actions. Instances of noncompliance with applicable laws may result in the imposition of fines or other penalties, including the inability to present our live Events and productions in the relevant jurisdictions, which could lead to a decline in revenue streams or have other adverse effects on our business, financial condition, and results of operations.

We are required to comply with export control and economic and trade sanctions laws imposed by the United States or by other jurisdictions where we have operations, maintain personnel or otherwise do business, which may restrict our transactions in certain markets, and with certain customers, business partners, and other persons and entities. As a result, we are not permitted to, directly or indirectly (including through a third-party intermediary), procure goods, services or technology from, or engage in transactions with, individuals and entities that are the target of applicable sanctions. We are also required to conduct our business in compliance with applicable export control requirements, including those that apply to the development and distribution of software, technology and other items. Our products have in the past, and could in the future be, provided inadvertently in violation of such laws. Any violation of export control or sanctions laws could result in fines, other civil and criminal sanctions against us or our employees, prohibitions on the conduct of our business (e.g., loss of export privileges, debarment from doing business with International Development Banks and similar organizations), and damage to our reputation, which could have an adverse effect on our business, financial condition, and results of operations.

We are subject to anti-corruption, anti-bribery, anti-money laundering, and similar laws, and non-compliance with such laws can subject us to criminal penalties or significant fines and harm our business and reputation.

We are subject to anti-corruption and anti-bribery and similar laws, such as the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, U.S. Travel Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (USA PATRIOT Act), as amended, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption and anti-bribery laws have been enforced aggressively in recent years and are interpreted broadly and prohibit companies and

 

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their employees and agents from promising, authorizing, making, or offering improper payments or any other thing of value to government officials and others in the private sector. As we increase our international sales and business, which may include increased interactions with officials and employees of government agencies or state-owned or -affiliated entities, our risks under these laws may increase. Noncompliance with these laws could subject us to investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, adverse media coverage, and other consequences. Any investigations, actions or sanctions could harm our business, results of operations, and financial condition.

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

Risks Related to Our Operations

We depend on the continued service of the members of our executive management team and other key employees, the loss or diminished performance of whom could adversely affect our business.

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

Volatility or lack of appreciation in the stock price of our Series A common stock may also affect our ability to attract and retain our key employees. Many of our senior personnel and other key employees have become, or will soon become, vested in a substantial amount of stock or stock options. We recently granted 5.3 million restricted stock units, or RSUs, to members of our management team and others that vest upon the effectiveness of a filing of a Registration Statement on Form S-8 registering such shares, which we anticipate will take place shortly after the consummation of the listing of our Series A common stock on the NYSE. Employees may be more likely to leave us if the shares they own or the shares underlying their vested options or RSUs, have significantly appreciated in value relative to the original purchase price of the shares or the exercise price of the options, or conversely, if the exercise price of the options that they hold are significantly above the market price of our Series A common stock. If we do not maintain and continue to develop our corporate culture as we grow and evolve, it could harm our ability to foster the innovation, craftsmanship, teamwork, curiosity, and diversity, we believe that we need to support our growth.

 

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We may be unsuccessful in our strategic acquisitions and investments, and we may pursue acquisitions and investments for our strategic value in spite of the risk of lack of profitability.

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

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

Our international sales and operations, including our planned business development activities outside of the United States, subject us to additional risks and challenges that can adversely affect our business, results of operations and financial condition.

During the year ended December 31, 2022, approximately 23.3% of our sales were to customers outside of the United States of America. As part of our growth strategy, we expect to continue to expand our international operations, which may include opening additional offices in new jurisdictions and providing our Technology Platform in additional languages and on-boarding new Creators, Brands and users outside the United States. Any new markets or countries into which we attempt to sell subscriptions to our Technology Platform or other products may not be receptive to our business development activities. We currently have sales personnel and sales and customer and product support operations in the United States, Canada, Bulgaria, the Netherlands, France, the United Kingdom, India and Mexico. We believe that our ability to attract new customers to our Technology Platform and to convince existing customers to renew or expand their use of our Technology Platform is directly correlated to the level of engagement we achieve with our customers in their home countries. To the extent that we are unable to effectively engage with non-U.S. customers, we may be unable to effectively grow in international markets.

Our international operations also subject us to a variety of additional risks and challenges, including:

 

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increased management, travel, infrastructure and legal compliance costs associated with having operations and developing our business in multiple jurisdictions;

 

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providing our Unified-CXM platform and operating our business across a significant distance, in different languages, among different cultures and time zones, including the potential need to modify our Unified-CXM platform and products to ensure that they are culturally appropriate and relevant in different countries;

 

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compliance with non-U.S. data privacy, protection and security laws, rules and regulations, including data localization requirements, and the risks and costs of non-compliance;

 

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legislative changes that may impose fines or other penalties for failure to comply with certain content removal, law enforcement cooperation and disclosure obligations;

 

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longer payment cycles and difficulties enforcing agreements, collecting accounts receivable or satisfying revenue recognition criteria, especially in emerging markets;

 

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hiring, training, motivating and retaining highly-qualified personnel, while maintaining our corporate culture;

 

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increased financial accounting and reporting burdens and complexities;

 

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longer sales cycle and more time required to educate enterprises on the benefits of our Technology Platform outside of the United States;

 

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requirements or preferences for domestic products;

 

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limitations on our ability to sell our Technology Platform and for our solution to be effective in non-U.S. markets that have different cultural norms and related business practices that de-emphasize the importance of positive customer and employee experiences;

 

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differing technical standards, existing or future regulatory and certification requirements and required features and functionality;

 

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orders restricting or blocking our services in particular geographies, or other government-imposed remedies as a result of content hosted on our services. For example, legislation in Germany and India has resulted in the past, and may result in the future, in the imposition of fines or other penalties for failure to comply with certain content removal, law enforcement cooperation, and disclosure obligations;

 

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political and economic conditions and uncertainty in each country or region in which we operate and general economic and political conditions and uncertainty around the world;

 

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changes in a specific country’s or region’s political or economic conditions, including in the United Kingdom as a result of the United Kingdom exiting the European Union;

 

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compliance with laws and regulations for non-U.S. operations, including anti-bribery laws, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our Technology Platform and develop our business in certain non-U.S. markets, and the risks and costs of non-compliance;

 

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heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact our financial condition and result in restatements of our consolidated financial statements;

 

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fluctuations in currency exchange rates and related effects on our results of operations;

 

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difficulties in repatriating or transferring funds from or converting currencies in certain countries;

 

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communication and integration problems related to entering new markets with different languages, cultures and political systems;

 

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new and different sources of competition;

 

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differing labor standards, including restrictions related to, and the increased cost of, terminating employees in some countries;

 

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the need for localized subscription agreements;

 

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the need for localized language support and difficulties associated with delivering support, training and documentation in languages other than English;

 

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increased reliance on channel partners;

 

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reduced protection for intellectual property rights in certain non-U.S. countries and practical difficulties of obtaining, maintaining, protecting and enforcing such rights abroad; and

 

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compliance with the laws of numerous foreign taxing jurisdictions, including withholding tax obligations, and overlapping of different tax regimes.

Any of these risks and challenges could adversely affect our operations, reduce our revenue or increase our operating costs, each of which could adversely affect our ability to expand our business outside of the United States and thereby our business more generally, as well as our results of operations, financial condition and growth prospects.

Global political uncertainty also poses risks of volatility in global markets, which could negatively affect our operations and financial results. Changes in U.S. policy regarding foreign trade or manufacturing may create negative sentiment about the U.S. among non-U.S. dealers, end customers, employees or prospective employees, all of which could adversely affect our business, sales, hiring and employee retention.

Compliance with laws and regulations applicable to our international operations substantially increases our cost of doing business. We may be unable to keep current with changes in government requirements as they change from time to time. Failure to comply with these regulations could have adverse effects on our business. In many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. or other regulations applicable to us. Although we have implemented policies and procedures designed to ensure compliance with these laws and policies, there can be no assurance that our employees, contractors, partners and agents will comply with these laws and policies. Violations of laws or our policies by our employees, contractors, partners or agents could result in delays in revenue recognition, financial reporting misstatements, enforcement actions, disgorgement of profits, fines, civil and criminal penalties, damages, injunctions, other collateral consequences and increased costs, including the costs associated with defending against such actions, or the prohibition of the importation or exportation of our Technology Platform and related services, each of which could adversely affect our business, results of operations and financial condition.

Existing and future laws and evolving attitudes about data privacy and security may impair our ability to collect, use, and maintain data points of sufficient type or quantity to develop and train our artificial intelligence algorithms.

Jurisdictions outside of the United States, the EU, and the UK also are passing more stringent data privacy and security laws, rules and regulations with which we may be obligated to comply. For example, Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais) (“LGPD”) (Law No. 13,709/2018), China’s Personal Information Protection Law (“PIPL”), and Japan’s Protection of Personal Information (“APPI”), impose strict requirements for processing personal data.

We continue to see jurisdictions imposing data localization laws, which require personal data, or certain subcategories of personal data, to be stored in the jurisdiction of origin. Specifically, Russia, China and India have passed or are in the process of passing laws that impose more stringent requirements on data privacy and which have, amongst other things, more stringent data localization requirements. These regulations may inhibit our ability to expand into those markets or prohibit us from continuing to offer services and/or collaborate with partners in those markets without significant additional costs.

In addition to our legal obligations, our contractual obligations relating to data privacy and security have become increasingly stringent due to changes in data privacy and security and the expansion of our service offerings. Certain data privacy and security laws, such as the EU GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.

Apart from government activity and our customer contracts, privacy advocacy and other industry groups have established or may establish new self-regulatory standards that may place additional burdens on our ability to provide our services globally. Our customers expect us to meet voluntary certification and other standards established by third parties, such as TRUSTe, the American Institute for Certified Public Accountants, or the International Standards Organization. If we are unable to maintain these certifications or meet these standards, it

 

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could adversely affect our ability to provide our solutions to certain customers and could harm our business. Business partners and other third parties with a strong influence on how consumers interact with our products, such as Apple, Google, Facebook and Mozilla, may create new privacy controls or restrictions on their products and platforms, limiting the effectiveness of our services.

With laws, rules, regulations and other obligations relating to data privacy and security imposing new and stringent obligations, and with substantial uncertainty over the interpretation and application of these and other obligations, we may face challenges in addressing their requirements and making necessary changes to our policies and practices, and may incur significant costs and expenses in an effort to do so. Additionally, if the third parties we work with, such as our vendors or third-party service providers, violate applicable laws, rules or regulations or our policies, such violations also may put our or our customers’ data at risk and could in turn have an adverse effect on our business. Any failure or perceived failure by us or our third-party service providers to comply with our applicable internal and external policies or notices relating to data privacy or security, our contractual or other obligations to customers or other third parties, or any of our other legal obligations relating to data privacy or security, may result in governmental investigations or inquiries (which have occurred in the past and may occur in the future), enforcement actions, litigation, disputes or other claims, indemnification requests, restrictions on providing our services, claims or public statements against us by privacy advocacy groups or others, adverse press and widespread negative publicity, reputational damage, significant liability or fines and the loss of the trust of our customers, any of which could have a material adverse effect on our business, results of operations and financial condition.

The costs of compliance with, and other burdens imposed by, laws, rules, regulations and other obligations relating to data privacy and security applicable to the businesses of our customers may adversely affect our customers’ ability and willingness to use, collect, manage, disclose, handle, store, transmit and otherwise process information from their employees, customers and partners, which could limit the use, effectiveness and adoption of our Technology Platform and reduce overall demand. Furthermore, the uncertain and shifting regulatory environment and trust climate may cause concerns regarding data privacy and may cause our customers or our customers’ customers to resist providing the data necessary to allow our customers to use our services effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption, effectiveness or use of our applications.

Unfavorable outcomes in legal proceedings may adversely affect our business and operating results.

Our results may be affected by the outcome of pending and future litigation. Unfavorable rulings in our legal proceedings could result in material liability to us or have a negative impact on our business, results of operations, financial condition, reputation, or relations with our employees or third parties. The outcome of litigation, including class action lawsuits, is difficult to assess or quantify. Plaintiffs in class action lawsuits may seek recovery of very large or indeterminate amounts and the magnitude of the potential loss relating to such lawsuits may remain unknown for substantial periods of time. Additionally, our current litigation related obligations are significantly greater than our cash on hand as of September 30, 2023 of $1.0 million. For example, as of the date of this prospectus, we owe approximately $37.0 million, plus interest, to the owners of Verzuz which is due and payable. This may affect our ability to remain solvent and pay our obligations when they come due, including under existing litigation settlement obligations and new adverse judgments. If we are unable to resolve any such matters favorably, our business, operating results, and financial condition may be adversely affected. See Risk Factors—“We are involved in lawsuits and other litigation matters that are expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, or results of operations.”

In addition, we are currently, and from time to time in the future may be, subject to various other claims, investigations, legal and administrative cases and proceedings (whether civil or criminal), or lawsuits by governmental agencies, or claims by our current or former employees or private parties. If the results of these investigations, proceedings, claims or suits are unfavorable to us or if we are unable to successfully defend against third-party lawsuits, we may be required to pay monetary damages or may be subject to fines, penalties, injunctions, or other censure that could have an adverse effect on our business, financial condition, and results of operations. Even if we

 

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adequately addresses the issues raised by an investigation or proceeding or successfully defend a third-party lawsuit or counter claim, we may have to devote significant financial and management resources to address these issues, which could have an adverse effect on our business, results of operations, and financial condition. See “Business—Legal Proceedings” and Note 14, Commitment and Contingencies, of the consolidated financial statements included elsewhere in this prospectus for a description of our legal proceedings for additional information.

We may be subject to liability claims if we breach our contracts.

We are subject to numerous obligations in our contracts with our business partners. Despite the procedures, systems and internal controls we have implemented to comply with our contracts, we have breached commitments in the past and may breach these commitments in the future, whether through a weakness in these procedures, systems, and internal controls, inability or difficulty complying with commitments, whether due to lack of resources or capabilities or otherwise, negligence, or the willful act of an employee or contractor. Our insurance policies, including our errors and omissions insurance, may be inadequate to compensate it for the potentially significant losses that may result from claims arising from breaches of our contracts, disruptions in our services, failures or disruptions to our infrastructure, catastrophic events and disasters or otherwise. See “Business—Legal Proceedings” for additional information and Note 14, Commitment and Contingencies—Samsung Arbitration Award, of the consolidated financial statements included elsewhere in this prospectus for a description of our legal proceedings for additional information.

In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of its merit, could be costly and divert management’s attention. For example, judgment has recently been entered against us following litigation regarding payment of fees with Universal Music Publishing Group. See Risk Factors—“We are involved in lawsuits and other litigation matters that are expensive and time consuming, and, if resolved adversely, could harm our business, financial condition, or results of operations.”

The market and sectors in which we participate are competitive and rapidly evolving, and if we do not compete effectively with established companies as well as new market entrants our business, results of operations, and financial condition could be harmed.

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

 

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from these possible consolidations may create more compelling product offerings and be able to offer more attractive pricing options, making it more difficult for us to compete effectively.

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

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

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

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

This prospectus includes certain internal estimates of the market for our Technology Platform and other opportunities. Market opportunity estimates, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates, forecasts and other forward-looking information in this prospectus relating to the size of our target market, market demand and adoption, capacity to address this demand, and pricing may prove to be inaccurate. The addressable market we estimate may not materialize for many years, if ever, and even if the markets in which it competes meet the size estimates in this prospectus, our business could fail to grow at similar rates, if at all. In addition, certain of the metrics, including Total Consumer Accounts, Number of Brands and Number of Creators, included in this prospectus are based on data we collect and obtain from third party APIs and we are not able to independently verify the data underlying such metrics or determine if the datapoints in such metrics represent users. We currently do not have systems or processes in place to accurately measure the amount of potential duplicative accounts on a continuous basis, although we have in the recent past undertaken a robust process to purge as many of the duplicate and bot accounts as practical be given our resources. Although we are responsible for the disclosure provided in this prospectus and believe such third-party information is reliable, we have not independently verified any such third-party information. As such, the metrics we include in this prospectus may prove to not be accurate.

Our Technology Platform and products are dependent on APIs built and owned by third parties, including social media networks, and if we lose access to data provided by such APIs or the terms and conditions on which we obtain such access become less favorable, our business could suffer.

Our Technology Platform and products depend on the ability to access and integrate with third-party APIs. In particular, we have developed our products to integrate with certain social media network APIs and the third-party applications of other parties. Generally, APIs and the data we receive from the APIs are written and controlled by the application provider. Any changes or modifications to the APIs or the data provided could negatively impact the functionality of, or require us to make changes to, our platform and products, which would need to occur quickly to avoid interruptions in service for our customers.

 

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To date, we have not relied on negotiated agreements to govern our relationships with most data providers and, in general, we rely on publicly available APIs. As a result, in many cases, we are subject to the standard terms and conditions for application developers of such providers, which govern the distribution, operation and fees of such integrations, and which are subject to change by such providers from time to time. Our business, cash flows or results of operations may be harmed if any third party provider changes, limits or discontinues our access to its APIs and data, modifies its terms of service or other policies, including fees charged or restrictions on us or application developers, changes or limits how we can use information and other data collected through the APIs; or experiences disruptions of its technology, services or business generally.

We ratified certain actions pursuant to Section 18-106(e) of the Delaware Limited Liability Company Act.

Prior to the Reorganization, the board of directors of Triller Hold Co LLC and its unitholders will ratify certain actions, including the issuance of units, pursuant to Section 18-106(e) of the Delaware Limited Liability Company Act (Section 18-106(e)), which allows a Delaware limited liability company to ratify a defective act or transaction retroactively to the date the corporate act or transaction was originally taken. Although we believe we will comply with the procedures and requirements of Section 18-106(e), there can be no assurance that (i) claims that the actions or issuances that were ratified are void or voidable due to the identified failure of authorization, or (ii) claims that the Delaware Court of Chancery should declare in its discretion that the ratification pursuant to Section 18-106(e) not be effective or be effective only on certain conditions or other claims related thereto, will not be asserted, and, if asserted, that any such claims will not be successful. If any of the ratifications pursuant to Section 18-106(e) were not effective, then the ratified acts would be invalid and, as applicable, we could have liability to our stockholders, as applicable, including being subject to monetary damages and rescission rights.

Additionally, there are certain corporate actions that the board of directors of Triller Hold Co LLC and its unitholders will need to ratify regarding our previous corporate actions, including prior issuances of equity. Although we expect to obtain these ratifications and fully comply with the procedures and requirements of Section 18-106(e), there can be no assurance that we will do so and that (i) claims that the actions or issuances to be ratified are void or voidable due to the identified failure of authorization, or (ii) claims that the Delaware Court of Chancery should declare in its discretion that the ratification pursuant to Section 18-106(e) should not be effective or be effective only on certain conditions or other claims related thereto, will not be asserted, and, if asserted, that any such claims will not be successful.

Risks Related to Accounting, Currency and Tax Matters

Our restatement of our consolidated financial statements, and possible future restatements, may have a material adverse effect on us.

We have effected restatements of prior period financial results as of and for the periods ended December 31, 2021. As a part of a reorganization and refocus of our business in 2022, it was determined that the Triller app would not be a revenue generating business model. As a result, we determined that costs that had previously been reported in cost of revenue would now be reported as part of sales and marketing expenses and general and administrative expenses. The restatement of prior financial periods has consumed a significant amount of management time and resources and may continue to do so. It has also resulted in substantial costs in the form of accounting, legal fees, and similar professional fees, in addition to the substantial diversion of time and attention of our senior management and members of our accounting team.

Our independent registered public accounting firm’s audit of our financial statements consisted primarily of substantive testing, where the auditor gathered samples to identify any material misstatements in our accounting records or other data, and did not include any tests on our internal controls. A material weakness is a significant deficiency, or combination of significant deficiencies, that result in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected. Since our independent registered public accounting firm identified material weaknesses and significant deficiencies in our internal control over financial reporting, we are subject to a number of additional risks and uncertainties, including the increased possibility of legal proceedings and could adversely impact our operations.

 

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We have identified material weaknesses and significant deficiencies in our internal control over financial reporting. If our remediation of the material weaknesses and significant deficiencies are not effective, or if we experience additional material weaknesses or significant deficiencies in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.

Upon listing on the NYSE, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) the Sarbanes-Oxley Act and the rules and regulations of the NYSE. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting. We have been a private company with limited accounting personnel to adequately execute our accounting processes and other supervisory resources with which to address our internal control over financial reporting and, as a result, we may experience difficulty in meeting these reporting requirements in a timely manner. To date, we have never conducted a review of our internal control for the purpose of providing the reports required by the Sarbanes-Oxley Act. During our review and testing, we may identify deficiencies and be unable to remediate them before we must provide the required reports.

In connection with the preparation of our 2022 condensed and consolidated financial statements, we and our independent auditors identified material weaknesses and significant deficiencies in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

These material weaknesses related to the following:

 

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We do not have an internal corporate accounting team – all accounting functions are outsourced to external accounting and consulting firms. As a result, we have not been devoting adequate resources to our accounting and reporting functions in order to properly and timely record, file and review our financial transactions on a regular basis in order to ensure accuracy.

 

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We do not have a properly documented internal control system in accordance with the requirements of the Committee on Sponsoring Organizations (“COSO”) or any similarly appropriate internal control methodology or formal documentation of our systems of internal control.

 

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As discussed in Note 2 to the financial statements, we restated our 2021 financial statements to correct for certain errors.

 

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We had errors in certain cash flow calculations used as part of the purchase price allocations for certain acquisitions, which resulted in an overstatement of the value of intangible assets acquired. We recorded an audit adjustment to correct the error.

 

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We failed to adjust the numerator in our calculation of loss per unit for deemed distributions and change in fair value of debt and warrant liability. We recorded an audit adjustment to correct the error.

Our auditor also noted the following deficiencies that we believe to be significant deficiencies. A significant deficiency is a deficiency, or combination of deficiencies in internal control over financial reporting, that adversely affects the entity’s ability to initiate, authorize, record, process, or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the entity’s financial statements that is more than inconsequential will not be prevented or detected by the entity’s internal control.

 

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We performed calculations of the fair value of certain warrants using improper inputs, and as a result, recorded an improper amount of unit-based compensation expense. The misstatements were immaterial.

 

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We failed to properly reclassify redeemed units, payable in cash, from mezzanine equity to a current liability. We recorded an audit adjustment to correct the error.

 

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We recorded and improper value transferred to preferred stockholders in calculating the value of a deemed distribution. We recorded an audit adjustment to correct the error.

 

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We recorded revenue from a contract for which the performance obligations had not been satisfied. We recorded an audit adjustment to correct the error.

 

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We failed to reverse unit-based compensation expense for a cancelled agreement. The misstatement was immaterial.

 

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We failed record to certain, immaterial, accruals for certain expenses.

 

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We did not maintain consistent documentation of all of its transactions.

 

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In certain instances, we failed to provide copies of updated or final versions of contracts.

If the hiring of additional finance and accounting personnel becomes economically feasible, we intend to take appropriate and timely steps to remediate these material weaknesses and significant deficiencies through the implementation of appropriate segregation of duties and formalization of accounting policies and controls. These steps include:

 

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hiring of a permanent Corporate Controller, Director of Financial Reporting, accounting managers and other team members to provide oversite of both corporate reporting and consolidated accounting functions for the Company and all subsidiaries;

 

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implementing a company-wide enterprise resource planning system to consolidate accounting for all subsidiaries at the corporate level in fiscal 2024;

 

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implementing stock administration software to automate accounting and reporting for stock option and equity plans and other equity awards; and

 

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implementing corporate reporting and accounting controls in compliance with Sarbanes-Oxley Act Section 404(a) on or before December 31, 2024.

However, we cannot assure you that these measures will significantly improve or remediate the material weaknesses and significant deficiencies described above. As of the date of this prospectus the material weaknesses and significant deficiencies have not been remediated.

We may discover additional weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our combined and consolidated financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If we are not able to comply with the requirements of the Sarbanes-Oxley Act in a timely manner, or if we are unable to maintain proper and effective internal controls over financial reporting, we may not be able to produce timely and accurate financial statements. If that were to happen, our investors could lose confidence in our reported financial information, the market price of our stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Although we are in the process of implementing internal controls, we are in the early stages of such implementation. We cannot assure you that the measures we have taken to date will be sufficient to remediate any weaknesses in our internal controls that we may identify or prevent the identification of significant deficiencies or material weaknesses in the future. If the steps we take do not create effective internal controls in a timely manner, there could be a reasonable possibility that our internal controls will be ineffective and could result in a material misstatement of our financial statements that would not be prevented or detected on a timely

 

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basis. If we are required to restate our consolidated financial statements in the future, we may be the subject of negative publicity focusing on financial statement inaccuracies and resulting restatement. In addition, our financial results as restated may reflect results that are less favorable than originally reported. In the past, certain publicly traded companies that have restated their consolidated financial statements have been subject to shareholder actions. The occurrence of any of the foregoing could harm our business and reputation and cause the price of our Series A common stock to decline after this offering. Further, investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate consolidated financial statements may have a material adverse effect on our stock price.

We may face exposure to foreign currency exchange rate fluctuations.

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

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

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

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

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and related notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements relate to and include, but are not limited to, determining the fair value of equity consideration transferred, assets acquired and liabilities assumed in business combinations, including fair value estimates of intangible assets; the fair value of unit based compensation; the fair value of contingent earn out liabilities; the fair value of debt for which the fair value option has been elected; the fair value of warrant liabilities; internally developed software; impairment of goodwill and intangible assets with definite lives and other long-lived assets; and income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Series A common stock.

 

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Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations

As of December 31, 2022, certain corporate subsidiaries of ours collectively had net operating loss (“NOL”) carryforwards for U.S. federal and State income tax purposes of approximately $5.0 million and $1.4 million, respectively, which may be available to offset taxable income in the future, if any. Under current law, U.S. federal NOLs generated in tax years beginning before January 1, 2018 may be carried forward for 20 tax years. U.S. federal NOLs generated in tax years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to no more than 80% of current year taxable income.

In addition, in general, under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation that undergoes an “ownership change” (generally defined as a greater than 50% change (by value) in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs to offset post-change taxable income. We have not undertaken any analysis under Section 382 of the Code, but we believe it is likely that we have undergone ownership changes, which may result in limitations on our ability to utilize our NOLs. Future changes in our stock ownership, some of which are outside of our control, could result in an ownership change under Section 382 of the Code. We have made numerous recent acquisitions, and the existing NOLs of some of our subsidiaries may be subject to limitations arising from ownership changes prior to, or in connection with, their acquisition by us. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may be subject to limitations. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities, including for state tax purposes. For these reasons, we may not be able to utilize some portion of our NOLs, none of which are currently reflected on our balance sheet, even if we attain profitability.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition, or results of operations.

New income, sales and use, or other tax laws or regulations could be enacted at any time, and existing tax laws and regulations could be interpreted, changed, modified, or applied adversely to us. These events could require us to pay additional taxes on a prospective or retroactive basis, as well as penalties, interest, and other costs for past amounts deemed to be due. New laws, or laws that are changed, modified, or interpreted or applied differently also could increase our compliance, operating, and other costs, as well as the costs of our products. Recent legislation in the United States, commonly referred to as the Inflation Reduction Act, enacts a 15% minimum tax on the adjusted financial statement income of certain large U.S. corporations for tax years beginning after December 31, 2022, as well as a 1% excise tax on stock repurchases made by public corporations after December 31, 2022. Further, legislation enacted in 2017 (informally titled the Tax Cuts and Jobs Act (the “TCJA”) and the Coronavirus Aid, Relief, and Economic Security Act) enacted many significant changes to U.S. tax laws, some of which may be modified in the future by the current or a future presidential administration. Further guidance from the IRS and other tax authorities with respect to such legislation may also affect us. For instance, for certain research and experimental expenses incurred in tax years beginning after December 31, 2021, the TCJA requires the capitalization and amortization of such expenses over five years if incurred in the United States and fifteen years if incurred outside the United States, rather than deducting such expenses currently. Although there have been legislative proposals to repeal or defer the capitalization requirement, there can be no assurance that such requirement will be repealed, deferred or otherwise modified. In addition, it is uncertain if and to what extent various states will conform to current U.S. federal tax law, or any newly enacted U.S. federal tax legislation. Changes in corporate tax rates, the realization of NOLs and other deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses could have a material impact on the value of our deferred tax assets and could increase our future tax expense.

 

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We could be required to collect additional sales taxes or be subject to other tax liabilities, which may adversely affect our business and results of operations.

Due to the global nature of the internet, various states and non-U.S. countries might attempt to impose new or additional sales, use, value-added, or other taxes relating to our business or activities. For instance, in 2018, in South Dakota v. Wayfair, Inc., the U.S. Supreme Court held that states may charge taxes on purchases made by their residents from out-of-state sellers that have no physical nexus to the state. After such decision, several states have imposed an economic presence standard with respect to the imposition of taxes. These new rules often have uncertainty with respect to the level of activity necessary to cause a taxable presence for taxpayers within the state. Although we believe that we currently collect sales taxes in all states that require us to do so, a successful assertion by one or more states requiring us to collect sales taxes where we currently do not, or to collect additional sales taxes in a state in which we currently collect them, could result in substantial tax liabilities (including penalties and interest). Other new or revised taxes, such as digital taxes, could also create significant increases in our tax liabilities and tax compliance costs. Any of these events could have a material adverse effect on our business and results of operations.

We will incur increased costs and obligations as a result of being a public company.

As a publicly traded company, we will incur additional legal, accounting and other expenses that we were not required to incur in the past. After the effectiveness of the registration statement of which this prospectus forms a part, we will be required to file with the SEC annual and quarterly information and other reports that are specified in Section 13 of the Exchange Act. We will also become subject to other reporting and corporate governance requirements, including the requirements of NYSE and certain provisions of the Sarbanes-Oxley Act and the regulations promulgated thereunder, which will impose additional compliance obligations upon us. As a public company, we will, among other things:

 

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prepare and distribute periodic public reports and other stockholder communications in compliance with our obligations under the federal securities laws and NYSE rules;

 

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create or expand the roles and duties of our board and committees of the board;

 

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institute more comprehensive financial reporting and disclosure compliance functions;

 

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enhance our investor relations function; and

 

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involve and retain to a greater degree outside counsel and accountants in the activities listed above.

These changes will require a commitment of additional resources, and many of our competitors already comply with these obligations. We may not be successful in implementing these requirements, and the commitment of resources required for implementing them could have a material adverse effect on our business, financial condition and results of operations.

The changes necessitated by becoming a public company require a significant commitment of resources and management oversight that has increased and may continue to increase our costs and could place a strain on our systems and resources. As a result, our management’s attention might be diverted from other business concerns. If we are unable to offset these costs through other savings, then it could have a material adverse effect on our business, financial condition and results of operations.

We have identified material weaknesses in our internal control over financial reporting. Our failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business, financial condition and results of operations.

We will be required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to provide a report by management on, among other things, the effectiveness of our internal control over financial reporting as of the end of the first fiscal year beginning after the effective date of the registration statement of which this prospectus

 

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forms a part and in each year thereafter. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, or have not remedied any material weaknesses we have identified, we will be unable to assert that our internal controls are effective. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As an “emerging growth company,” we will avail ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404. However, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth company.” When our independent registered public accounting firm is required to undertake an assessment of our internal control over financial reporting, the cost of our compliance with Section 404 will correspondingly increase. See Risk Factors — “We have identified material weaknesses and significant deficiencies in our internal control over financial reporting. If our remediation of the material weaknesses or significant deficiencies is not effective, or if we experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common stock.” There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements, which could cause the price of our Series A common stock to decline and have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Our Proposed Direct Listing and the Ownership of Our Series A Common Stock

Our listing differs significantly from an underwritten initial public offering.

Prior to the opening of trading on NYSE, there will be no book building process and no price at which underwriters initially sell shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on the. This Direct Listing of our Series A common stock on NYSE differs from an underwritten initial public offering in several significant ways, which include, but are not limited to, the following:

 

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There are no underwriters. Therefore, buy and sell orders submitted prior to and at the opening of trading of our Series A common stock on NYSE will not have the benefit of being informed by a published price range or a price at which the underwriters initially sell shares to the public, as would be the case in an underwritten initial public offering. Moreover, there will be no underwriters assuming risk in connection with the initial resale of shares of our Series A common stock. Unlike in a traditional underwritten offering, this prospectus does not include the registration of additional shares that may be used at the option of the underwriters in connection with overallotment activity. Moreover, we will not engage in, and have not and will not, directly or indirectly, request our financial advisors to engage in, any special selling efforts or stabilization or price support activities in connection with any sales made pursuant to this registration statement. In an underwritten initial public offering, the underwriters may engage in “covered” short sales in an amount of shares representing the underwriters’ option to purchase additional shares. To close a covered short position, the underwriters purchase shares in the open market or exercise the underwriters’ option to purchase additional shares. In determining the source of shares to close the covered short position, the underwriters typically consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the underwriters’ option to purchase additional shares. Purchases in the open market to cover short positions, as well as other purchases underwriters may undertake for their own accounts, may have the effect of preventing a decline in the trading price of shares of our Series A common stock. Given that there will be no underwriters’ option to purchase additional shares and no underwriters engaging in stabilizing transactions with respect to the trading of our Series A common stock on NYSE, there could be greater volatility in the trading price of our Series A common

 

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stock during the period immediately following the listing. See Risk Factor—“Our stock price may be volatile, and could decline significantly and rapidly.”

 

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In an underwritten initial public offering, it is customary for an issuer’s officers, directors, and most or all of its other stockholders to enter into a 180-day contractual lock-up arrangement with the underwriters to help promote orderly trading immediately after such initial public offering. Although directors and executive officers, certain stockholders affiliated with our directors and executive officers, and stockholders who hold more than 250,000 shares of Series A common stock, representing approximately 93% of the Series A common stock, entered into lock-up agreements with us until 365 calendar days after the date of our initial listing on NYSE. Consequently, our stockholders, including our executive officers, directors and certain other significant stockholders subject to such lock-up agreement, may sell any or all of their shares at any time (subject to any restrictions under applicable law). If such sales were to occur in a significant volume in a short period of time, it may result in an oversupply of our Series A common stock in the market, which could adversely impact the trading price of our Series A common stock. See Risk Factors—“Following our listing, sales of substantial amounts of our Series A common stock in the public markets, or the perception that sales might occur, could cause the trading price of our Series A common stock to decline.”

 

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We did not conduct a traditional “roadshow” with underwriters prior to the opening of trading of our Series A common stock on NYSE. Instead, we hosted an investor day on   and engaged in certain other investor education meetings. On    ,   we announced the date for this investor day over financial news outlets in a manner consistent with typical corporate outreach to investors. We prepared an electronic presentation for this investor day, which included content similar to a traditional roadshow presentation. A version of the presentation is publicly available, without restrictions, on our website. There can be no guarantee that the investor day and other investor education meetings will be as effective a method of investor education as a traditional “roadshow” conducted in connection with an underwritten initial public offering. As a result, there may not be efficient or sufficient price discovery with respect to our Series A common stock or sufficient demand among potential investors immediately after our listing, which could result in a more volatile trading price of our Series A common stock.

 

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Such differences from an underwritten initial public offering could result in a volatile trading price for our Series A common stock and uncertain trading volume, which may adversely affect your ability to sell any Series A common stock that you may purchase.

Unlike an underwritten initial public offering, the ability of stockholders to assert claims under the Securities Act in connection with a direct listing is uncertain. Unresolved pending and future litigation involving other offerings may limit or bar your ability to bring claims under the Securities Act in connection with this offering. Conversely, if in the future stockholders are permitted to assert claims under the Securities Act in connection with this direct listing, we may experience increased litigation which could harm our business.

Historically, stockholders who purchase securities pursuant, or “traceable,” to a registration statement filed in connection with an underwritten public offering have had standing to assert claims against the issuer and others under the Securities Act. However, due to the different structure and mechanics of a direct listing and limited judicial precedent construing these offerings it is uncertain whether courts would find that a stockholder would be able to “trace” its securities to this registration statement or otherwise have standing to sue under the Securities Act, thus creating a risk that stockholders may not be able to assert claims that would otherwise be available in connection with an unwritten public offering. Specifically, the U.S. Court of Appeals for the Ninth Circuit ruled in Pirani v. Slack Technologies, Inc., No. 20-16418 (9th Cir. 2021) (the “Slack Standing Case”) that investors in a direct listing do have standing to sue under the Securities Act, rejecting the contrary argument that investors cannot trace their securities to the registration in a direct listing and thus lack standing to bring claims under the Securities Act. Thereafter, the U.S. Supreme Court heard an appeal of the Slack Standing Case, and issued its opinion on June 1, 2023 in Slack Technologies LLC, FKA Slack Technologies, Inc. v. Pirani, et al.,

 

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Case No. 22-200. The U.S. Supreme Court held that Section 11 of the Securities Act “requires a plaintiff to plead and prove that he purchased shares traceable to the allegedly defective registration statement,” as opposed to unregistered shares. The U.S. Supreme Court remanded the case to the Ninth Circuit court of appeals to decide whether the plaintiff’s pleadings satisfy Section 11(a). The Supreme Court also declined to resolve the parties’ dispute regarding the viability of claims under Section 12 of the Securities Act. The U.S. Supreme Court’s opinion does not specify the particular facts that a Section 11 plaintiff must plead or establish in order to satisfy the traceability requirement. Nonetheless, the U.S. Supreme Court’s decision may limit or bar altogether your ability to bring claims under the Securities Act in connection with this offering. In particular, courts may conclude that investors who purchase shares in a mixed market comprised of registered and unregistered shares cannot satisfy the traceability requirement. If subsequent opinions concerning the traceability requirement are resolved in a manner adverse to investors, those decisions may further limit or bar altogether your ability to bring claims under the Securities Act in connection with this offering. If, however, subsequent opinions determine that stockholders have standing to assert such claims under the Securities Act in a direct listing, we may face greater exposure to litigation in the future, which could result in substantial expenses, divert our management’s attention and harm our ability to raise capital in the future.

Our stock price may be volatile, and could decline significantly and rapidly.

The listing of our Series A common stock and the registration of the Registered Stockholders’ shares of Series A common stock is a novel process that is not an underwritten initial public offering. We have engaged Clear Street LLC and Rosenblatt Securities Inc. to serve as our financial advisors. There will be no book building process and no price at which underwriters initially sell shares to the public to help inform efficient and sufficient price discovery with respect to the opening trades on NYSE. While in the past we have completed private capital raises, as there has not been a recent sustained history of trading in our common stock in a private placement market prior to listing, NYSE listing rules require that a designated market maker (“DMM”) consult with our financial advisors in order to effect a fair and orderly opening of trading of our Series A common stock without coordination with us, consistent with the federal securities laws in connection with our direct listing. Accordingly, the DMM will consult with our financial advisors in order for the DMM to effect a fair and orderly opening of our Series A common stock on the NYSE, without coordination with us, consistent with the federal securities laws in connection with our direct listing. Pursuant to Rule 7.35A(g) of the NYSE Listed Company Manual, and based upon information known to them at the time, our financial advisors are expected to provide input to the DMM regarding its understanding of the ownership of our outstanding Series A common stock and pre-listing selling and buying interest in our Series A common stock that they become aware of from potential investors and holders of our Series A common stock, including after consultation with certain investors (which may include certain of the Registered Stockholders). Such investor consultation by the financial advisors would not involve any coordination with or outreach on behalf of the Company. The financial advisors will not engage in a book building process as would typically be undertaken by underwriters in a registered initial public offering. Instead, the input that the financial advisors provides to the DMM will be based on information that they become aware of from potential investors and holders of our Series A common stock (which may include certain of the Registered Stockholders) in connection with investor education regarding the process and mechanics of the direct listing, the receipt of buy and sell orders and other customary brokerage activities undertaken without coordination with us. Based on information provided to the NYSE, the opening public price of our Series A common stock on the NYSE will be determined by buy and sell orders collected by the NYSE from broker-dealers, and the NYSE is where buy orders can be matched with sell orders at a single price. Based on such orders, the DMM will determine an opening price for our Series A common stock pursuant to NYSE rules. However, because our financial advisors will not have engaged in a book building process, they will not be able to provide input to the DMM that is based on or informed by that process. For more information, see “Plan of Distribution.” As a result, the absence of sufficient price discovery may result in delays in the opening of trading and, volatile prices and supply once trading commences. The opening public price may bear no relationship to the market price for our Series A common stock after our listing, and thus may decline below the opening public price.

 

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Moreover, prior to the opening trade, there will not be a price at which underwriters initially sell shares of Series A common stock to the public as there would be in an underwritten initial public offering. The absence of a predetermined initial public offering price could impact the range of buy and sell orders collected by NYSE from various broker-dealers. Consequently, upon listing on NYSE, the trading price of our Series A common stock may be more volatile than in an underwritten initial public offering and could decline significantly and rapidly. Further, because of our listing process, individual investors may have greater influence in setting the opening public trading price and subsequent public trading prices of our Series A common stock on the NYSE and may participate more in our initial and subsequent trading, leading to an increased amount of smaller orders at numerous prices, for example, than is typical for a traditional underwritten initial public offering with more institutional investor influence. These factors could result in more volatility in the public trading price of our Series A common stock and an unsustainable trading price if the price of our Series A common stock significantly rises upon listing and institutional investors believe our Series A common stock is worth less than retail investors, in which case the price of our Series A common stock may decline over time.

Further, if the trading price of our Series A common stock is above the level that investors determine is reasonable for our Series A common stock, some investors may attempt to short our Series A common stock after trading begins, which would create additional downward pressure on the trading price of our Series A common stock.

The trading price of our Series A common stock following the listing also could be subject to wide fluctuations in response to numerous factors in addition to the ones described in the preceding risk factors, many of which are beyond our control, including:

 

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price and volume fluctuations in the overall stock market from time to time;

 

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the number of shares of our Series A common stock made available for trading;

 

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actual or anticipated fluctuations in our financial condition, results of operations, or operating metrics and those of our competitors;

 

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failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or variance in our financial performance from expectations of securities analysts;

 

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changes in our projected operating and financial results;

 

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changes in laws or regulations applicable to our business;

 

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announcements by us or our competitors of new products, solutions or technologies, commercial relationships, events, significant business developments, acquisitions, or new offerings;

 

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the public’s reaction to our press releases, other public announcements and filings with the SEC;

 

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actual or perceived data breaches, disruptions to, or other incidents involving our businesses, network or Technology Platform;

 

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“flash crashes,” “freeze flashes” or other glitches that disrupt trading on the securities exchange on which we are listed;

 

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litigation involving us, our industry or both;

 

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future sales of our Series A common stock by us or our stockholders;

 

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changes in our board of directors, executive management, or key personnel;

 

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the trading volume of our Series A common stock;

 

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sales of large blocks of our common stock;

 

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market manipulation, including coordinated buying or selling activities;

 

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governmental or regulatory actions or audits;

 

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major catastrophic events in our domestic and foreign market;

 

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fluctuations in the trading volume of our shares or the size of our public float;

 

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changes in the anticipated future size and growth rate of our market;

 

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general economic and market conditions;

 

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changes in how enterprises perceive the benefits of our Technology Platform and products;

 

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other events or factors, including those resulting from war, incidents of terrorism, pandemics (including the COVID-19 pandemic), elections, or responses to these events; and

 

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whether investors or securities analysts view our stock structure unfavorably, particularly our dual- class structure and the concentrated voting control of our founders.

In addition, stock markets with respect to newly public companies, particularly technology companies, have experienced significant price and volume fluctuations that have affected and continue to affect the stock prices of these companies. Stock prices of many companies, have fluctuated in a manner often unrelated to the operating performance of those companies. These fluctuations may be even more pronounced in the trading market for our Series A common stock shortly following the listing of our Series A common stock on NYSE as a result of the supply and demand forces described above. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial expenses and divert our management’s attention. This could have an adverse effect on our business, results of operations and financial condition.

The trading price of our Series A common stock, upon listing on NYSE, may have little or no relationship to the historical sales prices of our capital stock in private placements, and our capital stock has no history of trading in private transactions.

Prior to the listing of our Series A common stock on NYSE, there has been no public market for our capital stock and our capital stock (or the units of our predecessor, Triller Hold Co LLC) has no history of trading in private transactions. In the section titled “Sale Price History of Our Capital Stock,” we have provided the historical sales prices of our capital stock in private placements. Given the limited history of these private placements, this information may have little or no relation to broader market demand for our Series A common stock and thus the initial trading price of our Series A common stock on NYSE once trading begins. As a result, you should not place undue reliance on these historical sales prices as they may differ materially from the opening trading prices and subsequent trading prices of our Series A common stock on NYSE. For more information about how the initial listing price on NYSE will be determined, see “Plan of Distribution.”

An active, liquid and orderly market for our Series A common stock may not develop or be sustained. You may be unable to sell your shares of Series A common stock at or above the price at which you purchased them.

We plan to apply to list our Series A common stock on the New York Stock Exchange under the symbol “ILLR”. Prior to listing on NYSE, there has been no public market for our Series A common stock. Moreover, consistent with Regulation M and other federal securities laws applicable to our listing, we have not consulted with Registered Stockholders or other existing stockholders regarding their desire or plans to sell shares in the public market following the listing or discussed with potential investors their intentions to buy our Series A common stock in the open market. While our Series A common stock may be sold after our listing on NYSE by the Registered Stockholders pursuant to this prospectus or by our other existing stockholders in accordance with Rule 144 of the Securities Act, unlike an underwritten initial public offering, there can be no assurance that any Registered Stockholders or other existing stockholders will sell any of their shares of Series A common stock, and there may initially be a lack of supply of, or demand for, Series A common stock on

 

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NYSE. Conversely, there can be no assurance that the Registered Stockholders and other existing stockholders will not sell all of their shares of Series A common stock, resulting in an oversupply of our Series A common stock on NYSE.

We cannot assure you that an active trading market for our Series A common stock will develop on such exchange or elsewhere or, if developed, that any market will be sustained. Further, institutional investors may be discouraged from purchasing our Series A common stock if they are unable to purchase a block of our Series A common stock in the open market in a sufficient size for their investment objectives due to a potential unwillingness of our existing stockholders to sell a sufficient amount of Series A common stock at the price offered by such institutional investors and the greater influence individual investors have in setting the trading price. If institutional investors are unable to purchase our Series A common stock in a sufficient amount for their investment objectives, the market for our Series A common stock may be more volatile without the influence of long-term institutional investors holding significant amounts of our Series A common stock.

In the case of a lack of demand for our Series A common stock, the trading price of our Series A common stock could decline significantly and rapidly after our listing. Therefore, an active, liquid, and orderly trading market for our Series A common stock may not initially develop or be sustained, which could significantly depress the trading price of our Series A common stock and/or result in significant volatility. Accordingly, we cannot assure you of the liquidity of any trading market, your ability to sell your shares of our Series A common stock when desired or the prices that you may obtain for your shares of our Series A common stock.

In making your investment decision, you should understand that we and our advisors have not authorized any other party to provide you with information concerning us or this offering, and you should not rely on information in public media that is published by third parties and you should rely only on statements made in this prospectus in determining whether to purchase our Series A common stock following our listing.

You should carefully evaluate all of the information in this prospectus. We have in the past received, and may continue to receive, a high degree of media coverage, including coverage that is not directly attributable to statements made by our officers and employees, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. We cannot confirm the accuracy of such coverage. We and our advisors have not authorized any other party to provide you with information concerning us or this offering. As a result, you should carefully evaluate all of the information in this prospectus and rely only on the information contained in this prospectus in determining whether to purchase our shares of Series A common stock following our listing.

We have not sought consent from certain third parties to utilize their likeness or name or reference studies conducted by them in this prospectus and we may face claims for intellectual property infringement or misappropriation, which could damage our relationships and result in payment of damages.

We cannot be certain that our use of third-party images, names, content and studies included in this prospectus will not result in claims for infringement or misappropriation of third-party intellectual property. While we believe we have amicable relationships with the persons named in this prospectus, we have not sought the consent or permission of certain of these third parties to use or reference their name, image or likeness nor sought consent to cite the third party studies referenced in this prospectus. Claims of misappropriation against us could subject us to liability for damages, including liability to Creators on our Technology Platform. Some potential litigants have the ability to dedicate substantial resources to the assertion of their intellectual property rights. Claims of infringement or misappropriation of a third-party’s intellectual property rights could be time consuming and expensive to defend, litigate or settle, divert the attention of our management, could require us to cease use of such intellectual property, could create ongoing obligations if we are subject to agreements or injunctions (stipulated or imposed) preventing us from engaging in certain acts, and we may not prevail. Any such clams, which could include a claim for injunctive relief and damages, if successful, could have an adverse effect on our business, prospects, financial condition and results of operations. In addition, such claims could damage our relationships with Creators, which could negatively impact our business, brand and reputation.

 

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Some of our corporate records may be incomplete and we may be subject to scrutiny in the future or be required to issue additional securities which could dilute our stockholders or harm our business.

We have a large number of corporate records, in part due to the large number of past acquisitions and financing arrangements, and we are currently undertaking a review of our corporate records. Locating all of our prior records, and in the absence of any such records, verifying security ownership in our company could lead to increased costs and discrepancies in our capitalization table, which may lead to litigation or unfavorable press. In the event we are unable to locate or verify all prior issuances of securities made by us or our subsidiaries, we may be subjected to claims in the future or be required to issue additional securities in the future which could dilute our existing stockholders and depress the market price of our Series A common stock.

Certain information in this prospectus is based on assumptions that certain listing-related transactions will occur and such assumptions may prove to be inaccurate.

As described in “About this Prospectus”, “the Reorganization” and “Capitalization”, some of the numerical information in this prospectus assumes that certain listing-related transactions, including that our convertible promissory notes, warrants and other securities will be converted into Series A common stock prior to or upon our planned listing on the NYSE. In order for certain of these listing-related transactions to occur, we will need to obtain the consent of the holders of such securities, who may not agree to convert their outstanding securities into Series A common stock. If this were to occur, some or all of our convertible promissory notes, warrants or other securities would remain outstanding following our listing. See Risk Factors—“We may not be able to generate sufficient cash flow to meet our current and any future debt service and other obligations, including amounts owed pursuant to new and ongoing litigation matters, due to future events and events beyond our control.” As a result, holders of our Series A common stock may experience substantial dilution in the future, future exercises or conversions of these securities may impede our efforts to obtain additional financing through the sale of additional securities on terms favorable to us, or at all, or make such financing more costly. In addition, the price of our Series A common stock may be adversely affected or we may have to negotiate and make concessions with certain holders of such securities in order for them to convert.

The issuance and sale of Series A common stock upon exercise of outstanding warrants, promissory notes, and convertible notes may cause substantial dilution to existing shareholders and may also depress the market price of our Series A common stock.

As of the date of this prospectus and without giving effect to the transactions described in the section titled “The Reorganization”, Triller Hold Co LLC had a total of 134,092,468 warrants outstanding, of which 8,016,368 are exercisable for Series A-1 preferred units, 10,618,304 are exercisable for Class A common units and 123,474,164 are exercisable for Class B common units. If the holders of the warrants choose to exercise the warrants, it will cause substantial dilution to the then holders of our Series A common stock. If exercises of the warrants and sales of such shares issuable upon exercise thereof take place, the price of our Series A common stock may decline. In addition, the common stock issuable upon exercise of the warrants may represent overhang that may also adversely affect the market price of our Series A common stock. Overhang occurs when there is a greater supply of a company’s stock in the market than there is demand for that stock. When this happens the price of our stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. If the volume of our Series A common stock cannot absorb shares sold by the warrant holders, then the value of our Series A common stock will likely decrease.

We have also have issued promissory notes and convertible notes which, upon giving effect to the Reorganization, will result in shares of our Series A common stock outstanding immediately prior to the date we become a publicly traded company. Our stockholders will experience immediate dilution upon the consummation of this offering.

 

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The dual class structure of our common stock has the effect of concentrating voting control with our founding partners and entities and trusts they or their immediate family members or affiliates control, which may limit your ability to influence the outcome of important transactions and to influence corporate governance matters, such as electing directors, and to approve material mergers, acquisitions, or other business combination transactions that may not be aligned with other stockholders’ interests.

Our Series B common stock has ten votes per share, whereas our Series A common stock, which is the stock we are listing on NYSE and is registered pursuant to the registration statement of which this prospectus forms a part, has one vote per share. Our Series B common stock will be held by one of our founding partners and Chief Executive Officer, Bobby Sarnevesht, and Proxima Media, which is affiliated with our other founding partner, Ryan Kavanaugh, and entities and trusts that they or their family members control. Together, these parties collectively own shares representing approximately 57.87% of the voting power of our outstanding capital stock, without giving effect to any conversions to Series A common stock in anticipation of our listing or any sales or purchases that these holders may make upon our listing. As a result, these parties will be able to exercise considerable influence and control over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or our assets, even if their stock holdings represent substantially less than 50% of the outstanding shares of our capital stock. This concentration of ownership will limit the ability of other stockholders to influence corporate matters and may cause us to make strategic decisions that could involve risks to you or that may not be aligned with other stockholders’ interests. In addition, when acting in their capacities as stockholders, these parties do not have any fiduciary duty to consider the interests of, and their interests may not be aligned with, the Company or our other stockholders, which could result in actions that are not in the best interests of our other stockholders. The control these parties hold may adversely affect our business, financial condition and results of operations as well as the market price of our Series A common stock and this concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future.

Further, future transfers by holders of our Series B common stock will generally result in those shares converting into shares of our Series A common stock, subject to limited exceptions. The conversion of shares of our Series B common stock into shares of our Series A common stock will have the effect, over time, of increasing the relative voting power of those holders of Series B common stock who retain their shares in the long term. As a result, it is possible that one or more of the persons or entities holding our Series B common stock could gain significant voting control as other holder of Series B common stock sells or otherwise converts their shares into Series A common stock.

In addition, while we do not expect to issue any additional shares of Series B common stock following the listing of our Series A common stock on NYSE, any future issuances of Series B common stock would be dilutive to holders of Series A common stock.

We cannot predict the impact our dual class structure may have on the market price of our Series A common stock.

We cannot predict whether our dual class structure, combined with the concentrated control of Proxima Media and Bobby Sarnevesht, our founding partners, together with entities and trusts they or their immediate family members or affiliates control, will result in a lower or more volatile market price of our Series A common stock or in adverse publicity or other adverse consequences. For example, certain index providers shave announced restrictions on including companies with multiple class share structures in certain of their indices. FTSE Russell and Standard & Poor’s does not allow most newly public companies utilizing dual or multi-class capital structures to be included in their indices. Affected indices include the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. Also in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria. Under the announced policies,

 

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our dual class capital structure would make us ineligible for inclusion in certain indices, and as a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our stock. In addition, we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from certain stock indices would likely preclude investment by many of these funds and would make our Series A common stock less attractive to other investors. As a result, the trading price and volume of our Series A common stock could be adversely affected.

We will be a “controlled company” under NYSE rules and expect to take advantage of certain exceptions to NYSE’s corporate governance requirements.

As a result of the voting power of Proxima Media and Bobby Sarnevesht following the Reorganization, our founding partners, together with entities and trusts or their immediate family members or affiliates control, we will be a “controlled company” within the meaning of the corporate governance standards of NYSE and expect to elect not to comply with certain corporate governance requirements of NYSE, including:

 

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

 

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

 

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

At the time of our listing, we do not expect to have a majority of independent directors or a nominating and corporate governance or compensation committee consisting entirely of independent directors. The independence standards are intended to ensure that directors who meet those standards are free of any conflicting interest that could influence their actions as directors. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of NYSE.

Our status as a “controlled company” could make our Series A common stock less attractive to some investors or otherwise harm our stock price.

Because we expect to qualify as a “controlled company” under the corporate governance rules for NYSE-listed companies, we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee or an independent nominating function. In the future we could elect not to have a majority of our board of directors be independent or not to have a compensation committee or an independent nominating function. Accordingly, should the interests of our controlling stockholders differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for NYSE-listed companies. Our status as a controlled company could make our Series A common stock less attractive to some investors or otherwise harm our stock price.

We will have outstanding shares of preferred stock that have rights and preferences senior to our Series A common stock.

At the time of our listing, we will have outstanding shares of Series A-1 preferred stock and undesignated preferred stock. We will also have shares of Series A-1 preferred stock reserved for issuance upon conversion of the Total Formation Convertible Note and upon exercise of outstanding warrants held by Total Formation. Based on initial conversion prices, which are subject to adjustment as described under “Description of Capital Stock—Preferred Stock,” the outstanding and reserved shares of Series A-1 preferred stock will have an aggregate original issue price of $    .

 

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In connection with our liquidation or dissolution, or a sale of control of the Company through a merger or consolidation or a sale of substantially all of our assets (a “deemed liquidation event”), the holders of shares of our preferred stock will be entitled to preferential payments equal to the original issue price (in the case of Series A-1). The holders of shares of Series A-1 preferred stock would also participate in any payments to holders of shares of common stock after such preferential payments. These provisions may limit the amounts available for payment, if any, to holders of shares of Series A common stock in such an event.

In addition, no dividends will be payable on shares of our common stock until dividends have been paid on our Series A-1 preferred stock in an amount equal to the original issue price thereof. To the extent any dividends are paid to holders of shares of our common stock, the holders of shares of preferred stock will participate in such dividends on an as-converted basis. In addition, for so long as the Total Formation Convertible Note is outstanding, we are not permitted to pay any cash dividends under the terms of the Note Purchase Agreement, dated August 18, 2022, between us and Total Formation.

These provisions may adversely impact the demand and trading price of shares of our Series A common stock.

Failure to obtain the consent of Total Formation and its affiliates as required pursuant to the terms of the Total Formation Convertible Note and Series A-1 Preferred Stock could limit our ability to engage in transactions that could benefit holders of our Series A common stock.

Pursuant to the terms of the Total Formation Convertible Note and, once issued, the Series A-1 preferred stock, we are not permitted to take certain actions or engage in certain transactions without the consent of Total Formation and its affiliates. Subject to limited exceptions, these actions and transactions relate to, among other things, engaging in mergers, consolidations and acquisitions; amending our organizational documents or any stockholder agreement in a manner that adversely affects Total Formation or the terms of the Series A-1 preferred stock; increasing the number of authorized shares of Series A-1 preferred stock or authorizing or issuing any capital stock other than that ranks junior to the Series A-1 preferred stock; dispositions of material businesses, subsidiaries or material assets outside of the ordinary course of business; redemptions and repurchases of equity interests; payment of dividends; making loans or advances to third parties; incurring or guaranteeing indebtedness; incurrence of liens; and transactions with affiliates. See “Description of Capital Stock—Preferred Stock” for additional information.

As a result of these provisions, Total Formation and its affiliates will be able to exercise considerable influence on our business. As a lender and preferred stockholder, Total Formation may have interests that do not generally align with holders of shares of our common stock. To the extent Total Formation does not consent to actions that management believes are in the best interests of the Company or our stockholders generally, it may adversely impact our business, results of operations and financial condition. In addition, we cannot predict the impact of these restrictions on the demand for, and trading price of, shares of our Series A common stock.

Following our listing, sales of substantial amounts of our Series A common stock in the public markets, or the perception that sales might occur, could cause the trading price of our Series A common stock to decline.

In addition to the supply and demand and volatility factors discussed above, sales of a substantial number of shares of our Series A common stock into the public market, particularly sales by our directors, executive officers, and principal stockholders, or the perception that these sales might occur in large quantities, could cause the trading price of our Series A common stock to decline.

We have also entered into the SEPA with Yorkville, whereby, we can sell shares of our Series A common stock in an aggregate amount up to $500.0 million, subject to certain conditions being met, within 36 months from the date of our listing on NYSE. If we sell shares pursuant to this agreement with Yorkville, you will experience dilution.

 

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The Registered Stockholders hold approximately    % of our outstanding capital stock, with our directors and executive officers and their affiliates holding approximately    % (with approximately    % of these shares subject to the lock-up agreement described below). Subject to the lock-up agreement described below to the extent applicable, these shares may be immediately sold pursuant to this prospectus.

The remainder of our outstanding shares of capital stock may be sold under Rule 144 subject to certain limitations. Once we have been a reporting company subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act for 90 days and assuming the availability of certain public information about us, subject to the lock-up agreement described below to the extent applicable, (i) non-affiliates who have beneficially owned our common stock for at least six months may rely on Rule 144 to sell their shares of common stock, and (ii) our directors, executive officers and other stockholders who have beneficially owned our common stock for at least six months, including certain of the shares of Series A common stock covered by this prospectus to the extent not sold hereunder, will be entitled to sell their shares of our Series A common stock subject to volume limitations under Rule 144.

We, certain directors and executive officers, certain stockholders affiliated with our directors and executive officers, and stockholders who hold more than 250,000 shares of Series A common stock, representing approximately 93% of the Series A common stock, have agreed not to, subject to certain limited exceptions, offer, pledge, sell, contract to sell, grant any option to purchase, or otherwise dispose of our Series A common stock or any securities convertible into or exchangeable or exercisable for Series A common stock, or to enter into any hedge or other arrangement or any transaction that transfers, directly or indirectly, the economic consequence of ownership of our Series A common stock, for a period of 365 calendar days after the initial listing date (the “Initial Listing Date”). Each such holder’s Series A common stock will thereafter be partially released from this lock-up arrangement as follows: if at any time (i) the last sale price of our Series A common stock equals or exceeds 120% premium to the reference price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) (the “Direct Listing Reference Price”) for at least any 20 trading days within any 30 consecutive trading day period commencing from 180 calendar days after the Initial Listing Date; and (ii) the average daily trading value is greater than $2,500,000 per day for at least any 20 trading days within any 30 consecutive trading day period commencing from 180 calendar days after the Initial Listing Date. The partial release shall be limited to 15% of our Series A common stock’s average weekly trading volume during the 30 consecutive trading day period prior to the lock-up release for each stockholder subject to a Lock-up Agreement. Sales of substantial amounts of our Series A common stock after the expiration or early termination of the lock-up period, or the perception that sales might occur, could cause the trading price of our Series A common stock to decline.

In addition, the holders of up to approximately                 shares of our capital stock have “piggy-back” registration rights, subject to some conditions, to include shares of Series A common stock (whether held directly or that may be acquired upon conversion of shares of Series B common stock or exercise of options or warrants) in registration statements that we may file. Any registration statement we file to register additional shares, whether as a result of registration rights or otherwise, could cause the trading price of our Series A common stock to decline or be volatile.

Finally, following the effectiveness of the registration statement of which this prospectus forms a part, we expect to file a registration statement on Form S-8 registering future issuances of up to             shares of Series A common stock under the Triller Corp. 2024 Stock Option and Incentive Plan (the “2024 Plan”). Accordingly, these shares will be able to be freely sold in the public market upon issuance, subject to compliance by affiliates with Rule 144.

 

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If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our Series A common stock, our stock price and trading volume could decline.

The trading market for our Series A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrade our Series A common stock or publish inaccurate or unfavorable research about our business, our Series A common stock price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our Series A common stock price or trading volume to decline and our Series A common stock to be less liquid.

Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise will dilute all other stockholders.

We expect to issue additional capital stock in the future that will result in dilution to all other stockholders. We expect to grant equity awards to employees, directors and consultants under the 2024 Plan. We may also raise capital through equity or convertible debt financings in the future. As part of our business strategy, we may acquire or make investments in companies, products or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Series A common stock to decline.

Additionally, each share of our Series B common stock converts into one share of our Series A common stock, at the option of the holder. Should holders of our Series B common stock convert their shares into Series A common stock, you will experience dilution. We also have 37,702,230 shares of Series A-1 preferred stock outstanding convertible into 37,702,230 shares of Series A common stock. Should holders of our outstanding warrants exercise their warrants for shares of our Series A common stock or if Total Formation Inc. converts its shares of Series A-1 preferred stock you will experience substantial dilution. We have an obligation to issue approximately $8.0 million of our Series A common stock if certain of our subsidiaries achieve specified revenue related earnout thresholds. If we have to issue these shares of Series A common stock, and those shares are converted into shares of Series A common stock, you will experience substantial dilution. Our issuance of these additional shares of Series A common stock or other equity securities of equal or senior rank would, all else being equal, have the following effects:

 

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the amount of cash available per share, including for payment of dividends in the future, may decrease;

 

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the relative voting strength of each previously outstanding share of Series A common stock would be diminished; and

 

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the market price of shares of our Series A common stock may decline.

The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members.

As a public company, we are subject to the reporting requirements of the Exchange Act, the listing standards of the NYSE, and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations, and financial condition. We may need to hire additional employees to assist us with complying with these requirements or engage outside consultants, which will increase our operating expenses.

 

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In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack 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. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit and risk committee and compensation committee, and qualified executive officers.

As a result of disclosure of information in this prospectus and in filings required of a public company, our business and financial condition will become more visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, results of operations, and financial condition could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, results of operations and financial condition.

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our Series A common stock.

We do not intend to pay any cash dividends in the foreseeable future. For so long as any shares of Series A-1 preferred stock are outstanding, we will not be permitted to pay dividends on our common stock unless and until dividends have been paid on the outstanding shares of Series A-1 preferred stock in an amount equal to the original issuance price thereof. In addition, for so long as the Total Formation Convertible Note is outstanding, we are not permitted to pay any cash dividends under the terms of the Note Purchase Agreement, dated August 18, 2022 between us and Total Formation, Inc. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, you may need to rely on sales of our Series A common stock after price appreciation, which may never occur, as the only way to realize any future gains on your investment.

We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our Series A common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are

 

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required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our Series A common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

We will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year following the fifth anniversary of the listing of our Series A common stock on NYSE; (ii) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (iii) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (iv) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates.

Upon listing, we also expect to be a “smaller reporting company” as defined in the Exchange Act, and have elected to take advantage of certain of the scaled disclosures available to smaller reporting companies.

We cannot predict if investors will find our Series A common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our Series A common stock less attractive as a result, there may be a less active trading market for our Series A common stock, and our stock price may be more volatile.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management, and limit the market price of our Series A common stock.

Provisions in our second amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our restated certificate of incorporation and amended and restated bylaws include provisions that:

 

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authorize our board of directors to issue, without further action by the stockholders, shares of undesignated preferred stock with terms, rights, and preferences determined by our board of directors that may be senior to our Series A common stock;

 

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a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;

 

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require that special meetings of our stockholders can be called only by our board of directors; and

 

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establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our board of directors.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally, subject to certain exceptions, prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our Series A common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our Series A common stock in an acquisition.

 

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Our amended and restated bylaws will provide for an exclusive forum in the Court of Chancery of the State of Delaware for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated bylaws that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for state law claims for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of, or a claim based on, a breach of a fiduciary duty owed by any director, officer or other employee to us or our stockholders, (iii) any action asserting a claim pursuant to any provision of the Delaware General Corporation Law or our certificate of incorporation or bylaws, (iv) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws, or (v) any action asserting a claim governed by the internal affairs doctrine, or the Delaware Forum Provision. The Delaware Forum Provision does not apply to any causes of action arising under the Securities Act or the Exchange Act. Our amended and restated bylaws further provides that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision. Our amended and restated bylaws provides that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the foregoing Delaware Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.

We believe these provisions may benefit us by providing increased consistency in the application of Delaware law by chancellors particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. The Delaware Forum Provision and the Federal Forum Provision may impose additional litigation costs on stockholders in pursuing the claims identified above, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the Delaware Forum Provision and Federal Forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or any of our directors, officers, other employees or stockholders, which may discourage lawsuits with respect to such claims or make such lawsuits more costly for stockholders. Furthermore, the enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that a court could find these types of provisions to be inapplicable or unenforceable. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable in an action, we may incur additional costs associated with resolving such an action. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Chancery Court or the federal district courts of the United States of America may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.

Claims for indemnification by our directors and officers or Registered Stockholders may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law.

In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and indemnification agreements that we have entered or intend to enter into with our directors and officers provide that:

 

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we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law;

 

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Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful;

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we may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law;

 

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we are required to advance expenses, as incurred, to our 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;

 

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we are authorized to enter into indemnification agreements with our directors, officers, employees, and agents and to obtain insurance to indemnify such persons; and

 

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we may not retroactively amend our amended and restated certificate of incorporation provisions to reduce our indemnification obligations to directors, officers, employees, and agents.

While we have procured directors’ and officers’ liability insurance policies, such insurance policies may not be available to us in the future at a reasonable rate, may not cover all potential claims for indemnification, and may not be adequate to indemnify us for all liability that may be imposed.

In addition, Registered Stockholders holding up to approximately              shares of our Series A common stock have registration rights pursuant to which we have agreed to indemnify them for certain claims arising out of sales made pursuant to this prospectus. As a result, we could be subject to expenses and damages in the event of securities litigation arising out of this offering.

Large indemnity payments, whether to our directors and officers in excess of any available insurance, or to Registered Stockholders, would materially adversely affect our business, financial condition, and results of operations.

Indemnification provisions in various agreements with third parties to which we are party potentially expose us to substantial liability for infringement, misappropriation or other violation of intellectual property rights, data protection and other losses.

Our agreements with our customers and other third parties may include indemnification provisions under which we agree to indemnify or otherwise be liable to such third party for losses suffered or incurred as a result of claims of infringement, misappropriation or other violation of intellectual property rights, data protection, damages caused by us to property or persons, or other liabilities relating to or arising from our software, services, platform, our acts or omissions under such agreements or other contractual obligations. In addition, customers typically require us to indemnify or otherwise be liable to them for breach of confidentiality or failure to implement adequate security measures with respect to their data stored, transmitted or processed by our Technology Platform. Some of these indemnity agreements provide for uncapped liability and indemnity provisions often survive termination or expiration of the applicable agreement.

We have in the past and may in the future receive indemnification requests from our customers related to such claims. Large indemnity payments could harm our business, financial condition and results of operations. Although we attempt to contractually limit our liability with respect to such indemnity obligations, we are not always successful and may still incur substantial liability related to them, and we may be required to cease use of certain functions of our Technology Platform or products as a result of any such claims. Any dispute with a customer or other third party with respect to such obligations could have adverse effects on our relationship with such customer or other third party and other existing or prospective customers, reduce demand for our products and services and adversely affect our business, financial conditions and results of operations. In addition, although we carry general liability insurance, our insurance may not be adequate to indemnify us for all liability

 

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that may be imposed or otherwise protect us from liabilities or damages with respect to claims alleging compromises of customer data, and any such coverage may not continue to be available to us on acceptable terms or at all.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that are subject to risks and uncertainties. Forward-looking statements are not historical facts but are based on certain assumptions of management, which we believe to be reasonable but are inherently uncertain, and describe our future plans, strategies and expectations. All statements other than statements of historical facts contained in this prospectus are forward-looking statements and can sometimes be identified by the use of forward-looking terminology, including, but not limited to, “may,” “could,” “seek,” “guidance,” “predict,” “potential,” “likely,” “believe,” “will,” “expect,” “anticipate,” “estimate,” “plan,” “intend,” “forecast” or variations of these terms and other similar expressions, or the negative of these terms or other similar expressions. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond our control that could cause our actual results, performance or achievements and other events to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to the following risks:

 

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challenges predicting our revenue, expenses and other operating results, which are exacerbated by our limited operating history;

 

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our history of losses and uncertainty about our ability to achieve profitability;

 

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our ability to successfully execute our business and growth strategy;

 

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our requirements for funding to operate and grow our business and the availability (if any), cost and other terms of any financing we may seek;

 

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holders of certain of our convertible securities electing to receive cash in lieu of shares of our common stock;

 

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the sufficiency of our cash, cash equivalents, and marketable securities to meet our liquidity needs and other obligations;

 

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our ability to increase the total number of Consumer Accounts, Events, Creators and Brands over time and generate revenue as a result of these increases;

 

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our ability to accurately determine the total number of Consumer Accounts, Brands and Creators on our Technology Platform;

 

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our estimates and expectations regarding our market opportunity and ability to monetize our Technology Platform;

 

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our ability to attract and retain creators and other users;

 

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our ability to maintain and grow relationships with Creators, users and Brands;

 

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our ability to compete effectively with existing competitors and new market entrants;

 

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our ability to increase the scale and efficiency of our technology infrastructure;

 

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our ability to develop our Technology Platform’s AI and ML capabilities to meet the needs of our Brands, Creators, users and consumers;

 

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our ability to accurately or efficiently integrate AI and ML features or functionalities of the quality or type sought by our customers;

 

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our ability to anticipate and react to changes in public and consumer preferences and industry trends and technologies;

 

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our ability to manage the financial risks and other risks associated with our Events business;

 

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potential security incidents allowing unauthorized access to our systems or network or data regarding our users or other business partners or any incidents impacting the continuity and availability of our systems, network or data;

 

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our reliance on key personnel and our ability to identify, recruit, and retain skilled personnel;

 

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difficulties with and uncertainties related to the integration and realization of the expected benefits of our acquisitions;

 

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the inability to capture all or part of the anticipated cost and revenue synergies from companies we have acquired and we may acquire in the future;

 

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our ability to successfully defend litigation brought against us and our ability to remain solvent and pay our obligations when they come due, including under existing litigation settlement obligations and new litigation adverse judgements;

 

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our ability to effectively manage our growth, whether through acquisitions or otherwise, including any international expansion;

 

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our ability to protect our intellectual property rights and not infringe on the intellectual property rights of others, and any costs associated therewith;

 

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the increased costs of becoming a public company;

 

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the concentration of voting power among our founders who have and will continue to have substantial control over our business;

 

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our status as a “controlled company”

 

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risks associated with our substantial indebtedness and convertible securities;

 

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the effects of general industry, economic and financial market conditions;

 

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impacts of pandemics, such as the COVID-19 pandemic, or other global events or macroeconomic trends;

 

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our expectations regarding the period during which we qualify as an emerging growth company (“EGC”) under the Jumpstart Our Business Startups Act or as a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934; and

 

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outcomes of and costs associated with legal and regulatory proceedings.

The outcome of the events described in these forward-looking statements are subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this prospectus. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

These statements are based on information available to us as of the date of this prospectus. We believe that all forward-looking statements are based upon reasonable assumptions, but such information may be limited or incomplete. We, however, caution that it is impossible to predict actual results or outcomes or the effects of risks, uncertainties or other factors on anticipated results or outcomes and that accordingly, you should not place undue reliance on these statements, which are made only as of the date when made. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements. We undertake no obligation to update these statements in light of subsequent events or developments.

 

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USE OF PROCEEDS

The Registered Stockholders may, or may not, elect to sell shares of our Series A common stock covered by this prospectus. To the extent any Registered Stockholder chooses to sell shares of our Series A common stock covered by this prospectus, we will not receive any proceeds from any such sales of our Series A common stock. See “Principal and Registered Stockholders” included elsewhere in this prospectus.

 

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DIVIDEND POLICY

We currently intend to retain any future earnings and do not expect to pay any dividends in the foreseeable future. For so long as any shares of Series A-1 preferred stock are outstanding, we will not be permitted to pay dividends on our Series A common stock and Series B common stock unless and until dividends have been paid on the outstanding shares of Series A-1 preferred stock in an amount equal to the original issuance price thereof. In addition, for so long as the Total Formation Convertible Note is outstanding, we are not permitted to pay any cash dividends under the terms of the Note Purchase Agreement, dated August 18, 2022 between us and Total Formation, Inc. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions and other factors that our board of directors may deem relevant.

We are a holding company and substantially all of our operations are carried out by our subsidiaries. The ability of our subsidiaries to pay dividends or make distributions to us may be limited by the terms of any future credit agreement or any future debt or preferred securities of ours or of our subsidiaries. Accordingly, you may need to sell your shares of Series A common stock to realize a return on your investment, and you may not be able to sell your shares at or above the price you paid for them.

 

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of September 30, 2023:

 

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on an actual basis; and

 

•

on a pro forma basis giving effect to the transactions described below and under “The Reorganization.”

Cash and cash equivalents are not components of our total capitalization. You should read this table together with the other information contained in this prospectus, including “The Reorganization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.

 

		As of September 30, 2023
		Unaudited				Unaudited
(In thousands, except share and per share data)		Triller Hold Co LLC				Triller Corp. Pro Forma1
Cash and cash equivalents		$	967			$	33,751
Short-term debt		$	125,493			$	76,235
Long-term debt			46,157				—
Total debt		$	171,650			$	76,235
Unitholders’ equity:
Common Units
Class A Common Units—$0.00 par value; Unlimited units authorized; 36,068,500 units outstanding			6,078				—
Class B Common Units—$0.00 par value; Unlimited units authorized; 85,925,353 units outstanding			985,100				—
Class C-1 Common Units—$0.00 par value; Unlimited units authorized; 21,833,075 units outstanding			6,158				—
Class C-2 Common Units—$0.00 par value; Unlimited units authorized; 38,263,382 units outstanding			10,792				—
Preferred Units
Series A-1 Preferred Units—$0.00 par value; 48,470,485 units authorized; 37,702,230 units outstanding			253,274				—
Series AA-1 Preferred Units—$0.00 par value; unlimited units authorized; 3,368,684 units outstanding			30,082				—
Stockholders’ equity:
Common Stock — $0.0001 par value per share; 500,000,000 shares authorized
Series A Common Stock — $0.0001 par value; 450,000,000 shares authorized; 276,296,994 shares outstanding on a pro forma basis			—				28
Series B Common Stock — $0.0001 par value; 50,000,000 shares authorized; 38,263,382 shares outstanding on a pro forma basis			—				4
Preferred Stock — $0.0001 par value per share; 100,000,000 shares authorized
Series A-1 Preferred Stock — 49,946,079 shares authorized; 37,702,230 shares outstanding on a pro forma basis			—				4
Additional paid-in capital			72,473				1,590,514
Accumulated other comprehensive income			215				215
Accumulated deficit			(1,388,607	)			(1,397,704	)
Total Triller Hold Co LLC unitholders’ equity / Triller Corp. stockholders’ equity		$	(24,435	)		$	193,061
Noncontrolling interest			5,353				5,353
Total unitholders’ equity / stockholders’ equity			(19,082	)			198,414
Total capitalization		$	147,215			$	269,295

 

(1)	The unaudited pro forma column in the table reflects the Reorganization and other transactions that have occurred or are probable of occurring that would be material to investors, as described below.

 

121

Except as otherwise indicated, all information in this prospectus assumes the consummation of the following transactions, which we refer to within this prospectus as the “Listing-related Transactions”:

 

•

prior to the consummation of the Reorganization, the receipt by Triller Hold Co LLC of additional advances totaling $17.2 million under a 7.5% PIK convertible promissory note issued to Capital Truth Holdings, Ltd. in the aggregate principal amount of up to $30 million and the issuance of warrants to purchase 4,231,311 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of a 7.5% PIK convertible promissory note in the aggregate principal amount of $27.5 million and warrants to purchase 3,526,093 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01 to Sabeera Triller 1 LLC;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of a 7.5% PIK convertible promissory note for a principal amount of $0.1 million and warrants to purchase 9,076 Class B common units of Triller Hold Co LLC with a weighted average exercise price per unit of $0.01;

 

•

prior to the consummation of the Reorganization, the cancellation of each promissory note and redemption of all Series AA-1 preferred units held by various parties in exchange for 7.5% PIK convertible promissory notes in the aggregate principal amount of $15.8 million and warrants to purchase 2,418,898 Class B common units with a weighted average exercise price of $0.01;

 

•

prior to the consummation of the Reorganization, the conversion of convertible promissory notes with an aggregate balance of $150.6 million, including the aforementioned issuances, into 17,330,922 Class B common units of Triller Hold Co LLC, which conversion is a condition to the consummation of the Reorganization;

 

•

prior to the consummation of the Reorganization, the cashless “net” exercise of 11,635,868 outstanding warrants to purchase Class A common units of Triller Hold Co LLC resulting in the issuance of 10,471,392 Class A common units of Triller Hold Co LLC and 132,508,279 outstanding warrants to purchase Class B common units of Triller Hold Co LLC resulting in the issuance of 73,185,601 Class B common units of Triller Hold Co LLC, all of which is a condition to the consummation of the Reorganization;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of 398,147 Series AA-1 preferred units, pursuant to agreements entered into between Triller Hold Co LLC and the recipients of such units;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of 3,000,000 Class B common units, pursuant to agreements entered into between Triller Hold Co LLC and the recipients of such units;

 

•

prior to the consummation of the Reorganization, the issuance by Triller Hold Co LLC of 155,146 Class B common units to an investor upon an exercise of warrants at an exercise price of $0.01;

 

•

the consummation of the Reorganization, in which:

 

•

prior to the effectiveness of the listing of the Company’s Series A common stock on the NYSE, Triller Reorg Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of the Company, will merge with and into Triller Hold Co LLC, with Triller Hold Co LLC surviving the merger as a direct, wholly owned subsidiary of the Company;

 

•

the Company’s certificate of incorporation will be amended and restated to, among other things, authorize one class of common stock consisting of two series, Series A common stock and Series B common stock, and one series of preferred stock, Series A-1, having the terms and rights described in “Description of Capital Stock”;

 

122

•

each common and preferred unit of Triller Hold Co LLC outstanding as of immediately prior to the closing will be canceled and converted the right to receive into one share of common stock or preferred stock of Triller Corp., with Series A-1 preferred units being converted into the right to receive shares of Series A-1 preferred stock, Series AA-1 preferred units, Class A common units, Class B common units, restricted Class B common units and Class C-1 common units being converted into the right to receive shares of Series A common stock and Class C-2 common units being converted into shares of Series B common stock;

 

•

all issued and outstanding service provider units of Triller Hold Co LLC will be canceled and converted into the right to receive 9,740,879 shares of Series A common stock; and

 

•

options to purchase 10,807,859 Class B Common units of Triller Hold Co LLC with a weighted average exercise price per unit of $8.02 will be assumed by the Company and converted into options to purchase 10,807,859 shares of Series A common stock with a weighted average exercise price per share of $8.02; and

 

•

transaction costs associated with this listing in the amount of $9.5 million.

The total above is based on      shares of our capital stock outstanding as of September 30, 2023, after giving effect to the Reverse Stock Split at a ratio of -for- which became effective on     , 2024, and excludes:

 

•

warrants to be issued to our financial advisor, Clear Street LLC, to purchase shares of our Series A common stock at an exercise price equal to the closing bid price of our Series A common stock on the date our Series A common stock commences trading on the NYSE, which such warrants shall have an aggregate value at the time of issuance equal $2.0 million;

 

•

warrants, which may be issued by us in our sole discretion to our financial advisor, Clear Street LLC, to purchase shares of our Series A common stock at an exercise price equal to the closing bid price of our Series A common stock on the date our Series A common stock commences trading on the NYSE, which such warrants have an aggregate value of $0.5 million, at the time of issuance;

 

•

8,016,368 shares of Series A common stock issuable to Total Formation, Inc. and its affiliates that may be issued upon the exercise of warrants with a weighted average exercise price of $2.11 per share;

 

•

37,702,230 shares of Series A common stock issuable upon conversion of issued and outstanding or reserved shares of Series A-1 preferred stock, which will remain outstanding following the completion of the reorganization and this listing (based on an assumed conversion price of $2.72) which conversion prices may be adjusted as described under “Description of Capital Stock—Preferred Stock”;

 

•

shares of Series A common stock underlying convertible notes issued subsequent to September 30, 2023;

 

•

shares of Series A common stock issuable upon the vesting and settlement of restricted stock units issued subsequent to September 30, 2023;

 

•

120,000,000 shares of Series A common stock reserved for issuance pursuant to 10,807,859 outstanding stock options with a weighted average exercise price per share of $8.02 and future awards that may be granted pursuant to our 2024 Plan (as defined herein);

 

•

shares of our Series A common stock available for future issuance under our 2024 Plan, as well as any future increases, including annual automatic evergreen increases, in the number of shares of Series A common stock reserved for issuance thereunder in accordance with the terms of such plan; and

 

•

shares of Series A common stock that may be issued to existing shareholders pursuant to antidilution clauses in certain of the Company’s agreements previously entered into for business acquisitions and subscription agreements for the sale of common units.

 

123

THE REORGANIZATION

Triller Inc. was formed on June 27, 2022 and Triller Reorg Merger Sub LLC was formed on April 10, 2023 for the purpose of completing a public offering. On March 30, 2023, we changed our name from Triller Inc. to Triller Corp. Prior to the Reorganization, our business has been conducted through Triller Hold Co LLC and its consolidated subsidiaries.

Currently, the capital structure of Triller Hold Co LLC consists of seven classes of membership units along with one class of options and three classes of warrants: Series A-1 Preferred Units, Series AA-2 Preferred Units, Class A Common Units, Class B Common Units, Class C-1 Common Units, Class C-2 Common Units, Service Provider Units, Class B Options, Series A-1 Warrants, Class A Warrants and Class B Warrants. Triller Hold Co LLC is the direct parent company of its various subsidiaries.

The diagram below provides a simplified overview of our organizational structure prior to the Reorganization:

 

Prior to the effectiveness of the listing of our Series A common stock on NYSE, Triller Reorg Merger Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Triller Corp., will merge with and into Triller Hold Co LLC, with Triller Hold Co LLC as the surviving entity, with the following effects:

 

•

our certificate of incorporation will be amended and restated to, among other things, authorize one class of common stock consisting of two series, Series A common stock and Series B common stock, Series A-1 preferred stock and undesignated preferred stock, each having the terms and rights described in “Description of Capital Stock”;

 

•

each unit of Triller Hold Co LLC will be canceled and converted into the right to receive one share of our preferred stock or common stock, with Series A-1 preferred units converting into the right to receive Series A-1 preferred stock, Series AA-1 preferred units, Class A common units, Class B common units and Class C-1 common units converting into the right to receive shares of Series A common stock and Class C-2 Units converting into the right to receive Series B common stock;

 

124

•

each Service Provider Unit issued and outstanding as of immediately prior to the consummation of Reorganization will be deemed 100% vested, canceled and converted into the right to receive shares of Series A common stock;

 

•

each outstanding option to purchase Class B common units will be assumed under our 2023 Stock Option and Incentive Plan; and

 

•

each warrant to purchase Series A-1 preferred units will be exchanged for a warrant to purchase Series A-1 preferred stock.

In addition to customary closing conditions such as the receipt of the requisite consents and the performance in all material respects with the covenants and agreements required to be performed under the transaction documents, the consummation of the merger is subject to the mutual satisfaction or waiver of the following conditions:

 

•

Triller Hold Co LLC shall have received exercise documentation in form and substance satisfactory to it from the holders of all warrants to purchase Class A common units and all warrants to purchase Class B common units providing for the exercise thereof, such exercise to be effectuated no later than immediately prior to the effective time of the merger; and

 

•

Triller Hold Co LLC shall have received conversion documentation in form and substance satisfactory to it of the holders of all convertible notes (other than the convertible notes convertible into Series A-1 preferred units), such conversion to be effectuated no later than immediately prior to the effective time of the merger.

The diagram below provides a simplified overview of our organizational structure after the Reorganization:

 

The purpose of the Reorganization is to reorganize our corporate structure so that the entity that is registering for sale Series A Common Stock to the public in this offering is a corporation rather than a limited liability company and so that our existing investors will own our common stock rather than units in a limited liability company.

 

125

THE REVERSE STOCK SPLIT

In connection with the Reorganization, on  , 2024, we effected the Reverse Stock Split in which each      shares of the outstanding capital stock were automatically combined and converted into      share of outstanding capital stock. Except as otherwise indicated, all references to our capital stock, share data, per share data and related information has been adjusted for the Reverse Stock Split ratio of  -for-  as if it had occurred at the beginning of the earliest period presented. The Reverse Stock Split correspondingly adjusted, among other things, the exercise price of and the number of shares issuable pursuant to our warrants, convertible notes and stock options. No fractional shares were issued in connection with the Reverse Stock Split, and any fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share.

 

126

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2023 and the unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2023 and for the year ended December 31, 2022 present our consolidated financial position and results of operations after giving effect to the Reorganization, Listing-related Transactions and Acquisitions as described and defined below and under “The Reorganization” and “Capitalization.”

The “Acquisitions” represent all of the acquisitions consummated by the Company at various times during 2022; specifically, the acquisitions of BKFC, Julius and Fangage. While all of these acquisitions were consummated by the Company at various times during 2022, the pro forma condensed consolidated statements of operations will reflect each of the acquisitions as if it took place as of the beginning of the earliest period presented; thus, as if they all took place on January 1, 2022.

The unaudited pro forma condensed consolidated balance sheet as of September 30, 2023 is derived from the Company’s historical balance sheet on a pro forma basis as if the changes in capitalization described in the Reorganization and Listing-related Transactions had been consummated as of September 30, 2023.

The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2023, and for the year ended December 31, 2022, give pro forma effect to the Acquisitions and the changes in capitalization described in the Reorganization and Listing-related Transactions as if they had been consummated as of January 1, 2022.

The unaudited pro forma condensed consolidated financial information has been presented for illustrative purposes only and is not necessarily indicative of the financial position and results of operations that would have been achieved had the Reorganization, Listing-related Transactions, and Acquisitions occurred on the date indicated. Further, the unaudited pro forma condensed consolidated financial information may not be useful in predicting our future financial condition and results of operations going forward. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of the unaudited pro forma condensed consolidated financial information and is subject to change as additional information becomes available and analyses are performed.

The unaudited pro forma condensed consolidated financial information should be read together with “The Reorganization,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Certain Relationships and Related Party Transactions” and our consolidated financial statements and related notes thereto included elsewhere in this prospectus.

Description of the Reorganization

On June 27, 2022, Triller Inc. was formed for the purpose of completing a public offering. On March 30, 2023, we changed our name from Triller Inc. to Triller Corp. The business operations to date have been conducted through Triller Hold Co LLC and its consolidated subsidiaries. In the Reorganization, among other things, Triller Reorg Merger Sub LLC, a Delaware limited liability company and a wholly owned Subsidiary of the Triller Corp., will be merged into Triller Hold Co LLC, with Triller Hold Co LLC as the surviving entity. For further details relating to the Reorganization transactions, see section titled “The Reorganization” included elsewhere in this prospectus.

 

127

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of September 30, 2023

(In thousands, except unit data)

 

		As of September 30, 2023										As of September 30, 2023
		Triller Hold Co LLC (Historical) Unaudited				Listing-related Transaction Adjustments (See Notes)						Triller Corp. Pro Forma
ASSETS
Current assets:
Cash and cash equivalents		$	967			$	32,784	[A]				$	33,751
Accounts receivable, net			3,913										3,913
Other current assets			1,750										1,750
Current assets of discontinued operations			—										—
Total current assets			6,630				32,784						39,414
Goodwill			234,112										234,112
Intangible assets, net			117,121										117,121
Other assets and long-term receivables			1,109										1,109
Operating right-of-use assets			315										315
Total Assets		$	359,287			$	32,784					$	392,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Current liabilities:
Accounts payable and accrued expenses		$	64,998									$	64,998
Earn-out liability, current			9,733										9,733
Other current liabilities			35,559										35,559
Current portion of operating lease liabilities			78										78
Current portion of long term debt .			125,493				(49,258	)[B],[C]					76,235
Current liabilities of discontinued operations			5,931										5,931
Total current liabilities			241,792				(49,258	)					192,534
Long-term debt			46,157				(46,157	)[C]					—
Long-term operating lease liabilities			248										248
Deferred tax liability			8,419				(8,419	)[F]					—
Warrant liability			80,877				(80,877	)[D]					—
Other liabilities			876										876
Long-term liabilities of discontinued operations			—										—
Total Liabilities		$	378,369			$	(184,711	)				$	193,658
Redeemable Class B Common Units			—										—
Unitholders’ equity:
Common Units
Class A Common Units—$0.00 par value; Unlimited units authorized; 36,068,500 units outstanding			6,078				(6,078	)[E]					—
Class B Common Units—$0.00 par value; Unlimited units authorized; 85,925,353 units outstanding			985,100				(985,100	)[E]					—
Class C-1 Common Units—$0.00 par value; Unlimited units authorized; 21,833,075 units outstanding			6,158				(6,158	)[E]					—
Class C-2 Common Units—$0.00 par value; Unlimited units authorized; 38,263,382 units outstanding			10,792				(10,792	)[E]					—
Preferred Units
Series A-1 Preferred Units—$0.00 par value; 48,470,485 units authorized; 37,702,230 units outstanding			253,274				(253,274	)[E]					—
Series AA-1 Preferred Units—$0.00 par value; unlimited units authorized; 3,368,684 units outstanding			30,082				(30,082	)[E]					—
Stockholders’ equity:

 

128