As filed with the Securities and Exchange Commission on October 3, 2022
Registration No. 333-266277
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 4
TO
FORM S-1
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
The Securities Act of 1933
MONDEE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization) |
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4700
(Primary Standard Industrial
Classification Code Number) |
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88-3292448
(I.R.S. Employer
Identification No.) |
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10800 Pecan Park Blvd.
Suite 315
Austin, Texas 78750
(650) 646-3320
Suite 315
Austin, Texas 78750
(650) 646-3320
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Prasad Gundumogula
Chief Executive Officer
10800 Pecan Park Blvd.
Suite 315
Austin, Texas 78750
(650) 646-3320
Chief Executive Officer
10800 Pecan Park Blvd.
Suite 315
Austin, Texas 78750
(650) 646-3320
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Michael S. Lee, Esq.
Lynwood Reinhardt, Esq.
Panos Katsambas, Esq.
Reed Smith LLP
599 Lexington Avenue
New York, NY 10022
Tel: (212) 521-5400
Lynwood Reinhardt, Esq.
Panos Katsambas, Esq.
Reed Smith LLP
599 Lexington Avenue
New York, NY 10022
Tel: (212) 521-5400
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
☒
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Smaller reporting company
☒
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Emerging growth company
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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 or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.
EXPLANATORY NOTE
This registration statement registers the resale by the selling securityholders named in this prospectus (or their permitted transferees) (the “Selling Securityholders”) of (i) up to 75,537,500 shares of Class A common stock, par value $0.0001 per share (the “New Mondee Common Stock”) of Mondee Holdings, Inc. (“New Mondee”) (including (a) 337,500 shares of New Mondee Common Stock that may be issued upon the exercise of outstanding warrants to purchase shares of ITHAX Class A ordinary shares issued in a private placement in connection with ITHAX’s initial public offering (the “private placement warrants”), (b) 7,000,000 shares of New Mondee Common Stock issued to certain of the Selling Securityholders in private placements pursuant to the terms of subscription agreements between such investors and ITHAX (such subscription agreements, as amended, the “Subscription Agreements” and such shares, the “PIPE Shares”), in connection with, and immediately prior to the consummation of, the business combination between ITHAX and Mondee described in the prospectus included in this registration statement (the “Business Combination”), (c) 60,800,000 shares of New Mondee Common Stock issued to Mondee Holdings, LLC in connection with the Business Combination (the “Merger Consideration”) (and subsequently distributed to the members of Mondee Holdings, LLC) and (d) 7,400,000 shares of New Mondee Common Stock that will be held in escrow and vest over the four-year period following the closing of the Business Combination (the “Earn-Out Shares”), and (ii) up to 337,500 private placement warrants. In addition, this registration statement registers the issuance by New Mondee of up to (i) 337,500 shares of New Mondee Common Stock upon the exercise of the private placement warrants from time to time and (ii) 12,075,000 shares of New Mondee Common Stock upon the exercise of warrants to purchase shares of ITHAX Class A ordinary shares sold as part of ITHAX’s initial public offering (the “public warrants”) from time to time.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, we and the Selling Securityholders hereunder may, from time to time, issue, offer and sell, as applicable, any combination of the securities described in this prospectus in one or more offerings. The Selling Securityholders may use this prospectus to sell up to an aggregate of 75,537,500 shares of New Mondee Common Stock and up to 337,500 private placement warrants from time to time through any means described in the section entitled “Plan of Distribution.” We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. We will receive proceeds from the exercise of the Warrants if the Warrants are exercised for cash. This prospectus also relates to the issuance by us of the shares of New Mondee Common Stock issuable upon exercise of the Warrants. See the section titled “Use of Proceeds.”
We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. Before purchasing any securities, you should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the section of this prospectus titled “Where You Can Find Additional Information.”
Neither we nor the Selling Securityholders have authorized any person to provide you any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the Selling Securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the Selling Securityholders are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
“Mondee,” Mondee logos and other trademarks, service marks, and trade names of Mondee are registered and unregistered marks of Mondee Holdings, Inc. (i.e. New Mondee). Trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. We have omitted the ® and TM designations, as applicable, for the trademarks used in this prospectus.
Information contained in this prospectus concerning the market and the industry in which Mondee competes, including its market position, general expectations of market opportunity and market size, is based on information from various third-party sources, on assumptions made by Mondee based on such sources and Mondee’s knowledge of the markets for its services and solutions. Any estimates provided herein involve numerous assumptions and limitations, and you are cautioned not to give undue weight to such information. Third-party sources generally state that the information contained in such source has been obtained from sources believed to be reliable; however, neither Mondee nor ITHAX has verified the accuracy or completeness of third-party data. The industry in which Mondee operates is subject to a high degree of uncertainty and risk. As a result, the estimates and market and industry information provided in this prospectus are subject to change based on various factors, including those described in the section entitled “Risk Factors-Risks Related to Our Business and Industry and Risks Related to Ownership of Our Common Stock” and elsewhere in this prospectus.
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FREQUENTLY USED TERMS
Unless otherwise stated in this prospectus or the context otherwise requires, references to:
“Amended and Restated Warrant Agreement” are to that certain Amended and Restated Warrant Agreement, by and between Continental and ITHAX;
“Articles of Association” are to the amended and restated articles of association of ITHAX;
“Business Combination” are to the Domestication, the Mergers and other transactions contemplated by the Business Combination Agreement, collectively, including the PIPE Financing;
“Business Combination Agreement” are to that certain Business Combination Agreement, dated December 20, 2021, by and among ITHAX, ITHAX Merger Sub I, LLC, ITHAX Merger Sub II, LLC and Mondee, and as may be amended, supplemented or otherwise modified from time to time;
“Bylaws” are to the bylaws of New Mondee that became effective at the First Effective Time;
“Cantor” are to Cantor, Fitzgerald & Co., the representative of the several underwriters in ITHAX’s initial public offering;
“Charter” are to the amended and restated certificate of incorporation of New Mondee that became effective at the First Effective Time;
“Class A ordinary shares” are to the Class A ordinary shares, par value $0.001 per share, of ITHAX that were sold as part of the units in the ITHAX initial public offering for $10.00 per unit, which automatically converted, on a one-for-one basis, into shares of New Mondee Common Stock in connection with the Domestication;
“Class B ordinary shares” are to the 6,037,500 Class B ordinary shares, par value $0.001 per share, of ITHAX that were initially issued to the Sponsor in a private placement prior to ITHAX’s initial public offering for approximately $0.005 per share and of which 10,000 were transferred to each of the ITHAX independent directors in October 2020, and, in connection with the Domestication, were converted into one share of Class B common stock, par value $0.001 per share, of New Mondee and, upon the First Effective Time, each issued and outstanding share of New Mondee Class B Common Stock was converted into one share of New Mondee Common Stock;
“Closing” are to the closing of the Transactions;
“Closing Date” are to July 18, 2022, the date the Closing actually occurred;
“Consent Solicitation” is to the solicitation of consents (the “Consent Solicitation”), commenced on September 16, 2022, by the Company from holders of the outstanding Warrants to amend the Amended and Restated Warrant Agreement.
“Continental” are to Continental Stock Transfer & Trust Company, the Company’s transfer agent, warrant agent and trustee of the trust account;
“Domestication” are to the transfer by way of continuation and deregistration of ITHAX from the Cayman Islands and the continuation and domestication of ITHAX as a corporation incorporated in the State of Delaware, which was effectuated on July 18, 2022;
“Earn-Out Shares” are to 7,400,000 shares of New Mondee Common Stock that will be held in escrow and vest over the four-year period following the closing of the Business Combination issuable to such shareholders pursuant to the Earn-Out Agreement.
“Exchange Act” are to the Securities Exchange Act of 1934, as amended;
“Existing Governing Documents” are to the Memorandum of Association and the Articles of Association;
“extraordinary general meeting” are to the extraordinary general meeting of ITHAX at 11:00 AM ET on July 15, 2022, located at the offices of Reed Smith LLP, ITHAX’s U.S. counsel, located at 599 Lexington Avenue, 22nd Floor, New York, New York 10022;
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“First Effective Time” are to the time at which the First Merger became effective;
“First Merger” are to the time at which the First Merger Sub merged with and into Mondee, with Mondee being the surviving entity in the merger;
“First Merger Sub” are to ITHAX Merger Sub I, LLC, a Delaware limited liability company;
“Governing Documents” are to the Charter and the Bylaws;
“GAAP” are to generally accepted accounting principles in the United States, as applied on a consistent basis;
“initial public offering” or “IPO” are to ITHAX’s initial public offering that was consummated on February 1, 2021;
“Initial Stockholders” are to Sponsor and each of the directors and officers of ITHAX;
“Interim Period” are to the date of the Business Combination Agreement until the earlier of the First Effective Time, or the termination of the Business Combination Agreement;
“ITHAX” are to ITHAX Acquisition Corp., a Cayman Islands exempted company, prior to the consummation of the Business Combination;
“ITHAX Board” are to ITHAX’s board of directors;
“Memorandum of Association” are to the amended and restated memorandum of association of ITHAX;
“Merger Consideration” means to the 60,800,000 shares of New Mondee Common Stock issued to the Mondee Stockholder in the Business Combination;
“Mergers” are to the merger of First Merger Sub with and into Mondee pursuant to the Business Combination Agreement, with Mondee as the surviving company in the First Merger and the merger of Mondee with and into Second Merger Sub, with Second Merger Sub being the surviving entity in the Second Merger;
“Mondee” are to Mondee Holdings II, Inc., a Delaware corporation, and its consolidated subsidiaries;
“Mondee Common Stock” means the shares of common stock, par value $0.01 per share, of Mondee;
“Mondee Stockholder” means Mondee Holdings, LLC, a Delaware limited liability company and the sole holder of capital stock of Mondee prior to the consummation of the Business Combination;
“Mondee Subsidiary” or “Mondee Subsidiaries” are to those subsidiaries of Mondee;
“Nasdaq” are to the Nasdaq Global Market;
“New Mondee,” “we,” “us” or “our” are to ITHAX, a Delaware corporation, upon and after the Domestication;
“New Mondee Board” or “our Board” are to the board of directors of New Mondee after the consummation of the Business Combination;
“New Mondee Class B Common Stock” are to the Class B common stock, par value $0.001 per share, of New Mondee;
“New Mondee Common Stock” are to the Class A common stock, par value $0.0001 per share, of New Mondee;
“New Mondee Preferred Stock” are to the preferred stock, par value $0.0001 per share, of New Mondee;
“New Mondee Private Warrants” are to the currently outstanding 337,500 private placement warrants to purchase Class A ordinary shares of ITHAX that were issued by ITHAX in its initial public offering or
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the private placement warrants to purchase New Mondee Common Stock that were issued as a matter of law upon the conversion of the ITHAX private placement warrants in connection with the Domestication, as the context requires;
“Offer to Purchase” is to the offer, commenced on September 16, 2022, by the Company to each holder of the Company’s outstanding Warrants to receive $0.65 in cash, without interest, for each outstanding Warrant tendered by the holder pursuant to the offer.
“ordinary shares” are to ITHAX’s Class A ordinary shares and Class B ordinary shares;
“PIPE Financing” are to the transactions contemplated by the Subscription Agreements, pursuant to which the PIPE Investors have collectively subscribed for an aggregate of 7,000,000 shares of New Mondee Common Stock for an aggregate purchase price of $70,000,000, which was consummated immediately prior to the First Effective Time;
“PIPE Investors” are to the certain “qualified institutional buyers” (as defined in Rule 144A under the Securities Act) and accredited investors who are party to the PIPE Financing;
“PIPE Shares” are to those 7,000,000 shares of New Mondee Common Stock issued at a price of $10.00 per share pursuant to the PIPE Financing;
“private placement shares” are to the 675,000 Class A ordinary shares outstanding as of the date of this prospectus that underlie our private placement units that we issued at a price of $10.00 per share in connection with the closing of our initial public offering or private placement shares that were issued as a matter of law upon the conversion of the ITHAX private placement warrants in connection with the Domestication, as the context requires;
“private placement warrants” are to the 337,500 private placement warrants outstanding as of the date of this prospectus that underlie our private placement units that we issued for $1.00 per warrant in connection with the closing of our initial public offering or the private placement warrants that were issued as a matter of law upon the conversion of the ITHAX private placement warrants in connection with the Domestication, as the context requires;
“private placement units” are to the 675,000 private placement units outstanding as of the date of this prospectus that were issued to the Sponsor and Cantor as part of the closing of our initial public offering at a price of $10.00 per unit (with the Sponsor purchasing 465,000 and Cantor purchasing 210,000 private placement units, respectively), which are substantially identical to the public units sold as part of the units in the initial public offering, subject to certain limited exceptions;
“pro forma” are to giving pro forma effect to the Business Combination, including the Mergers and the PIPE Financing;
“public stockholders” are to holders of public shares, whether acquired in ITHAX’s initial public offering or acquired in the secondary market;
“public shares” are to the currently outstanding 838,468 Class A ordinary shares of ITHAX, whether acquired in ITHAX’s initial public offering or acquired in the secondary market;
“public warrants” are to the currently outstanding 12,075,000 redeemable warrants to purchase Class A ordinary shares of ITHAX that were issued by ITHAX in its initial public offering as part of the units at a price of $10.00 per unit, with each unit consisting of one Class A ordinary share and one-half of one public warrant, or the redeemable warrants to purchase New Mondee Common Stock that were issued as a matter of law upon the conversion of the ITHAX public warrants in connection with the Domestication, as the context requires;
“Registration Statement” are to the registration statement of which this prospectus forms a part;
“SEC” are to the Securities and Exchange Commission;
“Second Effective Time” are to the time at which the Second Merger became effective
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“Second Merger” are to the time at which Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of New Mondee;
“Second Merger Sub” are to ITHAX Merger Sub II, LLC, a Delaware limited liability company;
“Securities Act” are to the Securities Act of 1933, as amended;
“Selling Securityholders” means the selling securityholders named in this prospectus.
“Sponsor” are to ITHAX Acquisition Sponsor LLC, a Delaware limited liability company that was dissolved on September 13, 2022;
“Sponsor Support Agreement” are to that certain Sponsor Agreement, dated as of December 20, 2021, by and among the Sponsor, ITHAX and Mondee, as amended and modified from time to time;
“Subscription Agreements” are to the subscription agreements, entered into by ITHAX and each of the PIPE Investors in connection with the PIPE Financing;
“Transactions” are to collectively, the Second Merger, the First Merger, and the other transactions contemplated by the Business Combination Agreement;
“transfer agent” are to Continental, the Company’s transfer agent;
“trust account” are to the trust account established at the consummation of ITHAX’s initial public offering that holds the proceeds of the initial public offering and is maintained by Continental, acting as trustee;
“units” are to the units of ITHAX, each unit representing one Class A ordinary share and one-half of one warrant to acquire one Class A ordinary share, that were offered and sold by ITHAX in its initial public offering and in its concurrent private placement; and
“Warrants” are to the public warrants and the private placement warrants.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this prospectus may constitute “forward-looking statements” for purposes of the federal securities laws. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding future events or future results, including those relating to the Business Combination; the benefits of the Business Combination; results of operations; financial condition; liquidity; prospects; growth; strategies and the markets in which Mondee operates, including estimates and forecasts of financial and operational metrics, projections of market opportunity and market share; future sales channels and strategies; and future expansion. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this prospectus include, for example, statements about:
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changes in domestic and foreign business, market, financial, political, regulatory and legal conditions;
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the Company’s ability to execute its business strategy, including monetization of its products;
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the Company’s ability to implement its strategic initiatives and continue to innovate its existing services;
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the Company’s projected financial information, growth rate and market opportunity;
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the ability to maintain the listing of the New Mondee Common Stock and the warrants on the Nasdaq Global Market, and the potential liquidity and trading of such securities;
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the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of New Mondee to grow and retain its key employees;
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costs related to the Business Combination;
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changes in applicable laws or regulations;
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the Company’s ability to raise financing in the future and ability to continue as a going concern;
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the Company’s success in retaining or recruiting, or changes required in, our officers, key employees or directors after the Business Combination;
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the Company’s ability to maintain relationships with customers and suppliers;
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the Company’s officers and directors allocating their time to other businesses and potentially having conflicts of interest with the Company’s business;
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the Company’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
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the Company’s financial performance;
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the Company’s ability to expand or maintain its existing customer base;
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the Company’s ability to remediate its material weaknesses and maintain an effective system of internal control over financial reporting;
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the outcome of any legal proceedings that may be instituted against the Company;
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the effect of COVID-19 on the foregoing;
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unfavorable conditions in the Company’s industry, the global economy or global supply chain, including financial and credit market fluctuations, international trade relations, pandemics (such as the COVID-19 pandemic), political turmoil, natural catastrophes, warfare (such as the conflict involving Russia and Ukraine), and terrorist attacks; and
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other factors detailed under the section entitled “Risk Factors.”
We caution you that the foregoing list does not contain all of the forward-looking statements made in this prospectus.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, operating results, financial condition and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors, including those 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. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this prospectus relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this prospectus to reflect events or circumstances after the date of this prospectus or to reflect new information or the occurrence of unanticipated events, except as required by law. You should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
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PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus. It does not contain all the information you should consider before investing in New Mondee Common Stock or Warrants. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Where You Can Find Additional Information,” “Unaudited Pro Forma Condensed Combined Financial Information,” and our consolidated financial statements and related notes included elsewhere in this prospectus, before making an investment decision. In this prospectus, unless the context requires otherwise, all references to “we,” “our,” “us,” “New Mondee,” and the “Company” refer to Mondee Holdings, Inc. and its consolidated subsidiaries.
Mondee Holdings, Inc.
We are a rapid-growth, travel technology company and marketplace with a portfolio of globally recognized brands in the leisure and corporate travel sectors. We provide state-of the art technologies, operating systems and services that seamlessly enable travel transactions to better serve travelers directly or through travel affiliates. Our platforms currently provide over 50,000 travel affiliates and millions of consumers with modern applications and efficient operating systems, which access differentiated travel inventory. This travel inventory is among the industry’s broadest, covering network and low-cost air carriers, a broad spectrum of accommodations including hotels, ground transportation and ancillary products such as travel insurance, much of it at directly negotiated rates. The feature-rich platforms provide all modern consumer engagement services such as conversational commerce, seamless connectivity and 24/7 assistance, as well as operating systems with full financial technology, insurance and marketing technology services built in.
We have scaled our business rapidly by adding a large base of travel agent customers and extensive private fare content to its modern technology platforms through a series of acquisitions. Since our inception, we have made fourteen accretive business acquisitions, including four large North American, EMEA and Asian market ticket consolidators. We expanded the travel content available on our platform by entering further relationships with other travel market suppliers, including network airlines, low-cost carriers, hotel aggregators and lodging properties, creating an efficient global travel marketplace. This technology led enhancement and scaling of its platforms accelerated our growth in global markets, customer reach, revenue and profit. The company is also well positioned for the growth of the gig economy and work-from- anywhere lifestyle, with its subscription based self-service applications backed by 24/7 support services.
Our principal executive office is located currently at 10800 Pecan Park Blvd., Suite 315, Austin, TX 78750. Our telephone number is (650) 646-3320. For additional information, see “Business of Mondee.”
Background
On July 18, 2022, ITHAX, our legal predecessor and a special purpose acquisition company, consummated the previously announced Business Combination with Mondee Holdings II, Inc., pursuant to which, upon the Mergers, Mondee merged with and into Second Merger Sub, which survived as a wholly-owned subsidiary of ITHAX. The Business Combination was approved by ITHAX’s stockholders at an extraordinary general meeting held on July 15, 2022.
In connection with the closing of the Business Combination, our Certificate of Incorporation was amended and restated to, among other things, change ITHAX’s name to “Mondee Holdings, Inc.” and authorize the issuance of up to 750,000,000 shares of New Mondee Common Stock and 250,000,000 shares of New Mondee Preferred Stock. For more information, see the section titled “Description of Securities.”
On July 18, 2022, our Class A Common Stock and Warrants, formerly those of ITHAX, began trading on Nasdaq under the symbols “MOND” and “MONDW,” respectively.
Implications of Being an Emerging Growth Company
We are an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor
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attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (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 nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies. As an emerging growth company, we can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the closing of ITHAX’s initial public offering, (b) in which we have total annual gross revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means, among other things, the market value of our common equity that is held by non-affiliates exceeds $700 million as of the last business day of its most recently completed second fiscal quarter; and (ii) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Smaller Reporting Company
Additionally, we are a “smaller reporting company” as defined in Rule 10(f)(1) of Regulation S-K. Even if we are no longer an emerging growth company, to the extent we qualify as a smaller reporting company, we may continue to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our shares of common stock held by non-affiliates exceeds $250 million as of the prior June 30th, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our shares of common stock held by non-affiliates exceeds $700 million as of the prior June 30th.
Recent Developments
Preferred Financing
On September 29, 2022, we completed a private placement of our newly designated Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and warrants (the “Preferred Financing Warrants”) to purchase shares of New Mondee Common Stock (collectively, the “Financing Transaction”), pursuant to the terms of those certain Subscription Agreements, dated September 29, 2022 (the “Preferred Subscription Agreements”), by and between the Company and certain investors (each individually, a “Preferred Subscriber,” and collectively, the “Preferred Subscribers”) thereto, that certain Registration Rights Agreement, dated September 29, 2022 (the “Preferred Registration Rights Agreement”), by and between the Company and the Subscribers, and that certain Warrant Agreement, dated September 29, 2022 by and between the Company and Continental Stock Transfer & Trust Company (the “Financing Transaction Warrant Agreement”). We have also granted holders of the Series A Preferred Stock the right to cause us to purchase the shares of Series A Preferred Stock any time after the fifth anniversary of the consummation of the Financing Transaction at a price equal to the stated value plus accrued and unpaid dividends. In accordance with the terms and conditions of the Preferred Subscription Agreement, the Company sold to the Preferred Subscribers 85,000 shares of Series A Preferred Stock at a purchase price of $1,000 per share, together with Preferred Financing Warrants to purchase 1,275,000 shares of New
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Mondee Common Stock (the “Financing Transaction Warrants”). In connection with the private placement, we received gross proceeds of $85 million, before deducting transaction expenses.
Sponsor Dissolution
On September 13, 2022, the Sponsor dissolved and distributed its securities on a pro rata basis to its members and permitted assignees. As a result of the dissolution, (i) Orestes Fintiklis received (1) 2,866,671 shares of New Mondee common stock, (2) 260,000 shares of New Mondee Common Stock held by ITHAX Acquisition Sponsor Cy Ltd., a company organized under the laws of Cyprus and for whom Mr. Fintiklis is the controlling shareholder, and (3) 174,375 private warrants originally issued to the Sponsor pursuant to the Private Placement Units Agreement; (ii) Dimitrios Athanasopoulos received (1) 433,915 shares of New Mondee Common Stock, (2) 17,437 private warrants issued to the Sponsor pursuant to the Private Placement Units Agreement, and (3) 19,500 shares of New Mondee Common Stock that represent the pro rata ownership of ITHAX Sponsor Cy Ltd.; (iii) Alex Argyros received (1) 141,305 shares of New Mondee Common Stock, (2) 5,812 private warrants issued to the Sponsor pursuant to the Private Placement Units Agreement, and (3) 6,500 shares of New Mondee Common Stock that represent the pro rata ownership of ITHAX Sponsor Cy Ltd; (iv) Antonios Achilleoudis received (1) 423,915 shares of New Mondee Common Stock, (2) 17,438 private warrants issued to the Sponsor pursuant to the Private Placement Units Agreement, and (3) 19,500 shares of New Mondee Common Stock that represent the pro rata ownership of ITHAX Sponsor Cy Ltd.; (v) George Faros received 400,000 shares; (vi) Faros Captial Holdings Ltd., a limited company wholly owned by George Faros, received (1) 23,915 shares of New Mondee Common Stock, (2) 17,438 private warrants issued to the Sponsor pursuant to the Private Placement Units Agreement, and (3) 19,500 shares of New Mondee Common Stock that represent the pro rata ownership of ITHAX Sponsor Cy Ltd.; (vii) The Whole Year Inn, LLC received 392,137 shares of New Mondee Common Stock; (viii) Gemini Investments Holding, LP received 490,171 shares of New Mondee Common Stock; and (viii) Sunset Harbours, LP received 490,171 shares of New Mondee Common Stock.
Issuer Tender Offer and Consent Solicitation
On September 16, 2022, we commenced (i) an offer to each holder of its outstanding Warrants to receive $0.65 in cash, without interest, for each outstanding Warrant tendered by the holder pursuant to the offer (the “Offer to Purchase”) and (ii) a solicitation of consents (the “Consent Solicitation”) from holders of the outstanding Warrants to amend that certain Amended and Restated Warrant Agreement, which governs all of the Warrants (the “Warrant Amendment”). If approved, the Warrant Amendment would permit us to redeem each Warrant that is outstanding upon the closing of the Offer to Purchase for $0.01 in cash, without interest, which is approximately 98% less than the purchase price applicable to the Offer to Purchase. Pursuant to the terms of the Amended and Restated Warrant Agreement, the consent of holders of at least a majority of the outstanding Public Warrants is required to approve the Warrant Amendment as it relates to the Public Warrants and the consent of holders of at least a majority of the outstanding Private Placement Warrants is required to approve the Warrant Amendment as it relates to the Private Placement Warrants.
The Offer to Purchase and Consent Solicitation will be open until one minute after 11:59 p.m., Eastern Time, on October 17, 2022, or such later date to which we may extend the Offer to Purchase and Consent Solicitation. Assuming 100% participation in the Offer to Purchase, we will need approximately $8.05 million to purchase all of the outstanding Warrants at the purchase price of $0.65 per Warrant. We estimate that the total amount of cash required to complete the Offer to Purchase and Consent Solicitation at 100% participation, including the payment of any fees, expenses and other related amounts incurred in connection with the Offer to Purchase and Consent Solicitation will be approximately $8.41 million, all of which will be funded by us from our existing and available cash reserves. Although this will have a negative impact on our liquidity, we do not believe this impacts our ability to continue as a going concern.
EBG Partnership
In June 2022, Mondee entered into a strategic partnership with Entertainment Benefits Group, LLC (“EBG”), an unrelated third party, to access EBG’s network of members and to provide reciprocal access to travel technology, complementary distribution networks and expanded travel and entertainment offerings.
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EBG is a leading e-commerce solutions provider and a market leader in merchandising thousands of attractions and activities, live events, hotel rooms, flights, vacation packages as well as other brands and services, through private employer and membership-based programs and other direct distribution channels. As part of the partnership, Mondee and EBG will cross-sell to their distribution networks, and EBG will have access to Mondee’s technology platform.
Summary of Risk Factors
New Mondee’s business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this prospectus summary. The following is a summary of the principal risks faced by New Mondee:
Risks Related to Our Financial Condition and Status as an Emerging Growth Stage Company
We have experienced substantial growth over a limited period of time, which makes it difficult to forecast its future results of operations. If we are unable to manage and expand our growth or execute our growth strategies effectively, our business and prospects may be materially and adversely affected.
Risks Related to Our Business and Industry
The COVID-19 pandemic has had, and may continue to have, a material adverse impact on the travel industry, which could materially affect our business, liquidity, financial condition and operating results. Our liquidity and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic. We have incurred negative cash flows and have had significant losses in the past and we may not be able to obtain additional capital.
Risks Related to Our Dependence on Third Parties
Our business depends on our relationships with travel agencies, airlines and other travel businesses and third parties. Our business and results of operations could be adversely affected if one or more of our major travel suppliers suffers a deterioration in its financial condition or restructures its operations or as a result of consolidation in the travel industry, loses bookings and revenue.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
Our success depends in large part on our ability to attract and retain high quality management and operating personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be negatively impacted. We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations on the terms and in the manner previously obtained. We may be unable to successfully close potential acquisitions, or successfully integrate the operations of such target businesses, if acquired, which could have an adverse impact on our business.
Risks Related to Intellectual Property, Information Technology, Data Security and Privacy
If we fail to develop new and innovative technologies or enhance our existing technologies and grow our systems and infrastructure in response to changing client demands and rapid technological change, our business may suffer. Cybersecurity attacks or security breaches could adversely affect our ability to operate, could result in personal information and our proprietary information being lost, stolen, made inaccessible, improperly disclosed or misappropriated and may cause us to be held liable or subject to regulatory’ penalties and sanctions and to litigation (including class action litigation), which could have a material adverse effect on our reputation and business.
Risks Related to Government Regulation, Tax and Litigation Matters
We may be unable to prevent unlawful or fraudulent activities in our operations, and we could be liable for such fraudulent or unlawful activities. We are subject to taxes in many jurisdictions globally. We are subject to anti-corruption, anti-money laundering, and economic sanctions laws and regulations in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and regulations
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administered and enforced by the U.S. Treasury’ Department’s Office of Foreign Assets Control (“OFAC”). Failure to comply with these laws and regulations could negatively impact our business, results of operations and financial condition. We are and, from time to time we may be, involved in legal proceedings and may experience unfavorable outcomes, which could affect our business and results of operations.
Risks Related to Our Organization and Structure
We are currently relying on the “controlled company” exemption under the Nasdaq Stock Market Listing Rules, pursuant to which “controlled companies” are exempt from certain corporate governance requirements otherwise applicable under Nasdaq listing rules and, as a result, will qualify for, and may rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.
Risks Related to Ownership of Our Common Stock
If we fail to comply with the listing requirements of Nasdaq, we would face possible delisting, which would result in a limited public market for our securities and make obtaining future debt or equity financing more difficult for us. An active trading market for the New Mondee Common Stock may never develop or be sustained, which may cause shares of the New Mondee Common Stock to trade at a discount to the price implied by the Business Combination and make it difficult to sell shares of New Mondee Common Stock. The market price of the New Mondee Common Stock may be volatile and fluctuate substantially, which could cause the value of your investment to decline and the exercise of outstanding public warrants may further dilute your investment. Ownership is concentrated among executive officers and directors of New Mondee, including New Mondee’s Chief Executive Officer.
Risks Related to New Mondee’s Business Following the Business Combination
We has incurred significant increased costs as a result of the Business Combination and will incur significant increased costs as a result of being a public company, and our management will be required to devote substantial time to new compliance initiatives.
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THE OFFERING
Issuer
Mondee Holdings, Inc.
Issuance of shares New Mondee Common Stock
Shares of New Mondee Common Stock issuable upon exercise of Warrants
Up to 12,412,500 shares of New Mondee Common Stock
Exercise Price of the Warrants
$11.50 per share, subject to adjustment as described herein.
Resale of private placement warrants and shares of New Mondee Common Stock
Shares of New Mondee Common Stock offered by the Selling Securityholders hereunder
Up to 75,537,500 shares of New Mondee Common Stock (including (a) 337,500 shares of New Mondee Common Stock that may be issued upon exercise of the private placement warrants, (b) 7,000,000 PIPE Shares, (c) 60,800,000 shares of New Mondee Common Stock issued to Mondee Holdings, LLC in connection with the Business Combination and (d) 7,400,000 shares of New Mondee Common Stock that will be held in escrow and vest over the four-year period following the closing of the Business Combination).
Private placement warrants offered by the Selling Securityholders hereunder
Up to 337,500 private placement warrants.
Redemption
The Warrants are redeemable in certain circumstances. See the section of this prospectus titled “Description of Securities — Warrants” for further discussion.
New Mondee Common Stock outstanding after the consummation of this offering and the Business Combination (after taking into account all redemptions)
81,346,160 shares
Use of Proceeds
We will not receive any proceeds from the sale of our securities offered by the Selling Securityholders. We will receive up to an aggregate of approximately $142.7 million from the exercise of all Warrants, assuming the exercise in full of such Warrants for cash. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive is dependent upon the market price of New Mondee Common Stock. If the market price for New Mondee Common Stock is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants. We expect to use any net proceeds from the exercise of the Warrants, if any, for general corporate purposes. See the section titled “Use of Proceeds” for more information.
Lock-Up Period
Certain of our stockholders are subject to certain restrictions on transfer until the termination of applicable lock-up periods. However, the Company may choose to release one or more Selling Securityholders from the applicable lock-up period if we determine it is in our
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stockholders’ and our best interests, which would allow for earlier sales of shares of Class A Common Stock in the public market. See “Certain Relationships and Related Person Transactions Prior to the Business Combination — ITHAX — Registration Rights Agreement” for further discussion.
Risk Factors
See the section titled “Risk Factors” beginning on page 15 of this prospectus and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in New Mondee Common Stock and Warrants.
Market for New Mondee Securities
New Mondee Common Stock and Warrants are listed on Nasdaq under the symbols “MOND” and “MONDW,” respectively.
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RISK FACTORS
Investing in our securities involves a high degree of risk. Before making an investment decision, you should consider carefully the risks and uncertainties described below. Our business, operating results, financial condition or prospects could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. If any of the risks actually occur, our business, operating results, financial condition and prospects could be adversely affected. In that event, the market price of the New Mondee Common Stock and Warrants could decline, and you could lose part or all of your investment. The risks discussed below may not prove to be exhaustive and are based on certain assumptions that later may prove to be incorrect or incomplete. Mondee may face additional risks and uncertainties that are not presently known to such entity, or that are currently deemed immaterial, which may also impair our business or financial condition.
Unless the context otherwise requires, any reference in this section of this prospectus to “the Company,” “we,” “us,” or “our” refers to New Mondee and its consolidated subsidiaries following the Business Combination.
Risks Related to Our Financial Condition and Status as an Early Stage Company
We have experienced substantial growth over a limited period of time, which makes it difficult to forecast its future results of operations.
Since 2015, we have experienced substantial growth in net revenue as a result of organic activities as well as through a series of acquisitions. During the period from 2015 to 2019, net revenues derived from business activity at the beginning of the period generated a cumulative annual growth rate (“CAGR”) of approximately 40%, and when including the contribution from businesses acquired during the period, a CAGR of approximately 62%. In light of this substantial growth within a limited period of time, our historical results should not be considered indicative of our future performance. Furthermore, our ability to accurately forecast results of operations in the future is limited and subject to a number of uncertainties, including our ability to plan for and model future growth and our ability to develop new products and services. In future periods, our growth could slow or decline for a number of reasons, including but not limited to slowing demand, increased competition, changes to technology, inability to scale up our technology, a decrease in the growth of the market, or our failure, for any reason, to continue to take advantage of growth opportunities.
We have also encountered, and will continue to encounter, risks and uncertainties frequently experienced by growing companies in rapidly changing industries. If our assumptions regarding these risks and uncertainties and its future growth are incorrect or change, or if we do not address these risks successfully, our operating and financial results could differ materially from its expectations, and its business could suffer.
If we are unable to manage and expand our growth or execute our growth strategies effectively, our business and prospects may be materially and adversely affected.
We may not be able to scale our business quickly enough to meet customer and market demand, which could result in lower profitability or cause it to fail to execute on its business strategies. In order to grow our business, we will need to continue to evolve and scale our business and operations to meet customer and market demand. Evolving and scaling our business and operations places increased demands on our management as well as its financial and operational resources to:
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attract new customers and grow our customer base;
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maintain and increase the rates at which existing customers use New Mondee’s platform, sell additional products and services to our existing customers, and reduce customer churn;
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invest in our platform and product offerings;
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effectively manage organizational change;
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accelerate and/or refocus research and development activities;
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increase sales and marketing efforts;
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broaden customer-support and services capabilities;
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maintain or increase operational efficiencies;
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implement appropriate operational and financial systems; and
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maintain effective financial disclosure, controls and procedures.
If we cannot evolve and scale its business and operations effectively, we may not be able to execute our business strategies in a cost-effective manner and its business, financial condition, profitability and results of operations could be adversely affected.
We may experience significant fluctuations in our operating results and rates of growth.
Even if the market in which we compete achieves the forecasted growth, our business could fail to grow at similar rates, if at all. Our success will depend upon our ability to successfully expand its solutions and services, retain customers, bring in new customers and retain critical talent.
Our business depends on our marketing efficiency and the general effectiveness of our marketing efforts.
Our success relies on efficiently marketing to corporate entities, travel agents, travel management companies and end consumers. Our business to business marketing aims to drive activity and attract businesses to our platforms and websites, and our business to business to consumer marketing aims to drive engagement with these businesses, travelers and end users of our products.
We may be successful in attracting new customers and/or members in the form of corporations, travel agents, travel management companies or entities. However, there is a risk that these customers’ end consumers will not engage with or use our products at a rate where we will see a significant revenue increase from such customers because we depend on their relationships with our corporate customers, travel agents and travel management companies to help drive this engagement.
We rely on the value of our brands, and the costs of maintaining and enhancing our brand awareness are increasing.
We invest considerable financial and human resources in our brands in order to retain and expand our customer base in existing and emerging markets. We expect that the cost of maintaining and enhancing our brands will continue to increase, and given the economic uncertainty and unpredictability around when the travel industry will recover, decisions we make on investing in brands could be less effective and costlier than expected.
In recent years, certain online travel companies and metasearch websites expanded their offline and digital advertising campaigns globally, increasing competition for share of voice, and we expect this activity to continue in the future. We are also pursuing and expect to continue to pursue long-term growth opportunities, particularly in emerging markets, which have had and may continue to have a negative impact on our overall marketing efficiency. Our efforts to preserve and enhance customer awareness of our brands may not be successful, and even if we are successful in our branding efforts, such efforts may not be cost-effective or as efficient as they have been historically, resulting in less direct traffic and increased customer acquisition costs. Moreover, branding efforts with respect to some brands within the New Mondee portfolio have in the past, and may in the future, result in marketing inefficiencies and may negatively impact growth rates of other brands within our portfolio. In addition, our decisions over allocation of resources and choosing to invest in branding efforts for certain brands in our portfolio at the expense of not investing in, or reducing our investments in, other brands in our portfolio could have an overall negative financial impact. If we are unable to maintain or enhance customer awareness of our brands and generate demand in a cost-effective manner, it would have a material adverse effect on our business and financial performance.
Risks Related to Mondee’s Business and Industry
The COVID-19 pandemic has had, and may continue to have, a material adverse impact on the travel industry, which could materially affect our business, liquidity, financial condition and operating results.
In response to the COVID-19 pandemic, many governments around the world have implemented, and continue to implement, a variety of measures to reduce the spread of COVID-19, including travel restrictions
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and bans, instructions to residents to practice social distancing, quarantine advisories, shelter-in-place orders, required closures of non-essential businesses and additional restrictions on businesses as part of re-opening plans. These government mandates have had a significant negative impact on the travel industry and many of the travel suppliers on which our business relies, as well as on our workforce, operations and clients. While many existing restrictions have begun to be lifted, there remains uncertainty around the impact of the new variants of COVID-19, if additional restrictions may be initiated, if there will be changes to travel behavior patterns when government restrictions are fully lifted, the continued efficacy of existing vaccines against the new variants and the timing of distribution and administration of vaccines globally.
The COVID-19 pandemic and the resulting economic conditions and government orders forced many of our travel suppliers, including airlines and hotels, to pursue cost reduction measures and seek financing, including government financing and support, in order to reduce financial distress and continue operating, and to curtail drastically their service offerings. The COVID-19 pandemic has resulted, and may continue to result, in the restructuring or bankruptcy of certain of those travel suppliers, and renegotiation of the terms of our agreements with them. In addition, the COVID-19 pandemic resulted in a material decrease in business and consumer spending and an unprecedented decline in transaction volumes in the global travel industry. Our financial results and prospects are largely dependent on these transaction volumes. As a result, our financial results for the year ended December 31, 2020 and the results for the 2021 fiscal year were significantly and negatively impacted, with a material decline in total revenues, net income, cash flow from operations and Adjusted EBITDA, as compared to 2019. This downward trend could continue for an unpredictable period.
Starting as of the fourth quarter of 2020, many COVID-19 vaccines were approved for widespread distribution across the world. Nevertheless, notwithstanding widespread vaccine distribution across the world, new variants of COVID-19, such as the Delta and Omicron variants have been identified in the second half of 2021 and early 2022. Accordingly, there remains uncertainty around the path to full economic and travel recovery from the COVID-19 pandemic due to the challenging logistics of distributing the vaccines globally, adoption of vaccines globally, travel restrictions, as well as the unknown impact of the new variants of COVID-19. As a result, we are unable to predict accurately the impact that the COVID-19 pandemic will have on our business going forward. While travel has historically been resilient to macroeconomic events, with the continued spread of COVID-19 and other variants throughout the world, the COVID-19 pandemic and its effects could continue to have an adverse impact on our business, financial condition, results of operations and cash flows for the foreseeable future. Recent trends have shown that the widespread distribution and adoption of effective vaccines, as well as treatments, help encourage a return to travel, but the timing and further extent of those developments remains uncertain, particularly in light of the identification of new variants of COVID-19.
We have incurred negative cash flows from operating activities and significant losses from operations in the past and if we are not able to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition could be adversely affected.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $190 million as of December 31, 2021. We believe that current cash and cash equivalents, as well as the $15.0 million unused line of credit, will be sufficient to fund our operations for at least the next 12 months. Our future capital requirements, however, will depend on many factors, including the on-going effects of the COVID-19 pandemic, consolidation of the travel industry, changes in the general market conditions for travel services, and future business combinations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt. If we are unable to raise additional capital when desired and on terms acceptable to us, our business, results of operations, and financial condition could be adversely affected.
Our liquidity and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic.
Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing and
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our operating performance. Since the COVID-19 pandemic, there has been increased volatility in the financial and securities markets, which has generally made access to capital less certain and has increased the cost of obtaining new capital. We intend to use the proceeds of the Business Combination to refinance substantially all or a substantial portion of our current outstanding indebtedness. However, we may need to obtain debt financing in the future to fund our operations, and there is no guarantee that such debt financing will be available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding. In addition, the terms of future debt agreements could include restrictive covenants, which could restrict our business operations.
The COVID-19 pandemic and the measures taken to contain it have and will continue to have an adverse impact on our financial condition and results of operations, if measures taken by management to ameliorate the impact of these COVID-19 related uncertainties are not successful or sufficient we may be unable to continue to fund our operations, develop our platform, or discharge our liabilities in the normal course of business.
Our negative cash flows from operating activities and significant losses from operations during the COVID-19 pandemic, as well as our growth plans, create the need for additional capital. There are uncertainties surrounding our ability to raise such capital, and our financial condition could be adversely affected. The continued COVID-19 pandemic and measures taken to contain it, including, but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions and advisories, limitations on gatherings of people and reduced operations and extended closures of businesses have and may continue to have an adverse impact on travel transaction volumes resulting in a material decline in net revenues, net income, cash flow from operations and Adjusted EBITDA, as compared to pre-COVID-19 pandemic results. To address the adverse impact of the COVID-19 pandemic, management have taken specific actions including, renegotiating certain terms and conditions of our loans with our lenders to defer interest payments and thereby manage our cash; raising additional capital through external borrowings; restructuring accounts payable to accommodate a longer time horizon for payment; as well as investing in and developing our platform to increase operating efficiencies and to reduce labor expenses.
While there is current evidence of the travel market transactions recovering, management will continue to monitor impacts on travel transaction volumes of the COVID-19 virus and future variants on a real-time basis and will update and immediately enact initiatives to scale the business infrastructure and operating expenses up or down as appropriate to ensure optimal earnings and cash flows in future periods. In addition, management will coordinate with suppliers, operating partners and its financial partners to attempt to arrange adequate capital to withstand potential COVID-19 induced volume variability. If we are unable to raise additional capital, increase operating efficiencies or reduce expenses we may be unable to continue to fund our operations, develop our platform, or discharge our liabilities in the normal course of business.
We have pledged substantially all of the assets of the Company and its Parent under the TCW Agreement. If the Lenders accelerate the repayment of borrowings, we may not have sufficient assets to repay them and we could experience a material adverse effect on our financial condition and results of operations.
On December 23, 2019, the Company, entered into a financing agreement (as amended from time to time, the “TCW Agreement”) with TCW (‘Lenders’) consisting of a $150 million multi-draw term loan in aggregate, of which the first draw was for a principal amount of $95 million. On February 6, 2020, the Company entered into a first amendment to the TCW Agreement and an incremental joinder with TCW for an aggregate principal amount of $55 million. These facilities are guaranteed by the Company and Mondee Holdings LLC and are secured by substantially all of the assets of the Company. To date, the Company has entered into a number of amendments to the TCW Agreement, including amendments that deferred the quarterly repayments of principal until the Closing, quarterly repayments of interest until September 30, 2022, and obligates the Company to make a principal prepayment of at least $40 million on the Closing date. However, if for whatever reason we unable to make scheduled payments when due or to repay such indebtedness by the schedule maturity date, we would seek the further consent of our Lenders to modify such terms. Although our Lenders have previously agreed to seven prior modifications of the TCW Agreement, there is no assurance that it will agree to any such modification and could then declare an event of default. Upon the occurrence of an event of default under the TCW Agreement, the Lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable. We have pledged substantially all of the assets of the Company under the TCW Agreement. If the Lenders accelerate the
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repayment of borrowings, we may not have sufficient assets to repay them and we could experience a material adverse effect on our financial condition and results of operations.
Consolidation in the travel industry may result in lost bookings and reduced revenue.
Consolidation among travel providers, including airline mergers and alliances, may increase competition from distribution channels related to those travel providers and place more negotiating leverage in the hands of those travel providers to attempt to lower booking fees further and to lower commissions. Examples include the merger of United and Continental Airlines, the merger of American Airlines and US Airways, the acquisition of AirTran Airways by Southwest Airlines, the merger of British Airways and Iberia and subsequent acquisitions of Aer Lingus and Vueling and the acquisition of Virgin America by Alaska Air Group. In addition, cooperation has increased within the oneworld, SkyTeam and Star Alliance. Changes in ownership of travel providers may also cause them to direct less business towards us. If we are unable to compete effectively, our suppliers could limit our access to their content, including exclusive content, and favorable fares and rates and other incentives, which could adversely affect our results of operations. Mergers and acquisitions of airlines may also result in a reduction in total flights and overall passenger capacity and higher fares, which may adversely affect the ability of our business to generate revenue.
Consolidation among travel agencies and competition for clients may also adversely affect our results of operations, since we compete to attract and retain clients. In addition, decisions by airlines to surcharge the channel represented by travel management companies and travel agencies, for example, by surcharging fares booked through or passing on charges to travel management companies and travel agencies, or introduction of such surcharges to fares booked through the Global Distribution Systems through which a material share of our content is sourced, could have an adverse impact on our business, particularly in regions in which our GDS is a significant source of bookings for an airline choosing to impose such surcharges.
To compete effectively, we may need to increase incentives, pre-pay incentives, discount or waive product or service fees or increase spending on marketing or product development. Further, as consolidation among travel providers increases, the potential adverse effect of a decision by any particular significant travel provider (such as an airline) to withdraw from or reduce its participation in our services also increases. The COVID-19 pandemic has increased the risk that the third parties we work with may voluntarily or involuntarily declare bankruptcy or otherwise cease or limit their operations, which could harm our business and results of operations. In particular, the potential harm to our business and results of operations is greater if there are bankruptcies or closures of larger partners such as airlines.
Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control could materially affect our business, liquidity, financial condition and operating results.
Our revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity, particularly air travel. Global factors over which we have no control but which could impact our clients’ willingness to travel and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
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widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian flu, SARS or any other serious contagious diseases;
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global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such attacks, including elevated threat warnings or selective cancellation or redirection of travel;
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cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war;
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natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
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climate change-related impact to travel destinations, such as extreme weather, natural disasters and disruptions, and actions taken by governments, businesses and supplier partners to combat climate change;
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the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns; and
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adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures.
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Any decrease in demand for consumer or business travel could materially and adversely affect our business, financial condition and results of operations.
Our business and financial performance is affected by macroeconomic conditions. Travel expenditures are sensitive to personal and business-related discretionary spending levels and tend to decline or grow more slowly during economic downturns, including during periods of slow, slowing or negative economic growth, higher unemployment or inflation rates, weakening currencies and concerns over government responses such as higher taxes or tariffs, increased interest rates and reduced government spending. Concerns over government responses to declining economic conditions such as higher taxes and reduced government spending could impair consumer and business spending and adversely affect travel demand. In addition, our relative exposure to certain sectors versus the broader economy may mitigate or exacerbate the effect of macroeconomic conditions. The global travel industry, which historically has grown at a rate in excess of global GDP growth during economic expansions, has experienced cyclical downturns in the past in times of economic decline or uncertainty. Future adverse economic developments in areas such as employment levels, business conditions, interest rates, tax rates, environmental impacts, fuel and energy costs and other matters could reduce discretionary spending and cause the travel industry to contract. The uncertainty of macroeconomic factors and their impact on client behavior, which may differ across regions, makes it more difficult to forecast industry and client trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and could materially and adversely affect our business, financial condition and results of operations.
Our international business exposes us to geo-political and economic risks associated with doing business in foreign countries. We have operations in the U.S., Canada, India, Thailand, and several other countries worldwide, and we indirectly provide services to travelers worldwide through our partners and affiliates. Our international operations can pose complex management, compliance, foreign currency, legal, tax, labor, data privacy and economic risks that we may not adequately address, including changes in the priorities and budgets of international travelers and geo-political uncertainties, which may be driven by changes in threat environments and potentially volatile worldwide economic conditions, various regional and local economic and political factors, risks and uncertainties, as well as U.S. foreign policy. We are also subject to a number of other risks with respect to our international operations, including:
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the absence in some jurisdictions of effective laws to protect our intellectual property rights;
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multiple and possibly overlapping and conflicting tax laws;
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duties, taxes or government royalties, including the imposition or increase of withholding and other taxes on the activities of, and remittances and other payments by, our non-U.S. subsidiaries;
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restrictions on movement of cash;
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the burden of complying with a variety of national and local laws;
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political instability;
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currency fluctuations;
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longer payment cycles;
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price controls or restrictions on exchange of foreign currencies;
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trade barriers; and
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potential travel restrictions.
The existence of any one of these risks could harm our international business and, consequently, our operating results. Additionally, operating in international markets requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required to operate in other countries will produce desired levels of revenue or net income.
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Complaints from travelers or negative publicity about our services can diminish client confidence and adversely affect our business.
Client complaints or negative word-of-mouth or publicity about our services or operations could severely diminish client confidence in and use of our services. To maintain good client relations, we must ensure that our travel advisors and partners and affiliates provide prompt, accurate and differentiated client service. Effective client service requires significant personnel expense and investment in developing programs and technology infrastructure to help our travel advisors, partners and affiliates carry out their functions. These expenses, if not managed properly, could significantly impact our profitability. Failure to properly manage our travel advisors, partners and affiliates could compromise our ability to handle client complaints effectively. If we do not handle client complaints effectively, our reputation and brand may suffer, and we may lose our customers’ confidence, which could reduce revenues and profitability.
Our indebtedness could adversely affect our business and growth prospects.
We have existing indebtedness, and we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. Although the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness and liens, these restrictions are subject to several significant qualifications and exceptions and, under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If we do so, the risks related to our high level of debt could increase. Specifically, our high level of debt could have important consequences, including the following:
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it may be difficult for us to satisfy our obligations, including debt service requirements under our outstanding debt;
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our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions or other general corporate purposes may be impaired;
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a substantial portion of cash flow from operations is required to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flow to fund our operations, capital expenditures, future business opportunities and other purposes;
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we could be more vulnerable to economic or business downturns, adverse industry conditions and other factors affecting our operations, and our flexibility to plan for, or react to, changes in our business or industry is more limited;
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our ability to capitalize on business opportunities and to react to competitive pressures, as compared to our competitors, may be compromised due to our high level of debt and the restrictive covenants in our existing or future indebtedness;
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the Company’s ability to receive distributions from its subsidiaries and to pay taxes, expenses and dividends may be adversely affected by the terms of our debt;
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increases in interest rates would increase the cost of servicing our debt; and
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our ability to borrow additional funds or to refinance debt may be limited.
Moreover, in the event of a default under any of our indebtedness, the holders of our indebtedness could elect to declare such indebtedness be due and payable and/or elect to exercise other rights, any of which could have a material adverse effect on our liquidity and our business, financial condition and results of operations.
We rely on internet search engines and application marketplaces to drive traffic to our platform, certain providers of which offer products and services that compete directly with ours. If links to our websites and apps are not displayed prominently, traffic to our platform could decline and our business would be negatively affected.
The number of consumers we attract to our platform is due in large part to how and where information from, and links to, our websites are displayed on search engine results pages, or SERPs. The display, including rankings, of search results can be affected by a number of factors, many of which are not in our control.
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Search engines frequently change the logic that determines the placement and display of the results of a user’s search, such that the purchased or algorithmic placement of links to our websites can be negatively affected. A search engine could alter its search algorithms or results causing our websites to place lower in search query results. For example, Google, a significant source of traffic to our websites, frequently promotes its own competing products in its search results, which has negatively impacted placement of references to our company and our websites on the SERP. If a major search engine changes its algorithms in a manner that negatively affects the search engine ranking of our websites or those of our travel partners, or if competitive dynamics impact the cost or effectiveness of SEO or SEM in a negative manner, our business and financial performance would be adversely affected. Furthermore, our failure to successfully manage our SEO and SEM strategies and/or other traffic acquisition strategies could result in a substantial decrease in traffic to our websites, as well as increased costs to the extent we replace free traffic with paid traffic.
We also rely on application marketplaces, or app stores such as Apple’s App Store and Google’s Play, to drive downloads of our apps. In the future, Apple, Google or other marketplace operators may make changes that make access to our products more difficult or may limit our access to information that would restrict our ability to provide the best user experience. For example, Google has entered various aspects of the online travel market, including by establishing a flight metasearch product and hotel metasearch product as well as reservation functionality. Our apps may receive unfavorable treatment compared to the promotion and placement of competing apps, such as the order in which they appear within marketplaces. In addition, Apple has announced new features that limit who has access to consumer data, including location information. Similarly, if problems arise in our relationships with providers of application marketplaces, traffic to our website and our user growth could be harmed.
The widespread adoption of teleconference and virtual meeting technologies could reduce the number of in-person business meetings and demand for travel and our services, which could adversely affect our business, financial condition and results of operations.
Our business and growth strategies rely in part upon our clients’ continued need for in-person meetings and conferences. Due to the COVID-19 pandemic, teleconference and virtual meeting technologies have become significantly more popular and many businesses have substituted these technologies for part or all of their in-person meetings and conferences. Even if and when the spread of COVID-19 is contained and travel and other restrictions are lifted, we cannot predict whether businesses will continue to choose to substitute these technologies for part or all of their in-person meetings and conferences and whether employer and employee attitudes toward business travel will change in a lasting way. Should businesses choose to continue to substitute these technologies for part or all of their in-person meetings and conferences and the preferences of our clients shift away from in-person meetings and conferences, it would adversely affect our business, financial condition and results of operations.
We operate in an increasingly competitive global environment and could fail to gain, or could lose, market share if we are unable to compete effectively with our current or future competitors.
The travel industry, and the business travel services industry, are highly competitive, and if we cannot compete effectively against the number and type of sellers of travel-related services, we may lose sales to our competitors, which may adversely affect our financial results and performance. We currently compete, and will continue to compete, with a variety of travel and travel-related companies, including other corporate travel management service providers, consumer travel agencies and emerging and established online travel agencies. We also compete with travel suppliers, such as airlines and hotels, where they market their products and services directly to travelers through platforms used by consumers to book and fulfill travel, including by offering more favorable rates, exclusive products/services and loyalty points to travelers who purchase directly from such travel suppliers through B2C channels. B2C may include business travelers who purchase travel outside of a company-sponsored and managed channel, or whose companies do not have such a channel. We compete, to a lesser extent, with credit card loyalty programs, online travel search and price comparison services, facilitators of alternative accommodations such as short-term home or condominium rentals and social media and e-commerce websites.
Some of our competitors may have access to more financial resources, greater name recognition and well-established client bases in their target client segments, differentiated business models, technology and other capabilities or a differentiated geographic coverage, which may make it difficult for us to retain or attract new clients.
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We cannot assure you that we will be able to compete successfully against any current, emerging and future competitors or provide sufficiently differentiated products and services to our client and traveler base. Increasing competition from current and emerging competitors, consolidation of our competitors, the introduction of new technologies and the continued expansion of existing technologies may force us to make changes to our business models, which could materially and adversely affect our business, prospects, financial condition and results of operations. If we cannot compete effectively against the number and type of sellers of travel-related services, we may lose sales to our competitors, which may adversely affect our financial results and performance.
Our failure to quickly identify and adapt to changing industry conditions, trends or technological developments may have a material and adverse effect on us.
Certain results and trends related to our business and the travel industry more generally are based on preliminary data and assumptions, and as a result, are subject to change and may differ materially from what we expect. We present certain results and trends in this prospectus related to our business and the travel industry more generally, which are based on an analysis of then-available or preliminary data, and the results, related findings or conclusions are subject to change. No assurance can be given that these results and trends, or that our expectations surrounding our business or the travel industry, will be accurate. These risks are heightened by the uncertainty of the COVID-19 pandemic and its impact on the travel industry and our business. Further, unanticipated events and circumstances may occur and change the outlook surrounding our business and the travel industry in material ways. Accordingly, certain of our expectations related to our business and the travel industry more generally may not occur as expected, if at all, and actual results or trends presented may differ materially from what we expect.
Operating as a public company will require us to incur substantial costs and will require substantial management attention. In addition, key members of our management team have limited experience managing a public company.
As a public company, we will face increased legal, accounting, administrative and other costs and expenses that we did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, the PCAOB and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements require us to carry out activities we have not done previously. For example, we have created new board committees and adopted new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified (for example, see the risk factor below titled “We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner”), we could incur additional costs rectifying those issues, and the existence of those issues could harm our reputation or investor perceptions of us. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on our Board or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs. In addition, we may be subject to stockholder activism, which can lead to additional substantial costs, distract management, and impact the manner in which we operate our business in ways that we cannot currently anticipate. 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 threatened or actual litigation, including by competitors.
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Our executive officers have limited experience in the management of a publicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities, which will result in less time being devoted to the management and growth of New Mondee. We may not have adequate personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the U.S. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Our failure to maintain effective internal controls over financial reporting could harm us.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Under standards established by the Public Company Accounting Oversight Board (“PCAOB”), a deficiency in internal controls over financial reporting exists when the design or operation of a control does not allow management or personnel, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. The PCAOB defines a material weakness as a deficiency, or combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented, or detected and corrected, on a timely basis. The PCAOB defines a significant deficiency as a deficiency, or a combination of deficiencies, in internal controls over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of a registrant’s financial reporting. We cannot assure you that material weaknesses and control deficiencies will not be discovered in the future. Our failure to maintain effective disclosure controls and internal controls over financial reporting could have an adverse effect on our business and could cause investors to lose confidence in our financial statements, which could cause a decline in the price of the New Mondee Common Stock, and we may be unable to maintain compliance with the Nasdaq listing standards. If we fail to maintain an effective system of internal controls, the accuracy and timing of our financial reporting may be adversely affected, and our liquidity and access to capital markets may be adversely affected, and we may be subject to regulatory investigations and penalties.
Risks Related to Our Dependence on Third Parties
Our business depends on our relationships with travel agencies, travel management companies and other travel businesses and third parties.
If we are unable to maintain existing, and establish new, arrangements with travel suppliers, or if our travel suppliers and partners reduce or eliminate the commission and other compensation they pay us, our business and results of operations would be negatively impacted. Our business is dependent on our ability to maintain our relationships and arrangements with existing travel suppliers, such as airlines, hotels, car rentals, hotel consolidators, destination services companies and GDSs, as well as our ability to establish and maintain relationships with new travel suppliers. Adverse changes in key arrangements with our travel suppliers, including an inability of any key travel supplier to fulfill its payment obligation to us in a timely manner, increasing industry consolidation, changes in travel suppliers’ booking practices regarding groups, or our inability to enter into or renew arrangements with these parties on favorable terms, if at all, could reduce the amount, quality, pricing and breadth of the travel services and products that we are able to offer, which could adversely affect our business, financial condition and results of operations.
We generate a significant portion of our revenue from commissions and incentive payments from travel suppliers, especially airline suppliers, and GDSs. If, as a result of a reduction in volumes from airlines shifting volume away from GDSs to the International Air Transport Association’s New Distribution Capacity, or any other reason, travel suppliers or GDSs reduce or eliminate the commissions, incentive payments or other
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compensation they pay to us, our revenue may decline unless we are able to adequately mitigate such reduction by increasing the service fee we charge to our travelers or increasing our transaction volume in a sustainable manner. However, an increase in service fees may also result in a loss of potential travelers.
Although we generally maintain formal contractual relationships with our travel suppliers, we do currently, and may continue to, maintain more informal arrangements with certain travel suppliers, such as airlines, GDSs, hotels and other travel product companies, which can be terminated with or without notice and which can create uncertainty with respect to the agreed terms including pricing. If these arrangements are terminated unexpectedly, or there is disagreement regarding the terms of the agreement with such travel supplier, our financial results or operations could be negatively impacted.
We cannot assure you that our agreements or arrangements with our travel suppliers or travel-related service providers will continue or that our travel suppliers or travel-related service providers will not reduce commissions, terminate their contracts, make their products or services unavailable to us or default on or dispute their payment or other obligations with us, any of which could reduce our revenue and margins or may require us to initiate legal or arbitral proceedings to enforce contractual payment obligations, which may materially and adversely affect our business, financial condition and results of operations.
Our business and results of operations could be adversely affected if one or more of our major travel suppliers suffers a deterioration in its financial condition or restructures its operations or as a result of consolidation in the travel industry, loses bookings and revenue.
A substantial portion of our revenue is affected by the prices charged by our travel suppliers, including airlines, GDS service providers, hotels, destination service providers and car rental suppliers, and the volume of products offered by our travel suppliers. As a result, if one or more of our major suppliers suffers a deterioration in their financial condition or restructures their operations, it could adversely affect our business, financial condition and results of operations.
In particular, as a substantial portion of our revenue depends on our sale of airline flights, we could be adversely affected by changes in the airline industry, including consolidations or bankruptcies and liquidations, and in many cases, we have no control over such changes. Consolidation among travel suppliers, including airline mergers and alliances, may increase competition from direct distribution channels related to those travel suppliers and place more negotiating leverage in the hands of those travel suppliers to attempt to lower booking fees and to lower commissions. Changes in ownership of travel suppliers may also cause them to direct less business towards us. If we are unable to compete effectively, our suppliers could limit our access to their content, including exclusive content, and favorable fares and rates and other incentives, which could adversely affect our results of operations. Mergers and acquisitions of airlines may also result in adjustments to routes, a reduction in total flights and overall passenger capacity and changes in fares, which may adversely affect the ability of our business to generate revenue.
Travel suppliers’ use of alternative distribution models, such as direct distribution models, could adversely affect our business.
Some of our travel suppliers, including some of our largest airline clients, have sought to increase usage of direct distribution channels. For example, these travel suppliers are trying to move more client traffic to their proprietary websites. This direct distribution trend enables them to apply pricing pressure on intermediaries and negotiate travel distribution arrangements that are less favorable to intermediaries. With travel suppliers’ adoption of certain technology solutions over the last decade, air travel suppliers have increased the proportion of direct bookings relative to indirect bookings. In the future, airlines may increase their use of direct distribution, which may cause a material decrease in their use of our services. Travel suppliers may also offer travelers advantages through their websites such as special fares and bonus miles, which could make their offerings more attractive than those available from us.
In addition, with respect to ancillary products, travel suppliers may choose not to comply with the technical standards that would allow ancillary products to be immediately distributed via intermediaries, thus resulting in a delay before these products become available through us relative to availability through direct distribution. In addition, if enough travel suppliers choose not to develop ancillary products in a
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standardized way with respect to technical standards our investment in adapting our various systems to enable the sale of ancillary products may not be successful.
Companies with close relationships with end consumers, like Facebook, as well as new entrants introducing new paradigms into the travel industry, such as metasearch engines, like Google, may promote alternative distribution channels by diverting client traffic away from intermediaries and travel agents, which may adversely affect our business.
Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business
Our success depends in large part on our ability to attract and retain high quality management and operating personnel, and if we are unable to attract, retain and motivate well-qualified employees, our business could be negatively impacted.
Our ability to identify, hire and retain senior management and other qualified personnel is critical to our results of operations and future growth. Much of our future success depends on the continued service, availability and performance of our senior management and other qualified personnel, particularly our professionals with experience in the travel industry. Any of these individuals may choose to terminate their employment with us at any time. The loss of any of these individuals could harm our business and reputation, especially if we have not been successful in developing adequate succession plans. Our business is also dependent on our ability to retain, hire and motivate talented, highly skilled personnel across all levels of our organization. We may experience higher compensation costs to retain senior management and qualified personnel that may not be offset by improved productivity or increased sales. If we are unable to continue to successfully attract and retain key personnel, our business may be harmed.
As we continue to grow, including from the integration of employees and businesses acquired in connection with previous or future acquisitions, we may find it difficult to hire, integrate, train, retain and motivate personnel who are essential to our future success.
We may not be able to accurately predict our future capital needs, and we may not be able to obtain additional financing to fund our operations on the terms and in the manner previously obtained.
We may need to raise additional funds in the future. Any required additional financing may not be available on terms acceptable to us, or at all. If we raise additional funds by issuing equity securities or convertible debt, investors may experience significant dilution of their ownership interest, and the newly issued securities may have rights senior to those of the holders of the New Mondee Common Stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to incur interest expense. Higher interest rates could increase debt service requirements on our current variable rate indebtedness, and on any debt we subsequently incur, and could reduce funds available for operations, future business opportunities or other purposes. If we need to repay debt during periods of rising interest rates, we could be required to refinance our then-existing debt on unfavorable terms or liquidate one or more of our assets to repay such debt at times which may not permit realization of the maximum return on such assets and could result in a loss. The occurrence of either or both of such events could materially and adversely affect our profitability, cash flows and results of operations. If additional financing is not available when required or is not available on acceptable terms, we may have to scale back our operations, and we may not be able to expand our business, take advantage of business opportunities or respond to competitive pressures, which could negatively impact our revenue and the competitiveness of our services.
Our success is subject to the development of new products and services over time.
Our growth occurs organically and through mergers and acquisitions. Although we develop products in-house by adding new features and improving upon existing technology, we heavily rely on mergers and acquisitions to expand our customer base.
We pursue growth opportunities by acquiring complementary businesses, solutions or technologies through strategic transactions, investments or partnerships. The identification of a suitable acquisition,
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strategic investment or strategic partnership candidate can be costly and time consuming and can distract our management team from its current operations. If such strategic transactions require us to seek additional debt or equity financing, we may not be able to obtain such financing on terms favorable to New Mondee or at all, and such transactions may adversely affect our liquidity and capital structure. Any strategic transaction might not strengthen our competitive position, may increase some of its risks, and may be viewed negatively by our customers, partners or investors.
Even if we successfully complete a strategic transaction, we may not be able to effectively integrate the acquired business, technology, systems, control environment, solutions, personnel or operations into our business. We may experience unexpected changes in how we are required to account for strategic transactions pursuant to U.S. GAAP and may not achieve the anticipated benefits of any strategic transaction. We may sustain unexpected costs, claims or liabilities that it incurs during the strategic transaction or that we assume from the acquired company, or we may discover adverse conditions post acquisition for which we have limited or no recourse.
We may be unable to successfully close potential acquisitions, or successfully integrate the operations of such target businesses, if acquired, which could have an adverse impact on our business.
Acquisitions have been and are expected to continue to be a critical part of our growth strategy. The travel service industry is highly competitive, and we face competition for acquisition opportunities from many other entities, including financial investors, some of which are significantly larger, have greater resources and lower costs of capital and are well established and have extensive experience in identifying and completing acquisitions. This competitive market for a small number of business opportunities may make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. The identification of suitable acquisition candidates can be difficult, time-consuming and costly, and we may not complete acquisitions successfully that we target in the future. Our business is subject to regulation in the U.S. and the other jurisdictions in which we operate, and any failure to comply with such regulations or any changes in such regulations could adversely affect us. If we cannot identify and purchase a sufficient quantity of profitable businesses at favorable prices, or if we are unable to finance acquisition opportunities on commercially favorable terms, our business, financial condition or results of operations could be materially adversely affected.
Acquisition activity presents certain risks to our business, operations and financial condition, and we may not realize the financial and strategic goals contemplated at the time of a transaction. Our ability to successfully implement our acquisition strategy will depend on our ability to identify, negotiate, complete and integrate acquisitions, and, if necessary, to obtain satisfactory debt or equity financing to fund those acquisitions.
Mergers and acquisitions are inherently risky, and any mergers and acquisitions that we complete may not be successful. The process of integrating an acquired company’s business into our operations and investing in new technologies is challenging and may result in expected or unexpected operating or compliance challenges, which may require significant expenditures and a significant amount of our management’s attention that would otherwise be focused on the ongoing operation of our business. The potential difficulties or risks of integrating an acquired company’s business include the following, among others, which risks can be magnified when one or more integrations are occurring simultaneously or within a small period of time:
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the effect of the acquisition on our financial and strategic positions and our reputation;
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risk that we are unable to obtain the anticipated benefits of the acquisition, including synergies, economies of scale, revenues and cash flow;
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retention risk with respect to key clients, service providers and travel advisors, and challenges in retaining, assimilating and training new employees;
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potential increased expenditure on human resources and related costs;
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retention risk with respect to an acquired company’s key executives and personnel;
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potential disruption to our ongoing business;
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especially high degree of risk for investments in immature businesses with unproven track records and technologies, with the possibility that we may lose the value of our entire investments or incur additional unexpected liabilities;
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risk of entering new jurisdictions and becoming subject to foreign laws and regulations not previously applicable to us;
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potential diversion of cash for an acquisition, ongoing operations or integration activities that would limit other potential uses for cash including IT, infrastructure, marketing and other investments;
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the assumption of known and unknown debt and other liabilities and obligations of the acquired company;
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potential integration risks related to acquisition targets that do not maintain internal controls and policies and procedures over financial reporting as would be required of a public company, which may amplify our risks and liabilities with respect to our ability to maintain appropriate internal controls and procedures;
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inadequacy or ineffectiveness of an acquired company’s disclosure controls and procedures and/or environmental, health and safety, anti-corruption, human resources or other policies and practices;
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challenges in reconciling accounting issues, especially if an acquired company utilizes accounting principles different from those that we use; and
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challenges in complying with newly applicable laws and regulations, including obtaining or retaining required approvals, licenses and permits.
We anticipate that any future acquisitions we may pursue as part of our business strategy may be partially financed through additional debt or equity. If new debt is added to current debt levels, or if we incur other liabilities, including contingent liabilities, in connection with an acquisition, the debt or liabilities could impose additional constraints and requirements on our business and operations, which could materially adversely affect our financial condition and results of operations. If we are not able to obtain such necessary financing, it could have an impact on our ability to consummate a substantial acquisition and execute our growth strategy.
Any due diligence conducted by us in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations.
We intend to conduct such due diligence as we deem reasonably practicable and appropriate based on the facts and circumstances applicable to any potential acquisition. The objective of the due diligence process will be to identify material issues which may affect the decision to proceed with any one particular acquisition target or the consideration payable for an acquisition. We also intend to use information revealed during the due diligence process to formulate our business and operational planning for, our valuation of and integration planning for, any target company or business. While conducting due diligence and assessing a potential acquisition, we may rely on publicly available information, if any, information provided by the relevant target company to the extent such company is willing or able to provide such information and, in some circumstances, third party investigations. We cannot assure you that the due diligence undertaken with respect to a potential acquisition will reveal all relevant facts that may be necessary to evaluate such acquisition or to formulate a business strategy. Furthermore, the information provided during due diligence may be incomplete, inadequate or inaccurate. As part of the due diligence process, we will also make subjective judgments regarding the results of operations, financial condition and prospects of a potential opportunity. If the due diligence investigation fails to correctly identify material issues and liabilities that may be present in a target company or business, or if we consider such material risks to be commercially acceptable relative to the opportunity, and we proceed with an acquisition, we may subsequently incur substantial impairment charges or other losses.
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Risks Related to Intellectual Property, Information Technology, Data Security and Privacy
If we fail to develop new and innovative technologies or enhance our existing technologies and grow our systems and infrastructure in response to changing client demands and rapid technological change, our business may suffer.
The travel industry is subject to changing client preferences and demands relating to travel and travel- related services, including in response to constant and rapid technological change. These characteristics are changing at an even greater pace as travel providers seek to address client needs and preferences resulting from the COVID-19 pandemic. If we are unable to develop or enhance technology in response to such changes, products or technologies offered or developed by our competitors may render our services less attractive to travelers.
Our ability to provide best-in-class service to our travelers depends upon the use of sophisticated information technologies and systems, including technologies and systems used for reservation systems, communications, procurement and administrative systems. As our operations grow in both size and scope, we continuously need to improve and upgrade our systems and infrastructure to offer and provide support for an increasing number of travelers and travel providers enhanced products, services, features and functionality, while maintaining the reliability and integrity of our systems and infrastructure. We may fail to effectively scale and grow our systems and infrastructure to accommodate these increased demands. Further, our systems and infrastructure may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages that could be harmful to our business, or could contain errors, bugs or vulnerabilities.
Our future success also depends on our ability to understand, adapt and respond to rapidly changing technologies in the travel industry that will allow us to address evolving industry standards and to improve the breadth, diversity and reliability of our services. For example, technological platforms that include the use of artificial intelligence (“Al”) to analyze known traveler data and preferences to develop a tailored travel plan are being developed. As they are in the early stages, we must understand and respond to the potential impacts of such technology. We may not be successful, or may be less successful than our current or new competitors, in developing such technology, which would negatively impact our business and financial performance.
If we are not able to maintain existing systems, obtain new technologies and systems, or replace or introduce new technologies and systems as quickly as our competitors or in a cost-effective manner, our business and operations could be materially adversely affected. Also, we may not achieve the benefits anticipated or required from any new technology or system or be able to devote financial resources to new technologies and systems in the future.
Cybersecurity attacks or security breaches could adversely affect our ability to operate, could result in personal information and our proprietary information being lost, stolen, made inaccessible, improperly disclosed or misappropriated and may cause us to be held liable or subject to regulatory’ penalties and sanctions and to litigation (including class action litigation), which could have a material adverse effect on our reputation and business.
We, and our travel suppliers and third party service providers on our behalf, collect, use and transmit a large volume of personal information, which pose a tempting target for malicious actors who may seek to carry out cyber-attacks against us or our suppliers or service providers. The secure transmission of client information over the internet is essential in maintaining the confidence of travel suppliers and travelers. Substantial or ongoing data security breaches or cyber-attacks, whether instigated internally or externally on our system or other internet-based systems, expose us to a significant risk of loss, theft, the rendering inaccessible, improper disclosure or misappropriation of this information, and resulting regulatory actions, litigation (including class action litigation) and potential liability, damages and regulatory fines and penalties, and other related costs (including in connection with our investigation and remediation efforts), which could significantly affect our reputation and harm our business. Further, some of our third party service providers, travel suppliers and other third parties may receive or store information, including client information provided by us. Our travel suppliers currently require most travelers to pay for their transactions with their credit card, especially in the U.S. Increasingly sophisticated technological capabilities pose greater
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cybersecurity threats and could result in a cyber-attack or a compromise or breach of the technology that we use to protect client transaction data.
We incur material expense to protect against cyber-attacks and security breaches and their consequences, and we may need to increase our security-related expenditures to maintain or increase our systems’ security in the future. However, despite these efforts, our security measures may not prevent cyber-attacks or data security breaches from occurring, and we may ultimately fail to detect, or accurately assess the severity of, a cyber-attack or security breach or not respond quickly enough. In addition, to the extent we experience a cyber-attack or security breach, we may be unsuccessful in implementing remediation plans to address exposure and future harms. It is possible that computer circumvention capabilities, new discoveries or advances or other developments, which change frequently and often are not recognized until launched against a target, could result in a compromise or breach of client data, even if we take all reasonable precautions, including to the extent required by law. These risks are likely to increase as we expand our offerings, expand internationally, integrate our products and services, and store and process more data, including personal information and other sensitive data. Further, if any of our third party service providers, travel suppliers or other third parties with whom we share client data fail to implement adequate data-security practices or fail to comply with our terms and policies or otherwise suffer a network or other security breach, our clients’ information may be improperly accessed, used or disclosed. We maintain a comprehensive portfolio of insurance policies to meet both our legal obligations and to cover perceived risks within our business, including those related to cybersecurity. We believe that our coverage and the deductibles under these policies are adequate for the risks that we face.
If a party (whether internal, external, an affiliate or unrelated third party) is able to circumvent our data security systems or those of the third parties with whom we share client information or engage in cyber-attacks, such cyber-attacks or data breaches could result in such party obtaining our proprietary information, the loss, theft or inaccessibility of, unauthorized access to, or improper use or disclosure of, our clients’ data and/or significant interruptions in our operations. Cyber-attacks and security breaches could also result in severe damage to our IT infrastructure, including damage that could impair our ability to offer our services. In addition, cyber-attacks or security breaches could result in negative publicity, damage our reputation, divert management’s time and attention, increase our expenditure on cybersecurity measures, expose us to risk of loss or litigation and possible liability, subject us to regulatory penalties and sanctions (and lead to further enhanced regulatory oversight), or cause travelers and potential travel suppliers to lose confidence in our security and choose to use the services of our competitors, any of which would have a material adverse effect on our brands, market share, results of operations and financial condition.
Third parties may claim that the operation of our business infringes on their intellectual proprietary rights. These claims could be costly to defend, result in injunctions and significant damage awards and limit our ability to use key technologies in the future (or require us to implement workarounds), which may cause us to incur significant costs, prevent us from commercializing our products and services or otherwise have a material adverse effect on our business.
In recent years, in the markets in which we operate, there has been considerable patent, copyright, trademark, domain name, trade secret and other intellectual property development activity, as well as litigation, based on allegations of infringement, misappropriation or other violations of intellectual property. Furthermore, individuals and groups can purchase patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. We may be subject to claims of alleged infringement, misappropriation or other violation of the intellectual property rights of our competitors or other third parties in the operation of our businesses, including for our use of third party intellectual property rights or our internally developed or acquired intellectual property, technologies and content. We cannot guarantee we have not, do not or will not infringe, misappropriate or otherwise violate the intellectual property rights of others. If we were to discover that our products or services infringe, misappropriate or otherwise violate the intellectual property rights of others, we may need to obtain licenses or implement workarounds that could be costly. We may not be able to obtain the necessary licenses on acceptable terms, or at all, or be able to implement workarounds successfully. Moreover, if we are sued for infringement, misappropriation or other violation of a third party’s intellectual property rights and such claims are successfully asserted against us, we could be required to pay substantial damages or ongoing royalty payments or to indemnify our licensees, or could be enjoined from offering our products or services
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or using certain technologies or otherwise be subject to other unfavorable circumstances. Accordingly, our exposure to damages resulting from such 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 the New Mondee Common Stock may decline. Even if intellectual property claims do not result in litigation or are resolved in our favor, these claims (regardless of their merit) 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, operating results, and financial condition.
Our failure to adequately protect our intellectual property may negatively impact our ability to compete effectively against competitors in our industry.
Our success and ability to compete depend, in part, upon our intellectual property, including our brands, technology and database. In the U.S. and other jurisdictions, we rely on a combination of copyright, trademark, patent, and trade secret laws, as well as license and confidentiality agreements and internal policies and procedures to protect our intellectual property. Even with these precautions, however, it may be possible for another party to infringe, copy or otherwise obtain and use our owned or licensed intellectual property without our authorization or to develop similar intellectual property independently, particularly in those countries where effective trademark, domain name, copyright, patent and trade secret protection may not be available. Even where effective protection is available, policing unauthorized use of our intellectual property is difficult and expensive. If it becomes necessary for us to litigate to protect these rights, any proceedings could be burdensome and costly, could result in counterclaims challenging our ownership of intellectual property or its validity or enforceability or accusing us of infringement, and we may not prevail. We cannot be certain that the steps that we have taken or will take in the future will prevent misappropriation or infringement of intellectual property used in our business. Unauthorized use and misuse of our intellectual property or intellectual property we otherwise have the rights to use could reduce or eliminate any competitive advantage we have developed, potentially causing us to lose sales or actual or potential clients, or otherwise harm our business, resulting in a material adverse effect on our business, financial condition or results of operations, and we cannot assure you that legal remedies would adequately compensate us for the damage caused by unauthorized use.
Any significant IT systems-related failures, interruptions or security breaches or any undetected errors or design faults in IT systems could result in limited capacity, reduced demand, processing delays, privacy risks and loss of customers, suppliers or marketplace merchants and a reduction of commercial activity.
We rely on IT systems to service our clients and enable transactions to be processed on our platforms.
If we are unable to maintain and improve our IT systems and infrastructure, this may result in system interruptions, defects and slowdowns. In the event of system interruptions and/or slow delivery times, prolonged or frequent service outages or insufficient capacity that impedes us from efficiently providing services to travelers, we may lose travelers and revenue or incur liabilities. Further, errors, bugs, vulnerabilities, design defects, or technical limitations within our IT Systems may lead to negative experiences for our clients, compromised ability to perform services in a manner consistent with our terms, contracts, or policies, delayed product introductions or enhancements, compromised ability to protect the data of our users, other clients, employees and business partners and/or our intellectual property or other data, or reductions in our ability to provide some or all of our services. Our IT systems are vulnerable to damage, interruption or fraudulent activity from various causes, any of which could have a material adverse impact on our business, financial condition or results from operations including:
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power losses, computer systems defects or failure, errors, bugs or vulnerabilities, computer viruses and other contaminants, internet and telecommunications or data network failures, losses and corruption of data and similar events;
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operator error, penetration by individuals seeking to disrupt operations, misappropriate information or perpetrate fraudulent activity and other physical or electronic breaches of security;
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the failure of third party software, systems or services that we rely upon to maintain our own operations;
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lack of cloud computing capabilities and other technical limitations; and
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natural disasters, fires, pandemics, wars and acts of terrorism.
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In addition, we are dependent upon software, equipment and services provided and/or managed by third parties in the operation of our business. We currently rely on a variety of third party systems, service providers and software companies, including GDSs and other electronic central reservation systems used by airlines, various channel managing systems and reservation systems used by other travel suppliers, as well as other technologies used by payment gateway providers. In particular, we rely on third parties for:
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the hosting of our websites;
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the hosting of websites of our travel suppliers, which we may rely on;
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certain software underlying our technology platform;
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transportation ticketing agencies to issue transportation tickets and travel assistance products, confirmations and deliveries;
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assistance in conducting searches for airfares and to process air ticket bookings;
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processing hotel reservations for hotels not connected to our management systems;
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processing credit card, debit card and net banking payments;
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providing computer infrastructure critical to our business;
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providing after hours travel management services; and
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providing client relationship management services.
Any disruption or failure in the software, equipment and services provided and/or managed by these third parties, or errors, bugs or vulnerabilities, could result in performance delays, outages or security breaches that could be harmful to our business. Generally, our third party IT service providers have disaster recovery and business continuity plans relating to the services provided to us. However, if certain system failures occur, we may not be able to switch to back-up systems immediately, and the time to fully recover could be prolonged.
In the event that the performance of such software, equipment or services provided and/or managed by third parties deteriorates or our arrangements with any of these third parties related to the provision and/or management of software, equipment or services are terminated, we may not be able to find alternative services, equipment or software on a timely basis, on commercially reasonable terms, or at all. Even if we are able to find alternative services, equipment or software, we may not be able to do so without significant cost or disruptions to our business, and our relationships with our travelers may be adversely impacted. Our failure to secure agreements with such third parties, or the failure of such third parties to perform under such agreements, may have a material adverse effect on our business, financial condition or results of operations.
We may have inadequate insurance coverage or insurance limits to compensate for losses from a major interruption, and remediation may be costly and have a material adverse effect on our operating results and financial condition. Any extended interruption or degradation in our technologies or systems could significantly curtail our ability to conduct our business and generate revenue.
There are various risks associated with the facilitation of payments from consumers, including risks related to fraud, compliance with evolving rules and regulations and reliance on third parties.
Our results have been and will likely continue to be negatively impacted by consumer purchases made using fraudulent credit cards, claims the consumer did not authorize the purchase or consumers who have closed bank accounts or have insufficient funds in their bank accounts to satisfy payments. We may be held
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liable for accepting fraudulent credit cards on our platforms or in connection with other fraudulent transactions on our platforms, as well as other payment disputes with consumers. Accordingly, we calculate and record an allowance for the resulting chargebacks. We must also continually implement and evolve measures to detect and reduce the risk of fraud, in particular as these methods become increasingly sophisticated. If we are unable to successfully combat the use of fraudulent credit cards on our platforms, our business, profit margins, results of operations and financial condition could be materially adversely affected.
We believe that an important component of our future success will be our ability to offer consumers their preferred method of payment in the most efficient manner on all our platforms, and as a result, we are processing more of our transactions on a merchant basis where we facilitate payments from travelers through the use of credit cards and other payment methods (such as PayPal, Alipay, Paytm and WeChat Pay). While processing transactions on a merchant basis allows us to process transactions for properties that do not otherwise accept credit cards and to increase our ability to offer a variety of payment methods and flexible transaction terms to consumers, we incur additional payment processing costs (which are typically higher for foreign currency transactions) and other costs related to these transactions, such as costs related to fraudulent payments and transactions and fraud detection. As we expand our payments services to consumers and business partners, in addition to the revenues from these transactions, we may experience a significant increase in these costs, and our results of operations and profit margins could be materially adversely affected, in particular if we experience a significant increase in non-variable costs related to fraudulent payments and transactions.
As a greater percentage of our transactions involve us processing payments, our global systems and processes must be managed on a larger scale, which adds complexity, administrative burdens and costs, and increases the demands on our systems and controls, which could adversely affect our results of operations. In addition, as our payment processing activities continue to develop, we expect to be subject to additional regulations, including financial services regulations, which we expect to result in increased compliance costs and complexities, including those associated with the implementation of new or advanced internal controls. For example, the E.U.’s Payment Services Directive 2 has further complicated the authentication process for accepting credit cards. As a result of this directive, payments made on our platforms by consumers in the European Economic Area are subject to Strong Customer Authentication, which requires the consumer to engage in additional steps to authenticate their transaction. This new requirement could cause consumer transactions to take longer to process or otherwise inconvenience the consumer, which could result in consumers choosing not to utilize our platforms as often or at all. The implementation of this process has resulted and may continue to result in increased compliance costs and administrative burdens for us.
Other new or expanded regulations that could apply to us as our payments activities evolve include those relating to money transmission licenses, anti-money laundering, card scheme associations, sanctions, banking, privacy and security of our processes, among others. Compliance with this changing regulatory environment creates significant additional compliance costs and burdens, and it could lead us to modify our business plans or operations, any of which could negatively impact our business, results of operations and profit margins.
We are also subject to payment card association rules and obligations under our contracts with the card schemes and our payment card processors, including the Payment Card Industry Data Security Standard (the “Standard”). Under the Standard and these association rules and obligations, if information is compromised, we could be liable to payment card issuers for associated expenses and penalties, and in some cases, we could be restricted in our ability to accept payment cards. Under certain circumstances in our agreements with the card schemes and in relation to the Standard, we are also subject to periodic audits, self- assessments and other assessments of our compliance with the rules and obligations of the payment card associations and the Standard, which could result in additional expenses and administrative burdens. In addition, if we fail to follow payment card industry security standards, even if no consumer information is compromised, we could incur significant fines or experience a significant increase in payment card transaction costs. Additionally, compliance with the Standard may not prevent all security incidents. If we are fined or required to pay additional processing fees, or if our ability to accept payment cards is restricted in any way as a result of our failure to comply with these payment card industry rules, or otherwise, it could adversely impact our business, results of operations and profit margins.
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We rely on banks, card schemes and other payment processors to execute certain components of the payments process. We generally pay these third parties interchange fees and other processing and gateway fees to help facilitate payments from consumers to travel service providers. As a result, if we are unable to maintain our relationships with these third parties on favorable terms, or if these fees are increased for any reason, our profit margin, business and results of operations could be harmed. Additionally, if these third parties experience service disruptions or if they cease operations (whether as a result of the COVID-19 pandemic or otherwise), consumers and travel service providers could have difficulty making or receiving payments, which could adversely impact our reputation, business and results of operations.
In addition, in the event that one of our major travel service providers voluntarily or involuntarily declares bankruptcy or otherwise ceases or limits operations, we could experience an increase in chargebacks from customers with travel reservations with such travel service provider, and we could experience financial loss from certain prepayments made to such travel service provider if we are not able to recover the prepayment. The COVID-19 pandemic and its resulting impact on travel demand, the travel industry and the economy increases the risk of insolvency or disruption to the ability of our travel service providers to provide services, and in some cases, has already resulted in the insolvency or closure of travel service providers. As a result, if one of our major travel service providers declares bankruptcy or ceases or limits operations, or if many travel service providers declare bankruptcy or cease or limit operations, it could adversely impact our business and results of operations.
Our use of “open source” software could adversely affect our ability to protect our proprietary software and subject us to possible litigation.
We use open source software in connection with our software development. From time to time, companies that use open source software have faced claims challenging the use of open source software and/or demanding compliance with open source license terms. We could be subject to suits by parties claiming ownership of what we believe to be open source software, or claiming non-compliance with open source licensing terms. Some open source licenses require licensees who distribute software containing, linking to or derived from open source software to make publicly available the source code of such distributed software, which in some circumstances could be valuable proprietary code, license our software for free or permit others to make derivative works based on such software. While we have implemented policies to ensure that no open source software is used in a manner that would require us to disclose our proprietary source code, license our software for free or permit others to make derivative works based on it, there can be no guarantee that such use could not inadvertently occur. Any requirement to disclose our proprietary source code, license it for free or license it for purposes of making derivative works, and any requirement to pay damages for breach of contract and/or intellectual property infringement may have a material adverse effect on our business, results of operations or financial condition, and could help our competitors develop services that are similar to or better than ours.
Our processing, storage, use and disclosure of personal data, including of travelers and our employees, exposes us to risks stemming from possible failure to comply with governmental law and regulation and other legal obligations.
In our processing of travel transactions, we or our travel suppliers and third party service providers collect, use, analyze and transmit a large volume of personal information. There are numerous laws with a significant impact on our operations regarding privacy, cyber security and the storage, sharing, use, analysis, processing, transfer, disclosure and protection of personal information and consumer data, the scope of which are changing, subject to differing interpretations, and may be inconsistent between states within a country or between countries. For example, the European General Data Protection Regulation, became effective on May 25, 2018, and has resulted and will continue to result in significantly greater compliance burdens and costs for companies with users and operations in the EU. The GDPR imposes numerous technical and operational obligations on processors and controllers of personal data and provides numerous protections for individuals in the EFT, including, but not limited to, notification requirements for data breaches, the right to access personal information and the right to delete personal information. The GDPR provides data protection authorities with enforcement powers which include the ability to restrict processing activities and impose fines of up to 20 million Euros or up to 4% of the annual global turnover of the infringer, whichever is greater. In addition, the GDPR imposes strict rules on the transfer of personal data
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out of the EFT to a “third country,” including the U.S. (and, pending a potential adequacy decision by the European Data Protection Board, the UK, as further discussed below). These obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other requirements or our practices.
Additionally, the UK’s exit from the EU has created uncertainty with regard to the regulation of data protection in the UK. The UK Data Protection Act contains provisions, including its own derogations, for how the GDPR is applied in the UK. The UK Data Protection Act has been enacted alongside the UK GDPR. From the beginning of 2021 (when the transitional period following Brexit expired), we have been required to continue to comply with GDPR and also the UK Data Protection Act and the UK GDPR, under which the applicable entities may be subject to fines for non-compliance that are of the same amount as provided for in the GDPR. The relationship between the UK and the EFT remains uncertain, including, for example, the role of the UK’s supervisory authority and how data transfers between the UK and the EFT and other jurisdictions will be treated. In February 2021, the European Commission proposed to issue the UK with an “adequacy” decision to facilitate the continued free flow of personal data from the EFT member states to the UK. This decision is subject to the review and/or approval of the European Data Protection Board and a committee composed of EFT member state representatives. More recently, in May 2021, the European Parliament issued a resolution asking the Commission to modify its draft decisions on whether or not the UK data protection is adequate and personal data can safely be transferred there. Accordingly, the UK currently remains a “third country” for the purposes of data transfers from the EU to the UK following the expiration of the personal data transfer grace period (from January 1, 2021) set out in the EU and UK Trade and Cooperation Agreement, unless the adequacy decision is adopted in favor of the UK. If an adequacy decision is not adopted in respect of the personal data transfers between the EU and the UK, then alternative contractual measures to transfer data to the UK from the EU will need to be implemented. These changes will increase our overall risk exposure, and we may also incur costs to comply with any new requirements and restrictions for data transfers.
Further, we are subject to evolving laws and regulations that dictate whether, how, and under what circumstances we can transfer, process and/or receive personal data. For example, in July 2020, the Court of Justice of the European Union invalidated the “EU-US Privacy Shield,” a framework for transfers of personal data from the European Economic Area to the United States. While the same CJEU decision considered and left intact the Standard Contractual Clauses, another mechanism to safeguard data transfers from the EU to third countries, including the U.S., reliance on SCCs is subject to enhanced due diligence on the data importer’s national laws, according to the CJEU. Additional measures may have to accompany the SCCs for a transfer to be compliant. If a new transatlantic data transfer framework is not adopted and we are unable to continue to rely on SCCs or validly rely upon other alternative means of data transfers from the European Economic Area or the United Kingdom to the U.S. and other countries where safeguards for transfers of personal data are required under the GDPR (and UK GDPR), we may be unable to operate material portions of our business in the European Economic Area or the United Kingdom as a result of the CJEU’s ruling and related guidance of competent European and national agencies, which would materially and adversely affect our business, financial condition, and results of operations. Additionally, if we are restricted from sharing data among our products and services, or if we are restricted from sharing data with our travel suppliers and third party service providers, it could affect our ability to provide our services or the manner in which we provide our services. Our current data transfer practices may also be more closely reviewed by supervisory authorities and could become subject to private actions.
In the U.S., the California Consumer Privacy Act became effective on January 1, 2020, and limits how we may collect and use personal information, including by requiring companies that process information relating to California residents to make disclosures to consumers about their data collection, use and sharing practices, provide consumers with rights to know and delete personal information and allow consumers to opt out of certain data sharing with third parties. The CCPA also creates an expanded definition of personal information, imposes special rules on the collection of consumer data from minors, and provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase the likelihood and cost of data breach litigation. The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and incur substantial costs and expenses in compliance and potential ligation efforts. Further, the California Privacy Rights Act, which will go into effect in 2023, creates certain additional rights for California residents. For example, the CPRA creates the new
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category of “sensitive personal information,” which covers data types such as precise geolocation information, biometric information, race and ethnicity, and information regarding sex life or sexual orientation. The CPRA also creates new rights for California residents to direct a business to limit the use and disclosure of such information to that which is necessary to perform the services reasonably expected by the consumer and to request that a company correct inaccurate personal information that is retained by the company. The Virginia Consumer Data Protection Act, which will go into effect in 2023, gives new data protection rights to Virginia residents and imposes additional obligations on controllers and processors of consumer data similar to the CCPA and CPRA. Other states have signed into law or are considering legislation governing the handling of personal data, indicating a trend toward more stringent privacy legislation in the U.S. In addition to the existing framework of data privacy laws and regulations, the U.S. Congress, U.S. state legislatures and many states and countries outside the U.S. are considering new privacy and security requirements that would apply to our business. Compliance with current or future privacy, cyber security, data protection, data governance, account access and information and cyber security laws requires ongoing investment in systems, policies and personnel and will continue to impact our business in the future by increasing our legal, operational and compliance costs and could significantly curtail our collection, use, analysis, sharing, retention and safeguarding of personal information and restrict our ability to fully maximize our closed-loop capability, deploy data analytics or Al technology or provide certain products and services, which could materially and adversely affect our profitability. We or our third party service providers could be adversely affected if legislation or regulations are expanded to require changes in our or our third party service providers’ business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our or our third party service providers’ business, results of operations or financial condition.
As a merchant that processes and accepts cards for payment, we have adopted and implemented internal controls over the use, storage and security of card data pursuant to the Payment Card Industry Data Security Standards. We assess our compliance with the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. If we fail to comply with these rules or requirements, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our clients, or facilitate other types of online payments, and our business and operating results could be adversely affected. For existing and future payment options we offer to both our corporate clients and travel suppliers, we may become subject to additional regulations and compliance requirements, including obligations to implement enhanced authentication processes, which could result in significant costs to us and our travel suppliers and reduce the ease of use of our payments options.
While we have taken steps to comply with privacy, cyber security, data protection, data governance, account access and information and cyber security laws and PCI-DSS, any failure or perceived failure by us, our third party service providers, our independent travel advisors or our partners or affiliates to comply with the privacy policies, privacy- or cyber security-related obligations to travelers or other third parties, or privacy- or cybersecurity-related legal obligations could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, monetary penalties and damages, ongoing regulatory monitoring and increased regulatory scrutiny, client attrition, diversion of management’s time and attention, decreases in the use or acceptance of our cards and damage to our reputation and our brand, all of which could have a material adverse effect on our business and financial performance. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information and cyber security in the U.S., the EU and various other countries in which we operate.
We are subject to payment-related risks.
As a merchant that processes and accepts cards for payment, we have adopted and implemented internal controls over the use, storage and security of card data pursuant to the Payment Card Industry Data Security Standards. We assess our compliance with the PCI DSS rules on a periodic basis and make necessary improvements to our internal controls. If we fail to comply with these rules or requirements, we may be liable for card issuing banks’ costs, subject to fines and higher transaction fees, and lose our ability to accept credit and debit card payments from our clients, or facilitate other types of online payments, and our business and operating results could be adversely affected. For existing and future payment options we
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offer to both our corporate clients and travel suppliers, we may become subject to additional regulations and compliance requirements, including obligations to implement enhanced authentication processes, which could result in significant costs to us and our travel suppliers and reduce the ease of use of our payments options.
While we have taken steps to comply with privacy, cyber security, data protection, data governance, account access and information and cyber security laws and PCI-DSS, any failure or perceived failure by us, our third party service providers, our independent travel advisors or our partners or affiliates to comply with the privacy policies, privacy- or cyber security-related obligations to travelers or other third parties, or privacy- or cybersecurity-related legal obligations could result in potentially significant regulatory and/or governmental investigations and/or actions, litigation, fines, sanctions, monetary penalties and damages, ongoing regulatory monitoring and increased regulatory scrutiny, client attrition, diversion of management’s time and attention, decreases in the use or acceptance of our cards and damage to our reputation and our brand, all of which could have a material adverse effect on our business and financial performance. In recent years, there has been increasing regulatory enforcement and litigation activity in the areas of privacy, data protection and information and cyber security in the U.S., the EU and various other countries in which we operate.
Risks Related to Government Regulation, Tax and Litigation Matters
We may be unable to prevent unlawful or fraudulent activities in our operations, and we could be liable for such fraudulent or unlawful activities.
We are operating in a transitional period in which we are going from a private to public company, and we are learning how to meet internal control needs at the same time. As a newly public company, there is a risk that these internal controls over fraudulent or unlawful activities may not be wholly sufficient. For example, in 2017, the then-CFO of Rocketrip committed fraud by embezzling approximately $110,000 from Rocketrip by making payments to a fake vendor. Also, the former CFO of HariWorld Travel personally collected certain accounts receivable and did not return such collections to Mondee.
We also may acquire companies where fraud may have taken place, which could make us liable for such activities. Please see Risk Factor titled “Any due diligence conducted by us in connection with potential future acquisitions may not reveal all relevant considerations or liabilities of the target business, which could have a material adverse effect on our financial condition or results of operations” for further information.
New Mondee is subject to taxes in many jurisdictions globally.
We are subject to a variety of taxes in many jurisdictions globally, including the United States, India, Thailand and Canada. We are also subject to income and non-income taxes in the United States at the federal, state and local levels, and in many other countries. Significant judgment is required in determining its worldwide provision for taxes.
In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. We operate in numerous countries where its tax returns are subject to audit and adjustment by local tax authorities. Because we operate globally, the nature of the uncertain tax positions is often very complex and subject to change, and the amounts at issue can be substantial. It is inherently difficult and subjective to estimate such amounts, as Mondee has to determine the probability of various possible outcomes. We re-evaluate uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit and new audit activity. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from its historical tax provisions and accruals. Our effective tax rate may change from year to year based on changes in the mix of activities and income allocated or earned among various jurisdictions, tax laws in these jurisdictions, tax treaties between countries, its eligibility for benefits under those tax treaties, and the estimated values of deferred tax assets and liabilities. Such changes could result in an increase in the effective tax rate applicable to all or a portion of its income which would reduce its profitability.
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We establish reserves for our potential liability for U.S. and non-U.S. taxes, including sales, occupancy and value-added taxes, consistent with applicable accounting principles and in light of all current facts and circumstances. These reserves represent our best estimate of its contingent liability for taxes. The interpretation of tax laws and the determination of any potential liability under those laws are complex, and the amount of our liability may exceed our established reserves.
New tax laws, statutes, rules, regulations or ordinances could be enacted at any time and existing tax laws, statutes, rules, regulations and ordinances could be interpreted, changed, modified or applied adversely to us. These events could require us to pay additional tax amounts on a prospective or retroactive basis, as well as require us to pay fees, penalties or interest for past amounts deemed to be due. New, changed, modified or newly interpreted or applied laws could also increase its compliance, operating and other costs, as well as the costs of our products and services. For example, on December 22, 2017, the Tax Cuts and Jobs Act, was signed into law. The TCJA contains significant changes to the U.S. corporate income tax system, including a reduction of the federal corporate income tax rate from 35% to 21%, a limitation of the tax deduction for interest expense to 30% of adjusted taxable income (as defined in the TCJA), base erosion provisions related to intercompany foreign payments and global low-taxed income, a one-time taxation of offshore earnings at reduced rates in connection with the transition of U.S. international taxation from a worldwide tax system to a partially territorial tax system, the elimination of U.S. tax on foreign earnings (subject to certain important exceptions), and the modification or repeal of many business deductions and credits. It is possible that U.S. tax law will be further modified by the Biden administration by increasing corporate tax rates, eliminating or modifying some of the provisions enacted in the TCJA or other changes that could have an adverse effect on our operations, cash flows and results of operations and contribute to overall market volatility.
Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities.
The application of domestic and international income and non-income tax laws, rules and regulations to our historical and new products and services is subject to interpretation by the relevant taxing authorities. Given a focus on revenue generation, taxing authorities have become more aggressive in their enforcement of such laws, rules and regulations, resulting in increased audit activity and audit assessments and legislation, including new taxes on our technology platform and digital services. As such, potential tax liabilities may exceed our current tax reserves or may require us to modify its business practices and incur additional cost to comply, any of which may have a material adverse effect on our business.
The enactment of legislation implementing changes in taxation of domestic or international business activities, the adoption of other corporate tax reform policies, or changes in tax legislation or policies could materially affect our financial position and results of operations.
Many of the statutory laws, rules, and regulations imposing taxes and other obligations were enacted before the growth of the digital economy. Certain jurisdictions have enacted new tax laws, rules, and regulations directed at taxing the digital economy and multi-national businesses. If existing tax laws, rules, or regulations change, by amendment or new legislation, with respect to occupancy tax, sales tax, value-added taxes, goods and services tax, digital services tax, withholding taxes, revenue based taxes, unclaimed property, or other tax laws applicable to the digital economy or multi-national businesses, the result of these changes could increase our tax liabilities. Potential outcomes include, prospectively or retrospectively, additional responsibility to collect and remit indirect taxes, including on behalf of travel suppliers, imposition of interest and penalties, multiple levels of taxation, and an obligation to comply with information reporting laws or regulations requiring us to provide information about travel suppliers, customers, and transactions on our technology platform. The outcome of these changes may have an adverse effect on our business or financial performance. Demand for our products and services may decrease if we pass on such costs to the consumer; tax reporting and compliance obligations may result in increased costs to update or expand our technical or administrative infrastructure, or effectively limit the scope of our business activities if we decide not to conduct business in particular jurisdictions.
Taxing authorities have focused legislative efforts on tax reform, transparency, and base erosion prevention. As a result, policies regarding corporate income and other taxes in various jurisdictions are under heightened scrutiny, and tax reform legislation is being proposed or enacted in several jurisdictions.
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In general, changes in tax laws may affect our effective tax rate, increase our tax liabilities and impact the value of deferred tax balances. Since releasing its interim report in 2018, the Organization for Economic Co-operation and Development (“OECD”) has proposed measures to address corporate tax challenges of the digital economy. These measures include “Pillar One and Pillar Two” reports that focus on nexus, profit allocation, and minimum tax proposals. As the OECD continues its evaluation of these proposals, several territories have enacted or proposed measures to impose new digital services taxes on companies. These taxes are incremental to taxes historically incurred by the Company and result in taxation of the same revenue in multiple countries. The enacted and proposed measures may have an adverse effect on our business or financial performance.
Our tax liabilities in the future may also be adversely affected by changes to our operating structure, changes in the mix of revenue and earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax balances or the discontinuance of beneficial tax arrangements in certain jurisdictions. We continue to work with relevant governmental authorities and legislators, as appropriate, to clarify our obligations under existing, new and emerging tax laws, rules and regulations. However, due to the increasing pace of legislative changes and the scale of our business activities, any substantial changes in tax policies, enforcement activities or legislative initiatives may materially and adversely affect our business, the taxes we are required to pay, our financial position and results of operations.
Our business is subject to regulation in the U.S. and the other jurisdictions in which we operate, and any failure to comply with such regulations or any changes in such regulations could adversely affect us.
We are subject to various regulations in the U.S. and the international jurisdictions in which we operate. In addition, we maintain travel licenses and/or registrations in the jurisdictions that require them. We are required to renew our licenses, typically on an annual basis, and to do so, we must satisfy the licensee renewal requirements of each jurisdiction. Failure to satisfy any of the requirements to which our licensed entities are subject could result in a variety of regulatory actions ranging from a fine, a directive requiring remedial action, suspension of a license or, ultimately, revocation of a license.
We are subject to other laws and regulations on matters as diverse as anti-bribery and anti-corruption laws, internal controls over financial reporting, regulation by the DOT regarding the provision of air transportation, data privacy and protection, taxation, environmental protection, anti-trust, wage-and-hour standards, headcount reductions and employment and labor relations. In addition, certain of our clients have government contracts that subject them and us to governmental reporting requirements.
Supervision efforts and the enforcement of existing laws and regulations impact the scope and profitability of our existing business activities, limit our ability to pursue certain business opportunities and adopt new technologies, compromise our competitive position, and affect our relationships with partners, merchants, vendors and other third parties. Moreover, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. New laws or regulations could similarly affect our business, increase our costs of doing business and require us to change certain of our business practices and invest significant management attention and resources, all of which could adversely affect our results of operations and financial condition.
If we fail to satisfy regulatory requirements, our financial condition and results of operations could be adversely affected, and we may be restricted in our ability to take certain capital actions (such as declaring dividends or repurchasing outstanding shares) or engage in certain business activities or acquisitions, which could compromise our competitive position.
Our international operations are also subject to local government laws, regulations and procurement policies and practices which may differ from U.S. government regulations. For example, in Europe, computerized reservation systems regulations or interpretations of regulations may:
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increase our cost of doing business or lower our revenue;
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limit our ability to sell marketing data;
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impact relationships with travel agencies, airlines, rail companies, or others, impair the enforceability of existing agreements with travel agencies and other users of our system;
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prohibit or limit us from offering services or products; or
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limit our ability to establish or change fees.
Our business and financial performance could be adversely affected by unfavorable changes in or interpretations of existing laws, rules and regulations or the promulgation of new laws, rules and regulations applicable to us and our businesses, including those relating to travel, the provision of travel packages, the internet and online commerce, internet advertising and price display, consumer protection, licensing and regulations relating to the offer of travel insurance and related products, anti-corruption, anti-trust and competition, economic and trade sanctions, tax, banking, data security, the provision of payment services and privacy. For example, there are, and will likely continue to be, an increasing number of laws and regulations pertaining to the internet and online commerce that may relate to liability for information retrieved from or transmitted over the internet, display of certain taxes and fees, online editorial and user-generated content, user privacy, behavioral targeting and online advertising, taxation, liability for third-party activities and the quality of products and services. Additionally, certain foreign jurisdictions are considering regulations intended to address the issue of “overtourism,” including by restricting access to city centers or popular tourist destinations or limiting accommodation offerings in surrounding areas, such as by restricting the construction of new hotels or the renting of homes or apartments. Such regulations could adversely affect travel to, or our ability to offer accommodations in, such markets, which could negatively impact our business, growth and results of operations. Also, compliance with the European Economic Community (“EEC”) Council Directive on Package Travel, Package Holidays and Package Tours could be costly and complex, and could adversely impact our ability to offer certain packages in the EEC in the future.
Similarly, companies we acquired may not have been subject to U.S. laws until we acquired them. Until we are able to fully integrate our compliance processes into the operations of such acquired companies, we are at risk of the acquired company’s failure to comply with U.S. laws, rules and regulations. Failure by us and our subsidiaries to comply with these laws could subject us to government investigations, civil and criminal penalties and reputational harm, which could have a material adverse effect on our consolidated operating results and financial position. Further, we rely on third parties that we do not control, including travel suppliers, strategic partners, third party service providers and affiliates. If these third parties fail to meet our requirements or standards or the requirements or standards of applicable laws or governmental regulations, it could damage our reputation, make it difficult for us to operate some aspects of our business, or expose us to liability for their actions which could have an adverse impact on our business and financial performance.
We are subject to anti-corruption, anti-money laundering, and economic sanctions laws and regulations in the jurisdictions in which we operate, including the U.S. Foreign Corrupt Practices Act (“FCPA”) and regulations administered and enforced by the U.S. Treasury’ Department’s Office of Foreign Assets Control (“OFAC”). Failure to comply with these laws and regulations could negatively impact our business, results of operations and financial condition.
Civil and criminal penalties may be imposed for violations of the FCPA, anti-money laundering laws and regulations, and regulations administered and enforced by OFAC and similar laws and regulations. Although we have policies in place with respect to compliance with the FCPA and similar laws, anti-money laundering laws and economic sanctions laws and regulations, we cannot assure you that our directors, officers, employees and agents will comply with those laws and our policies, and we may be held responsible for any such non-compliance. If we or our directors or officers violate such laws or other similar laws governing the conduct of our business (including local laws), we or our directors may be subject to criminal and civil penalties or other remedial measures, which could harm our reputation and have a material adverse impact on our business, financial condition and results of operations. Any investigation of any actual or alleged violations of such laws could harm our reputation or have an adverse impact on our business, financial condition and results of operations. The SEC, Department of Justice (“DOJ”) and OFAC, as well as foreign regulatory authorities, have continued to increase the enforcement of economic sanctions and trade regulations, anti-money laundering, and anti-corruption laws, across industries. As regulations continue to evolve and regulatory oversight continues to increase, we cannot guarantee that our programs and policies will be deemed compliant by all applicable regulatory authorities.
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Economic sanctions and embargo laws and regulations, such as those administered and enforced by OFAC, vary in their application, as they do not all apply to the same covered persons or proscribe the same activities, and such sanctions and embargo laws and regulations may be amended or strengthened over time. We cannot assure you that we will be in compliance with such laws, particularly as the scope of certain laws may be unclear and may be subject to changing interpretations.
We may engage with partners and third-party intermediaries to market our services and to obtain necessary permits, licenses, and other regulatory approvals. In addition, New Mondee or our third-party intermediaries may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, and of its employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. We cannot provide any assurance that all of our employees and agents will not take actions in violation of its policies and applicable law, for which we may be ultimately held responsible.
In the future, we may acquire companies with business operations outside of the U.S., some of which may not have previously been subject to certain U.S. laws and regulations, including the FCPA, OFAC, or other anti-corruption, anti-money laundering and economic sanctions laws applicable to us. We may be held responsible for any violations of such laws by an acquired company that occurred prior to our acquisition, or subsequent to the acquisition but before we are able to institute our compliance procedures. The process of integrating an acquired company’s business into our operations is challenging, and we may have difficulty in implementing compliance procedures for newly applicable anti-corruption and economic sanctions laws.
Exchange rate fluctuations may negatively affect our results of operations.
Our functional and presentational currency is U.S. dollars and as a result, our consolidated financial statements are reported in U.S. dollars. We have acquired, and may in the future acquire, businesses that denominate their financial information in a currency other than the U.S. dollar and/or conduct operations or make sales in currencies other than U.S. dollars. When consolidating a business that has functional currency other than U.S. dollars, we will be required to translate the balance sheet and operational results of such business into U.S. dollars. Due to the foregoing, changes in exchange rates between U.S. dollars and other currencies could lead to significant changes in our reported financial results from period to period. Among the factors that may affect currency values are trade balances, levels of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation and political or regulatory developments. We currently do not engage in foreign currency hedging activities and although we may seek to manage our foreign exchange exposure, including by active use of hedging and derivative instruments, we cannot assure you that such arrangements will be entered into or available at all times when we wish to use them or that they will be sufficient to cover the risk.
We are and, from time to time we may be, involved in legal proceedings and may experience unfavorable outcomes, which could affect our business and results of operations.
We are, and in the future, may be, subject to material legal proceedings in the course of our business, including, but not limited to, actions relating to contract disputes, business practices, intellectual property and other commercial and tax matters. Such legal proceedings may involve claims for substantial amounts of money or for other relief or might necessitate changes to our business or operations, and the defense of such actions may be both time consuming and expensive. Further, if any such proceedings were to result in an unfavorable outcome, it could result in reputational damage and have a material adverse effect on our business, financial position and results of operations. Insurance may not cover such claims, may not provide sufficient payments to cover all of the costs to resolve one or more such claims and may not continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby leading analysts or potential investors to reduce their expectations of our performance, which could reduce the market price of the New Mondee Common Stock .
Our reported results of operations may be adversely affected by changes in accounting principles generally accepted in the U.S.
Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate
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accounting principles. Although we are not aware of any recently issued and not yet effective, or pending accounting standards that may impact us, a change in these principles or interpretations could have a significant effect on our reported results of operations, and may even affect the reporting of transactions completed before the announcement or effectiveness of a change.
Investments in us may be subject to foreign investment screening regulations which may impose conditions or limitations on certain investors.
Many jurisdictions continue to strengthen their foreign direct investment (“FDI”) screening regimes, and investments and transactions may be subject to review by FDI regulators if such investments are perceived to implicate national security policy priorities. Any review and approval of an investment or transaction by an FDI regulator may have outsized impacts on transaction certainty, timing, feasibility, and cost, among other things. FDI regulatory policies and practices are rapidly evolving, and in the event that an FDI regulator reviews the Business Combination, there can be no assurances that the Business Combination will be able to proceed on the terms currently proposed. An FDI regulator may seek to prevent the Business Combination, require the divestiture of some or all of our business operations, impose requirements on the management, control and conduct of our business, or impose limitations or restrictions on, or prohibit, investments by certain investors.
Risks Related to Our Organization and Structure
We currently rely on the “controlled company” exemption under Nasdaq Stock Market Listing Rules, pursuant to which “controlled companies” are exempt from certain corporate governance requirements otherwise applicable under Nasdaq listing rules.
The Nasdaq Stock Market Listing Rules exempt “controlled companies,” or companies of which more than 50% of the voting power is held by an individual, a group or another company, from certain corporate governance requirements. ITHAX relied on the controlled company exemption for certain of the above requirements, including the requirement that director nominees be selected or recommended to the ITHAX Board by a majority of its independent directors, or by a nominating committee that is composed entirely of independent directors. In addition, the Mondee Stockholder beneficially owns, in the aggregate, more than 50% of the combined voting power for the election of New Mondee’s Board. As a result, we will continue be a “controlled company” within the meaning of the Nasdaq listing rules. Accordingly, our stockholders will not be afforded the same protections generally as stockholders of other Nasdaq-listed companies with respect to corporate governance for so long as we rely on these exemptions from the corporate governance requirements.
Investment in new business strategies and acquisitions could disrupt our ongoing business and present risks not originally contemplated.
Our strategy involves evaluating and potentially entering complementary businesses. We have invested, and in the future may invest, in new business strategies and acquisitions. For example, we acquired Rocketrip in 2020 to increase our access to large corporate customers through an incentive platform that reduces corporate travel spending. We also have acquired, and in the future may acquire, businesses similar to those we already operate in an effort to expand our geographic markets, acquire technology or products or to otherwise improve or grow our business. Such endeavors may involve significant risks and uncertainties, including diversion of management’s attention from current operations, greater than expected liabilities and expenses, inadequate return on capital, new risks with which we are not familiar, legal compliance obligations that previously did not apply to us, integration risks and difficulties and unidentified issues not discovered in our investigations and evaluations of those strategies and acquisitions. As a result, entering new businesses involves risks and costs that could, if realized, have an adverse effect on our business, reputation, results of operations, profit margins, cash flows or financial condition, as well as on our ability to achieve the expected benefits of any such investments or acquisitions.
We may decide to make minority investments, including through joint ventures, in which we have limited or no management or operational control. The controlling person in such a case may have business interests, strategies or goals that are inconsistent with ours, and decisions of the company or venture in which
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we invested may result in harm to our reputation or business or adversely affect the value of our investment. A substantial portion of our goodwill and intangible assets were acquired in acquisitions. If we determine that any of our goodwill and intangible assets, or any goodwill or intangible assets acquired in future transactions, experiences a decline in value, we may be required to record an impairment which could materially, adversely affect our results of operations. Further, we may issue shares of New Mondee Common Stock in these transactions, which could result in dilution to our stockholders.
We may not be able to successfully integrate acquired businesses or combine internal businesses.
The integration of acquired businesses requires significant time and resources, and we may not manage these processes successfully. Further, as our businesses developed, our strategy evolved and market conditions changed, we have integrated businesses that had been managed independently, integrated certain functions across businesses and restructured or ceased operating certain assets or businesses, and we may do so in the future, including through divestitures. These integrations may be of varying degree, depending on many factors such as business compatibility, strategic goals or geographic location, among others. Integrations are complex, often involve additional or unexpected costs and create a variety of issues and risks, including:
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disruption or harm to the businesses involved;
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disruption to our other businesses, including as a result of the need for management to spend time and attention on the integration;
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difficulty combining different company cultures, systems, reporting structures, titles and job descriptions and compensation schemes;
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problems retaining key personnel, in particular at the acquired or integrated company;
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loss of travel service providers or partners of the acquired business; and
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difficulty implementing and maintaining effective controls, procedures and policies.
We may not successfully integrate companies 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.
Delaware law and our Certificate of Incorporation and Bylaws contain certain provisions, including anti- takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
Our Certificate of Incorporation and bylaws of the Company (the “Bylaws”), and the DGCL, contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by the New Mondee Board and therefore depress the trading price of New Mondee Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the New Mondee Board or taking other corporate actions, including effecting changes in our management. Among other things, the Certificate of Incorporation and the Bylaws include provisions regarding:
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the ability of the New Mondee Board to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
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the limitation of the liability of, and the indemnification of, our directors and officers;
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removal of the ability of New Mondee stockholders to take action by written consent in lieu of a meeting such action has been recommended or approved pursuant to a resolution approved by the affirmative vote of all of the directors then in office;
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the requirement that a special meeting of stockholders may be called only by a majority of the entire New Mondee Board, which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;
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controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;
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the ability of the New Mondee Board to amend the bylaws, which may allow the New Mondee Board to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and
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advance notice procedures with which stockholders must comply to nominate candidates to the New Mondee Board or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the New Mondee Board, and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the New Mondee Board or management.
The Certificate of Incorporation designates the Delaware Court of Chancery or the United States federal district courts as the sole and exclusive forum for substantially all 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, stockholders, employees or agents.
The Certificate of Incorporation, provides 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 breach of a fiduciary duty owed by any current or former director, officer, employee, agent or stockholder of New Mondee to New Mondee or our stockholders, or any claim for aiding or abetting such an alleged breach; (iii) any action asserting a claim arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws, or to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws; (iv) any action asserting a claim against the Company or any current or former director, officer, employee, agent or stockholder, whether arising under the DGCL, the Certificate of Incorporation or the Bylaws, or such actions as to which the DGCL confer jurisdiction on the Delaware Court of Chancery; or (v) any action asserting a claim against the Company or any current or former director, officer, employee, agent or stockholder governed by the internal affairs doctrine. The foregoing provisions will not apply to any claims as to which the Delaware Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of such court, which is rested in the exclusive jurisdiction of a court or forum other than such court (including claims arising under the Exchange Act), or for which such court does not have subject matter jurisdiction, or to any claims arising under the Securities Act and, unless the Company consents in writing to the selection of an alternative forum, the United States District Court for the District of Delaware will be the sole and exclusive forum for resolving any action asserting a claim arising under the Securities Act.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules or regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Certificate of Incorporation provides that, unless we consent in writing to the selection of an alternative forum, United States District Court for the District of Delaware shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. There is uncertainty as to whether a court would enforce the forum provision with respect to claims under the federal securities laws.
This choice of forum provision in our Certificate of Incorporation 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, or other employees, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. It is possible that a court could find these types of provisions to be inapplicable or unenforceable, and if a court were to find the
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choice of forum provision contained in the Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition. Furthermore, investors cannot waive compliance with the federal securities laws and rules and regulations thereunder
Risks Related to Ownership of New Mondee Common Stock
If we fail to comply with the listing requirements of Nasdaq, we would face possible delisting, which would result in a limited public market for our securities and make obtaining future debt or equity financing more difficult for us.
The Company’s Class A common stock and warrants are listed on Nasdaq under the symbols “MOND” and “MONDW,” respectively. Nasdaq may delist the New Mondee Common Stock or warrants from trading on its exchange for failure to meet the continued listing standards.
As previously disclosed in the Company’s current report on Form 8-K, filed July 18, 2022, we received written notice (the “Notice”) from the Staff of the Listing Qualifications Department (the “Staff”) of Nasdaq stating that the Staff has determined that we have not complied with the requirements of IM-5101-2 because the Company did not demonstrate that its New Mondee Common Stock complies with (a) the minimum 1,100,000 Unrestricted Publicly Held Shares requirement in Listing Rule 5405(a)(2) (the “Unrestricted Publicly Held Shares Requirement”) and (b) the minimum $20 million in Market Value of Unrestricted Publicly Held Shares requirement in Listing Rule 5405(b)(3)(B) (the “Market Value of Unrestricted Publicly Held Shares Requirement” and, together with the Unrestricted Publicly Held Shares Requirement, the “Exchange Requirements”) and (ii) the Company’s warrants do not qualify for initial listing since the security underlying the warrant, the New Mondee Common Stock, does not qualify. The Notice indicated that the Company’s New Mondee Common Stock and warrants would be suspended from Nasdaq on July 27, 2022. The Company requested a hearing before a Hearings Panel (the “Panel”) on July 25, 2022, which took place on August 26, 2022. On September 1, 2022, the Hearings Panel granted our request for an extension to October 21, 2022 to evidence compliance with all initial listing rules as required under Nasdaq Listing Rule 5405(a), during which extension period the New Mondee Common Stock and warrants will continue to be listed on Nasdaq.
We have not regained compliance as of the date of this registration statement. We are closely monitoring our unrestricted publicly held shares and market value and may consider available options to achieve compliance, including, but not limited to, releasing one or more Selling Securityholders from the applicable lock-up period, which would allow for earlier sales of shares of New Mondee Common Stock in the public market. As of the date of this prospectus, we have not released any Selling Securityholder from their applicable lock-up period. However, we cannot assure you that we will be able to regain compliance in a timely manner. If we fail to receive a hearing extension, we may be subject to delisting. The delisting of our securities or transfer of listing may significantly reduce the liquidity of our securities, cause further declines to the market price of New Mondee Common Stock and make it more difficult for us to obtain adequate financing to support our continued operation.
If our securities are delisted from trading on such exchange for failure to meet the listing standards, we and our stockholders could face significant adverse consequences including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that New Mondee Common Stock is a “penny stock,” which will require brokers trading in our New Mondee Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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decreased ability to issue additional securities or obtain additional financing in the future.
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An active trading market for the New Mondee Common Stock may never develop or be sustained, which may cause shares of the New Mondee Common Stock to trade at a discount to the price implied by the Business Combination and make it difficult to sell shares of New Mondee Common Stock.
New Mondee Common Stock is listed under the symbol “MOND” on the Nasdaq. However, we cannot assure you that an active trading market for the New Mondee Common Stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for the New Mondee Common Stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of the New Mondee Common Stock when desired or the prices that you may obtain for your shares. Additionally, the New Mondee Common Stock likely will not be eligible to be included in certain stock indices because of our dual class voting structure. For example, certain index providers have announced restrictions on including companies with multiple- class share structures in certain of their indexes. S&P, Dow Jones and FTSE Russell have each announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500. These changes exclude companies with multiple classes of shares from being added to these indices.
Certain existing stockholders purchased securities in New Mondee at a price below the current trading price of such securities, and may experience a positive rate of return based on the current trading price. Future investors in New Mondee may not experience a similar rate of return.
Certain stockholders in the Company, including certain of the Selling Securityholders, acquired shares of New Mondee Common Stock or warrants in the Company at prices below the current trading price of our New Mondee Common Stock, and may experience a positive rate of return based on the current trading price.
Prior to the Business Combination, Legacy Mondee equity holders subscribed for an aggregate of 60,800,000 shares of New Mondee Common Stock at purchase prices ranging between approximately $3.99 per share and $9.91 per share. In addition, following the consummation of the Business Combination, each ITHAX ordinary share issued and outstanding immediately prior to the Business Combination was automatically canceled and converted into newly issued shares in New Mondee Common Stock in accordance with the terms of the Business Combination Agreement. The Sponsor paid an aggregate of $25,000 for the 5,854,700 ITHAX Class B ordinary shares owned by the Sponsor, its directors and certain other advisors and/or affiliates of the Sponsor to whom the Sponsor has transferred such Class B ordinary shares. Following the Business Combination, each ITHAX Class B ordinary share was converted on a one-for-one basis to shares of New Mondee Common Stock. In connection with the PIPE Financing, the PIPE Investors paid $70,000,000 to purchase an aggregate of 7,000,000 shares of New Mondee Common Stock for $10.00 per share. The Sponsor and Cantor Fitzgerald & Co. paid $6,750,000 in the aggregate to purchase an aggregate of 337,500 private placement warrants, each exercisable to purchase one ITHAX Class A ordinary share at $11.50, subject to adjustment. In connection with the Business Combination, the 337,500 private placement warrants were exchanged for 337,500 warrants of New Mondee with an exercise price of $11.50 per share, the exercise of which will result in the issuance of 337,500 shares of New Mondee Common Stock. For more details on the foregoing transactions, see “Certain Relationships and Related Person Transactions.” On September 13, 2022, the Sponsor dissolved and distributed its shares of New Mondee Common Stock and warrants to members of the sponsor (the “Sponsor Members”) on a pro rata basis. For more details on the dissolution and pro-rata distribution of the Sponsor’s securities, see “Recent Developments.” On September 28, 2022, the last reported sale price of our shares of New Mondee Common Stock as reported on Nasdaq was $9.12 per share. Holders of our warrants are less likely to exercise their warrants to the extent that the exercise prices of their warrants exceed the market price of our New Mondee Common Stock. There is no guarantee that our warrants will be in the money prior to their expiration, and as such, the warrants may expire worthless or may be redeemed by the Company for $0.01 per share to the extent that the Warrant Amendment is approved by at least a majority of the holders of the public warrants or private warrants, as applicable, in the Consent Solicitation, which is approximately 98% less than the purchase price applicable to the Offer to Purchase. As such, any cash proceeds that we may receive in relation to the exercise of the warrants overlying shares being offered for sale in this prospectus will be dependent on the trading price of our New Mondee Common Stock.
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Given the relatively lower purchase prices that some of our shareholders paid to acquire shares of New Mondee Common Stock and exercise prices that some of our shareholders may pay to exercise warrants to acquire shares of New Mondee Common Stock compared to the current trading price of our New Mondee Common Stock, these stockholders, some of whom are our Selling Securityholders, in some instances will earn a positive rate of return on their investment, which may be a significant positive rate of return, depending on the market price of our shares at the time that such stockholders choose to sell their shares of New Mondee Common Stock. Investors who purchase our shares of New Mondee Common Stock on the Nasdaq following the Business Combination may not experience a similar rate of return on the securities they purchase due to differences in the purchase prices and the current trading price. Based on the last reported sale price of our New Mondee Common Stock referenced above and their respective purchase prices, Legacy New Mondee equity holders may experience potential profit of up to $5.13 per share.
Concentration of ownership among our executive officers, directors and their respective affiliates may limit other stockholders’ ability to influence corporate matters and delay or prevent a third party from acquiring control over New Mondee.
The executive officers and directors of New Mondee, excluding Prasad Gundumogula, who will serve as New Mondee’s Chief Executive Officer, and their respective affiliates beneficially own, in the aggregate, approximately 8.7% of outstanding New Mondee Common Stock. Following the closing of the Business Combination, Mr. Gundumogula beneficially owns more than 83% of the outstanding shares of New Mondee Common Stock, which includes shares he is deemed to beneficially own through his control of Mondee Holdings, LLC, the sole holder of capital stock of Mondee, as well as the 6,000,000 Earn-Out Shares that he received upon the closing of the Business Combination. This significant concentration of ownership may have a negative impact on the trading price for the New Mondee Common Stock because investors often perceive disadvantages in owning stock in companies where there is a concentration of ownership in a small number of stockholders. In addition, these stockholders will be able to exercise influence over all matters requiring stockholder approval, including the election of directors and approval of corporate transactions, such as a merger or other sale of us or our assets. This concentration of ownership could limit other stockholders’ ability to influence corporate matters and may have the effect of delaying or preventing a change in control, including a merger, consolidation or other business combination, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if that change in control would benefit the other stockholders.
The market price of the New Mondee Common Stock may be volatile and fluctuate substantially, which could cause the value of your investment to decline.
The trading price of the New Mondee Common Stock is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in the New Mondee Common Stock. Factors that could cause fluctuations in the trading price of the New Mondee Common Stock include the following:
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price and volume fluctuations in the overall stock market from time to time;
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volatility in the trading prices and trading volumes of travel industry stocks;
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changes in operating performance and stock market valuations of other travel companies generally, or those in our industry in particular;
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sales of shares of the New Mondee Common Stock by stockholders or by us;
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failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company or our failure to meet these estimates or the expectations of investors;
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the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;
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announcements by us or our competitors of new offerings or platform features;
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the public’s reaction to our press releases, other public announcements and filings with the SEC;
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rumors and market speculation involving us or other companies in our industry;
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actual or anticipated changes in our results of operations or fluctuations in our results of operations;
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the COVID-19 pandemic and its impact on the travel industry;
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actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;
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litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;
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developments or disputes concerning our intellectual property or other proprietary rights;
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announced or completed acquisitions of businesses, services or technologies by us or our competitors;
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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
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changes in accounting standards, policies, guidelines, interpretations or principles;
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any significant change in our management;
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general economic conditions and slow or negative growth of our markets; and
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other factors described in this “Risk Factors” section.
In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
If securities analysts do not publish research or reports about our business or if they publish negative evaluations of the New Mondee Common Stock, the market price and trading volume of the New Mondee Common Stock could decline.
The trading market for the New Mondee Common Stock will rely, in part, on the research and reports that industry or financial analysts publish about us or our business. We do not currently have, and may never obtain, research coverage by industry or financial analysts. If no, or few, analysts commence coverage of us, the trading price of the New Mondee Common Stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of the New Mondee Common Stock, the price of the New Mondee Common Stock could decline. If one or more of these analysts cease to cover the New Mondee Common Stock, we could lose visibility in the market for the New Mondee Common Stock, which in turn could cause our stock price to decline.
The securities being offered in this prospectus represent a substantial percentage of the outstanding New Mondee Common Stock and the sales of such securities, or the perception that these sales could occur, could cause the market price of the securities of the Company to decline significantly and certain Selling Stockholders still may receive a positive rate of return on the sale of their securities.
The Resale Securities being offered in this prospectus represent approximately 92.4% of our outstanding shares of New Mondee Common Stock, including (a) 337,500 shares of New Mondee Common Stock that may be issued upon the exercise of the private placement warrants at a price of $11.50 per share, (b) 7,000,000 PIPE Shares, which were issued at a price of $10.00 per share to certain of the Selling Securityholders in private placements pursuant to the terms of the Subscription Agreements in connection with, and immediately prior to the consummation of, the Business Combination between ITHAX and Mondee, (c) 60,800,000 Merger Consideration shares originally issued to Legacy Mondee equity holders at purchase prices ranging between approximately $3.99 per share and $9.91 per share, after giving effect to the exchange ratio in the Business Combination; and (d) 7,400,000 Earn-Out Shares issuable to such shareholders pursuant to the Earn-Out Agreement and (ii) up to 337,500 private placement warrants originally issued in a private placement at a price of $1.00 per private placement warrant, which private placement warrants have an exercise price of $11.50 per share, that closed concurrently with ITHAX’s initial public offering. In addition, this prospectus relates to the issuance by New Mondee of up to 337,500 shares of New Mondee Common Stock upon the exercise of the private placement warrants from time to
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time and (ii) 12,075,000 shares of New Mondee Common Stock upon the exercise of public warrants at a price of $11.50 per share, which were originally sold as part of ITHAX’s initial public offering of units at a price of $10.00 per unit, with each unit consisting of one Class A ordinary share and one-half of one public warrant.
The majority of the shares being registered for resale were purchased by the Selling Securityholders for prices considerably below the current market price of New Mondee Common Stock. The sale of all the securities being offered in this prospectus, or the perception that these sales could occur, could increase the volatility of the market price of New Mondee Common Stock or result in a significant decline in the public trading price of New Mondee Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that it deems appropriate. Resales of New Mondee Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well.
For instance, Prasad Gundumogula, the Company’s chief executive officer, will have control over 82.6% of outstanding shares of New Mondee Common Stock, and upon expiration of certain lock-up restrictions entered into in connection with the Business Combination that will expire six months following the Business Combination, will be able to sell any or all of such shares for so long as the registration statement of which this prospectus forms a part is available for use. Even if there were a decline in the public trading price of our securities, the Selling Security holders may still experience a positive rate of return on the securities they purchased due to the differences in the purchase prices described above and the public trading price of our securities, but our public securityholders may not experience a similar rate of return on the securities they purchased due to differences in the purchase prices and the current trading price. Based on the closing price of the New Mondee Common Stock referenced above, the Legacy Mondee equity holders may experience potential profit of up to $5.13 per share.
Although the Sponsor, Sponsor Members, the Mondee Stockholders and the Members (as defined herein) will be prohibited from transferring any shares of New Mondee Common Stock until the date that is six months following the Closing Date, subject to certain exceptions, these shares may be sold after the expiration of such lock-up period or in the event that the Company chooses to release shares of New Mondee Common Stock held by such Selling Securityholders from such lock-up periods prior to the expiration of such periods. For instance, we may choose to release one or more Selling Securityholders from the applicable lock-up periods, if we determine it is in our stockholders’ and our best interests, which would allow for earlier sales of shares of New Mondee Common Stock in the public market, which could have a negative impact on the price of New Mondee Common Stock. For example, as of July 18, 2022, we have a small public float of approximately 838,468 shares of New Mondee Common Stock. We may need to increase our public float in order to comply with Nasdaq listing standards. In addition, our small public float could limit the ability of large, institutional investors to invest in our equity, limit our ability to raise additional capital through sales of New Mondee Common Stock and limit the attractiveness of our equity to potential strategic partners. For these reasons or other unforeseen developments, we may determine that it in our stockholders’ and our best interests to release one or more selling stockholders from their applicable lock-up obligations. As of the date of this prospectus, we have not released any Selling Securityholder from their applicable lock-up period.
Following the expiration of or earlier release from the applicable lock-ups described in this prospectus and as restrictions on resale end and registration statements are available for use, the market price of New Mondee Common Stock could decline if the holders of restricted or locked up shares sell them or are perceived by the market as intending to sell them. As such, sales of a substantial number of shares of New Mondee Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell such shares, could reduce the market price of New Mondee Common Stock. Despite such a decline in the public trading price of our securities, certain of the Selling Securityholders may still experience a positive rate of return on the securities they purchased due to the differences in the purchase prices described above and the public trading price of our securities.
In addition, downward pressure on the market price of the New Mondee Common Stock that likely will result from sales of New Mondee Common Stock issued in connection with exercise of warrants or sales of warrants upon expiration of any applicable lock-up periods could encourage short sales of New Mondee Common Stock by market participants. Generally, short selling means selling a security, contract or
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commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of New Mondee Common Stock could have a tendency to depress the price of the New Mondee Common Stock, which could increase the potential for short sales.
The Warrants included in this prospectus will become exercisable for New Mondee Common Stock, which will increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.
As a result of the Business Combination being completed, outstanding public warrants to purchase an aggregate of 12,075,000 shares of New Mondee Common Stock and outstanding private warrants to purchase 337,500 shares of New Mondee Common Stock are exercisable in accordance with the terms of the warrant agreement governing those securities. These Warrants are exercisable at any time commencing on August 18, 2022 (i.e., 30 days after the completion of the Business Combination) and ending on July 18, 2027 (i.e., the fifth anniversary of the completion of the Business Combination), subject to certain limitations and exceptions. The exercise price of these Warrants is $11.50 per share. On September 16, 2022, the Company commenced an offer to purchase each of its Warrants in the Offer to Purchase for a purchase price of $0.65 per Warrant. To the extent such warrants are exercised, additional shares of New Mondee Common Stock will be issued, which will result in dilution to the holders of New Mondee Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of New Mondee Common Stock. However, there is no guarantee that the Warrants will be in the money prior to their expiration, and as such, the Warrants may expire worthless or may be redeemed by the Company for $0.01 per share to the extent that the Warrant Amendment is approved by at least a majority of the holders of the public warrants or private warrants, as applicable, in the Consent Solicitation, which is approximately 98% less than the purchase price applicable to the Offer to Purchase.
The exercise price for our Warrants is $11.50 per share, which exceeds the market price of New Mondee Common Stock, which was $9.12 per share based on the closing price of New Mondee Common Stock on the Nasdaq on September 28, 2022. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive is dependent upon the market price of New Mondee Common Stock. If the market price for New Mondee Common Stock is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants.
The Series A Preferred Stock has rights, preferences and privileges that will not be held by, and will be preferential to, the rights of holders of New Mondee Common Stock, which could adversely affect the liquidity and financial condition of the Company, and may result in the interests of the holders of Series A Preferred Stock differing from those of the holders of New Mondee Common Stock.
The Series A Preferred Stock ranks senior to shares of our New Mondee Common Stock with respect to liquidation preferences. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred Stock will be entitled to receive distributions out of our assets in an amount per share equal to $1,000 plus all accrued and unpaid dividends before any distributions shall be made on any shares of New Mondee Common Stock.
In addition, holders of Series A Preferred Stock will be entitled to dividends at a rate equal to SOFR plus 7% per annum (which rate increases to SOFR plus 10.50% per annum beginning on the second anniversary of the consummation of the Financing Transaction).
The preferential rights described above could result in divergent interests between the holders of shares of Series A Preferred Stock and the holders of New Mondee Common Stock.
You may experience future dilution as a result of future equity offerings or if we issue shares subject to options, warrants, stock awards or other arrangements.
In order to raise additional capital, we may in the future offer additional shares of New Mondee Common Stock or other securities convertible into or exchangeable for New Mondee Common Stock. We may sell shares or other securities in any other offering at a price per share that is less than the current market
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price of our securities, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. The sale of additional shares of New Mondee Common Stock or other securities convertible into or exchangeable for New Mondee Common Stock would dilute all of our stockholders, and if such sales of convertible securities into or exchangeable into New Mondee Common Stock occur at a deemed issuance price that is lower than the current exercise price of our outstanding Preferred Financing Warrants sold to the Preferred Subscribers in September 2022, the exercise price for those warrants would adjust downward to the deemed issuance price pursuant to price adjustment protection contained within those warrants.
Risks Related to the Business Combination and New Mondee
Litigation or legal proceedings could expose New Mondee, to significant liabilities and have a negative impact on New Mondee’s respective reputations or business, as applicable.
New Mondee may become subject to claims, litigation, disputes and other legal proceedings from time to time. We evaluate these claims, litigation, disputes and other legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, the amount of potential losses. Based on these assessments and estimates, we may establish reserves, as appropriate. These assessments and estimates are based on the information available to each management team at the time of its respective assessment and involve a significant amount of management judgment. Actual outcomes or losses may differ materially from our assessments and estimates.
Under the terms of the DB Engagement Letter, ITHAX agreed to indemnify and hold harmless and its directors, officers, agents, and employees and each other person, if any, who controls Deutsche Bank, within the meaning of the Securities Act, against any and all claims, losses, damages, liabilities, costs, and expenses as incurred arising related to or arising out of or in connection with, in each case, any actual or proposed transactions giving rise to or contemplated by the DB Engagement Letter or Deutsche Bank’s engagement under the DB Engagement Letter. Accordingly, if any claims, litigation, disputes or other legal proceedings are brought by third parties against Deutsche Bank in relation to the services it provided to ITHAX under any of these agreements, then New Mondee may be liable to pay for or reimburse Deutsche Bank for the losses and costs it incurs, unless such claims, losses, damages, liabilities, costs, or expenses arise primarily and directly out of or are based primarily or directly upon any action or failure to act by Deutsche Bank that is found in a final and non-appealable judicial determination by a court of competent jurisdiction (or settlement tantamount thereto) to constitute willful misconduct or gross negligence on the part of such indemnified party.
Even when not merited or whether or not New Mondee ultimately prevails, the defense of these lawsuits may divert management’s attention, and we may incur significant expenses in defending these lawsuits. The results of litigation and other legal proceedings are inherently uncertain, and adverse judgments or settlements in some of these legal disputes may result in adverse monetary damages, penalties or injunctive relief against any New Mondee, which could negatively impact any of our financial positions, cash flows or results of operations. An unfavorable outcome of any legal dispute could imply that New Mondee becomes liable for damages or may have to modify its business model.
Further, any liability or negligence claim against New Mondee in US courts may, if successful, result in damages being awarded that contain punitive elements and therefore may significantly exceed the loss or damage suffered by the successful claimant. Any claims or litigation, even if fully indemnified or insured, could damage our reputation and make it more difficult to compete effectively or to obtain adequate insurance in the future. A settlement or an unfavorable outcome in a legal dispute could have an adverse effect on New Mondee’s business, financial condition, results of operations, cash flows and/or prospects.
Furthermore, while New Mondee maintains insurance for certain potential liabilities, such insurance does not cover all types and amounts of potential liabilities and is subject to various exclusions as well as caps on amounts recoverable. Even if we believe a claim is covered by insurance, insurers may dispute its entitlement to recovery for a variety of potential reasons, which may affect the timing and, if the insurers prevail, the amount of our recovery.
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The Business Combination may be subject to U.S. foreign investment regulations, which may impose conditions on, prevent, or un-wind the consummation of the Business Combination. Such conditions or limitations could also potentially make New Mondee Common Stock less attractive to investors or cause our future investments to be subject to U.S. foreign investment regulations.
Investments that involve the acquisition of, or investment in, a U.S. business by a non-U.S. investor may be subject to U.S. laws that regulate foreign investments in U.S. businesses and access by foreign persons to technology developed and produced in the United States. These laws include Section 721 of the Defense Production Act of 1950, as amended by the Foreign Investment Risk Review Modernization Act of 2018, and the regulations at 31 C.F.R. Parts 800 and 802, as amended, administered by the Committee on Foreign Investment in the United States (“CFIUS”).
Whether CFIUS has jurisdiction to review an acquisition or investment transaction depends on, among other factors, the nature and structure of the transaction, including the level of beneficial ownership interest and the nature of any information or governance rights involved. For example, investments that result in “control” of a “U.S. business” by a “foreign person” (in each case, as such terms are defined in 31 C.F.R. Part 800) always are subject to CFIUS jurisdiction. Significant CFIUS reform legislation, which was fully implemented through regulations that became effective in 2020, expanded the scope of CFIUS’s jurisdiction to investments that do not result in control of a U.S. business by a foreign person, but afford certain foreign investors certain information or governance rights in a U.S. business that has a nexus to “critical technologies,” “covered investment critical infrastructure,” and/or “sensitive personal data” (in each case, as such terms are defined in 31 C.F.R. Part 800).
The investments by Sponsor and foreign persons controlling certain PIPE Investors in connection with the Business Combination resulted in investments in us by non-U.S. persons that could be considered by CFIUS to be covered investments or minority interests that could result in a covered control transaction that CFIUS would have authority to review. For example, Mr. Fintiklis, who is a Cypriot national and a permanent resident of the United States, served as the Chief Executive Officer of ITHAX and currently serves as a director of New Mondee, controls Ithaca Capital Partners 6 LLC, a Delaware limited liability company and one of the managing members of the Sponsor. The other managing member of the Sponsor was GMDA Capital Opportunities Ltd, an entity organized under the laws of Cyprus. Certain PIPE Investors are also foreign persons or controlled by foreign persons.
CFIUS or another U.S. governmental agency could choose to review the Business Combination or past or proposed transactions involving new or existing foreign investors in New Mondee, even if a filing with CFIUS is or was not required at the time of such transaction. There can be no assurances that CFIUS or another U.S. governmental agency will not choose to review the Business Combination. Any review and approval of an investment or transaction by CFIUS may have outsized impacts on transaction certainty, timing, feasibility, and cost, among other things. CFIUS policies and agency practices are rapidly evolving, and in the event that CFIUS reviews the Business Combination or one or more proposed or existing investment by investors, there can be no assurances that such investors will be able to maintain, or proceed with, such investments on terms acceptable to the parties to the Business Combination or such investors. Among other things, CFIUS could seek to impose limitations or restrictions on, or prohibit, investments by such investors (including, but not limited to, limits on purchasing New Mondee Common Stock, limits on information sharing with such investors, requiring a voting trust, governance modifications, or forced divestiture, among other things) or CFIUS could order us to divest all or a portion of Mondee if we had proceeded without first obtaining CFIUS clearance.
We may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the share price of our securities, which could cause you to lose some or all of your investment.
We cannot assure you that the due diligence conducted in relation to Mondee has identified all material issues or risks associated with Mondee, its business or the industry in which it competes. As a result of these factors, we may incur additional costs and expenses and we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. If any of these risks
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materialize, this could have a material adverse effect on our financial condition and results of operations and could contribute to negative market perceptions about our securities or New Mondee. Accordingly, any New Mondee stockholders could suffer a reduction in the value of their shares and warrants. Such shareholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by our officers or directors of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or prospectus relating to the Business Combination contained an actionable material misstatement or material omission.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing our warrants. As a result of the SEC Statement, we reevaluated the accounting treatment of our 12,075,000 public warrants and 337,500 private placement warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.
As a result, included on ITHAX’s balance sheets as of June 30, 2022 and December 31, 2021 contained elsewhere in this prospectus are derivative liabilities related to embedded features contained within our warrants. Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material. The impact of changes in fair value on earnings may have an adverse effect on the market price of our securities.
ITHAX identified a material weakness in internal control over financial reporting. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with GAAP. Our management is likewise required, on a quarterly basis, to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses identified through such evaluation in those internal controls. 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 financial statements will not be prevented or detected on a timely basis.
As described elsewhere in this prospectus, ITHAX identified a material weakness in internal control over financial reporting related to our complex financial instruments. As a result of this material weakness, ITHAX’s management concluded that its internal control over financial reporting was not effective as of June 30, 2022.
Any continued failure to maintain such internal control over our financial reporting control could adversely impact our ability to report our financial position and results from operations on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is listed, the SEC or other
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regulatory authorities. In either case, there could result a material adverse effect on our ability to consummate the initial business combination.
As a result of the material weakness described above, we face potential for litigation or other disputes which may include, among others, claims under federal and state securities laws, contractual claims or other claims arising from the material weakness in our internal control over financial. As of the date of this prospectus, we have no knowledge of any such litigation or dispute.
We can give no assurance as to our ability to timely remediate the material weakness identified, if at all; that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls; or that any litigation or dispute will not arise in the future.
The warrants may never be in the money, and they may expire worthless and the terms of the public warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then-outstanding public warrants approve of such amendment.
The warrants were issued in registered form under a warrant agreement between Continental and the Company, as warrant agent, and the Company. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision or correct any mistake, but requires the approval by the holders of at least a majority of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least a majority of the then-outstanding public warrants approve of such amendment and, solely with respect to any amendment to the terms of the private placement warrants or any provision of the warrant agreement with respect to the private placement warrants, a majority of the number of the then-outstanding private placement warrants. Although our ability to amend the terms of the public warrants with the consent of at least a majority of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash, shorten the exercise period or decrease the number of shares of New Mondee Common Stock purchasable upon exercise of a warrant. On September 16, 2022, we commenced the Offer to Purchase and Consent Solicitation with respect to the Warrants. To the extent that the Warrant Amendment is approved by at least a majority of the holders of the public warrants or private warrants, as applicable, in the Consent Solicitation, we will have the right to redeem each public warrant or private warrant, as applicable, that is outstanding upon the closing of the Offer to Purchase for $0.01 in cash, without interest
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem outstanding Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, upon a minimum of 30 days’ prior written notice of redemption, provided that the last reported sales price of the New Mondee Common Stock equals or exceeds $18.00 per share (as adjusted for share subdivisions, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date we send the notice of redemption to the warrant holders. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws.
In addition, on September 16, 2022, the Company commenced (i) an offer to each holder of its outstanding Warrants to receive $0.65 in cash, without interest, for each outstanding Warrant tendered by the holder pursuant to the offer and (ii) a solicitation of consents from holders of the outstanding Warrants to approve the Warrant Amendment. If approved, the Warrant Amendment would permit the Company to redeem each Warrant that is outstanding upon the closing of the Offer to Purchase for $0.01 in cash, without interest, upon a minimum of 5 days’ prior written notice of redemption.
Redemption of the outstanding warrants could force you to: (i) exercise your warrants and pay the exercise price therefore at a time when it may be disadvantageous for you to do so; sell your warrants at the
54
then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.
The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and may not compensate the holders for the value of the warrants, including because the number shares of New Mondee Common Stock received is capped at one share of New Mondee Common Stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants. None of the private placement warrants will be redeemable by us, subject to certain circumstances, so long as they are held by the Sponsor or its permitted transferees, unless a majority of the holders of the private placement warrants consent to the Warrant Amendment in connection with the Consent Solicitation.
New Mondee is subject to changing laws and regulations regarding regulatory matters, corporate governance and public disclosure that have increased New Mondee’s costs and the risk of non-compliance.
New Mondee will be subject to rules and regulations by various governing bodies, including, for example, the SEC, which are charged with the protection of investors and the oversight of companies whose securities are publicly traded, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations have resulted in and will likely continue to result in, increased general and administrative expenses and a diversion of management time and attention from seeking a business combination target.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to New Mondee’s disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed.
55
USE OF PROCEEDS
All of the securities offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. We will not receive any of the proceeds from these sales.
Assuming the exercise of all Warrants being offered pursuant to this prospectus for cash, we will receive an aggregate of approximately $142.7 million but will not receive any proceeds from the sale of the shares of New Mondee Common Stock issuable upon such exercise. The exercise price for our Warrants is $11.50 per share, which exceeds the market price of New Mondee Common Stock, which was $9.12 per share based on the closing price of New Mondee Common Stock on the Nasdaq on September 28, 2022. The likelihood that warrant holders will exercise the Warrants and any cash proceeds that we would receive is dependent upon the market price of New Mondee Common Stock and the outcome of the Offer to Purchase and Consent Solicitation. If the market price for New Mondee Common Stock is less than $11.50 per share, we believe warrant holders will be unlikely to exercise their Warrants. If holders of the Warrants tender their Warrants in the Offer to Purchase, then the number of Warrants outstanding and the potential proceeds from the exercise of any remaining Warrants will decrease. If the Warrant Amendment is approved by the consent of holders of at least a majority of the outstanding Warrants pursuant to the Consent Solicitation, then the Company may redeem each Warrant outstanding upon the closing of the Offer to Purchase for $0.01 in cash. We expect to use any net proceeds from the exercise of the Warrants, if any, for general corporate purposes. We will have broad discretion over the use of any proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise for cash any or all of such Warrants. To the extent that any Warrants are exercised on a “cashless basis,” we would not receive any proceeds from the exercise of such Warrants.
Except as otherwise provided in the Registration Rights Agreement, the Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by them for brokerage, accounting, tax or legal services or any other expenses incurred in disposing of the securities. We will bear the costs, fees and expenses incurred in effecting the registration of the securities covered by this prospectus, including all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accounting firm.
56
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below have the same meaning as terms defined and included in the Proxy Statement/Prospectus. In this section, the historical financial information presented for ITHAX is for Mondee Holdings, Inc. (f/k/a ITHAX Acquisition Corp.), and the historical financial information presented for Mondee is for Mondee Holdings II, Inc. and Subsidiaries..
Introduction
The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” Release No. 33-10786 requires pro forma adjustments that depict the accounting for the transaction (“Transaction Accounting Adjustments”) and allows optional pro forma adjustments that present the reasonably estimable synergies and other transaction effects that have occurred or are reasonably expected to occur (“Management’s Adjustments”).
ITHAX and Mondee are collectively referred to herein as the “Companies,” and the Companies, subsequent to the Business Combination and the PIPE Investment, are referred to herein as “New Mondee.”
In addition, the related party loan receivable was settled upon the consummation of the Business Combination by delivery of New Mondee Common Stock and through the acquisition of Metaminds Technologies Pvt. Ltd (“Metaminds”) assets. On July 18, 2022, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Metaminds Technologies Pvt. Ltd., (“Seller”) to acquire substantially all of Metaminds assets. The Company acquired Metaminds, an entity under common control for a purchase price of $2 million. Management is currently evaluating the impact and values of all major classes of assets and liabilities acquired from the transaction, including the information required for contingencies. The transaction adjustment of $2 million reflected in additional paid-in-capital is based on provisional amounts since management believes that the expected net assets acquired are insignificant compared to this transaction.
The unaudited pro forma condensed combined balance sheet as of June 30, 2022, combines the historical consolidated balance sheet of ITHAX and the historical consolidated balance sheet of Mondee on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on June 30, 2022.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and for the year ended December 31, 2021 combines the historical consolidated statements of operations of ITHAX and Mondee on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on January 1, 2021, the beginning of the earliest period presented:
•
The Business Combination of ITHAX with and into Mondee, with Mondee surviving such Business Combination as a wholly owned subsidiary of New Mondee;
•
The PIPE Financing and related adjustment;
•
The redemption of 23,311,532 shares of ITHAX from ITHAX public shareholders who elected to have their shares redeemed in connection with the Business Combination for an aggregate redemption price of $233,586;
•
The settlement of a related party loan receivable immediately upon completion of the Business Combination by the delivery of New Mondee Common Stock;
•
All outstanding shares of Mondee common stock were cancelled and converted in to shares of New Mondee using a conversion ratio calculated in accordance with the terms of the Business Combination Agreement, and certain shareholders have received the contingent right to receive Earn-Out Shares based on specified terms in the Earn-Out agreement;
•
All outstanding ITHAX Class A (after the redemption described above) and Class B ordinary shares were cancelled and converted into shares of common stock of New Mondee.
57
•
The unvested Incentive stock units converted to New Mondee common stock in connection with the consummation of the Business;
•
The asset purchase agreement with Metaminds; and
•
Amendment 7 to the TCW loan reflecting a Debt modification.
The historical financial information of ITHAX was derived from the audited consolidated financial statements of ITHAX as of and for the year ended December 31, 2021, as well as the unaudited condensed consolidated financial statements of Mondee Holdings, Inc. (f/k/a ITHAX Acquisition Corp.) for the six months ended June 30, 2022, included in the Proxy Statement/Prospectus. The historical financial information of Mondee was derived from the audited consolidated financial statements of Mondee as of and for the year ended December 31, 2021, as well as the unaudited condensed consolidated financial statements of Mondee for the six months ended June 30, 2022, included in the Proxy Statement/Prospectus. This information should be read together with ITHAX’s and Mondee’s audited and unaudited financial statements and related notes, the sections titled “ITHAX’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Mondee’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other financial information included in the Proxy Statement/Prospectus.
The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and do not necessarily reflect what New Mondee’s financial condition or results of operations would have been had the Business Combination occurred on the dates indicated. The pro forma combined financial information also may not be useful in predicting the future financial condition and results of operations of New Mondee. 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 after recording actual redemptions totaling 23,311,532 shares of ITHAX represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.
The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with accounting principles generally accepted in the United States of America. Under this method of accounting, ITHAX is treated as the acquired company for financial reporting purposes. Accordingly, for accounting purposes, the Business Combination is treated as the equivalent of Mondee issuing shares for the net assets of ITHAX, accompanied by a recapitalization. The net assets of ITHAX is recognized at historical cost, with no goodwill or other intangible assets recorded.
This unaudited condensed combined pro forma balance sheet represents the scenario in which the outstanding principal and interest on the related party loan receivable is settled by the delivery of New Mondee Common Stock equal to the fair market value of the obligation to Mondee Inc. in full satisfaction of the outstanding principal and interest immediately upon consummation of the Business Combination. The transaction accounting adjustment of $22,181 will have an impact reducing the related party loan receivable and increasing the Treasury Stock of New Mondee.
58
Unaudited Pro Forma Condensed Combined Balance Sheet As of June 30, 2022
(in thousands, except share and per share amounts)
(in thousands, except share and per share amounts)
| | | |
ITHAX
(Historical) |
| |
Mondee
(Historical) |
| |
Transaction
Accounting Adjustments |
| | | | | | | |
Pro Forma
Combined |
| ||||||||||||
| Assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Cash and cash equivalents
|
| | | $ | 157 | | | | | $ | 10,932 | | | | | $ | 8,304 | | | | |
|
3(a)
|
| | | | $ | 19,393 | | |
|
Restricted short-term investments
|
| | | | — | | | | | | 8,476 | | | | | | — | | | | | | | | | | | | 8,476 | | |
|
Trade accounts receivable
|
| | | | — | | | | | | 20,260 | | | | | | — | | | | | | | | | | | | 20,260 | | |
|
Contract assets
|
| | | | — | | | | | | 8,110 | | | | | | — | | | | | | | | | | | | 8,110 | | |
|
Prepaid and other current assets
|
| | | | 35 | | | | | | 12,421 | | | | | | (8,591) | | | | |
|
3(i)
|
| | | | | 3,865 | | |
|
Total current assets
|
| | | | 192 | | | | | | 60,199 | | | | | | (287) | | | | | | | | | | | | 60,104 | | |
|
Property and equipment, net
|
| | | | — | | | | | | 10,029 | | | | | | — | | | | | | | | | | | | 10,029 | | |
|
Investments held in Trust Account
|
| | | | 241,937 | | | | | | — | | | | | | (241,937) | | | | |
|
3(a)(1)
|
| | | | | — | | |
|
Goodwill
|
| | | | — | | | | | | 66,420 | | | | | | — | | | | | | | | | | | | 66,420 | | |
|
Intangible assets, net
|
| | | | — | | | | | | 60,539 | | | | | | — | | | | | | | | | | | | 60,539 | | |
|
Loan receivable from related parties
|
| | | | — | | | | | | 22,310 | | | | | | (22,310) | | | | |
|
3(h)
|
| | | | | — | | |
|
Operating lease right-of-use-assets
|
| | | | — | | | | | | 2,275 | | | | | | — | | | | | | | | | | | | 2,275 | | |
|
Other non-current assets
|
| | | | — | | | | | | 1,994 | | | | | | — | | | | | | | | | | | | 1,994 | | |
|
Total assets
|
| | | $ | 242,129 | | | | | $ | 223,766 | | | | | $ | (264,534) | | | | | | | | | | | $ | 201,361 | | |
| Liabilities and stockholders’ (deficit) equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Accounts payable
|
| | | $ | — | | | | | $ | 29,740 | | | | | $ | — | | | | | | | | | | | $ | 29,740 | | |
|
Amounts payable to related parties
|
| | | | — | | | | | | 1,552 | | | | | | — | | | | | | | | | | | | 1,552 | | |
|
Paycheck Protection Program (PPP) and other government loans, current portion
|
| | | | — | | | | | | 50 | | | | | | — | | | | | | | | | | | | 50 | | |
|
Accrued expenses and other current liabilities
|
| | | | 682 | | | | | | 21,743 | | | | | | (8,807) | | | | |
|
3(g)
|
| | | | | 13,618 | | |
|
Deferred revenue
|
| | | | — | | | | | | 6,743 | | | | | | — | | | | | | | | | | | | 6,743 | | |
|
Long term debt, current portion
|
| | | | — | | | | | | 15,454 | | | | | | (7,713) | | | | |
|
3(l)
|
| | | | | 7,741 | | |
|
Total current liabilities
|
| | | | 682 | | | | | | 75,282 | | | | | | (16,520) | | | | | | | | | | | | 59,444 | | |
|
Deferred income taxes
|
| | | | — | | | | | | 604 | | | | | | — | | | | | | | | | | | | 604 | | |
|
Loan payable to related parties
|
| | | | — | | | | | | 195 | | | | | | — | | | | | | | | | | | | 195 | | |
|
PPP and other government loans
|
| | | | — | | | | | | 199 | | | | | | — | | | | | | | | | | | | 199 | | |
|
Long term debt excluding current portion
|
| | | | — | | | | | | 166,097 | | | | | | (39,123) | | | | |
|
3(l)
|
| | | | | 126,974 | | |
|
Deferred revenue excluding current portion
|
| | | | — | | | | | | 13,138 | | | | | | — | | | | | | | | | | | | 13,138 | | |
|
Operating lease liabilities
|
| | | | — | | | | | | 1,648 | | | | | | — | | | | | | | | | | | | 1,648 | | |
|
Other long-term liabilities
|
| | | | — | | | | | | 2,543 | | | | | | — | | | | | | | | | | | | 2,543 | | |
|
Deferred business combination fees
|
| | | | 7,033 | | | | | | — | | | | | | (7,033) | | | | |
|
3(k)
|
| | | | | — | | |
|
Warrant liability
|
| | | | 3,600 | | | | | | — | | | | | | (3,502) | | | | |
|
3(e)(2)
|
| | | | | 98 | | |
|
Deferred underwriting fee
|
| | | | 9,083 | | | | | | — | | | | | | (9,083) | | | | |
|
3(a)(4)
|
| | | | | — | | |
|
Total liabilities
|
| | | | 20,398 | | | | | | 259,706 | | | | | | (75,261) | | | | | | | | | | | | 204,843 | | |
|
Common stock subject to possible redemption
|
| | | | 241,937 | | | | | | — | | | | | | (241,937) | | | | |
|
3(b)
|
| | | | | — | | |
|
ITHAX Class A Ordinary Shares
|
| | | | 1 | | | | | | — | | | | | | (1) | | | | |
|
3(c)
|
| | | | | — | | |
|
ITHAX Class B Ordinary Shares
|
| | | | 6 | | | | | | — | | | | | | (6) | | | | |
|
3(c)(2)
|
| | | | | — | | |
|
New Mondee Common Stock
|
| | | | — | | | | | | — | | | | | | 52 | | | | |
|
3(d)
|
| | | | | 52 | | |
|
Treasury Stock
|
| | | | — | | | | | | — | | | | | | (20,310) | | | | |
|
3(j)
|
| | | | | (20,310) | | |
|
Additional paid-in capital
|
| | | | — | | | | | | 163,626 | | | | | | 60,576 | | | | |
|
3(e)
|
| | | | | 224,202 | | |
|
Accumulated other comprehensive income (loss)
|
| | | | — | | | | | | (445) | | | | | | — | | | | | | | | | | | | (445) | | |
|
Retained earnings (accumulated deficit)
|
| | | | (20,213) | | | | | | (199,121) | | | | | | 12,353 | | | | |
|
3(f)
|
| | | | | (206,981) | | |
|
Total stockholders’ (deficit) equity
|
| | | | (20,206) | | | | | | (35,940) | | | | | | 52,664 | | | | | | | | | | | | (3,482) | | |
|
Total liabilities and stockholders’ (deficit) equity
|
| | | $ | 242,129 | | | | | $ | 223,766 | | | | | $ | (264,534) | | | | | | | | | | | $ | 201,361 | | |
59
Unaudited Pro Forma Condensed Combined Statement of Operations
for the Six Months Ended June 30, 2022
(in thousands, except share and per share amounts)
for the Six Months Ended June 30, 2022
(in thousands, except share and per share amounts)
| | | |
ITHAX
(Historical) |
| |
Mondee
(Historical) |
| |
Transaction
Accounting Adjustments |
| | | | | | | |
Pro Forma
Combined |
| | | | | | | ||||||||||||
|
Revenue, net
|
| | | $ | — | | | | | $ | 80,303 | | | | | $ | — | | | | | | | | | | | $ | 80,303 | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
General and administrative expenses
|
| | | | 7,862 | | | | | | 4,465 | | | | | | — | | | | | | | | | | | | 12,327 | | | | | | | | |
|
Sales and other expenses
|
| | | | — | | | | | | 6,378 | | | | | | — | | | | | | | | | | | | 6,378 | | | | | | | | |
|
Marketing expenses
|
| | | | — | | | | | | 49,018 | | | | | | — | | | | | | | | | | | | 49,018 | | | | | | | | |
|
Personnel expenses, including stock based compensation
|
| | | | — | | | | | | 11,324 | | | | | | 944 | | | | |
|
3(m)
|
| | | | | 12,268 | | | | | | | | |
|
Information technology expenses
|
| | | | — | | | | | | 2,464 | | | | | | — | | | | | | | | | | | | 2,464 | | | | | | | | |
|
Provision for doubtful accounts receivable and contract assets
|
| | | | — | | | | | | 86 | | | | | | — | | | | | | | | | | | | 86 | | | | | | | | |
|
Depreciation and amortization
|
| | | | — | | | | | | 5,586 | | | | | | — | | | | | | | | | | | | 5,586 | | | | | | | | |
|
Total operating expenses
|
| | | | 7,862 | | | | | | 79,321 | | | | | | 944 | | | | | | | | | | | | 88,127 | | | | | | | | |
|
Loss from operations
|
| | | | (7,862) | | | | | | 982 | | | | | | (944) | | | | | | | | | | | | (7,824) | | | | | | | | |
|
Interest income
|
| | | | 337 | | | | | | 261 | | | | | | (593) | | | | |
|
3(p)
|
| | | | | 5 | | | | | | | | |
|
Interest expense
|
| | | | — | | | | | | (12,830) | | | | | | (1,531) | | | | |
|
3(r)
|
| | | | | (14,361) | | | | | | | | |
|
Gain on extinguishment of PPP loan
|
| | | | — | | | | | | 2,009 | | | | | | — | | | | | | | | | | | | 2,009 | | | | | | | | |
|
Other income (expense)
|
| | | | 3,103 | | | | | | 764 | | | | | | (299) | | | | |
|
3(o)
|
| | | | | 3,568 | | | | | | | | |
|
Loss before income taxes
|
| | | | (4,422) | | | | | | (8,814) | | | | | | (3,367) | | | | | | | | | | | | (16,603) | | | | | | | | |
|
Provision from income taxes
|
| | | | — | | | | | | (290) | | | | | | — | | | | | | | | | | | | (290) | | | | | | | | |
|
Net income (loss)
|
| | | | (4,422) | | | | | | (9,104) | | | | | | (3,367) | | | | | | | | | | | | (16,893) | | | | | | | | |
|
Other comprehensive income (loss)
|
| | | | — | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | | | |
|
Total comprehensive income (loss)
|
| | | $ | (4,422) | | | | | $ | (9,104) | | | | | $ | (3,367) | | | | | | | | | | | $ | (16,893) | | | | | | | | |
|
Basic and diluted income (loss) per share, Class A Ordinary shares subject to possible redemption
|
| | | $ | (0.14) | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | — | | | | | | | | |
|
Weighted average shares outstanding, Class A Ordinary shares subject to possible redemption
|
| | | | 24,150,000 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic and diluted income (loss) per share, Non-redeemable Ordinary shares
|
| | | $ | (0.14) | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | — | | | | | | | | |
|
Weighted average shares outstanding, Non-redeemable Ordinary shares
|
| | | | 6,712,500 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Basic and diluted income (loss) per share
|
| | | | N/A | | | | | | N/A | | | | | $ | — | | | | | | | | | | | $ | (0.23) | | | | | | | | |
|
Weighted average shares outstanding, basic and
diluted |
| | | | N/A | | | | | | N/A | | | | | | | | | | | | | | | | | | 73,319,968 | | | | |
|
3(n)
|
| |
60
Unaudited Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2021
(in thousands, except share and per share amounts)
For the Year Ended December 31, 2021
(in thousands, except share and per share amounts)
| | | |
ITHAX
(Historical) |
| |
Mondee
(Historical) |
| |
Transaction
Accounting Adjustments |
| | | | | | | |
Pro Forma
Combined |
| | | | | | | ||||||||||||
|
Revenue, net
|
| | | $ | — | | | | | $ | 93,194 | | | | | $ | — | | | | | | | | | | | $ | 93,194 | | | | | | | | |
| Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
|
General and administrative expenses
|
| | | | 834 | | | | | | 7,455 | | | | | | — | | | | | | | | | | | | 8,289 | | | | | | | | |
|
Sales and other expenses
|
| | | | — | | | | | | 11,165 | | | | | | 92 | | | | |
|
3(m)
|
| | | | | 11,257 | | | | | | | | |
|
Marketing expenses
|
| | | | — | | | | | | 54,611 | | | | | | — | | | | | | | | | | | | 54,611 | | | | | | | | |
|
Personnel expenses, including stock based compensation
|
| | | | — | | | | | | 23,422 | | | | | | 1,014 | | | | |
|
3(m)
|
| | | | | 24,436 | | | | | | | | |
|
Information technology expenses
|
| | | | — | | | | | | 4,058 | | | | | | — | | | | | | | | | | | | 4,058 | | | | | | | | |
|
Provision for doubtful accounts receivable and contract assets
|
| | | | — | | | | | | 1,874 | | | | | | — | | | | | | | | | | | | 1,874 | | | | | | | | |
|
Depreciation and amortization
|
| | | | — | | | | | | 12,861 | | | | | | — | | | | | | | | | | | | 12,861 | | | | | | | | |
|
Total operating expenses
|
| | | | 834 | | | | | | 115,446 | | | | | | 1,106 | | | | | | | | | | | | 117,386 | | | | | | | | |
|
Loss from operations
|
| | | | (834) | | | | | | (22,252) | | | | | | (1,106) | | | | | | | | | | | | (24,192) | | | | | | | | |
|
Interest income
|
| | | | 100 | | | | | | 505 | | | | | | (607) | | | | |
|
3(p)
|
| | | | | (2) | | | | | | | | |
|
Interest expense
|
| | | | — | | | | | | (23,683) | | | | | | (2,917) | | | | |
|
3(s)
|
| | | | | (26,600) | | | | | | | | |
|
Gain on extinguishment of PPP loans
|
| | | | — | | | | | | 5,868 | | | | | | — | | | | | | | | | | | | 5,868 | | | | | | | | |
|
Other income (expense)
|
| | | | 4,045 | | | | | | 980 | | | | | | (4,283) | | | | |
|
3(q)
|
| | | | | 742 | | | | | | | | |
|
Income (Loss) before income taxes
|
| | | | 3,311 | | | | | | (38,582) | | | | | | (8,913) | | | | | | | | | | | | (44,184) | | | | | | | | |
|
Provision from income taxes
|
| | | | — | | | | | | (323) | | | | | | — | | | | | | | | | | | | (323) | | | | | | | | |
|
Net income (loss)
|
| | | | 3,311 | | | | | | (38,905) | | | | | | (8,913) | | | | | | | | | | | | (44,507) | | | | | | | | |
|
Other comprehensive loss
|
| | | | — | | | | | | (311) | | | | | | — | | | | | | | | | | | | (311) | | | | | | | | |
|
Total comprehensive income (loss)
|
| | | $ | 3,311 | | | | | $ | (39,216) | | | | | $ | (8,913) | | | | | | | | | | | $ | (44,818) | | | | | | | | |
|
Basic and diluted income per share, Class A Ordinary shares subject to possible redemption
|
| | | $ | 0.12 | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | — | | | | | | | | |
|
Weighted average shares outstanding, Class A Ordinary shares subject to possible redemption
|
| | | | 22,098,904 | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | | | |
|
Basic income per Ordinary share, Class A and Class B Ordinary shares
|
| | | $ | 0.12 | | | | | $ | — | | | | | $ | | | | | | | | | | | $ | | | | | | | | | ||
|
Weighted average shares outstanding, Class A Ordinary shares
|
| | | | 6,588,288 | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | | | |
|
Diluted income per Ordinary share, Class A and Class B Ordinary shares
|
| | | $ | 0.12 | | | | | $ | — | | | | | $ | — | | | | | | | | | | | $ | — | | | | | | | | |
|
Weighted average shares outstanding, Diluted Class A and Class B Ordinary shares
|
| | | | 6,655,171 | | | | | | — | | | | | | — | | | | | | | | | | | | — | | | | | | | | |
|
Basic and diluted loss per share
|
| | | | N/A | | | | | | N/A | | | | | $ | — | | | | | | | | | | | $ | (0.61) | | | | | | | | |
|
Weighted average shares outstanding, basic and
diluted |
| | | | N/A | | | | | | N/A | | | | | | — | | | | | | | | | | | | 73,145,568 | | | | |
|
3(n)
|
| |
61
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Note 1 — Description of the Business Combination
On December 20, 2021, ITHAX entered into a Business Combination Agreement by and among Merger Sub I, LLC (“Merger Sub I”), Ithax Merger Sub II, LLC (“Merger Sub II”) and Mondee, with the Business Combination being consummated on July 18, 2022.
Upon the closing of the Business Combination, subject to the terms and conditions contained in the Business Combination Agreement, ITHAX has acquired a minority interest in New Mondee, and the existing Mondee Shareholders in the aggregate, own a majority voting interest in New Mondee. Following the closing, the Company has changed its name to Mondee Holdings, Inc.
At the effective time of the Business Combination (the “Effective Time”), by virtue of the Business Combination and without any action on the part of ITHAX, Merger Sub I, Merger Sub II and New Mondee or the holders of any of New Mondee’s securities:
a)
each Mondee Common Share that is issued and outstanding immediately prior to the Effective Time was converted into the right to receive the number of shares of Common Stock of the New Mondee equal to the Exchange Ratio (defined as the Closing Merger Consideration divided by Mondee outstanding shares), rounded down to the nearest whole share, for a total of 60,800,000 shares of New Mondee Common Stock (defined as the Merger Consideration), plus the contingent right of certain shareholders to receive the Earn-Out Consideration following the closing of the Business Combination (as defined in greater detail below);
b)
all shares of common stock of Mondee held in treasury of Mondee and all shares of Mondee common stock owned by any direct or indirect wholly owned subsidiary of Mondee immediately prior to the Business Combination was cancelled without any conversion thereof;
c)
the issuance and sale of 7,000,000 shares of New Mondee Common Stock immediately prior to the Business Combination for an aggregate cash purchase price of $70 million, or $10.00 per share. Of the 7 million shares of New Mondee Common Stock to be issued pursuant to the Subscription Agreements, the Sponsor, affiliates and/or assignees have agreed to purchase approximately 7.1% of New Mondee Common Stock on the same terms and conditions of the PIPE Investors at a price of $10.00 per share. The Subscription Agreements contain customary representations, warranties, covenants and agreements of ITHAX, and the PIPE Investors and are subject to customary closing conditions and termination rights;
d)
each issued and outstanding share of common stock of Second Merger Sub was converted into and became one validly issued, fully paid and nonassessable share of common stock of the surviving corporation;
e)
603,750 Class B ordinary Shares held by the Sponsor were forfeited in connection with the Business Combination in accordance with terms of the Business Combination Agreement.
The following summarizes consideration to Mondee at the closing of the Business Combination:
| |
Shares transferred at Closing
|
| | | | 60,800,000 | | |
| |
Value per share
|
| | | $ | 10 | | |
| |
Total Share Consideration(1)
|
| | | $ | 608,000,000 | | |
(1)
Excludes 9,000,000 Earn-Out Shares that may be issued pursuant to the Earn-Out Agreement, subject to the conditions set forth therein and an aggregate of 331,600 of shares of New Mondee Common Stock issuable upon the Closing to certain executive officers of Mondee. See “Beneficial Ownership of Securities” for more information.
Note 2 — Basis of presentation
The unaudited pro forma condensed combined financial information has been adjusted to include transaction accounting adjustments, which reflect the application of the accounting required by U.S.
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GAAP, linking the effects of the Business Combination, described above, to the ITHAX and Mondee historical financial statements. The Company has elected not to present Management’s Adjustments and are only presenting Transaction Accounting Adjustments in the unaudited pro forma condensed combined financial information.
The Business Combination is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with accounting principles generally accepted in the United States of America, or GAAP. Under this method of accounting, ITHAX is treated as the “acquired” company for accounting purposes. A reverse recapitalization does not result in a new basis of accounting, and the financial statements of the combined entity represent the continuation of the financial statements of Mondee. Mondee is deemed the accounting predecessor and New Mondee is the successor SEC registrant, which means that Mondee’s financial statements for previous periods is disclosed in New Mondee’s future periodic reports filed with the SEC. The consolidated assets, liabilities and results of operations of Mondee is now the historical financial statements of New Mondee, and ITHAX’s assets, liabilities and results of operations is consolidated with Mondee beginning on the acquisition date. Mondee has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:
•
Mondee’s pre-combination stockholders have the majority of the voting power in the post- Business Combination company;
•
Mondee’s stockholders have the ability to appoint a majority of the New Mondee Board;
•
Mondee’s management team is considered the management team of the post-Business Combination company;
•
Mondee’s prior operations is comprised of the ongoing operations of the post-Business Combination company;
•
Mondee is the larger entity based on historical revenues and business operations; and
•
The post-Business Combination company has assumed Mondee’s operating name.
The unaudited pro forma condensed combined balance sheet as of June 30, 2022, assumes that the Business Combination occurred on June 30, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 and six months ended June 30, 2022 presents the pro forma effect of the Business Combination as if it had been completed on January 1, 2021. These periods are presented on the basis of Mondee being the accounting acquirer.
The unaudited pro forma condensed combined balance sheet as of June 30, 2022 has been prepared using, and should be read in conjunction with, the following:
•
ITHAX’s unaudited condensed consolidated balance sheet as of June 30, 2022 and the related notes for the six months ended June 30, 2022, included in the Proxy Statement/Prospectus; and
•
Mondee’s unaudited condensed consolidated balance sheet as of June 30, 2022 and the related notes for the six months ended June 30, 2022, included in the Proxy Statement/Prospectus.
Management has made significant estimates and assumptions in its determination of the pro forma adjustments (“Transaction Accounting Adjustments”). As the unaudited pro forma condensed combined financial information has been prepared based on these preliminary estimates, the final amounts recorded may differ materially from the information presented.
The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings that may be associated with the Business Combination. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated.
The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the Business Combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of New Mondee. They should be read in conjunction with the audited financial statements and notes thereto of each of ITHAX and Mondee included in the Proxy Statement/Prospectus.
63
The unaudited pro forma condensed combined financial information does not reflect the income tax effects of the pro forma adjustments as based on the statutory rate in effect for the historical periods presented. Management believes this unaudited pro forma condensed combined financial information to not be meaningful given the combined company has incurred significant losses during the historical periods presented.
The following table summarizes the pro forma common stock shares outstanding at Closing on a combined basis:
| | | |
Pro Forma Combined
|
| |||||||||
| | | |
Number of
Outstanding Shares |
| |
Percentage of
Outstanding Shares |
| ||||||
|
Mondee Stockholder(1)
|
| | | | 60,800,000 | | | | | | 80.7% | | |
|
Initial Shareholders(2)
|
| | | | 6,502,500 | | | | | | 8.6% | | |
|
Cantor
|
| | | | 210,000 | | | | | | 0.3% | | |
|
Former ITHAX Class A Public Shareholders
|
| | | | 838,468 | | | | | | 1.1% | | |
|
PIPE Investors
|
| | | | 7,000,000 | | | | | | 9.3% | | |
| Total | | | | | 75,350,968 | | | | | | 100% | | |
(1)
Excludes the 9,000,000 shares of New Mondee Common Stock that New Mondee may issue to the Members pursuant to the Earn-Out Agreement and an aggregate of 331,600 of shares of New Mondee Common Stock issuable upon the Closing to certain executive officers of Mondee. See “Beneficial Ownership of Securities” and “Mondee’s Executive and Director Compensation — Employment Agreements with our Named Executive Officers” for more information. The aggregate number of shares to the Mondee Stockholder includes up to 2,031,000 shares of New Mondee common stock that may be transferred to Mondee, Inc (a subsidiary of the Company) by Prasad Gundumogula in full or partial satisfaction of the Mondee Group Note, as amended. See “Unaudited Pro Forma Condensed Combined Financial Information” and the notes thereto included elsewhere in this Report and “Certain Relationships and Related Person Transactions — Mondee — Mondee Group Note.”
(2)
Excludes the shares purchased by the Sponsor in the PIPE Financing. The 7,000,000 shares purchased by PIPE investors is reflected separately above.
Upon consummation of the Business Combination, certain holders of New Mondee capital stock, immediately prior to consummation of the Business Combination will have the contingent right to receive Earn-Out Shares. The aggregate number of Earn-Out Shares is 9,000,000 shares of New Mondee Common Stock. The Earn-Out Shares will be issued following the Business Combination, as further described below.
The Earn-Out Shares are issuable following the consummation of the Business Combination as follows: (a) one-third (1/3) shares of New Mondee Common Stock if the closing share price of a share of New Mondee Common Stock is equal to or exceeds $12.50 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the closing and ending on the fourth anniversary of the closing, (b) one-third (1/3) shares of New Mondee Common Stock if the closing share price of a share of New Mondee Common Stock is equal to or exceeds $15.00 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the closing and ending on the fourth anniversary of the closing and (c) one-third (1/3) shares of New Mondee Common Stock if the closing share price of a share of New Mondee Common Stock is equal to or exceeds $18.00 for 20 trading days in any 30 consecutive trading day period at any time during the period beginning on the first anniversary of the closing and ending on the fourth anniversary of the closing.
The issuance of such Earn-Out Shares would dilute the value of all shares of New Mondee Common Stock outstanding at that time. Assuming the current capitalization structure, the approximately 3,000,000 Earn-Out Shares that would be issued upon meeting the $12.50 Earn-Out threshold, would represent approximately 3% of total shares outstanding at Closing. Assuming the current capitalization structure, the
64
total shares of an additional approximately 3,000,000 Earn-Out Shares that would be issued upon meeting the $15.00 Earn-Out threshold, would represent approximately 3% of total shares outstanding at Closing. Assuming the current capitalization structure, the total shares of approximately 3,000,000 Earn-Out Shares that would be issued upon meeting the $18.00 Earn-Out threshold, would represent an additional approximately 3% (approximately 9% if all thresholds are met) of total shares outstanding at Closing.
The Company has concluded that the Earn-Out Shares issuable to holders of New Mondee capital stock are accounted for as liability instruments under ASC 815-40. As terms are subject to change, the unaudited pro forma condensed combined financial information does not give effect to the impacts from such Earn-Out Shares issuable.
Note 3 — Transaction Accounting Adjustments
Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet as of June 30, 2022
The transaction accounting adjustments included in the unaudited pro forma condensed combined balance sheet as of June 30, 2022 are as follows:
3(a)
Represents transaction accounting adjustments to cash and cash equivalents balance of the Company:
| | | |
Transaction
Accounting Adjustments |
| |||
|
ITHAX cash held in Trust Account(1)
|
| | | $ | 241,937 | | |
|
PIPE Financing(2)
|
| | | | 70,000 | | |
|
Payment of transaction costs(3)
|
| | | | (19,597) | | |
|
Payment of deferred underwriting fees(4)
|
| | | | (9,083) | | |
|
Redemption of ITHAX Public Shareholders(5)
|
| | | | (233,586) | | |
|
TCW Prepayment(6)
|
| | | | (41,200) | | |
|
TCW 3rd Party Cost(7)
|
| | | | (167) | | |
|
Total transaction accounting adjustments
|
| | | $ | 8,304 | | |
(1)
Represents the reclassification of cash held in the Trust Account to cash and cash equivalents that became available following the Business Combination, and prior to redemptions.
(2)
Represents the issuance, in a private placement consummated concurrently with the closing of the Business Combination, to PIPE investors of 7,000,000 shares of ITHAX Class A Common Stock at $10 per share, for an aggregate purchase price of $70.0 million.
(3)
Represents payment of other transaction costs of $10.9 million incurred by Mondee for legal, financial advisory and other professional fees incurred in consummating the Business Combination. The unaudited pro forma condensed combined balance sheet reflects Mondee costs as a reduction of cash with a corresponding decrease in additional paid-in capital of $11.4 million. Additionally, this includes transaction costs incurred by ITHAX in the amount of $8.7 million. The unaudited pro forma condensed combined balance sheet reflects payment of these costs as a reduction of cash, with a corresponding decrease in additional paid-in capital and an increase in accumulated deficit.
(4)
Represents payment of deferred underwriting fees incurred as part of ITHAX’s IPO committed to be paid upon the consummation of the Business Combination with a corresponding increase in accumulated deficit.
65
(5)
Represents the redemption of 23,311,532 shares of ITHAX from ITHAX public shareholders who elected to have their shares redeemed in connection with the Business Combination for an aggregate redemption price of $233,586.
(6)
Represents the prepayment of $41.2 million which includes $40 million of principal SPAC prepayment and a 3% fee charged on the prepayment. The SPAC prepayment is related to the TCW loan pursuant to the seventh amendment dated July 18, 2022
(7)
Represents the 3rd party cost of $167 thousand related to the TCW loan pursuant to the seventh amendment dated July 18, 2022.
3(b)
Represents the reclassification of $241.9 million of ITHAX public shares from mezzanine equity to permanent equity, prior to redemptions. The unaudited pro forma condensed balance sheet reflects the reclassification with a corresponding increase of $241.9 million to additional paid in-capital and an increase of $0.02 million to ITHAX Class A Common Stock.
3(c)
The following table represents the impact of the Business Combination on ITHAX Class A Common Stock:
| | | |
Transaction
Accounting Adjustments |
| |||
|
Conversion and recapitalization of ITHAX Stock(1)
|
| | | $ | (31) | | |
|
ITHAX’s Domestication(2)
|
| | | | 6 | | |
|
Reclassification of ITHAX’s redeemed shares to ITHAX Class A common stock3(b)
|
| | | | 24 | | |
|
Total transaction accounting adjustments
|
| | | $ | (1) | | |
(1)
The adjustment reflects recapitalization of ITHAX’s shares (exchange of New Mondee shares for ITHAX shares).
(2)
The adjustment reclassifies par value of ITHAX’s Class B Ordinary Shares to Class A Ordinary Shares as a result of ITHAX’s domestication.
3(d)
The following table represents the impact of the Business Combination on New Mondee Common Stock:
| | | |
Transaction
Accounting Adjustments |
| |||
|
PIPE Offering3(a)(2)
|
| | | $ | 7 | | |
|
Conversion and Recapitalization of ITHAX & Mondee Stock(1)
|
| | | | 68 | | |
|
Redemption of ITHAX Public Shareholder(e)(5)
|
| | | | (23) | | |
|
Total transaction accounting adjustments
|
| | | $ | 52 | | |
(1)
The adjustment reflects recapitalization of Mondee and ITHAX shares (exchange of New Mondee shares for ITHAX and Mondee shares).
3(e)
The following table represents the impact of the Business Combination on additional paid -in capital:
| | | |
Transaction
Accounting Adjustments |
| |||
|
Payment of Mondee and ITHAX transaction costs3(a)(3)
|
| | | $ | (12,348)(4) | | |
|
Reclassification of ITHAX’s redeemable shares to ITHAX Class A Common Stock3(b)
|
| | | | 241,913 | | |
|
PIPE Financing3(a)(2)
|
| | | | 69,993 | | |
|
Elimination of historical ITHAX accumulated deficit(1)
|
| | | | (20,213) | | |
66
| | | |
Transaction
Accounting Adjustments |
| |||
|
Reclassification of ITHAX Public Warrants(2)
|
| | | $ | 3,502 | | |
|
Conversion and Recapitalization of ITHAX & Mondee Stock3(c)(1)
|
| | | | (37) | | |
|
Incentive Units Vesting Upon IPO(3)
|
| | | | 944 | | |
|
Redemption of ITHAX Public Shareholders(5)
|
| | | | (230,928) | | |
|
Issuance of Class G Units(6)
|
| | | | 9,750 | | |
|
Metaminds Purchase Price Consideration(7)
|
| | | | (2,000) | | |
|
Total transaction accounting adjustments
|
| | | $ | 60,576 | | |
| | |||||||
(1)
Reflects the reclassification of ITHAX’s historical accumulated deficit to additional paid-in-capital in connection with the consummation of the Business Combination.
(2)
Reflects the reclassification of $3.5 million of warrant liabilities associated with ITHAX’s public warrants to additional paid-in capital. Upon the consummation of the Business Combination, New Mondee has a single class equity structure, and the public warrants qualify as equity instruments under ASC 815, Derivatives and Hedging.
(3)
Reflects the calculated valuation of the Incentive stock units under the Black Scholes Model to additional paid-in-capital in connection with the consummation of the Business Combination.
(4)
The $12.3 million in transaction costs is comprised of $11.4 million and $994 thousand related to Mondee and ITHAX, respectively.
(5)
Represents the redemption of 23,311,532 shares of ITHAX from ITHAX public shareholders who elected to have their shares redeemed in connection with the Business Combination. The aggregate redemption price was $233,586, of which $23 was recorded to New Mondee Common Stock and $230,928 was recorded to additional paid-in capital. The $230,928 net effect on additional paid-in capital includes both the $233,586 from the redemption of shares and the offsetting $2,635 of transaction costs allocated to the warrant liability.
(6)
Reflects the issuance of 3,000,000 Class G units at a stock value of $3.25 in association with Amendment 7 of the TCW debt agreement.
(7)
Represents the purchase price consideration of $2 million to acquire the assets and liabilities of Metamind Technologies Pvt. Ltd. This is a common control transaction.
3(f)
Reflects the reclassification of ITHAX’s historical accumulated deficit to additional paid-in-capital in connection with the consummation of the Business Combination, offset by the incentive stock units adjusted to reflect the New Mondee Profit sharing units vested in connection with the consummation of the Business Combination and offset by $0.1 million of transaction cost pertaining to public warrants allocation.
3(g)
Reflects the transaction cost incurred as of June 30, 2022 recorded within accrued expenses, other current liabilities, deferred legal fee, and deferred printer fee.
3(h)
Represents $20.3 million settlement of the related party loan receivable by delivery of New Mondee Common Stock, as applicable on consummation of the Business Combination. On the unaudited pro forma condensed balance sheets, such adjustment reflects repayment of the loan receivable in accordance with the terms of the agreement, as the same may be amended. See “Certain Relationships and Related Person Transactions — Mondee — Mondee Group Note.”
On July 18, 2022, Mondee entered into an asset purchase agreement with Metaminds Technologies Private Limited (“Metaminds”) to acquire substantially all of the assets of the Company for a purchase consideration of $2 million. Management is currently evaluating the impact and values of all major classes of assets and liabilities acquired from the transaction, including the information required for contingencies.
3(i)
Reflects the transaction costs incurred as of June 30, 2022 recorded within other current assets.
67
3(j)
Reflects 2,031,000 shares of New Mondee Common Stock assumed at a fair value of $10 delivered to the Company as repayment upon the settlement of the related party loan receivable on consummation of the Business Combination. On the unaudited pro forma condensed balance sheets, such adjustment reflects repayment of the loan receivable in accordance with the terms of the agreement, as the same may be amended. See “Certain Relationships and Related Person Transactions — Mondee — Mondee Group Note.”
3(k)
Represents payment of transaction costs incurred by ITHAX for financial advisory and other professional fees incurred in consummating the Business Combination. The unaudited pro forma condensed combined balance sheet reflects ITHAX costs as a reduction of cash with a corresponding decrease in additional paid-in capital.
3(l)
Represents the prepayment of $41.2 million which includes $40 million of principal SPAC prepayment and a 3% fee charged on the prepayment. The SPAC prepayment is related to the TCW loan pursuant seventh amendment dated July 18th, 2022. The $1.2 million SPAC prepayment fee was partially offset by $451 thousand related to its amortization. Additionally, the TCW debt recognized issuance cost associated with the distribution of Class G units of $9.8 million which was partially offset by $3.7 million related to its amortization.
Adjustments to the Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 2021 and six months ended June 30, 2022
3(m)
Represents New Mondee Profit sharing units vested in connection with the consummation of the Business Combination. This is a non-recurring item.
3(n)
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined statements of operations are based upon the number of post-business combination shares of Common Stock outstanding at the closing of the Business Combination and the PIPE Financing assuming they each occurred on January 1, 2021, as fully described in Note 4. For the issuance of additional shares in connection with the Business Combination, the calculations assume the shares were outstanding at the beginning of the periods presented. When assuming redemptions, the calculations are adjusted to eliminate such shares for the entire periods.
The Company excluded warrants underlying public units of 12,075,000 and warrants underlying private units of 337,500 from the computation of diluted net loss per share attributable to common shareholders for all redemption scenarios because these warrants represent contingently issuable shares. Contingently issuable shares should be included in EPS only when there is no circumstance under which those shares would not be issued. If the transaction does not go through, these shares will not be issued. These warrants are not shares that will or must be issued to consummate the transaction.
Further, the per share pro forma net loss excludes the impact of outstanding and unexercised public and Private Placement Warrants as the inclusion of these would have been anti-dilutive.
3(o)
Represents the portion of capitalized transaction costs, incurred by ITHAX for the Business Combination, allocated to the derivative warrant liabilities at $299 thousand, which are expensed in the unaudited condensed combined pro forma statement of operations and reduce retained earnings. This is a non-recurring item.
3(p)
The $593 thousand is comprised of the elimination of the interest income earned on the related party loan receivable of $256 thousand and the elimination of the income earned on the money market fund of $337 thousand that is not expected to continue after the business combination for the year ended June 30, 2022. The $607 thousand is comprised of the elimination of the interest income earned on the related party loan receivable of $507 thousand and the elimination of the income earned on the money market fund of $100 thousand that is not expected to continue after the business combination for the year ended December 31, 2021.
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On the unaudited pro forma condensed statement of operations, the related party loan reflects repayment of the loan receivable in accordance with the terms of the agreement, as the same may be amended. See “Certain Relationships and Related Person Transactions — Mondee — Mondee Group Note.”
3(q)
Represents the portion of capitalized transaction costs, incurred by ITHAX for the Business Combination, allocated to the derivative warrant liabilities at $4.3 million, which are expensed in the unaudited condensed combined pro forma statement of operations and reduce retained earnings. This is a non-recurring item.
3(r)
The $1.5 million is comprised of the amortization expense related to the issuance of Class G units in connection with Amendment 7 of the TCW Loan totaling $1.2 million, the amortized SPAC prepayment issuance cost of $149 thousand, and the 3rd party cost associated with the TCW debt modification of $167 thousand. The 3rd party cost is a non-recurring item.
3(s)
The $2.9 million is comprised of the amortization expense related to the issuance of Class G units in connection with Amendment 7 of the TCW Loan totaling $2.5 million, the amortized SPAC prepayment issuance cost of $301 thousand, and the 3rd party cost associated with the TCW debt modification of $167 thousand. The 3rd party cost is a non-recurring item.
4. Net loss per Share
Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination, assuming the shares were outstanding since January 1, 2021. As the Business Combination and related transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire periods presented (amounts in thousands, except share and per share data).
The 9 million Earnout Shares, issuable in three equal tranches to the certain Equity holders have been excluded from basic and diluted pro forma net loss per share as such shares are contingently issuable until the Earnout Triggering Events have occurred.
| | | |
Six Months Ended
June 30, 2022 |
| |
Year Ended
December 31, 2021 |
| ||||||
| | | |
Pro Forma Combined
|
| |
Pro Forma Combined
|
| ||||||
|
Unaudited Pro Forma Net Loss
|
| | | $ | (16,893) | | | | | $ | (44,507) | | |
|
Basic weighted average shares outstanding
|
| | | | 73,319,968 | | | | | | 73,145,568 | | |
|
Net loss per share- Basic and Diluted
|
| | | $ | (0.23) | | | | | $ | (0.61) | | |
| Basic weighted average shares outstanding | | | | | | | | | | | | | |
|
Mondee Stockholder
|
| | | | 60,800,000 | | | | | | 60,800,000 | | |
|
Initial Shareholders
|
| | | | 6,502,500 | | | | | | 6,502,500 | | |
|
Cantor
|
| | | | 210,000 | | | | | | 210,000 | | |
|
Former ITHAX Class A Public Shareholders
|
| | | | 838,468 | | | | | | 838,468 | | |
|
PIPE Investors
|
| | | | 7,000,000 | | | | | | 7,000,000 | | |
|
Treasury Stock
|
| | | | (2,031,000) | | | | | | (2,205,400) | | |
|
Total
|
| | | | 73,319,968 | | | | | | 73,145,568 | | |
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
As a result of the closing of the Business Combination, the financial statements of Mondee Holdings II, Inc. are now the financial statements of New Mondee. Thus, the following discussion and analysis of our financial condition and results of operations of Mondee Holdings II, Inc. prior to the Business Combination and New Mondee following the completion of the Business Combination should be read together with Mondee Holdings II, Inc.’s consolidated financial statements and the related notes appearing elsewhere in this prospectus. The discussion and analysis should also be read together with the pro forma financial information as of the years ended December 31, 2021 and 2020 included in this prospectus. See “Unaudited Pro Forma Condensed Combined Financial Information.” This discussion includes both historical information and forward-looking statements based upon current expectations that involve risk, uncertainties and assumptions. New Mondee’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section titled “Risk Factors” starting on page 15 and elsewhere in this prospectus. New Mondee’s historical results are not necessarily indicative of the results that may be expected for any period in the future.
Overview
We are a rapid-growth, technology-first travel marketplace with a portfolio of globally recognized brands in the leisure, retail and corporate travel sectors.
New Mondee provides state-of-the art technologies, operating systems and services that modernize travel market transactions to better serve travelers seeking enhanced life-style choices directly or through travel affiliates. These technology-led platforms, combined with our distribution network, access to global travel inventory and its extensive, negotiated travel content, create a modern travel marketplace, that includes financial technology and insurance, marketing technology, and conversational commerce platforms. The Company believes this modern travel marketplace provides enhanced options to the increasingly discerning traveler, on efficient consumer-friendly distribution platforms that support its travel supplier partners in utilizing highly perishable travel inventory.
In addition to the rapid development of a modern travel marketplace, the Company is increasingly focused on expanding its marketplace to the gig economy segment of the travel market. The Company believes gig workers are seeking more flexible, diverse content travel services and that its platform is well suited to serve them.
From its founding, the Company began building a leading international wholesale travel business through acquisitions and deployment of our technology platform. We have continued to enhance our technology, expand our market reach and increase our travel market penetration with a combination of organic and inorganic initiatives and transactions. Most recently we acquired companies with subscription product, expanded hotel and retail consumer services and additional global content.
The successful execution of this combined organic and inorganic acquisition business strategy has enhanced New Mondee’s modern travel marketplace and we believe positions us well for the emerging travel business opportunities.
We generate revenue primarily from sales of airline tickets and other travel products and have begun adding subscription fees with some services. Primarily all of the Company’s revenue today is generated by providing omni-channel travel services that result in airline ticket and ancillary sales. Revenue is received in the form of ticket markup, supplier commission or ticketing or ancillary fees, fintech revenue, as well as incentive payments from airlines, Global Distribution Systems (“GDS”) service providers, and banks and financial institutions, which New Mondee leverages in its payment processing and settlement platforms. The Company fulfills and settles the reservations booked through affiliated travel agents or directly by travelers.
Historically, we have financed our operations primarily through financing activities, however we did not obtain further financing during the six months ended June 30, 2022. We have raised an aggregate of $0.0 million and $3.6 million for the six months ended June 30, 2022 and 2021, respectively. We incurred a net loss of $9.1 million and our operations provided $0.2 million in cash for the six months ended June 30, 2022. We incurred a net loss of $25.4 million, including the impacts of COVID-19, and used $1.8 million
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in cash from operating activities for the six months ended June 30, 2021. We did not acquire any businesses during the six months ended June 30, 2022.
Impact of COVID-19
The continued global pandemic of novel coronavirus (“COVID-19”) has resulted and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. In response to the pandemic, Governments, healthcare and other organizations around the world have imposed, and may impose in the future, various measures, including but not limited to, voluntary and mandatory quarantines, stay-at-home orders, travel restrictions and advisories, limitations on gatherings of people, reduced operations and extended closures of businesses.
With respect to the Company, since our business and prospects are largely dependent on travel transaction volumes, that have and will continue to be adversely affected by these and other measures to mitigate risk associated with COVID-19, our financial results for the year ended December 31, 2020 were significantly and negatively impacted, with a material decline in total revenues, net income, cash flow from operations and Adjusted EBITDA. Mondee withstood these unprecedented impacts in the form of airline and traveler cancellations, customer chargebacks, and refunds. However, we took measures to mitigate or control risks associated with COVID-19 and reduce costs and manage cashflow. In particular, we (a) renegotiated certain terms and conditions of our loans with our lenders to defer interest payments and thereby managed our cash; (b) raised additional capital through external borrowings; (c) restructured accounts payable to accommodate a longer time horizon for payment; and (d) invested in and developed our platform to increase operating efficiencies and to reduce labor expenses. Our financial results for the six months ended June 30, 2022 improved from the negatively impacted fiscal 2020 as the travel industry began to rebound. Revenues for the six months ended June 30, 2022 was $43.3 million higher than the six months ended June 30, 2021 as vaccination rates increased and COVID-19 travel restrictions began to lift around the world.
During 2020, Mondee also applied for and received a loan of $4.3 million from the U.S. Small Business Administration Paycheck Protection Program (“PPP”), all of which was forgiven in August 2021. Mondee and Rocketrip each applied for second tranches of the PPP in January 2021 and received, in aggregate $3.6 million. In November 2021, Rocketrip’s second tranche of $1.6 million was forgiven. In May 2022, Mondee’s second tranche of $2.0 million was forgiven.
A global travel recovery began during the second half of 2021 and is generally continuing into 2022, based somewhat on the development, rapid approval and more widespread use of many COVID-19 vaccines. Nevertheless, notwithstanding widespread vaccine distribution across the world, new variants of COVID-19, such as the Delta and Omicron variants have been identified in the second half of 2021 and early 2022, impacting the pace of the nascent recovery. Accordingly, there remains uncertainty and volatility around the path to full economic and travel recovery from the COVID-19 pandemic due to deployment and adoption of vaccines globally, changing travel restrictions, as well as the potential impact of the new variants of COVID-19. As a result, we are unable to predict accurately the impact that the COVID-19 pandemic will have on the pace of recovery of our business going forward.
See “Risk Factors” for further discussion of the possible impact of COVID-19 on our business.
Business Combination and Public Company Costs
On December 20, 2021, Mondee signed a Business Combination Agreement (“BCA”) with ITHAX Acquisition Corp (“ITHAX”), Ithax Merger Sub I, LLC (“First Merger Sub”), a Delaware limited liability company and wholly owned subsidiary of ITHAX, Ithax Merger Sub II (“Second Merger Sub”), LLC a Delaware limited liability company and wholly owned subsidiary of ITHAX. On July 18, 2022, First Merger Sub merged with and into Mondee, with Mondee surviving such merger as a wholly owned subsidiary of New Mondee (the “First Merger”), and at the time the First Merger became effective, immediately following the First Merger, Mondee merged with and into Second Merger Sub, with Second Merger Sub surviving such merger as a wholly owned subsidiary of New Mondee (“the Second Merger”).
The Business Combination was accounted for as a reverse recapitalization. Under this method of accounting, ITHAX was treated as the acquired company for financial statement reporting purposes. Upon
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consummation of the First Merger, Second Merger, and the PIPE Financing, the most significant change in the Company’s future reported financial position and results was an estimated increase in cash (as compared to Mondee’s condensed consolidated balance sheet at June 30, 2022) of $8.3 million.
The sale of New Mondee securities in the public market, including sales pursuant to this prospectus, or the perception that such sales could occur, could harm the prevailing market price of such securities. These sales, or the possibility that such sales could occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate. Resales of the Company’s securities may cause the market price of such securities to drop significantly, even if the Company’s business is doing well. Prasad Gundumogula controls 82.6% of outstanding shares, and upon expiration of certain lock-up restrictions entered into in connection with the Business Combination that will expire six months following the Business Combination will be able to sell any or all of such shares for so long as the registration statement of which this prospectus forms a part is available for use. Sale of a significant number of these securities in the public market, or the perception that such sales could occur, could reduce the market price of securities.
Factors affecting our performance
The COVID-19 pandemic has had, and may continue to have, a material impact on the expansion of the global gig economy and remote worker populations, which could provide a material business leverage opportunity for New Mondee with commensurate operating and revenue performance results.
The COVID-19 pandemic caused a fundamental and potentially permanent shift of business practices globally to the adoption of remote and virtual work environments. This, among other generational factors, rapidly increased the proliferation of the global gig economy, creating larger fragmented pools of remote, part- time and home-based gig workers. In many industries, and especially in travel, this has created a significant market white space for remote and home-based business solutions which are largely technology enabled. We believe New Mondee’s micro-services and self-service modern technology platforms and operating systems, combined with its affiliate and travel agent market segment focus, extensive high-value content access and consumer-friendly apps, give us a material early-to-market advantage in this market white space. This may provide us with significant market growth and penetration opportunities for an unpredictable period of time, which could result in a potentially material increase in transactions. Since our financial results and prospects are largely dependent on these transaction volumes we may see a commensurate positive impact on our operating and financial performance.
The COVID-19 pandemic has had, and may continue to have, a material adverse impact on the travel industry, which could materially affect our business, liquidity, financial condition and operating results.
The COVID-19 pandemic and the resulting economic conditions and government orders forced many of our travel suppliers, including airlines and hotels, to pursue cost reduction measures and seek financing, including government financing and support, in order to reduce financial distress and continue operating, and to curtail drastically their service offerings. In addition, the COVID-19 pandemic resulted in a material decrease in business and consumer spending and an unprecedented decline in transaction volumes in the global travel industry. Our financial results are largely dependent on these transaction volumes. As a result, our financial results for the six months ended June 30, 2022 and 2021, and the years ended December 31, 2021 and 2020 were impacted in total revenues, net income, cash flow from operations and Adjusted EBITDA, as compared to 2019. Financial results began to improve in 2021 and continued to trend upward through the first six months ended June 30, 2022.
Our liquidity and ongoing access to capital could be materially and negatively affected by the impacts of the COVID-19 pandemic.
We have incurred negative cash flows from operating activities and significant losses from operations in the past as reflected in our accumulated deficit of $190 million and $199 million as of December 31, 2021 and June 30, 2022, respectively. We believe that the cash on hand, cash generated from operating activities, available line of credit, additional investments obtained through the Business Combination, including the $70,000 PIPE investments, cash held by ITHAX of $157, and $8,351 net of redemptions, as well as the
72
$85,000 of proceeds from the Series A Preferred Stock Financing Transaction will satisfy the Company’s working capital and capital requirements for at least the next twelve months. Our future capital requirements, however, will depend on many factors, including the on-going effects of the COVID-19 pandemic, consolidation of the travel industry, changes in the general market conditions for travel services, and future business combinations. We may in the future enter into arrangements to acquire or invest in complementary businesses, services, and technologies, including intellectual property rights. From time to time, we may seek to raise additional funds through equity and debt. If we are unable to raise additional capital when desired and on reasonable terms, our business, results of operations, and financial condition could be adversely affected.
Our continued access to sources of liquidity depends on multiple factors, including global economic conditions, the condition of global financial markets, the availability of sufficient amounts of financing and our operating performance. Since the COVID-19 pandemic, there has been increased volatility in the financial and securities markets, which has generally made access to capital less certain and has increased the cost of obtaining new capital. However, there is no guarantee that we will not need to obtain debt financing in the future to fund our operations, or that such debt financing will be available in the future, or that it will be available on commercially reasonable terms, in which case we may need to seek other sources of funding.
Adverse changes in general market conditions for travel services, including the effects of macroeconomic conditions, terrorist attacks, natural disasters, health concerns, civil or political unrest or other events outside our control could materially affect our business, liquidity, financial condition and operating results.
Our revenue is derived from the global travel industry and would be significantly impacted by declines in, or disruptions to, travel activity, particularly air travel. Global factors over which we have no control but which could impact our clients’ willingness to travel and, depending on the scope and duration, cause a significant decline in travel volumes include, among other things:
•
widespread health concerns, epidemics or pandemics, such as the COVID-19 pandemic, the Zika virus, H1N1 influenza, the Ebola virus, avian flu, SARS or any other serious contagious diseases;
•
global security concerns caused by terrorist attacks, the threat of terrorist attacks, or the precautions taken in anticipation of such attacks, including elevated threat warnings or selective cancellation or redirection of travel;
•
cyber-terrorism, political unrest, the outbreak of hostilities or escalation or worsening of existing hostilities or war;
•
natural disasters or severe weather conditions, such as hurricanes, flooding and earthquakes;
•
climate change-related impact to travel destinations, such as extreme weather, natural disasters and disruptions, and actions taken by governments, businesses and supplier partners to combat climate change;
•
the occurrence of travel-related accidents or the grounding of aircraft due to safety concerns; and
•
adverse changes in visa and immigration policies or the imposition of travel restrictions or more restrictive security procedures.
•
Any decrease in demand for consumer or business travel could materially and adversely affect our business, financial condition and results of operations.
Our operating results are impacted by our ability to manage costs and expenses while achieving a balance between making appropriate investments to grow revenue while driving increased profitability.
Cost and expense management will have a direct impact on our financial performance. New Mondee may look to drive revenue growth through investments in marketing, technology, and acquisitions to increase its net revenue, product offerings, revenue per transaction, and ultimately market share. These investments will need to be weighed against creating a more cost-efficient business to reduce operating expenses as a percentage of revenue.
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To address the adverse impact of the COVID-19 pandemic, management have taken specific actions including, renegotiating certain terms and conditions of our loans with our lenders to defer interest payments and thereby manage our cash; raising additional capital through external borrowings; restructuring accounts payable to accommodate a longer time horizon for payment; as well as investing in and developing our platform to increase operating efficiencies and to reduce labor expenses.
While there is current evidence of the travel market transactions recovering, management will continue to monitor impacts on travel transaction volumes of the COVID-19 virus and future variants on a real-time basis and will update and immediately enact initiatives to scale the business infrastructure and operating expenses up or down as appropriate to ensure optimal earnings and cash flows in future periods. In addition, management will coordinate with suppliers, operating partners and its financial partners to attempt to arrange adequate capital to withstand potential COVID-19 induced volume variability.
Use of Transaction Volumes
Transaction volume represents the gross value of transactions handled by our platform between a third party seller or service provider and the ultimate customer. We generate revenue from service fees earned on these transactions and, accordingly our revenue increases or decreases based on the increase or decrease in either or both the number or value of transactions we process. Revenue will increase as a result of an increase in the number of customers using New Mondee’s platform and/or as a result of an increase in service fees from higher value services offered on the platform. As an example of one of these two factors, while transaction volume was flat from 2020 to 2021, revenue increased from $66.0 million to $93.0 million as a result of an increase in transaction value, driven by our development of new revenue streams such as fintech revenue as well as the addition of subscription based and other ancillary revenues. Management considers that transaction volume has a strong correlation to the opportunity to realize revenue and is therefore a useful unit of measurement for investors.
Comparability of Financial Information
The Company’s results of operations and statements of assets and liabilities may not be comparable between year 2020 and 2021 as a result of the Business Combination.
Lastly, the 2020 and 2021 annual financial results were more severely impacted by the COVID-19 pandemic, an event that occurred out of the ordinary course of business, in comparison with the financial results during the first six months of 2022. The travel industry began to recover during 2021 as vaccination rates increased, infection rates decreased, and restrictions began to lift, and continues to trend upwards towards pre-pandemic travel activity during the first six months of 2022.
Non-GAAP Financial Measures
In addition to our financial results determined in accordance with GAAP, we believe the following non-GAAP measures are useful in evaluating our operating performance. We use the Adjusted EBITDA to evaluate our ongoing operations and for internal planning and forecasting purposes. We believe that this non-GAAP financial measure, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding our performance by excluding certain items that may not be indicative of our business, results of operations, or outlook.
We consider Adjusted EBITDA and Unlevered Free Cash Flow to be important non-GAAP financial measures because they illustrate underlying trends in our business and our historical operating performance on a more consistent basis. We believe that the use of Adjusted EBITDA and Unlevered Free Cash Flow are helpful to our investors in assessing the health of our business and our operating performance.
However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. In addition, other companies, including companies in our industry, may calculate similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for the non-GAAP financial measures to the
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most directly comparable financial measures stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, and not to rely on any single financial measure to evaluate our business.
Adjusted EBITDA and Unlevered Free Cash Flow
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance, while management believes Unlevered Free Cash Flow is relevant to investors as it provides a measure of cash generated internally that is available for debt service and to fund inorganic growth or acquisitions. Management believes that these measures provide useful information to investors regarding the Company’s operating performance. The Company believes that these measures are used by many investors, analysts and rating agencies as a measure of performance. By reporting these measures, the Company provides a basis for comparison of our business operations between current, past and future periods by excluding items that the Company does not believe are indicative of our core operating performance. Financial measures that are non-GAAP should not be considered as alternatives to operating income, cash flows from operating activities or any other performance measures derived in accordance with GAAP as measures of operating performance, or cash flows as measures of liquidity. These measures have limitations as analytical tools, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.
Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning purposes. We define Adjusted EBITDA as net loss before depreciation and amortization, provision for income taxes, interest expense (net), other income net, stock-based compensation, and gain on forgiveness of PPP loans.
Unlevered Free Cash Flow is defined as cash used in operating activities less capital expenditures plus cash paid for interest.
The following table reconciles net loss to Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021, and the years ended December 31, 2021 and 2020, respectively:
| | | |
Three Months Ended
June 30, |
| |
Six Months Ended
June 30, |
| |
Years Ended
December 31, |
| |||||||||||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
2022
|
| |
2021
|
| |
2021
|
| |
2020
|
| ||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||
|
Net loss
|
| | | $ | (2,113) | | | | | $ | (13,078) | | | | | $ | (9,104) | | | | | $ | (25,429) | | | | | $ | (38,905) | | | | | $ | (41,734) | | |
|
Interest expense, (net)
|
| | | | 6,467 | | | | | | 5,685 | | | | | | 12,569 | | | | | | 11,110 | | | | | | 23,178 | | | | | | 19,902 | | |
|
Stock-based compensation expense
|
| | | | 81 | | | | | | 3,771 | | | | | | 161 | | | | | | 3,771 | | | | | | 3,936 | | | | | | 15 | | |
|
Depreciation and amortization
|
| | | | 2,769 | | | | | | 3,305 | | | | | | 5,586 | | | | | | 6,520 | | | | | | 12,861 | | | | | | 11,414 | | |
|
Provision for income taxes
|
| | | | 236 | | | | | | 55 | | | | | | 290 | | | | | | 120 | | | | | | 323 | | | | | | (14,042) | | |
|
Gain on forgiveness of PPP loans
|
| | | | (2,009) | | | | | | — | | | | | | (2,009) | | | | | | — | | | | | | (5,868) | | | | | | — | | |
|
Other expense (income), net
|
| | | | (915) | | | | | | 26 | | | | | | (764) | | | | | | 35 | | | | | | (980) | | | | | | 17 | | |
|
Adjusted EBITDA
|
| | | $ | 4,516 | | | | | $ | (236) | | | | | $ | 6,729 | | | | | $ | (3,873) | | | | | $ | (5,455) | | | | | $ | (24,428) | | |
Some of the limitations of Adjusted EBITDA include (i) Adjusted EBITDA does not properly reflect capital commitments to be paid in the future, and (ii) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA does not reflect these capital expenditures. In evaluating Adjusted EBITDA, you should be aware that in the future we may not incur expenses similar to the adjustments in this presentation. Lastly, Adjusted EBITDA can obfuscate the one- time impacts of events that happen out of the ordinary course of business, such as the COVID-19 impact on 2021’s Adjusted EBITDA.
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We believe the presentation of Unlevered Free Cash Flow is relevant and useful for investors because it makes it easier to compare our results with the results of other companies that have different financing and capital structures. Unlevered Free Cash Flow is the gross free cash flow from operations that the company can use to expand operations, pay debt holders, or pay equity and other stakeholders.
Unlevered Free Cash Flow has the same limitations as Adjusted EBITDA, in that it does not consider the capital structure of the company.
The following table reconciles net cash used in operating activities to Unlevered Free Cash Flows for the three and six months ended June 30, 2022 and 2021, and for the years ended December 31, 2021 and 2020, respectively:
| | | |
Three Months
Ended June 30, |
| |
Six Months
Ended June 30, |
| |
Years Ended
December 31, |
| |||||||||||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
2022
|
| |
2021
|
| |
2021
|
| |
2020
|
| ||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||
|
Net cash provided by (used in) operating activities
|
| | | $ | (3,254) | | | | | $ | 219 | | | | | $ | 164 | | | | | $ | (1,810) | | | | | $ | (15,673) | | | | | $ | (3,662) | | |
|
Capital expenditures
|
| | | | (1,754) | | | | | | (902) | | | | | | (3,472) | | | | | | (2,089) | | | | | | (4,022) | | | | | | (4,061) | | |
|
Cash paid for interest
|
| | | | 90 | | | | | | 51 | | | | | | 94 | | | | | | 102 | | | | | | 6,740 | | | | | | 316 | | |
|
Unlevered free cash flow
|
| | | $ | (4,915) | | | | | $ | (632) | | | | | $ | (3,214) | | | | | $ | (3,797) | | | | | $ | (12,955) | | | | | $ | (7,407) | | |
Basis of presentation
Mondee currently conducts its business through two operating segments, namely Travel Marketplace (transactional business serving the end travelers directly or through travel affiliates) and SAAS Platform. Substantially, all our long-lived assets are maintained in, and our losses are attributable to, the United States of America. See Note 1 and 14 in the accompanying audited consolidated financial statements for the years ended December 31, 2021 and 2020 for more information on basis of presentation and operating segments, respectively.
Components of results of operation
Revenues, net
The company currently has four material revenue streams: transactional revenue, incentive revenue, Fin- Tech program revenue, and subscription services revenue.
We generate transactional revenue primarily by airline ticket sales which includes mark-up fees as well as commissions from the sale of ancillary products such as travel insurance, seats, and bags. The Company also derives transactional revenue from hotel and rental car commission. The Company generates backend incentives from airlines for achieving volume targets. The Company also generates booking incentives from the three separate global distribution systems (“GDS”) service providers and supplier direct systems, who host the airlines’ inventory that New Mondee uses to sell to New Mondee’s marketplace. New Mondee earns incentives from Fin-Tech programs held with banks and financial institutions, which New Mondee leverages in its payment processing and settlement platforms. The Fin-Tech programs include a wide array of payment options, such as credit cards, wallets, and alternate payment methods; and next generation fraud protection tools. In most cases, revenue is recognized at the time of booking, as the Company is in an agent position and thus not responsible for the delivery of travel and has no significant obligations following the sale.
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Revenue by Segments
| | | |
Three Months
Ended June 30, |
| |
Six Months
Ended June 30, |
| |
Years Ended
December 31, |
| |||||||||||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
2022
|
| |
2021
|
| |
2021
|
| |
2020
|
| ||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||
|
Travel Marketplace
|
| | | $ | 42,397 | | | | | $ | 23,467 | | | | | $ | 79,758 | | | | | $ | 36,617 | | | | | $ | 92,038 | | | | | $ | 65,057 | | |
|
Subscription Based Platform
|
| | | | 253 | | | | | | 90 | | | | | | 545 | | | | | | 434 | | | | | | 1,156 | | | | | | 739 | | |
|
Total revenue
|
| | | $ | 42,650 | | | | | $ | 23,557 | | | | | $ | 80,303 | | | | | $ | 37,051 | | | | | $ | 93,194 | | | | | $ | 65,796 | | |
New Mondee’s corporate platform, Rocketrip, is a corporate enterprise travel solution that helps companies save on travel costs by empowering and rewarding employees of large companies to make cost-saving decisions. Rocketrip charges an annual Software-as-a-Service (“SaaS”) fee to generate real-time Prices-to- Beat for its customers’ travelers, as well as to implement and manage a rewards program for travelers whose travel expense is below the Price-to-Beat. Although collected upfront, Rocketrip recognizes the SaaS fee over the course of that contract year.
See “— Critical Accounting Policies and Estimates — Revenue Recognition” for a more detailed discussion of our revenue recognition policy
Sales and Other Expenses
Sales and other expenses are generally variable in nature and consist primarily of: (1) credit cards and other payment processing fees associated with merchant transactions; (2) fees paid to third parties that provide call center, website content translations, fraud protection services, and other services; (3) offshore customer support and (4) customer chargeback provisions.
Marketing expenses
We rely on marketing channels to generate a significant amount of traffic to our websites. Marketing expenses consist primarily of the costs of: (1) advertising, including digital and physical advertising and (2) affiliate marketing programs. We intend to continue to make significant investments in our marketing organization to drive additional revenue, further penetrate the market and expand our global customer base. As a result, we expect our marketing expenses to increase in absolute dollars as we expect to invest in growing and training our sales force and broadening our brand awareness.
General and Administrative
General and administrative expenses consist primarily of: (1) occupancy and office expenses; (2) fees for outside professionals, including legal and accounting services; (3) audit and tax fees; and (4) other miscellaneous expenses. We expect to incur additional general and administrative expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and stock exchange listing standards, additional insurance expenses (including directors’ and officers’ insurance), investor relations activities and other administrative and professional services. We also expect to increase the size of general and administrative functions to support the growth of our business. However, we anticipate general and administrative expenses to decrease as a percentage of revenue over the long term.
Personnel Expenses
Personnel expenses consist of compensation to our personnel, including salaries, bonuses, payroll taxes, and employee health and other benefits. We expect to incur additional personnel expenses as a result of operating as a public company, including expanding head count through organic growth as well as increasing headcount through business combinations. However, we anticipate personnel expenses to decrease as a percentage of revenue over the long term.
77
Information Technology
Information technology expenses consist primarily of: (1) software license and system maintenance fees; (2) outsourced data center and web hosting costs; (3) payments to contractors; and (4) data communications and other expenses associated with operating the Company’s services. We expect to incur additional information technology expenses as a result of operating as a public company, including expanding our operations through growth of our online booking platform and hosting fees. We also expect to increase the size of information technology expenses to support the growth of our business. However, we anticipate information technology expenses to decrease as a percentage of revenue over the long term.
Depreciation and Amortization
Depreciation and amortization expenses consist of: (1) amortization of intangible assets with determinable lives; (2) depreciation of computer equipment; (3) amortization of internally developed and purchased software; and (4) depreciation of furniture and office equipment. We expect to incur additional depreciation and amortization expenses as a result of operating as a public company, including expanding our operations through capital expenditures and purchases of long-lived assets, as well as potential impacts of a continued mergers and acquisitions strategy. However, we anticipate depreciation and amortization expenses to decrease as a percentage of revenue over the long term.
Other income (Expense)
Other income (expense) consists primarily of: (1) interest income; (2) interest expense; and (3) other interest and expense. Interest expense relates to interest on loans and amortization of debt issuance costs. We record interest income from our related party loan. Other expenses include realized gains and losses on foreign currency exchange.
Benefit from (Provision for) Income Taxes
The company is subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, the company determines its consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the condensed consolidated financial statement and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, the company believes it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
The company evaluates uncertain tax positions to determine if it is more likely than not that they would be sustained upon examination. The company records a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (“GILTI”) of its controlled foreign corporations (“CFCs”). The Company is subject to tax under GILTI provisions and includes its CFCs income in its U.S. income tax provision in the period the CFCs earn the income.
Results of Operations
Comparison of Three and Six Months Ended June 30, 2022 and 2021
We have derived this data from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. This information should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus. The results of historical periods are not necessarily indicative of the results of operations for any future period. The following tables set forth our unaudited condensed consolidated statement of operations as well as other financial data management considers meaningful for 2022 and 2021:
78
| | | |
Three Months
Ended June 30, |
| | | | | | | | | | | | | |
Six Months
Ended June 30, |
| | | | | | | | | | | | | ||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
Revenues, net
|
| | | $ | 42,650 | | | | | $ | 23,557 | | | | | $ | 19,093 | | | | | | 81% | | | | | $ | 80,303 | | | | | $ | 37,051 | | | | | $ | 43,252 | | | | | | 117% | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
|
Marketing expenses
|
| | | | 25,847 | | | | | | 12,833 | | | | | | 13,014 | | | | | | 101% | | | | | | 49,018 | | | | | | 21,075 | | | | | | 27,943 | | | | | | 133% | | |
|
Sales and other expenses
|
| | | | 3,554 | | | | | | 3,130 | | | | | | 424 | | | | | | 14% | | | | | | 6,378 | | | | | | 4,337 | | | | | | 2,041 | | | | | | 47% | | |
|
Personnel expense
|
| | | | 5,752 | | | | | | 8,527 | | | | | | (2,775) | | | | | | (33)% | | | | | | 11,324 | | | | | | 12,662 | | | | | | (1,338) | | | | | | (11)% | | |
|
General and administrative expense
|
| | | | 2,025 | | | | | | 1,228 | | | | | | 797 | | | | | | 65% | | | | | | 4,465 | | | | | | 2,915 | | | | | | 1,550 | | | | | | 53% | | |
|
Information technology expense
|
| | | | 1,158 | | | | | | 1,088 | | | | | | 70 | | | | | | 6% | | | | | | 2,464 | | | | | | 2,113 | | | | | | 351 | | | | | | 17% | | |
|
Provision for doubtful accounts receivable and contract assets
|
| | | | (121) | | | | | | 758 | | | | | | (879) | | | | | | (116)% | | | | | | 86 | | | | | | 1,593 | | | | | | (1,507) | | | | | | (95)% | | |
|
Depreciation and
amortization |
| | | | 2,769 | | | | | | 3,305 | | | | | | (536) | | | | | | (16)% | | | | | | 5,586 | | | | | | 6,520 | | | | | | (934) | | | | | | (14)% | | |
|
Total Operating Expenses
|
| | | $ | 40,984 | | | | | $ | 30,869 | | | | | $ | 10,115 | | | | | | 33% | | | | | $ | 79,321 | | | | | $ | 51,215 | | | | | $ | 28,106 | | | | | | 55% | | |
|
Net (loss) Income from operations
|
| | | $ | 1,666 | | | | | $ | (7,312) | | | | | $ | 8,978 | | | | | | (123)% | | | | | $ | 982 | | | | | $ | (14,164) | | | | | $ | 15,146 | | | | | | (107)% | | |
| Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
|
Interest income
|
| | | | 134 | | | | | | 128 | | | | | | 6 | | | | | | 5% | | | | | | 261 | | | | | | 252 | | | | | | 9 | | | | | | 4% | | |
|
Interest expense
|
| | | | (6,601) | | | | | | (5,813) | | | | | | (788) | | | | | | 14% | | | | | | (12,830) | | | | | | (11,362) | | | | | | (1,468) | | | | | | 13% | | |
|
Gain on extinguishment of PPP loan
|
| | | | 2,009 | | | | | | — | | | | | | 2,009 | | | | | | N/A | | | | | | 2,009 | | | | | | — | | | | | | 2,009 | | | | | | N/A | | |
|
Other (expense) income, net
|
| | | | 915 | | | | | | (26) | | | | | | 941 | | | | | | (3,619)% | | | | | | 764 | | | | | | (35) | | | | | | 799 | | | | | | (2,283)% | | |
|
Total other expense
|
| | | | (3,543) | | | | | | (5,711) | | | | | | 2,168 | | | | | | (38)% | | | | | | (9,796) | | | | | | (11,145) | | | | | | 1,349 | | | | | | (12)% | | |
|
Net loss before income
taxes |
| | | | (1,877) | | | | | | (13,023) | | | | | | 11,146 | | | | | | (86)% | | | | | | (8,814) | | | | | | (25,309) | | | | | | 16,495 | | | | | | (65)% | | |
|
Benefit from (provision for) income taxes
|
| | | | (236) | | | | | | (55) | | | | | | (181) | | | | | | 329% | | | | | | (290) | | | | | | (120) | | | | | | (170) | | | | | | 142% | | |
|
Net loss
|
| | | $ | (2,113) | | | | | $ | (13,078) | | | | | $ | 10,965 | | | | | | (84)% | | | | | $ | (9,104) | | | | | $ | (25,429) | | | | | $ | 16,325 | | | | | | (64)% | | |
| | | |
Three Months
Ended June 30, |
| | | | | | | | | | | | | |
Six Months
Ended June 30, |
| | | | | | | | | | | | | ||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
Revenues, net
|
| | | $ | 42,650 | | | | | $ | 23,557 | | | | | $ | 19,093 | | | | | | 81% | | | | | $ | 80,303 | | | | | $ | 37,051 | | | | | $ | 43,252 | | | | | | 117% | | |
Revenues, net for the three and six months ended June 30, 2022 increased by $19.1 million and $43.3 million, or 81% and 117%, compared to the same periods in 2021. The increase was primarily driven by significant improvement in travel demand trends starting in fiscal 2021 and continuing through fiscal 2022, as the COVID-19 pandemic recovery continues to improve. Specifically, transactional revenues increased by $9.0 million and $25.0 million during the three and six months ended June 30, 2022, compared to the same periods in 2021. GDS incentives and other service revenues increased by $4.0 million and $7.4 million during the three and six months ended June 30, 2022, compared to the same periods in 2021. Further, Airline incentive revenues increased by $2.9 million and $6.2 million during the three and six months ended June 30, 2022, compared to the same periods in 2021.
79
Operating Expenses and Other (Income) Expense
| | | |
Three Months Ended
June 30, |
| | | | | | | | | | | | | |
Six Months Ended
June 30, |
| | | ||||||||||||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
Marketing expenses
|
| | | $ | 25,847 | | | | | $ | 12,833 | | | | | $ | 13,014 | | | | | | 101% | | | | | $ | 49,018 | | | | | $ | 21,075 | | | | | $ | 27,943 | | | | | | 133% | | |
|
Sales and other expenses
|
| | | | 3,554 | | | | | | 3,130 | | | | | | 424 | | | | | | 14% | | | | | | 6,378 | | | | | | 4,337 | | | | | | 2,041 | | | | | | 47% | | |
|
Personnel expense
|
| | | | 5,752 | | | | | | 8,527 | | | | | | (2,775) | | | | | | (33)% | | | | | | 11,324 | | | | | | 12,662 | | | | | | (1,338) | | | | | | (11)% | | |
|
General and administrative expense
|
| | | | 2,025 | | | | | | 1,228 | | | | | | 797 | | | | | | 65% | | | | | | 4,465 | | | | | | 2,915 | | | | | | 1,550 | | | | | | 53% | | |
|
Information technology expense
|
| | | | 1,158 | | | | | | 1,088 | | | | | | 70 | | | | | | 6% | | | | | | 2,464 | | | | | | 2,113 | | | | | | 351 | | | | | | 17% | | |
|
Provision for doubtful accounts receivable and contract assets
|
| | | | (121) | | | | | | 758 | | | | | | (879) | | | | | | (116)% | | | | | | 86 | | | | | | 1,593 | | | | | | (1,507) | | | | | | (95)% | | |
|
Depreciation and
amortization |
| | | | 2,769 | | | | | | 3,305 | | | | | | (536) | | | | | | (16)% | | | | | | 5,582 | | | | | | 6,520 | | | | | | (934) | | | | | | (14)% | | |
|
Interest income
|
| | | | (134) | | | | | | (128) | | | | | | (6) | | | | | | 5% | | | | | | (261) | | | | | | (252) | | | | | | (9) | | | | | | 4% | | |
|
Interest expense
|
| | | | 6,601 | | | | | | 5,813 | | | | | | 788 | | | | | | 14% | | | | | | 12,830 | | | | | | 11,362 | | | | | | 1,468 | | | | | | 13% | | |
|
Gain on extinguishment of PPP loan
|
| | | | (2,009) | | | | | | — | | | | | | (2,009) | | | | | | 100% | | | | | | (2,009) | | | | | | — | | | | | | (2,009) | | | | | | 100% | | |
|
Other (income) expense, net
|
| | | | (915) | | | | | | 26 | | | | | | (941) | | | | | | (3,619)% | | | | | | (764) | | | | | | 35 | | | | | | (799) | | | | | | (2,283)% | | |
| | | | | $ | 44,527 | | | | | $ | 36,580 | | | | | $ | 7,947 | | | | | | 22% | | | | | $ | 89,117 | | | | | $ | 62,360 | | | | | $ | 26,757 | | | | | | 43% | | |
Marketing Expenses
Marketing expenses for the three and six months ended June 30, 2022 increased by $13.0 million and $27.9 million, or 101% and 133%, respectively, compared to the same periods in 2021. The increase was primarily driven by an increase in affiliate marketing and web advertising spend as travel demand increased during the period as the industry has been recovering from the COVID-19 pandemic.
Sales and Other Expenses
Sales and Other Expenses for the three and six months ended June 30, 2022 increased by $0.4 million and $2.0 million, or 14% and 47%, respectively, compared to the same periods in 2021. The increase was primarily driven by credit card fees associated with merchant transactions, which grew by 47% over prior period, consistent with the increase net revenue growth. Credit card fees are correlated with the volume of business to consumer sales.
Personnel Expense
Personnel expenses for the three and six months ended June 30, 2022 decreased by $2.8 million and $1.3 million, or 33% and 11%, respectively, compared to the same periods in 2021. The decrease was primarily attributable to a reduction in stock-based compensation attributed to grants with upfront vesting offered to employees in 2021. The Company did not offer any grants or units in 2022. The decrease is offset by an increase in salary cost due to the additional employees hired from Metaminds in April 2022.
General and Administrative
General and administrative expenses for the three and six months ended June 30, 2022 increased by $0.8 million and $1.6 million, or 65% and 53%, respectively, compared to the same periods in 2021. The increase was primarily attributable to an increase in audit and tax fees, professional service fees, and legal expenses incurred in preparation for the ITHAX Business Combination.
80
Information Technology
Information technology expenses for the three and six months ended June 30, 2022 increased by $0.1 million and $0.4 million, or 6% and 17%, respectively, compared to the same periods in 2021. The increase was primarily due to an increase in web hosting and software costs and expenses.
Provision for doubtful accounts
Provision for doubtful accounts for the three and six months ended June 30, 2022 decreased by $0.9 million and $1.5 million, or 116% and 95%, respectively, compared to the same periods in 2021. The decrease was driven by a reduction in collection times and risk of receivables not being collectable compared to the first six months of 2021, which were severely impacted by the COVID-19 pandemic.
Depreciation and amortization
Depreciation and amortization expenses for the three and six months ended June 30, 2022 decreased by $0.5 million and $0.9 million, or 16% and 14%, respectively, compared to the same periods in 2021. The decrease was primarily due to certain customer relationships and acquired technology intangible assets being fully amortized during the year ended 2021.
Interest Income
Interest income for the for the three and six months ended June 30, 2022 increased by $6 thousand and $9 thousand, or 5% and 4%, respectively, compared to the same periods in 2021. The increase was immaterial.
Interest expense
Interest expense for the three and six months ended June 30, 2022 increased by $0.8 million and $1.5 million, or 14% and 13%, respectively, compared to the same periods in 2021. The increase was driven by an increase in the Company’s outstanding debt balance as paid-in-kind interest continues to accrue towards the outstanding debt balance.
Other (income)/expense
Other income for the three and six months ended June 30, 2022 increased by $0.9 million and $0.8 million, or 3,619% and 2,283%, respectively, compared to the same periods in 2021. The decrease was primarily due the reduction in the fair value of the LBF earnout liability.
Income Taxes
| | | |
Three Months Ended
June 30, |
| | | | | | | | | | | | | |
Six Months Ended
June 30, |
| | | | | | | | | | | | | ||||||||||||||||||
| | | |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| |
2022
|
| |
2021
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||||||||||||||
| | | |
($ in thousands)
|
| |||||||||||||||||||||||||||||||||||||||||||||
|
Benefit from (provision for)
income taxes |
| | | | (236) | | | | | | (55) | | | | | | (181) | | | | | | 329% | | | | | | (290) | | | | | | (120) | | | | | | (170) | | | | | | 142% | | |
The provision for income taxes for the three and six months ended June 30, 2022 increased by $0.2 million and $0.2 million, or 329% and 142%, respectively, compared to the same periods in 2021, mainly driven by the difference in booked income in within the Indian subsidiary for the prior periods compared to the effective tax rate projected for the India subsidiary in 2022.
Our effective tax rate for 2021 was lower than the 21% federal statutory income tax rate due to the valuation allowance recorded on the net deferred tax assets, partially offset by state income taxes.
Our effective tax rate for 2020 was higher than the 21% federal statutory income tax rate because of the state income taxes and the impact of the valuation allowance release arising from the non-taxable deferred goodwill acquired through the CTS acquisition. Additionally, the valuation allowance recorded on the net deferred tax assets partially reduced the effective tax rate.
81
Comparison of Years Ended December 31, 2021 and 2020
We have derived this data from our consolidated financial statements included elsewhere in this prospectus. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. The results of historical periods are not necessarily indicative of the results of operations for any future period. The following tables set forth our consolidated statement of operations as well as other financial data management considers meaningful for 2021 and 2020:
| | | |
For the year ended
December 31, |
| | | | | | | | | | | | | |||||||||
| | | |
2021
|
| |
2020
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||
| | | |
($ in thousands)
|
| | | | | | | | | | | | | |||||||||
|
Revenues, net
|
| | | $ | 93,194 | | | | | $ | 65,796 | | | | | $ | 27,398 | | | | | | 42% | | |
| Operating expenses: | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Marketing expenses
|
| | | | 54,611 | | | | | | 39,501 | | | | | | 15,110 | | | | | | 38% | | |
|
Sales and other expenses
|
| | | | 11,165 | | | | | | 14,434 | | | | | | (3,269) | | | | | | (23)% | | |
|
Personnel expense
|
| | | | 23,422 | | | | | | 20,658 | | | | | | 2,764 | | | | | | 13% | | |
|
General and administrative expense
|
| | | | 7,455 | | | | | | 7,736 | | | | | | (281) | | | | | | (4)% | | |
|
Information technology expense
|
| | | | 4,058 | | | | | | 3,255 | | | | | | 803 | | | | | | 25% | | |
|
Provision for doubtful accounts receivable and contract
assets |
| | | | 1,874 | | | | | | 4,655 | | | | | | (2,781) | | | | | | (60)% | | |
|
Depreciation and amortization
|
| | | | 12,861 | | | | | | 11,414 | | | | | | 1,447 | | | | | | 13% | | |
|
Total Operating Expenses
|
| | | $ | 115,446 | | | | | $ | 101,653 | | | | | $ | 13,793 | | | | | | 14% | | |
|
Loss from operations
|
| | | $ | (22,252) | | | | | $ | (35,857) | | | | | $ | 13,605 | | | | | | (38)% | | |
| Other income (expense): | | | | | | | | | | | | | | | | | | | | | | | | | |
|
Interest income
|
| | | | 505 | | | | | | 508 | | | | | | (3) | | | | | | (1)% | | |
|
Interest expense
|
| | | | (23,683) | | | | | | (20,410) | | | | | | (3,273) | | | | | | 16% | | |
|
Gain on forgiveness of PPP loans
|
| | | | 5,868 | | | | | | — | | | | | | 5,868 | | | | | | N/A | | |
|
Other (expense) income, net
|
| | | | 980 | | | | | | (17) | | | | | | 997 | | | | | | (5,865)% | | |
|
Total other expense
|
| | | | (16,330) | | | | | | (19,919) | | | | | | 3,589 | | | | | | (18)% | | |
|
Net loss before income taxes
|
| | | | (38,582) | | | | | | (55,776) | | | | | | 17,194 | | | | | | (31)% | | |
|
Benefit from (provision for) income taxes
|
| | | | (323) | | | | | | 14,042 | | | | | | (14,365) | | | | | | (102)% | | |
|
Net loss
|
| | | $ | (38,905) | | | | | $ | (41,734) | | | | | $ | 2,829 | | | | | | (7)% | | |
Revenues, net
| | | |
Year Ended
December 31, |
| | | | | | | | | | | | | |||||||||
| | | |
2021
|
| |
2020
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||
| | | |
($ in thousands)
|
| | | | | | | | | | | | | |||||||||
|
Revenues, net.
|
| | | $ | 93,194 | | | | | $ | 65,796 | | | | | $ | 27,398 | | | | | | 42% | | |
Revenues, net for the year ended December 31, 2021 increased by $27.4 million or 42% from $65.8 million in 2020 to $93.2 million in 2021. The increase was primarily driven by significant improvement in travel demand trends since 2020, which was severely impacted by the COVID-19 pandemic.
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Operating Expenses and Other (Income) Expense
| | | |
For the year ended
December 31, |
| | | | | | | | | | | | | |||||||||
| | | |
2021
|
| |
2020
|
| |
$ Change
|
| |
% Change
|
| ||||||||||||
| | | |
($ in thousands)
|
| | | | | | | | | | | | | |||||||||
|
Marketing expenses
|
| | | $ | 54,611 | | | | | $ | 39,501 | | | | | $ | 15,110 | | | | | | 38% | | |
|
Sales and other expenses
|
| | | | 11,165 | | | | | | 14,434 | | | | | | (3,269) | | | | | | (23)% | | |
|
Personnel expense
|
| | | | 23,422 | | | | | | 20,658 | | | | | | 2,764 | | | | | | 13% | | |
|
General and administrative expense
|
| | | | 7,455 | | | | | | 7,736 | | | | | | (281) | | | | | | (4)% | | |
|
Information technology expense
|
| | | | 4,058 | | | | | | 3,255 | | | | | | 803 | | | | | | 25% | | |
|
Provision for doubtful accounts receivable and contract
assets |
| | | | 1,874 | | | | | | 4,655 | | | | | | (2,781) | | | | | | (60)% | | |
|
Depreciation and amortization
|
| | | | 12,861 | | | | | | 11,414 | | | | | | 1,447 | | | | | | 13% | | |
|
Interest Income
|
| | | | (505) | | | | | | (508) | | | | | | 3 | | | | | | (1)% | | |
|
Interest expense
|
| | | | 23,683 | | | | | | 20,410 | | | | | | 3,273 | | | | | | 16% | | |
|
Gain on extinguishment of PPP loans
|
| | | | (5,868) | | | | | | — | | | | | | (5,868) | | | | | | N/A | | |
|
Other (income) expense, net
|
| | | | (980) | | | | | | 17 | | | | | | (997) | | | | | | (5,865)% | | |
| | | | | $ | 131,776 | | | | | $ | 121,572 | | | | | $ | 10,204 | | | | | | 8% | | |
Marketing Expenses
Marketing expenses for the year ended December 31, 2021 increased by $15.1 million or 38% from $39.5 million in 2020 to $54.6 million in 2021. The increase was primarily driven by an increase in affiliate marketing and web advertising spend as travel demand increased since 2020, which was severely impacted by the COVID-19 pandemic.
Sales and Other Expenses
Sales and other expenses for the year ended December 31, 2021 decreased by $3.3 million or 23% from $14.4 million in 2020 to $11.2 million in 2021. The decrease was primarily driven by a significant decrease in chargebacks from customers as fewer cancellations were made compared to 2020, which was severely impacted by the COVID-19 pandemic.
Personnel Expense
Personnel expenses for the year ended December 31, 2021 increased by $2.8 million or 13% from $20.7 million in 2020 to $23.4 million in 2021. The increase was primarily attributable to an increase in stock-based compensation expense incurred from profit interest awards issued to the Company’s employees and an increase in employee bonuses.
General and Administrative
General and administrative expenses for the year ended December 31, 2021 decrease by $0.3 million or 4% from $7.7 million in 2020 to $7.5 million in 2021. The decrease was primarily attributable to a $0.8 million decrease in rent expense as the Company continued to decrease the amount of rental office space and employ a virtual work environment and a $0.4 million decrease in miscellaneous expenses. The decreases were partially offset by a $1.2 million increase in legal, professional, audit and tax service fees incurred as the Company prepares for the ITHAX business combination.
Information Technology
Information technology expenses for the year ended December 31, 2021 increased by $0.8 million or 25% from $3.3 million in 2020 to $4.1 million in 2021. The increase was primarily due to $1.2 million increase in web hosting, software costs and expenses, partially offset by a $0.3 million decrease in outsourced costs.
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Provision for doubtful accounts
Provision for doubtful accounts for the year ended December 31, 2021 decreased by $2.8 million or 60% from $4.7 million in 2020 to $1.9 million in 2021. The decrease was driven by a reduction in collection times and risk of receivables not being collectable compared to 2020, which was severely impacted by the COVID-19 pandemic.
Depreciation and amortization
Depreciation and amortization expense for the year ended December 31, 2021 increased by $1.4 million or 13% from $11.4 million in 2020 to $12.9 million in 2021. The increase was primarily due to additional amortization expense incurred from intangible assets acquired during 2020.
Interest Income
Interest income for the year ended December 31, 2021 decreased by $3 thousand, or 1%, from $508 thousand in 2020 to $505 thousand in 2021. The decrease was immaterial.
Interest expense
Interest expense for the year ended December 31, 2021, increased by $3.3 million or 16% from $20.4 million in 2020 to $23.7 million in 2021. The increase was driven by an increase in the Company’s outstanding debt balance as paid-in-kind interest continues to accrue towards the outstanding debt balance.
Gain on extinguishment of PPP loans
Gain on extinguishment of PPP loans for the year ended December 31, 2021, increased by $5.9 million or 100% from $0.0 million in 2020 to $5.9 million in 2021. The Company received forgiveness on its PPP loans obtained in April 2020 as well as the forgiveness on the PPP loans obtained by its subsidiary in February 2021.
Other (income)/expense
The Company earned $1.0 million in other income during the year ended December 31, 2021 and incurred $17 thousand in other expense during the year ended December 31, 2020. The change was primarily due to outstanding shortfall and other fees that were waived by one of the Company’s GDS operators.
Income Taxes
| | | |
Year Ended December 31,
|
| | | | | | | | | | | | | |||||||||
| | | |
2021
|
| |
2020
|
| |
$ Change
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% Change
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| ||||||||||||
| | | |
($ in thousands)
|
| | | | | | | | | | | | | |||||||||
|
Benefit from (provision for) income taxes
|
| | | $ | (323) | | | | | $ | 14,042 | | | | | $ | (14,365) | | | | | | (102)% | | |
The benefit from (provision for) income taxes for the year ended December 31, 2021 decreased by $14.4 million or 102% from a $14.0 million benefit in 2020 to a $0.3 million expense in 2021.
Our effective tax rate for 2021 was lower than the 21% federal statutory income tax rate due to the valuation allowance recorded on the net deferred tax assets, partially offset by state income taxes.
Our effective tax rate for 2020 was higher than the 21% federal statutory income tax rate because of the state income taxes and the impact of the valuation allowance release arising from the non-taxable deferred goodwill acquired through the CTS acquisition. Additionally, the valuation allowance recorded on the net deferred tax assets partially reduced the effective tax rate.
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Liquidity and Capital Resources
Sources of Liquidity
As of June 30, 2022, we had cash and cash equivalents totaling $10.9 million, which were held for working capital purposes, as well as restricted short-term investments of $8.5 million and $15 million available line of credit. Our cash equivalents are comprised primarily of cash checking accounts. To date, our principal sources of liquidity have been payments received from our revenue arrangements and financing arrangements with banks and financial institutions.
On December 23, 2019, the Company, entered into a financing agreement (the “TCW Agreement”) with TCW Asset Management Company LLC (“TCW”) consisting of a $150 million multi-draw term loan in aggregate, of which the first draw was for a principal amount of $95 million. Additionally, on the same day, the Company entered a revolving credit facility (‘LOC’) with an aggregate principal amount not exceeding $15 million. Undrawn balances available under the revolving credit facility are subject to commitment fees of 1%. These facilities are guaranteed by the Company and its Parent, Mondee Holdings LLC and are secured by substantially all of the assets of the Company and its Parent. No amounts on the revolving credit facility have been drawn down as of June 30, 2022 and 2021.
On February 6, 2020, the Company entered into a first amendment to the TCW Agreement and an incremental joinder with TCW for an aggregate principal amount of $55 million. On May 1, 2020, the Company entered into a second amendment with TCW, which modified the Applicable Margin of any Reference Rate Loan, or any portion thereof, to 9.50% per annum and any LIBOR Rate Loan, or any portion thereof, to 10.50%, increased from 8.50% and 9.50%, respectively, prior to the second amendment taking effect. The increase was due to the Company renegotiating the terms of the TCW Agreement as a result of the COVID-19 pandemic. In addition, the Parent issued 2.5 million of Class G Preferred units to TCW as part of the second amendment to the TCW Agreement, with an aggregate value of $6.5 million. The Company incurred $15.1 million in debt issuance cost and debt discount for the year ended December 31, 2020 related to this offering. The funds drawn from the $55 million term loan were primarily used to pay for the CTS acquisition, MS Loan, Mondee Group LLC Loan, and for other working capital purposes.
On June 22, 2021, the Company entered into a fourth amendment with TCW, which specifies that if Company does not secure $25 million in financing, or enter into a change of control agreement, by June 30, 2022 then the Company must issue 3,600,000 Class G units to TCW. In connection with the fourth amendment and in consideration thereof, the Company incurred an amendment fee of $1.8 million, which was paid in kind and added to the outstanding principal balance.
On December 31, 2021, the Company entered into a fifth amendment with TCW to increase the Applicable Margin by 1% and capitalize interest during the period of October 1, 2021 to March 31, 2022. Additionally, quarterly installments for loan repayment were deferred until June 30, 2022. The modification is only in effect through June 30, 2022, at which time the Applicable Margin will revert to the original percentages.
Beginning on April 1, 2021, 5% Payment in Kind (“PIK”) interest has been accrued on the outstanding principal balance by increasing the principal amount over the term of the loan. On July 2, 2021, the PIK interest rate decreased to 4%. The PIK rate eventually increased to 12.25% beginning October 1, 2021. The effective interest rate of the TCW Agreement for three months ended June 30, 2022, and June 30, 2021 is 15.52% and 15.48%, respectively.
On April 15, 2022, the Company entered into a sixth amendment and waiver with TCW to request to have waived certain defaults and also to make certain revisions to the TCW Agreement. The revisions pertained to updating Unadjusted EBITDA, Leverage Ratio and Fixed Charge Coverage Ratio (each as defined therein).
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On July 8, 2022, the Company entered into a seventh amendment to the financing agreement to the TCW Agreement, pursuant to which, among other things, (i) TCW consented to the Business Combination, the change of the name of the Company from “ITHAX Acquisition Corp.” to “Mondee Holdings, Inc.,” and a further extension of the loan repayment schedule, and (ii) the Company agreed to execute joinders for Mondee Holdings, Inc. and Mondee Holdings II, Inc. to become borrowers under the TCW Agreement. The seventh amendment further provides that the quarterly repayment of interest and quarterly principal repayment have been extended to September 30, 2022, and Closing Date, respectively. Additionally, the amendment extended the trigger date to issue 3,600,000 of Class G units related to the consummation of the transaction to July 31, 2022. In the event the company completes the consummation of the business by or before July 31, 2022 the Company will be subject issue up to 3,000,000 in Class G units which is dependent on the aggregate amount of the loan after giving effect to the business combination. On July 17, 2022, the Company entered into an amendment to the seventh amendment to the TCW Agreement, pursuant to which, among other things, TCW consented to reduce the amount of the loans required to be prepaid at closing to $40 million. On July 18, 2022, based on the prepayment of $41,200,000 aggregate amount of the loans, the Company issued 3,000,000 Class G units to TCW.
On April 13, 2020, Mondee, Inc., was granted a loan from JP Morgan Chase Bank in the aggregate amount of $4.3 million pursuant to the PPP under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”). In January 2021, the Company was granted a Second Draw PPP Loan in the amount of $2 million. In February 2021, the Company was granted another Second Draw PPP Loan in the amount of $1.6 million. As the legal form of the PPP loan is debt, the company accounted for the loan as debt under ASC 470 Debt. In November 2021, the $1.6 million PPP loan was forgiven, and in May 2022, the $2.0 million PPP loan was forgiven. Refer to the “Impact of COVID-19” section for further details.
The Company has prepared its condensed consolidated financial statements assuming that the Company will continue as a going concern. The Company is required to make debt repayments aggregating to $15,454 and $9,128 up to June 30, 2023 and June 30, 2024, respectively. As of June 30, 2022, current liabilities are $75,282 and current assets are $60,199. Given that the Company has historically generated recurring net losses, it may be unable to make such specified debt repayments from operations when the balance is due. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
As of June 30, 2022, the Company has $10,932 of un-restricted cash and $15,000 in unused line of credit. Upon completion of the Business Combination with ITHAX in July 2022 the Company’s consolidated cash balance increased due to the PIPE investments of $70,000, cash held by ITHAX of $157, and $8,351 net of redemptions. The increase was offset by a modified debt facility with TCW Asset Management Company LLC (“TCW”) which entailed a prepayment of some of its obligations totaling $41,200 in July 2022. The Company was also required to make various payments including SPAC transaction costs incurred and deferred underwriting commissions aggregating to $28,680 upon the close of the Business Combination. Further, for the six months ended June 30, 2022, the Company generated positive cash flows from operating activities and expects to continue for the next 12 months, despite the increases in costs of operating as a public company such as recurring audit fees and legal services.
As of the date on which these condensed consolidated financial statements were available to be issued, we believe that the cash on hand, cash generated from operating activities, available line of credit, and additional investments obtained through the Business Combination will satisfy the Company’s working capital and capital requirements, including the potential expenditure of up to $8.4 million in connection with the offer to purchase warrants, for at least the next twelve months and accordingly, substantial doubt about the Company’s ability to continue as a going concern is alleviated.
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Cash Flow Summary for the Six Months Ended June 30, 2022 and 2021
The following table summarizes our cash flows for the periods presented:
| | | |
Six Months Ended
June 30, |
| |||||||||
| | | |
2022
|
| |
2021
|
| ||||||
| | | |
($ in thousands)
|
| |||||||||
|
Net cash provided by/(used in) Operating activities
|
| | | $ | 164 | | | | | $ | (1,810) | | |
|
Net cash used in Investing activities
|
| | | | (3,472) | | | | | | (1,809) | | |
|
Net cash (used in)/provided by Financing activities
|
| | | | (1,094) | | | | | | 3,205 | | |
|
Effect of exchange rate changes on cash, cash equivalents and restricted
cash |
| | | | (172) | | | | | | (92) | | |
|
Net (decrease) in cash and cash equivalents
|
| | | $ | (4,574) | | | | | $ | (506) | | |
Operating Activities
During the six months ended June 30, 2022, cash provided by operating activities was $0.2 million. The primary factors affecting our operating cash flows during this period were offset of our net loss totaling $9.1 million, by non-cash charges of $11.8 million primarily consisting of payment in kind interest expense of $6.8 million and depreciation and amortization of $5.6 million. This reduction attributable to non-cash charges were offset by a $2.0 million gain on forgiveness of Mondee’s PPP loan. Cash provided from changes in our operating assets and liabilities was $2.5 million, primarily owing to $10.2 million increase in accounts payable and $11.2 million increase in accrued expenses and other current liabilities, partially offset by a $10.2 million increase in accounts receivable, $9.0 million increase in prepaid expense and other current assets, and $4.2 million increase in contract assets.
During the six months ended June 30, 2021, cash used in operating activities was $1.8 million. The primary factors affecting our operating cash flows during this period were our net loss of $25.4 million, offset by our non-cash charges of $20.0 million primarily consisting of payment in kind interest expense of $7.2 million and depreciation, amortization of $6.5 million, and stock-based compensation expense of $3.8 million. The cash provided from changes in our operating assets and liabilities was $3.4 million, which was primarily due to a $3.3 million increase in accounts payable, $3.0 million increase in accrued expenses and other current liabilities, and a $2.1 million decrease in contract assets, partially offset by a $4.1 million increase in accounts receivable.
Investing Activities
During the six months ended June 30, 2022, cash used in investing activities was $3.5 million, which was primarily due to the purchase of property and equipment.
During the six months ended June 30, 2021, cash used in investing activities was $1.8 million, which was primarily due to the purchase of property and equipment.
Financing Activities
During the six months ended June 30, 2022, cash used in financing activities was $1.1 million, primarily for the payment of deferred offering costs related to the Business Combination.
During the six months ended June 30, 2021, cash provided by financing activities was $3.2 million, primarily due to proceeds from the Company’s PPP loan.
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Cash Flow Summary for Years Ended December 31, 2021 and 2020
The following table summarizes our cash flows for the periods presented:
| | | |
Year Ended December 31,
|
| |||||||||
| | | |
2021
|
| |
2020
|
| ||||||
| | | |
($ in thousands)
|
| |||||||||
|
Net cash used in Operating activities
|
| | | $ | (15,673) | | | | | $ | (3,662) | | |
|
Net cash used in Investing activities
|
| | | | (3,112) | | | | | | (37,710) | | |
|
Net cash provided by Financing activities
|
| | | | 3,077 | | | | | | 61,087 | | |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
| | | | (311) | | | | | | 1 | | |
|
Net (decrease) increase in cash and cash equivalents
|
| | | $ | (16,019) | | | | | $ | 19,716 | | |
Operating Activities
During the year ended December 31, 2021, operating activities used $15.7 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $38.9 million, offset by our non-cash charges of $29.7 million primarily consisting of payment in kind interest expense of $14.6 million and depreciation and amortization of $12.9 million, stock-based compensation expense of $3.9 million, partially offset by the increase in accounts receivable of $6.7 million and the forgiveness of the PPP loans of $5.9 million.
During the year ended December 31, 2020, operating activities used $3.7 million in cash. The primary factors affecting our operating cash flows during this period were our net loss of $41.7 million, offset by our non-cash charges of $22.3 million primarily consisting of depreciation and amortization of $11.4 million, non-cash interest expense of $19.6 million, $(13.9) million in benefits for deferred taxes, and bad debt expense of $4.7 million. The cash provided from changes in our operating assets and liabilities was $15.8 million, which was primarily due to $19.6 million decrease in contract assets, $11.5 million decrease in accounts receivable, $1 million decrease in prepaid expense and other current assets, and a $2.4 million increase in accrued liabilities. These amounts were partially offset by a $20 million decrease in accounts payable.
Investing Activities
During the year ended December 31, 2021, cash used in investing activities was $3.1 million, of which $4.0 million was used for the purchase of property and equipment and $0.9 million was generated from the sale of restricted short-term investments.
During the year ended December 31, 2020, cash used in investing activities was $37.7 million, of which $34.9 million was used in business acquisitions, $4.1 million was used for the purchase of property and equipment, partially offset by cash generated from the sale of restricted short-term investments of $1.5 million.
Financing Activities
During the year ended December 31, 2021, cash provided by financing activities was $3.1 million, primarily from the proceeds from the second tranche of the PPP loans of $3.8 million partially offset by the repayment of debt of $0.6 million.
During the year ended December 31, 2020, cash provided by financing activities was $61.1 million, primarily from net proceeds from the issuance of long-term debt of $55 million, proceeds from issuance of Parent units of $11.6 million, and $4.3 million proceeds from a PPP loan. These amounts were partially offset by a $6.8 million payment of a related party note, a $1.8 million payment for a loan origination fee for long-term debt, and a $1.3 million repayment of long-term debt.
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Off- Balance Sheet Arrangements
We had the following Off-Balance Sheet Arrangements as of June 30, 2022 and December 31, 2021:
|
(In millions)
|
| |
June 30,
2022 |
| |
December 31,
2021 |
| ||||||
|
Letters of credit
|
| | | $ | 7.1 | | | | | $ | 7.3 | | |
No amount on the revolving credit facility have been drawn down as of June 30, 2022 and December 31, 2021.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates.
We do not believe that inflation has had a material effect on our business, results of operations or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations or financial condition.
Interest Rate Risk
As of June 30, 2022, we had cash and cash equivalents of approximately $10.9 million, which consisted primarily of checking accounts, which carries a degree of interest rate risk. A hypothetical 10% change in interest rates would not have a material impact on our financial condition or results of operations due to the short-term nature of our investment portfolio.
Foreign Currency Exchange Risk
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. All our revenue is generated in U.S. dollars. Our expenses are generally denominated in the currencies of the jurisdictions in which we conduct our operations, which are primarily in the U.S. and to a lesser extent in Europe and Asia. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business would not have a material impact on our historical consolidated financial statements. To date, we have not engaged in any hedging strategies. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Critical Accounting Policies and Estimates
The preparation of the condensed consolidated financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other factors we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates. Significant items subject to such estimates and assumptions include, but are not limited to, the useful lives of property and equipment, revenue recognition, allowances for doubtful accounts and customer chargebacks, the valuation of financial instruments, acquisition purchase price allocations, the valuation of intangible and other long- lived assets, income taxes, impairment of goodwill and indefinite life intangibles, capitalization of software development costs, determination of the incremental borrowing rate, and other contingencies.
The COVID-19 pandemic has created and may continue to create significant uncertainty in macroeconomic conditions, which may cause further business disruptions and adversely impact our results
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of operations. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change materially in future periods.
Deferred Offering Costs
Deferred offering costs, which consist of direct incremental legal, consulting, and accounting fees and printer costs relating to an anticipated public offering, are capitalized and will be offset against proceeds upon the consummation of the offering. As of June 30, 2022, the Company had deferred $9.0 million of deferred offering costs in prepaid assets on the condensed consolidated balance sheets. No amounts were capitalized as of December 31, 2021.
Revenues, net
Our revenues are generated by providing online travel reservation services, which principally allows travelers to book travel reservations with travel suppliers through our platforms. These services are primarily related to reservation of airline tickets. It also includes, to a lesser extent, services related to reservation of hotel accommodation, rental car, travel insurance and other travel products and services. While we generally refer to a consumer that books travel reservation services on our platforms as our customer, for accounting purposes; our customers are the travel suppliers. Our contracts with travel suppliers give them the ability to market their reservation availability without transferring responsibility to deliver the travel service to us. Therefore, we are an agent in a transaction and our revenues are presented on a net basis (that is, the amount billed to a traveler less the amount paid to a travel supplier) in the condensed consolidated statements of operations. Our revenue is earned through service fees, margins and commissions.
We earn incentives from airline companies which are recognized based on the achievement of targets set by contract, that mainly relate to the amount of airline ticket bookings that have been flown, and consequently are not subject to cancellation. We also receive incentives from our Global Distribution System (“GDS”) service providers based on the volume of segment bookings mediated by us through the GDS systems. In addition to the above travel-related revenue, we also generate revenue from incentives received from credit card companies for ancillary services based on the volume of transaction amount processed by us.
Revenue from service fee, margin and commission on sale of airline tickets is recognized when the traveler books the airline ticket as the performance obligation is satisfied by us on issuance of an airline ticket to the traveler. Revenue is recorded net of cancellation, refunds and chargebacks. In the event of cancellation of airline tickets, revenue recognized in respect of commissions and margins earned by us on such tickets is reversed and is netted off from the revenue earned during the fiscal period at the time the cancellation is made by the customers.
Revenue from commission and margin on other travel products and services is recognized when the traveler completes the reservation as our performance obligation is satisfied at that point.
Revenue relating to contracts with travel suppliers which include incentive payments from airline companies and GDS are accounted for as variable consideration when the amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur. This revenue is recognized net of cancellations, refunds and shortfall penalty fees, as applicable, at a time when performance targets are achieved.
When an airline ticket is purchased, there is a risk of customer chargebacks including those related to fraud. We record estimates for chargebacks of our fees or margin or commission earned upon sale of airline tickets as variable consideration. We record estimates for losses related to chargebacks of the face value of tickets as an operating expense classified within sales and other expense. Reserves are recorded based on our assessment of various factors, including the amounts of actual chargeback activity during the current year.
Our ‘Rocketrip’ brand offers a corporate travel cost savings solution through its technology platform. We generate subscription and set-up revenue from customers who are provided access to our platform as software-as-a-service. Revenue is recognized over the term of the contract.
‘Tripplanet’ is an end-to-end business travel platform for small to medium sized businesses, membership organizations, associations, educational institutions, and NGOs. The platform combines New Mondee’s
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global content hub, marketplace, and conversational commerce engine to provide organizations discounted rates for airfare, hotels, and cars using our private platform. Individuals within these organizations can also utilize the platform for leisure travel. The platform is set up as a subscription base service where revenue is recognized over the term of the contract. Revenue from commission and margin on the travel bookings are recognized when the traveler completes the reservation as our performance obligation is satisfied.
‘Unpub’ provides consumer groups access to a subscription based private membership travel platform where they can purchase flights, reserve hotel rooms and rental cars, and receive member benefits. Revenue related to the subscription platform is recorded over the contract period. Revenue from commission and margin on the travel bookings are recognized when the traveler completes the reservation as our performance obligation is satisfied.
Income Taxes
The Company is subject to payment of federal and state income taxes in the U.S. and other forms of income taxes in other jurisdictions. Consequently, the Company determines its consolidated provision for income taxes based on tax obligations incurred using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based upon the temporary differences between the condensed consolidated financial statement and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which those temporary differences are expected to be recovered or settled. The deferred tax assets are recorded net of a valuation allowance when, based on the weight of available evidence, the Company believes it is more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods.
The Company evaluates uncertain tax positions to determine if it is more likely than not that they would be sustained upon examination. The Company records a liability when such uncertainties fail to meet the more likely than not threshold.
A U.S. shareholder is subject to current tax on “global intangible low-taxed income” (GILTI) of its controlled foreign corporations (CFCs). The Company is subject to tax under GILTI provisions and includes its CFCs income in its US income tax provision in the period the CFCs earn the income.
Recoverability of Goodwill and Indefinite and Definite-Lived Intangible Assets
Goodwill is not subject to amortization and is tested annually or more when events and circumstances indicate impairment may have occurred. In the evaluation of goodwill for impairment, we typically perform our qualitative assessment, prior to performing the quantitative analysis, to determine whether the fair value of the goodwill is more likely than not impaired. If a quantitative assessment is made we compare the fair value of the reporting unit to the carrying value and, if applicable, record an impairment charge based on the excess of the reporting unit’s carrying amount over its fair value.
We generally base our measurement of fair value of reporting units, on a blended analysis of the present value of future discounted cash flows and market valuation approach. The discounted cash flows model indicates the fair value of the reporting units based on the present value of the cash flows that we expect the reporting units to generate in the future. Our significant estimates in the discounted cash flows model include: our weighted average cost of capital; long-term rate of growth and profitability of our business; and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison of the Company to comparable publicly traded firms in similar lines of business. Our significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and operating income multiples in estimating the fair value of the reporting units.
We believe the weighted use of discounted cash flows and market approach is the best method for determining the fair value of our reporting units because these are the most common valuation methodologies used within the travel and internet industries; and the blended use of both models compensates for the inherent risks associated with either model if used on a stand-alone basis.
In our evaluation of our indefinite-lived intangible assets, we typically first perform a qualitative assessment prior to performing the quantitative analysis, to determine whether the fair value of the indefinite- lived intangible asset is more likely than not impaired. An impairment charge is recorded for the excess of the carrying value of indefinite-lived intangible assets over their fair value, if necessary. We base
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our measurement of fair value of indefinite-lived intangible assets, which consist of trade name, using the relief- from-royalty method. This method assumes that the trade name has value to the extent that its owner is relieved of the obligation to pay royalties for the benefits received from them.
Intangible assets with definite lives and other long-lived assets are carried at cost and are amortized on a straight-line basis over their estimated useful lives of one to twenty years. We review the carrying value of long-lived assets or asset groups, including property and equipment, to be used in operations whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others. If such facts indicate a potential impairment, we would assess the recoverability of an asset group by determining if the carrying value of the asset group exceeds the sum of the projected undiscounted cash flows expected to result from the use and eventual disposition of the assets over the remaining economic life of the primary asset in the asset group. If the recoverability test indicates that the carrying value of the asset group is not recoverable, we will estimate the fair value of the asset group using appropriate valuation methodologies which would typically include an estimate of discounted cash flows. Any impairment would be measured as the difference between the asset groups carrying amount and its estimated fair value.
Assets held for sale, to the extent we have any, are reported at the lower of cost or fair value less costs to sell.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements included elsewhere in this prospectus for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this prospectus.
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BUSINESS
References in this section to “we,” “our,” “us,” “the Company,” or “Mondee” generally refer to Mondee Holdings II, Inc. and its consolidated subsidiaries prior to the consummation of the Business Combination and to Mondee Holdings, Inc. (formerly ITHAX Acquisition Corp.) and its consolidated subsidiaries following the Business Combination.
Company Overview
Mondee is a rapid-growth, travel technology company and marketplace with a portfolio of globally recognized brands in the leisure and corporate travel sectors. Mondee provides state-of-the art technologies, operating systems and services that seamlessly enable travel transactions to better serve travelers directly or through travel affiliates. These technology-led platforms with access to global travel inventory and extensive negotiated travel content, combined with Mondee’s distribution network, create a modern travel marketplace. The company’s modern marketplace provides the increasingly discerning traveler with enhanced options on efficient consumer-friendly platforms while supporting its travel supplier partners in utilizing highly perishable travel inventory.
In addition to the rapid development of a modern travel marketplace, Mondee is increasingly focused on expanding its penetration of the gig economy segment of the travel market. The company believes its platforms are well suited to serve gig workers seeking more flexible, diverse content and travel services. The feature-rich platforms provide the necessary modern consumer engagement services such as conversational commerce, seamless connectivity and 24/7 assistance, as well as operating systems with current financial technology, insurance and marketing technology services built in.
The company scaled its business rapidly by adding a large base of travel agent customers and extensive private fare content to its modern technology platforms through a series of acquisitions. Since its inception, Mondee made fourteen accretive business acquisitions, including four large North American, EMEA and Asian market ticket consolidators. Management believes that Mondee’s ability to successfully integrate acquisitions is underpinned by its highly efficient operating systems which modernize the process for leisure travel providers to engage consumers and quickly access, search, sell and distribute segment-specific inventory. Mondee expanded the travel content available on its platform by entering further relationships with other travel market suppliers, including network airlines, low-cost carriers, hotel aggregators and lodging properties, creating an even broader global travel marketplace.
Management believes Mondee’s technology-led business model means the company is well-positioned to be a leading travel marketplace in the growing gig economy and recovering global travel market, by supplying modern operating systems for segment-targeted travel search, booking and service. The company has leveraged its position in the traditional travel distribution ecosystem to create a marketplace which offers a significant depth and breadth of content, transaction platform and innovative technology to maximize value for travelers, travel affiliates and suppliers. Mondee believes the three pillars of its business — technology, content and distribution — create a powerful competitive advantage that will protect the company’s market leadership and propel its future growth into the evolving traveler market segments.
Mondee Business
Mondee’s business is built around three areas, where its marketplace value is created — Technology, Content and Distribution.
Technology
Mondee’s technology platforms combine consumer-friendly applications and efficient operating systems with access to the company’s global content across all current and emerging market segments. These platforms offer the Mondee marketplace stakeholders feature-rich tools and services for all aspects of consumer engagement, transaction processing and business development.
The company’s platforms enable emerging stakeholders in the travel market — gig economy workers and travelers — to provide curated content and personalized travel experiences efficiently to discriminating
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value savvy consumers. Through a modern and intuitive user interface, these gig economy workers, gain access to Mondee’s global content as well as integrated marketing tools, conversational commerce, Fintech solutions, self-service booking and world class 24/7 support. Current hallmarks of Mondee’s consumer engaging technology features include seamless connectivity across mobile devices, email, SMS and chat, extending conversational commerce to the consumers platform of choice such as Facebook Messenger, WhatsApp, and Slack, while offering reward wallets, sustainability options and traveler safety features.
Mondee’s platforms also incorporate tools and services that increase revenue and profitability when compared to legacy distribution systems. The company’s product platforms, such as its TripPro platform that enables gig workers, are constantly enhanced with technologies such as conversational commerce, and continues to bring innovation to an industry still largely reliant upon an antiquated distribution infrastructure. In addition to best-in-class search, booking and transaction tools and service support, the company’s platforms currently incorporate a Fintech platform with an extensive selection of payment options, eWallet integrations, insurance and fraud protection. Further, Mondee’s technology offers a multi-channel marketing platform supporting marketplace participants growth and business development with fully integrated marketing campaigns and CRM tools. The end result is a more comprehensive, engaging and cost-effective transaction process for travel consumers, gig workers, affiliated travel agencies, home-based agents and other affiliates, designed to make them all more productive and competitive.
The company has further extended its technologies, platforms and services to develop and provide more modern traveler direct applications focused on corporations and the small to medium enterprise (“SME”), enterprise customer, member organization and affiliated consumer market segments with products and brands such as Rocketrip, TripPlanet and UnPub. In most instances, these applications are offered in subscription-based models to members of closed user groups seeking feature-rich gig economy services such as curated value-based content and personalized experiences in Mondee’s omni-channel engagement and delivery systems. These state-of-the-art traveler engaging applications are built to allow the company, its customers and suppliers to extend their reach into the emerging growth segments of the travel market.
Content
Mondee has negotiated rates and private content on a global scale which it combines with access to all other available travel inventory to create one of the industry’s leading Global Content Hubs (“GCH”). The GCH’s extensive private fare content is maintained exclusively on the company’s technology-led platforms and deployed efficiently to segment-specific markets through rules-based systems targeted to closed and subscriber user groups.
Although Mondee started as a marketplace for negotiated airfares and private content, the company transformed quickly into a one-stop shop for a wide variety of travel supplier inventory with near real time access to substantially all globally available content. To enhance its offerings, Mondee developed its private fares platform to allow negotiated rates and all other value-based supplier inventory to be provided to targeted market segments very efficiently in the GCH. The GCH platform was initially populated with negotiated fares from Mondee’s acquisitions and today maintains direct relationships or access to over 500 airlines, one million hotel and alternative hospitality accommodations, and the company continues to add new rental car, cruise and tour offerings. Mondee’s GCH fuels its travel marketplace, providing global content that caters to a wide range of consumer travel needs and life-style choices. In addition, the company offers individuals and small medium enterprises full service support when needed, with curated options and opportunities to save on travel bookings that fit the changing needs and life-style choices of the existing and emerging value-savvy travel cohorts.
Distribution
Mondee maintains strong partnerships with stakeholders at every stage in the chain of travel distribution.
The company offers its platforms, products and services to these target market segments today — affiliate travel workers and agencies, affiliated consumers, corporations, SMEs and enterprise customers — which comprised approximately the $1 trillion annual assisted and affiliated travel market in 2019. The end consumers of the distributor and affiliated consumer segments are primarily leisure travelers and individual subscribers,
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whereas customers in the corporate and SME segments are primarily businesses and membership organizations who coordinate travel for their employees and other constituents.
The company’s distributor target segment is comprised of the fragmented population of gig workers, home-based agents, traditional travel agents and travel management customers who plan, manage or otherwise service travel experiences for leisure travelers. Through both organic growth and strategic acquisitions, the company has created one of the industry’s leading distribution platforms with an infrastructure designed to grow quickly and at scale. Today, travel professionals partner with Mondee through the TripPro platform and services for access to the company’s extensive GCH and feature-rich operating systems to provide service to millions of end customers. The company is well positioned to continue expanding its distribution presence rapidly in the emerging gig travel segment with its modern TripPro “Travel Solution in a Box,” offering the complete suite of conversational commerce customer tools, content access, integrated marketing tools, Fintech solutions, self-service booking and 24/7 support all geared to building a gig travel community or business.
Mondee’s second target segment, affiliated consumers, is the gig economy’s discerning traveler focused on value-based offerings and personalized experiences, who pay subscription fees and affiliate with life-style consumer cohorts. Customers in this segment use the company’s subscription-based services TripPlanet and Unpub, which were launched in the second half of 2021, to access all Mondee services. These modern Apps seamlessly integrate global travel content with curated solutions at value-based prices, backed by world class 24/7 support services, that appeal to the gig economy’s value-savvy consumers. It also provides travel suppliers with a targeted network of individuals willing to fill largely excess capacity of seats on flights and hotel rooms in order to optimize load factors, revenue and profitability.
The company’s enterprise customer, corporate and SME target segment is served on its Rocketrip traveler rewards platform and TripPlanet product. Larger businesses are connected with travel suppliers through Rocketrip, which was founded in 2013 and acquired by Mondee in 2020. It is an enterprise travel platform with a shared-rewards price-to-beat feature helping companies reduce travel costs significantly by empowering and rewarding employees to make cost-saving decisions. By contrast, TripPlanet is a comprehensive, mobile App travel booking platform, catering to SMEs, nonprofits and other membership organizations. Both products also are backed by Mondee’s world class 24/7 support platform and services and provide value-pricing, detailed reporting and other features which were traditionally reserved only for larger corporations.
All stakeholders in travel distribution benefit from the Mondee platforms as they efficiently connect sellers of travel accommodations and products with today’s travel consumers. More importantly, this growing reliance on Mondee’s platforms and network creates an economic moat around its travel marketplace that the company believes is a significant competitive advantage for its shareholders.
All of Mondee’s products are supported by its seamless customer service. The company provides world class, end-to-end travel support service for customers and travelers through its technology led platforms, well-established processes and high efficiency operating tools. These services are currently deployed in Mondee’s 24/7 contact centers and operations facilities in several countries, including the US, Canada, India, Thailand, and several other countries worldwide. With over 1,000 travel professionals assisting consumers to research, plan and book the best travel options, the service centers also offer in transit support and other travel transaction services including itinerary changes, irregular operations assistance, cancellations, rebooking and rewards application, along with best practices conversational commerce capability.
Industry & Market
Prior to the COVID-19 pandemic, travel and tourism was one of the largest and fastest growing global economic sectors. Mondee believes these sectors represented approximately 10% of global GDP in 2019. Mondee believes that global travel spending of approximately $1.9 trillion industry at that time, is increasing at an annual rate of approximately 6% in recent years prior to the outbreak of the COVID-19 pandemic.
The travel bookings segment can be subdivided into Self-Service Consumer Travel and Assisted and Affiliated Consumer Travel. Self-Service Consumer Travel includes travel inventory sold to travelers by
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airlines and hotel companies directly, Online Travel Agencies and Metasearch companies. Mondee does not focus on this market segment.
Assisted and Affiliated Consumer Travel, on the other hand, includes inventory sold to a traveler through affiliates and curators such as travel agents, TMCs, corporations, call centers, associations and other membership organizations. Through these third parties, end consumers gain access to airline and hotel reservations, car reservations and other accommodations, which have been configured for specific trip or experience requirements and best-value priced. Mondee believes Assisted and Affiliated Consumer Travel accounted for $1 trillion in revenue in 2019. Mondee focuses on this segment of the travel bookings market, which is growing rapidly and is increasing in choice and complexity. According to IBIS Global Tourism GL Industry Report of August 2021 and Global Travel Agency Services GL Industry Report of August 2021, the global travel market is expected to grow by 9% on average year on year for the period 2021 and 2025, whilst in the same period the travel agency market is expected to grow by 11%.
Many of the traditional stakeholders providing Assisted and Affiliated Consumer Travel are still largely dependent on legacy distribution networks, archaic operating systems and rely on traditional booking methods that fail to align with modern consumers’ booking preferences and life-style requirements. They often lack transaction platforms and operating systems with current consumer engagement technologies and transaction services, thereby underserving the emerging consumer cohorts. Mondee believes these stakeholders generally fail to reach or satisfy significant segments of the rapidly emerging gig economy travel market, including small- and medium-sized businesses and most member organizations, creating significant white space market opportunities. It is in this Assisted and Affiliated Consumer Travel segment that Mondee’s platforms provide comprehensive solutions and a modern marketplace for both leisure and business travelers.
The Effect of COVID-19
Since March 2020, the COVID-19 pandemic severely restricted the level of economic activity around the world and has continued to have an unprecedented impact on the global travel industry. Government measures of imposing restrictions on travel and business operations or requesting individuals forgo activities outside of their homes to contain the spread of COVID-19, continue to limit leisure and business travel significantly below 2019 levels. While a general recovery in travel demand began in 2021 and is expected to continue through 2022, the pace and scope of the recovery is proving volatile with the emergence of new COVID-19 variants and other events impacting the global economy.
In early 2020, Mondee began to experience the effects of the pandemic. As the world locked down, to protect its business from near-term market disruptions and the prospect of a prolonged negative impact, Mondee applied for and received a loan of $4,292,000 from the U.S. Small Business Association Paycheck Protection Program (“PPP”), all of which was forgiven. Rocketrip also applied for and received a $1,514,000 loan prior to the acquisition of the company, which was forgiven post-acquisition. Mondee and Rocketrip then each applied for second tranches of the PPP in January 2021 and received, in aggregate, $3,576,000, none of which has yet to be forgiven.
Similarly, the company’s Canadian subsidiaries Skylink Travel Inc. and Leto Travel, Inc. (dba CTS Travel) applied for and received Canada Emergency Business Accounts (“CEBA”) loans equal to CAD$80,000 in the aggregate, and loans of CAD$250,000 in the aggregate under the Business Development Bank of Canada’s Highly Affected Sectors Credit Availability Program (“HASCAP”) in emergency assistance from the Canadian government.
In addition, Mondee quickly took action to reduce costs. In particular, the company (a) renegotiated its loan structure with lenders to defer interest payments to manage cash; (b) raised additional capital through equity financing; (c) restructured accounts payable to accommodate a longer time horizon; and (d) invested in and developed its platforms to increase operating efficiencies and to reduce labor expenses. Mondee’s swift management of expenses, together with its existing cash position, and the PPP, CEBA and HASCAP loan funds helped prudently manage the business through the effects of the pandemic during 2020 and 2021. In addition, while travel restrictions were at their tightest during the pandemic, the company took measures to invest in modernizing its platforms to best position Mondee for growth as the effect of the COVID-19 pandemic subsides. For example, during this period, Mondee acquired Rocketrip and launched Trip Planet
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to better serve gig travelers and distribution customers, as well as improve hotel inventory to growits share of the hotel accommodations market.
The COVID-19 pandemic also had a material impact on the expansion of the global gig economy and rise of the remote worker. Fundamental shifts have taken place in business practices globally with the significant adoption of remote and virtual work environments. This, among other generational factors, rapidly increased the proliferation of the global gig economy, creating larger fragmented pools of remote, part-time and home-based gig workers. In many industries, and especially in travel, this has created a significant market white space for remote and home-based business solutions which are comprehensive, seamless and technologically enabled. Mondee’s micro-services and self-service modern technology platforms and operating systems, combined with its affiliate and travel agent market segment focus, extensive high-value content access and consumer-friendly apps, give it a material early-to-market advantage in this market white space. This will provide the company with significant market growth and penetration opportunities.
Mondee Competitive Strengths
Management believes Mondee currently accounts for approximately 5% of the $70 billion private airfare market in North America and has a significant penetration in the travel agent segment. Mondee believes the following strengths are key to its ability to obtain and maintain its position as a market leader:
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NextGen Travel Marketplace with unmatched access to extensive content and fares. Mondee’s distribution network connects over 50,000 travel affiliates and agents to more than 500 airlines and over one million hotel and alternative hospitality accommodations, and the company continues to expand its rental car, cruise and tour content to match emerging consumer demand. Mondee believes this distribution network enables it to broadly provide segment-targeted traveler access to its Global Content Hub (“GCH”) inventory, setting the company apart from its competitors. The flagship user-friendly platforms, TripPro, Rocketrip, TripPlanet and Unpub, then help travelers in target market segments take advantage of GCH inventory appropriately to maximize its value for all marketplace participants.
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Modern disruptive technology platform and interface. Mondee’s travel ecosystem disrupts incumbent platforms by modernizing an industry still reliant on legacy technology infrastructure. The company’s technology platform increases the efficiency of transactions, provides great mobile accessibility, and incorporates modern marketing and Fintech tools. As an example, TripPro is a leading gig economy solution in the travel services market empowering gig workers with the comprehensive infrastructure necessary to build a successful work-from-anywhere travel constituency or business. Unpub is a comprehensive travel solution optimized for value-savvy consumers seeking life-style travel choices and who prefer a subscription-based service.
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Significant barriers to entry and market leadership. The company’s market leadership is protected by a three-pronged moat of content, distribution and unique technology. Mondee’s platforms create efficiencies, which benefit its partners in the travel marketplace. As a result, both travel suppliers and affiliates rely on the company’s platforms to fuel transaction volume.
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Proven management team. Mondee’s management team has 100+ years of combined experience in the travel industry, and its Founder and CEO, Prasad Gundumogula, is a seasoned entrepreneur with significant experience adding value to companies at the intersection of travel and technology. Under his leadership, Mondee has grown quickly, both organically and through several successfully integrated acquisitions. The management team’s growth mindset has successfully navigated the COVID-19 pandemic, and by reallocating resources to invest in further acquisitions and the development of its platform, Mondee is well-positioned to take advantage of the significant market recovery and emerging white-space growth opportunities that it anticipates will soon follow given the pent-up demand for travel globally.
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Extensive organic and inorganic growth. Between 2015 and 2019, Mondee’s CAGR generated through organic growth was approximately forty percent (40%). When growth through the company’s strategic acquisitions is included, Mondee’s CAGR was approximately sixty-two percent (62%) during this same time period. Mondee believes the size of the private airfare market in 2019 was
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approximately $70 billion and that this growth led to a 2.4x expansion in the company’s share of gross revenues from the private airfare market in North America between 2015 and 2019 including acquisitions.
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Proven track record of building scale through acquisitions. Mondee has successfully acquired and integrated 14 businesses, covering content, technology and distribution areas. This M&A activity has built scale and added capabilities to the company’s platforms. Further, Mondee has demonstrated an ability to integrate those companies into its existing platforms to fundamentally improve the acquired businesses.
Business Strategy for Future Growth
Mondee will continue to capitalize on its disruptive technology, extensive content and large, scalable distribution network to propel its future growth both organically and through acquisitions. The company believes this multi-pronged strategy best positions it to take advantage of the pent-up demand, changes and rapid growth of the travel market expected in the current recovery from the COVID-19 economic slowdown.
Technology
Mondee’s platform brings needed technological innovation to an industry which remains largely run on legacy distribution systems. The company plans to continue innovating and further disrupt the travel market by prioritizing the following growth-oriented actions:
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Expand Its Leading Travel Platform for the Gig Economy. Mondee has prioritized the implementation and ongoing expansion of TripPro’s “Travel Solutions in a Box” offering, which will require the continued building of the infrastructure supporting the emerging gig travel economy. The company will equip gig workers with the full suite of business tools and efficiently provide them with full access to its travel content.
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Extend the Platform to Serve SMEs. The company is using its technology to identify new customer segments, such as small businesses. According to Statista Number of SMEs Worldwide 2000-2020 published September 2021, there are over 200 million small-medium enterprises globally and Mondee estimates millions of these book online and receive no special treatment. The company believes its TripPlanet subscription-based service can help these small enterprises achieve savings on travel bookings while receiving superior customer service. The company launched TripPlanet’s direct subscription service to SMEs in the second half of 2021, and plans to prioritize the growth and refinement of this product.
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Monetize New Features. The company believes it can maximize profits by implementing further add-on and ancillary booking features on its platform. Mondee’s customers select an ancillary, such as premium seat selection, trip insurance or fraud protection, when booking a flight, hotel, or other travel products. Mondee plans to further expand its platform with more of these lucrative features.
Content
The company already has an extensive high value inventory of travel content for both the business and leisure travel segments, however the following initiatives will help Mondee further expand the quality and depth of its future travel content offerings:
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Expand Global Flight Content. To differentiate itself from competitors, Mondee will expand its extensive flight content by working with all airlines that need to fill planes quickly as the COVID-19 pandemic wanes. Most airlines reduced flights and capacity to partially offset the significant reduction in passenger traffic, rapid decrease in their load factors and steep increase in their losses. As the travel market recovery progresses and these airlines reopen their routes and reestablish capacity, they will need additional help to fill seats and increase load factors. Mondee has anticipated this need and has prioritized implementation of its content expansion.
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Strengthen Hotel Inventory. Hotel bookings are a recent addition to the Mondee platform and presently account for less than 10% of its bookings. As such, the company will focus on expanding its hotel content by building relationships with additional hotels and other alternative lodging suppliers.
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Mondee believes its Unpub subscription-based product, will appeal to hoteliers hoping to fill last-minute hotel inventory. Additionally, the company plans to leverage its strength in airfare content to increase hotel demand by featuring hotel bookings as an add-on and/or bundled offering to primarily air transactions.
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Add New Categories of Content. Mondee will prioritize the addition of new categories of travel content, such as cruises, dynamic packages, and entertainment, organically and through acquisitions. For example, travel affiliates currently initiate a majority of cruise bookings through offline channels and specialty distributors, therefore, the company can leverage its strong relationships with travel affiliates and its positioning with emerging gig workers worldwide to expand its cruise relationships and content.
Distribution
Mondee currently maintains a distribution network that includes over 50,000 travel affiliates and agents, enterprise corporate customers, and partners with direct channels to travelers. While the company’s distribution network is already large, it believes there is substantial room for growth in both the leisure and business travel sectors. Mondee plans to take the following actions to strengthen its worldwide travel distribution network:
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Increase International Market Share. The company plans to expand its presence globally to become a leading operating system for global travel accommodations. Mondee plans to make international expansion a priority in 2022 and beyond.
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Facilitate the Growth of the Gig Travel Economy. Mondee is now expanding TripPro’s new “Travel Solutions in a Box” offering, which will transform gig workers into 21st century travel providers. The company expects this new pool of gig workers will exponentially increase the travel provider market in the near future. Importantly, these gig workers will rely on Mondee’s platform to conduct this business, strengthening the company’s competitive advantage vis-à-vis legacy providers who do not have this technology. The company expects the new gig travel economy will also encourage travel suppliers desiring to sell their travel content through these new gig travel providers to use Mondee’s marketplace, which will further bolster its content and distribution network.
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Unveil and Grow the Subscription-Based Affiliated Consumer Revenue Model. TripPlanet and Unpub will be the members-only subscription-based platforms giving value-savvy leisure travelers access to appropriate segment-targeted rates on flights and hotels. The modest annual subscription fee will provide Mondee with a recurring revenue stream and increase customer stickiness by supplying superior travel pricing combined with a loyalty rewards program and free ancillary packages. By targeting existing leisure travelers with various marketing and viral campaigns, the company believes Unpub will achieve rapid adoption and growth.
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Expand SME Travel Market Share. Traditionally, only large enterprises have had access to value pricing, better service and reporting, but with TripPlanet, Mondee plans to provide this model efficiently to SMEs, nonprofits and other membership organizations. TripPlanet already brings a deep set of travel benefits and the company plans to grow this business by targeting more small businesses and non-business organizations. Mondee plans to further expand offerings to include new leisure travel benefits to employees and members of these enterprises.
Strategic and Accretive M&A
The company has historically built scale and added capabilities through M&A activity. It has demonstrated an ability to execute accretive and synergistic acquisitions as well as integrate and fundamentally improve its acquired businesses. Mondee expects to continue pursuing strategic opportunities that strengthen its platforms, expand the breadth and depth of its content, and enhance its distribution infrastructure.
In particular, among a number of emerging white-space and growth options, the company initially has identified potential opportunities that will grow its inventory of hotel and lodging, cruise and tour offerings. With even greater content offerings, Mondee plans to expand its dynamic packaging capabilities, and is
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assessing acquisition candidates with this expertise to enhance these functions on its platform. Also, the company has identified opportunities to increase its international footprint through the acquisition of distributors, aggregators and platforms based in Europe and other international markets.
Mondee will continue to actively monitor and evaluate these and future opportunities in its M&A pipeline in both the near- and mid-term.
Competition
The travel services industry is competitive. Travel suppliers, travel distributors and wholesalers, OTAs, travel agencies and corporate travel service providers all compete for a share of the overall travel market, and Mondee competes for its own share across multiple market segments. The following, however, are most relevant in the Assisted and Affiliated Customer Travel segment:
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Larger Travel Agencies and Managed Travel Companies. This segment consists primarily of a few traditional consolidators, regional wholesalers and some larger international travel agencies, such as Flight Centre Travel Group, Internovos’ Travel Leaders Group, and Corporate Travel Management. These companies generally provide travel agents with private fare inventory utilizing primarily legacy distribution systems, which Mondee believes do not compete favorably with its modern technology platform. Most are often based outside the North American market with a specific area of geographic focus, whereas Mondee has comprehensive global content and supplier partnerships.
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Corporate Travel Service Providers. There are a number of travel service providers that offer discounted fares and customer service to large corporations, such as TripActions and Egencia, who might compete directly with Mondee’s Rocketrip and TripPlanet services in certain market sub-segments. These corporate or otherwise managed travel companies, however, have not historically extended offerings to SMEs, nonprofits, associations and membership organizations, nor provided competitive subscription-based services. Mondee targets these corporate and SME customer groups with the same level of benefits and services typically afforded only to large corporations.
In the future, the company may face increased competition through the emergence of new competitors or business models. Some of Mondee’s competitors may have access to significant financial resources, greater name recognition and well-established client bases in their target customer segments, differentiated business models, technology and other capabilities, or a differentiated geographic coverage, which may make it more difficult for Mondee to attract new customers. Nevertheless, the company believes its extensive content, large and scalable distribution and innovative technology establish a significant and competitive advantage for its diverse product offerings that sustainably distinguishes Mondee from other market players.
Suppliers/Partners and Customers
Travel suppliers, such as airlines, hoteliers, rental car agencies, cruise companies, tour operators, insurance companies and all three major GDSs supply the company with travel content and ancillary products. Mondee has longstanding relationships with almost all global network and most low-cost carriers representing over 500 airlines, most international hotel and hospitality companies representing over one (1) million hotel and alternate hospitality accommodations, most international car rental companies and several other travel inventory and ancillary travel product suppliers.
Mondee’s customers and content consumers primarily fall into the three following categories:
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Gig Economy Workers, Home Based Agents and Travel Agencies. The company currently provides travel inventory and other travel content to over 50,000 travel affiliates and agents worldwide through its TripPro service and, with the release of TripPro’s new gig economy feature, will also create a network of gig travel workers and home based agents that use Mondee’s platforms to deliver curated travel experiences to end consumers.
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SMEs and other Organizations. Corporations and other organizations comprise another core group of Mondee’s customers. Rocketrip works with large-scale enterprise customers to motivate their employees with shared rewards to save costs on business travel by making more value-conscious travel choices. TripPlanet, on the other hand, provides comprehensive travel booking services on a
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subscription basis to employees and members of SMEs, nonprofits and other membership organizations. TripPlanet’s customer base currently includes access to over 4 million members.
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Travel Consumers. Gig travelers and affiliated consumers make up the third primary group of Mondee’s customers. In addition to its current direct consumers supported by Mondee call centers, with the launch of Unpub, the company will sell travel inventory through a subscription-based service to value-savvy consumers in life-style affiliated cohorts.
Intellectual Property
Mondee’s intellectual property is an important component of its business. The company relies on a combination of domain names, trademarks, copyright, know-how and trade secrets, as well as contractual provisions and restrictions, to protect its intellectual property. As of December 31, 2021, Mondee has no active patents or patent applications, but intends to pursue patent protection to the extent it believes it would be beneficial and cost effective.
As of December 31, 2021, the company owned twelve (12) U.S. registered or pending trademarks and registered or pending trademarks in nine (9) other jurisdictions. Mondee also owns several domain names including “mondee.com” “trippro.com,” “rocketrip.com” and “tripplanet.com.”
The company relies on trade secrets and confidential information to develop and maintain its competitive advantage. Mondee seeks to protect its trade secrets and confidential information through a variety of methods, including confidentiality agreements with employees, third parties, and others who may have access to the company’s proprietary information. Mondee also requires key employees to sign invention assignment agreements with respect to inventions arising from their employment, and restrict unauthorized access to the company’s proprietary technology. In addition, Mondee has developed proprietary, AI-driven software that is protected through a combination of copyright and trade secrets.
Notwithstanding the company’s efforts to protect its intellectual property, there can be no assurance the measures taken will be effective or that its intellectual property will provide any competitive advantage. Mondee can provide no assurance that any patents will be issued from its pending applications or any future applications or that any issued patents will adequately protect its proprietary technology. The company’s intellectual property rights may be invalidated, circumvented or challenged. Furthermore, the laws of certain countries do not protect intellectual property and proprietary rights to the same extent as the laws of the United States and, as a result, Mondee may be unable to protect its intellectual property and other proprietary rights in certain jurisdictions. In addition, while the company has confidence in the measures it takes to protect and preserve its trade secrets, it cannot guarantee these measures will not be circumvented, or that all applicable parties have executed confidentiality or invention assignment agreements. In addition, such agreements can be breached, and may not have adequate remedies should any such breach occur. Accordingly, Mondee’s trade secrets may otherwise become known or be independently discovered by competitors.
Properties
Mondee is headquartered in Austin, Texas. Other domestic operations are located in the San Francisco bay area, several Southern California locations, Michigan, New York and elsewhere in the United States. The company also maintains offices in Canada, India, Thailand, as well as employees operating in several other locations.
The company continues to seek ways to reduce its global footprint in response to the COVID-19 pandemic while maintaining world class customer service. The COVID-19 pandemic has highlighted the ability to maintain most central business operations outside of traditional office space. Mondee believes its facilities are adequate and suitable for current business needs and expects to continue to reduce reliance on fixed office space in the future.
Sales and Marketing
The company’s marketing strategy includes brand, performance and viral marketing, such as word of mouth, peer-to-peer, micro-networking and crowd sourcing, as well as nurture marketing. Brand marketing, which may also include the company’s presence on social media platforms, increases awareness among
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potential customers, helping them understand the benefits of using Mondee’s platforms to book their travel experiences, including flights, hotels, cars, cruises and tours. The company deploys performance marketing strategies through digital and offline channels to drive additional traffic and transactions from high-intent prospective customers. An example of these marketing campaigns is the use of online marketing companies and platforms for paid clicks and conversion results. To increase the efficiency of its performance marketing initiatives, the company utilizes a Customer Relationship Management platform, which provides further opportunities to personalize marketing campaigns and target advertising to specific market segments. Mondee complements its brand and performance marketing with nurture initiatives through email and outbound communications to ensure the company retains high-value customers, increases brand loyalty and drives recurring transactions.
In addition to brand, performance and nurture marketing, Mondee engages in traditional public relations and communications activities, such as trade show participation, to strengthen its brand and enable it to be less reliant on performance marketing, reducing the company’s customer acquisition costs. The company’s communications team works across press and policy channels to share timely and important news about the company. They also oversee the execution of a consumer, product, corporate, and policy communications plan that supports Mondee’s brand strategy.
R&D
Mondee has a research and development culture that rapidly and consistently delivers high-quality enhancements to the functionality, usability, and performance of its platforms. As of December 31, 2021, the company has assembled a team of more than 125 highly skilled engineers, designers, product managers, and data scientists whose expertise spans a broad range of technical areas. Mondee embraces a DevOps culture and the company’s technology organization is structured as cross-functional agile delivery teams, integrating product management, engineering, data science, design, and system operations. Mondee utilizes a micro-services architecture that allows these teams to release updates rapidly and independently. The company focuses on creating rich customer experiences while also architecting for massive scale. Its web-based offerings are responsive, mobile-enabled and operating system-agnostic.
Mondee’s People and Culture
The company has adopted a high-performance culture. By staying true to these values, Mondee has created a business where talented people can do great work and drive value for all stakeholders. These values guide the company in individual everyday tasks to high-level strategic planning. They foster a culture of dialogue, collaboration, recognition, achievement and sense of family that contributes to Mondee’s long-term success.
Mondee engages and empowers its team with ongoing career, learning and development opportunities, fostering a growth mindset and culture where all voices are heard, and team members can build a strong bench of leaders for tomorrow’s business challenges. Continued growth and success will depend on the performance of the company’s current and future employees, including certain key team members. Recruitment and retention of these individuals is vital to growing the business and meeting the objectives of the company’s business plans. Mondee espouses the principle that all team members can bring their whole selves to work and thrive.
Importantly, Mondee’s values and the culture they inspire extend to the company’s relationships with every customer and corporate partner. Mondee fosters a long-term, personal rapport with each, which not only promotes high customer satisfaction but also fulfills the mission to change the way travelers experience the world. After more than ten years, the company believes its culture is real, valued, deeply ingrained, and sustained in part by robust and scalable training that helps create consistently positive customer interactions and experiences.
Legal Proceedings
Mondee is currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and
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investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights.
Additionally, in connection with its acquisition of certain assets of LBF, a former shareholder of LBF has sued LBF and Mondee, claiming he has not received fair compensation for his interests in the purchased assets. He is asserting certain contractual and tort claims against both LBF and Mondee. The status of this legal proceeding is currently ongoing.
Depending on the nature of the proceeding, claim, or investigation, the company may be subject to monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect Mondee’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, the company believes based on its current knowledge that the resolution of all such pending matters will not, either individually or in the aggregate, have a material adverse effect on the business, results of operations, cash flows or financial condition.
Regulatory Compliance
The company’s overall business approach and strategy includes rigorous attention to regulatory compliance, as its operations are subject to regulations in the following principal areas, across a wide variety of jurisdictions.
Travel Licenses and Regulation
Mondee maintains travel licenses and/or registrations in the jurisdictions in which they are required. The company is required to renew its licenses, typically on an annual basis, and to do so, must satisfy the licensee renewal requirements of each jurisdiction. Failure to satisfy any of the requirements to which its licensed entities are subject could result in a variety of regulatory actions ranging from a fine, a directive requiring remedial action, suspension of a license or, ultimately, revocation of a license.
In the United States, the company’s businesses are subject to regulation by the DOT under the U.S. Transportation Code and state agencies under state seller of travel laws, and the company must comply with various rules and regulations governing the holding out, offering, sale and arrangement of travel products and services as a travel agency and, in the case of the DOT, air transportation as a ticket agent. Failure to comply with these rules and regulations could also result in a variety of regulatory actions, including investigations, fines or directives requiring remedial action.
Mondee’s businesses also are subject to licensing requirements imposed by airline established organizations, including agent accreditation requirements by the Airline Reporting Corporation (“ARC”) in the United States and, in other countries, the International Air Transport Association (“IATA”). Pursuant to such accreditations, Mondee’s businesses are authorized to sell and issue tickets on behalf of various airlines, subject to agent rules set by the ARC and the IATA. The failure by the company’s businesses to comply with such rules could result in the suspension or revocation of its authority to sell and issue tickets on behalf of one or more airlines.
As Mondee continues to expand the reach of its products and brands into other regions, the company is increasingly subject to laws and regulations applicable to travel advisors or tour operators in those regions, including, in some countries, pricing display requirements, licensing and registration requirements, mandatory bonding and travel indemnity fund contributions, industry specific value-added tax regimes and laws regulating the provision of travel packages.
Privacy and Data Protection Regulation
In processing travel transactions and information about customers, the company receives and stores a large volume of personally identifiable data. The collection, storage, processing, transfer, use, disclosure and protection of this information are increasingly subject to legislation and regulations in numerous jurisdictions around the world, such as the European Union’s General Data Protection Regulation (“GDPR”)
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and variations and implementations of that regulation in the member states of the European Union, as well as privacy and data protection laws and regulations in various U.S. states and other jurisdictions, such as the California Consumer Privacy Act (as amended by the California Privacy Rights Act), the Canadian Personal Information Protection and Electronic Documents Act (“PIPEDA”), and the UK General Data Protection Regulation and the UK Data Protection Act.
Mondee incorporates a variety of technical and organizational security measures and other procedures and protocols to protect data within the company’s platforms and business services, including personally identifiable data pertaining to guests and employees, and Mondee is engaged in an ongoing process of evaluating and considering additional steps to maintain compliance with the California Consumer Privacy Act, GDPR, PIPEDA, the UK General Data Protection Regulation, and the UK Data Protection Act.
Employment
The company is also subject to laws governing its relationship with employees, including laws governing wages and hours, benefits, immigration and workplace safety and health.
Other Regulation
Mondee’s business is subject to various other laws and regulations, involving matters such as income tax and other taxes, consumer protection, online messaging, advertising and marketing, the U.S. Foreign Corrupt Practices Act and other laws governing bribery and other corrupt business activities, and regulations aimed at preventing money laundering or prohibiting business activities with specified countries or persons. As the company expands into additional markets, it will be subject to additional laws and regulations.
The regulatory environment in each market is often complex, evolving and can be subject to significant change. Some relevant laws and regulations are inconsistent, ambiguous and could be interpreted by regulators and courts in ways that could adversely affect the company’s business, results of operations, and financial condition. Moreover, certain laws and regulations have not historically been applied to an innovative hospitality provider such as Mondee, which often makes their application to its business uncertain. For additional information regarding the laws and regulations that affect the company’s business, see the section titled “Risk Factors” in this prospectus.
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CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Certain Relationships and Related Person Transactions Prior to the Business Combination — ITHAX
Class B Ordinary Shares
On October 6, 2020, the Sponsor paid $25,000, or approximately $0.005 per share, to cover certain offering and formation costs in consideration of 5,031,250 Class B ordinary shares, par value $0.001 per share. On October 16, 2020, the Sponsor transferred an aggregate of 20,000 Class B ordinary shares to Mr. Guimarães and Mr. Vir, with each of them receiving 10,000 Class B ordinary shares. In addition, on October 28, 2020, the Sponsor and Mr. Syllantavos entered into a securities assignment agreement, pursuant to which the parties agreed that Mr. Syllantavos would pay the Sponsor $41,250 and in exchange the Sponsor would transfer to him 10,000 Class B ordinary shares and (ii) immediately following ITHAX’s initial business combination, transfer a total of 4% of the outstanding Class A ordinary shares then held by the Sponsor to Mr. Syllantavos, with such percentage to include the 10,000 Class B ordinary shares he already holds. On January 27, 2021, ITHAX effectuated a stock dividend of 0.2 shares for each share outstanding, resulting in an aggregate of 6,037,500 Class B ordinary shares outstanding. On July 18, 2022, the Sponsor transferred 206,550 Class A ordinary shares to Mr. Syllantavos pursuant to the terms of the above referenced securities assignment agreement.
Private Placement Units
Simultaneously with the closing of the initial public offering, pursuant to those certain private placement units purchase agreements with each of Cantor and the Sponsor, ITHAX issued an aggregate of 675,000 private placement units to the Sponsor and Cantor (465,000 private placement units to the Sponsor and 210,000 private placement units to Cantor), at a purchase price of $10.00 per private placement unit, or $6,750,000 in the aggregate. Each private placement unit consists of one Class A ordinary share and one-half of one redeemable private placement warrant, with each whole private placement warrant exercisable for one Class A ordinary share at a price of $11.50 per share, subject to adjustment, as described in the final prospectus filed with the SEC on February 1, 2021 No underwriting discounts or commissions were paid with respect to the sale of the private placement units. The issuance of the private placement units was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The private placement units (including the underlying securities) may not, subject to certain limited exceptions, be transferred, assigned or sold by the holder until August 18, 2022 (i.e., 30 days after the completion of our initial business combination).
Promissory Note
On October 6, 2020, ITHAX issued an unsecured promissory note (the “Promissory Note”) to the Sponsor, pursuant to which ITHAX could borrow up to an aggregate principal amount of $300,000. The Promissory Note was non-interest bearing and payable on the earlier of (i) December 31, 2021 or (ii) the completion of the initial public offering. The then outstanding balance under the Promissory Note of $88,264 was repaid at the closing of the initial public offering on February 1, 2021. Borrowings are no longer available under the Promissory Note.
Expense Reimbursement
No compensation of any kind, including finder’s and consulting fees, will be paid to the Sponsor, its Officers and Directors, or their respective affiliates, for services rendered prior to or in connection with the completion of an initial business combination. However, these individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our Audit Committee reviews on a quarterly basis all payments that were made by us to the Sponsor, Officers, Directors or their affiliates and determines which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.
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The Sponsor advanced $88,264 to cover expenses related to ITHAX’s initial public offering. The balance was repaid at the closing of the initial public offering.
PIPE Financing
Concurrently with the execution of the Business Combination Agreement, ITHAX entered into Subscription Agreements (the “Subscription Agreements”) with certain “qualified institutional buyers” (as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and accredited investors (together, the “Initial PIPE Investors”), pursuant to which the Initial PIPE Investors have agreed to subscribe for and purchase, and ITHAX has agreed to issue and sell to the Initial PIPE Investors, an aggregate of 5,000,000 shares of New Mondee Common Stock at a price of $10.00 per share, for aggregate gross proceeds of $50,000,000 (the “Initial PIPE Investment”). Subsequently, on April 21, 2022, ITHAX entered into a Subscription Agreement with an additional investor (the “Additional PIPE Investor” together with the Initial PIPE Investors the “PIPE Investors”) pursuant to which the Additional PIPE Investor agreed to subscribe for and purchase, and ITHAX has agreed to issue and sell to the Additional PIPE Investor, 2,000,000 shares of New Mondee Common Stock at a price of $10.00 per share, for gross proceeds of $20,000,000 (the “Additional PIPE Investment”). The aggregate gross proceeds to New Mondee from the Initial PIPE Investment and the Additional PIPE Investment are expected to equal $70,000,000 (the “PIPE Financing”). The offer and sale of the shares of New Mondee Common Stock to be issued in the PIPE Financing pursuant to the Subscription Agreements has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act. ITHAX will grant the PIPE Investors certain registration rights in connection with the PIPE Financing. The PIPE Financing is to be consummated immediately prior to the First Effective Time and is contingent upon, among other things, the substantially concurrent Closing of the Transactions.
Registration Rights Agreement
Concurrently with the Closing of the Transactions, New Mondee, the Sponsor, certain former Stockholders of Mondee and certain other persons entered into a registration rights agreement (the “Registration Rights Agreement”), which will become effective at the Closing, pursuant to which, among other things, the parties thereto have been granted certain customary registration rights with respect to their respective shares of New Mondee Common Stock. An aggregate of 74,300,000 shares of New Mondee Common Stock are subject to resale registration rights. Such shares include (i) the 7,000,000 PIPE Shares; (ii) the 60,800,000 Merger Consideration shares; and (iii) an aggregate of up to 6,500,000 Earn-Out Shares.
Additionally and pursuant to the Registration Rights Agreement, the holders of any shares of the New Mondee Common Stock (the “Lock-Up Shares”) issued to the Sponsor prior to the Closing or to the Mondee Stockholder in connection with the Business Combination Agreement, or to the Members (as defined below) in connection with the Earn-Out Agreement (as defined below), may not transfer any Lock-Up Shares during the period beginning on the Closing Date and ending on the date that is the earlier of (A) six (6) months after the Closing Date, (B) the date on which the closing price of the New Mondee Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any twenty (20) trading days within any thirty (30) trading-day period commencing at least ninety (90) calendar days following the Closing Date and (C) the date on which ITHAX consummates a sale, merger, liquidation, exchange offer or other similar transaction after the Closing, which results in the stockholders immediately prior to such transaction having beneficial ownership of less than fifty percent (50%) of the outstanding voting securities of the combined company. However, the Company may choose to release one or more of the Selling Securityholders from the applicable lock-up periods, if the Company decides it is in the best interests of the Company and its stockholders, which would allow for earlier sales of shares of New Mondee Common Stock in the public market. For example, the Company currently has a small public float of approximately 819,468 shares of New Mondee Common Stock and may need to increase its public float in order to comply with Nasdaq listing standards. In addition, our small public float could limit the ability of large, institutional investors to invest in our equity, limit our ability to raise additional capital through sales of New Mondee Common Stock and limit the attractiveness of our equity to potential strategic partners. For these reasons or other unforeseen developments, the Company could determine that it is in the best interests of the Company and its stockholders to release some of its existing stockholders from their applicable lock-up obligations.
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Amended and Restated Warrant Agreement
Concurrently with the Closing, New Mondee and Continental entered into an amended and restated warrant agreement (the “Amended and Restated Warrant Agreement”), pursuant to which (i) all references to ITHAX warrants will be revised to become references to warrants of New Mondee; and (ii) the outstanding warrants will be adjusted pursuant to the terms of the existing warrant agreement, such that the warrants will be exercisable for New Mondee Common Stock, in lieu of the ITHAX Class A ordinary shares previously issuable and receivable upon the exercise of rights under the existing warrant agreement.
Earn-Out Agreement
Pursuant to the Business Combination Agreement, ITHAX entered into an earn-out agreement (the “Earn-Out Agreement”) with certain signatories thereto (the “Members”), pursuant to which ITHAX has agreed, among other things that in connection with and upon the First Merger, New Mondee will issue to the Members up to 9,000,000 shares of New Mondee Common Stock (the “Earn-Out Shares”), with the Earn- Out Shares vesting over the four-year period following Closing based on the achievement of certain milestones related to the trading price of New Mondee Common Stock set forth in the Earn-Out Agreement. Upon the closing of the Business Combination, Prasad Gundumogula, who is the Chief Executive Officer of New Mondee received 6,000,000 of these Earn-Out Shares. In connection with that certain employment agreement, dated August 23, 2022 and effective as of July 19, 2022, by and between the Company and Orestes Fintiklis, the Company’s Chief Corporate Strategy and Business Development Officer and a member of the Company’s Board of Directors, the Company agreed to issue to Mr. Fintiklis 900,000 Earn-Out Shares. There are 1,600,000 Earn-Out Shares remaining, which are unallocated but reserved for issuance to parties that may be designated by the Chief Executive Officer in accordance with the terms of the Earn-Out Agreement.
Stockholder Support Agreement
Pursuant to the Business Combination Agreement, Mondee and the Mondee Stockholder entered into a Support Agreement (the “Stockholder Support Agreement”) with ITHAX, pursuant to which the Mondee Stockholder has, among other things, agreed to vote to adopt and approve the Business Combination Agreement and all other documents and transactions contemplated thereby. The Stockholder Support Agreement will terminate upon the termination of the Business Combination Agreement if the Closing does not occur.
Sponsor Support Agreement
In connection with the execution of the Business Combination Agreement, ITHAX entered into a sponsor support agreement with the Sponsor and Mondee (the “Sponsor Support Agreement”), pursuant to which the Sponsor has agreed to, among other things, vote all of its 6,472,500 ordinary shares in favor of the approval of the Transactions and to waive any redemption rights with respect to any ordinary shares held by it. The Sponsor did not receive separate consideration for its waiver of redemption rights in the Sponsor Support Agreement. In addition, the Sponsor has agreed that 603,750 Class B ordinary shares issued in connection with ITHAX’s initial public offering (which were converted to 603,750 shares of New Mondee Class B Common Stock in connection with the Domestication) would be forfeited if the minimum cash condition contemplated by the Business Combination Agreement was not satisfied as of the Closing. Since the minimum cash condition was waived and not satisfied, the Sponsor forfeited 603,750 shares of New Mondee Class B Common Stock at Closing in accordance with the terms of the Sponsor Support Agreement.
Certain Relationships and Related Person Transactions Prior to the Business Combination — Mondee
Unless the context otherwise requires, any reference in this section of this prospectus to “Mondee,” “we,” “us” or “our” refers to Mondee and its consolidated subsidiaries prior to the consummation of the Business Combination.
MetaMinds Services Agreement
Metaminds Technologies Pvt. Ltd. and Metaminds Software Solutions Ltd, corporations limited by shares organized under the laws of India, and Metaminds Global Solutions Inc. (“Metaminds”), provide
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certain consulting services to Mondee and its Subsidiaries in the areas of software development, fulfillment and other support, pursuant to that certain Amended and Restated Services Agreement dated September 26, 2011 and made effective as of April 16, 2010. During the years ended December 31, 2021 and 2020, transactions with Metaminds amounted to $2,640,000 and $4,031,000, respectively. Prasad Gundumogula (“Gundumogula”) and Gundumogula’s wife, Madhuri Pasam (“Pasam”) own Metaminds. Prior to acquisition of certain assets and liabilities of Metaminds Technologies, Mondee hired all employees of Metaminds Technologies and Metaminds Software in April 2022. There were no services rendered by Metaminds Technologies for offshore IT, offshore software development, or sales support for three months ended June 30, 2022.
On July 18, 2022, the Company entered into an Asset Purchase Agreement (the “Agreement”) with Metaminds Technologies Pvt. Ltd., (“Seller”), Gundumogula and Pasam, and Mondee Group, LLC (“Mondee Group”) where the Company acquired the assets and liabilities of Metaminds Technologies for a purchase consideration of $2,000,000. Mondee Group is a separate entity that is owned by both Gundumogula and Pasam.
Gundumogula is the Chief Executive Officer of Mondee and a material shareholder. Gundumogula and Pasam serve on the Board of Directors of Mondee, Inc. and certain of its subsidiaries.
We secured financing pursuant to that certain Financing Agreement dated as of December 23, 2019 (as amended, the “TCW Financing Agreement”) by and among Mondee, certain affiliates and subsidiaries thereof, certain lenders from time to time party thereto (“Lenders”) and TCW Asset Management Company LLC, as agent for lenders (“Agent”). See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Sources of Liquidity” elsewhere in this Prospectus for further information.
Services Provided by Fly.com and FlyEx, Inc.
Gundumogula owns Fly Holding LLC and FlyEx, Inc., and each of these companies provide free services to Mondee and certain of our affiliates and subsidiaries pursuant to revocable, unwritten arrangements. Fly Holding LLC runs Fly.com, a metasearch engine that routes web traffic and phone calls to us. Fly.com also provides Mondee with certain pricing information. FlyEx Inc. has developed an application based on the sharing economy model, which supports TripPro, the gig economy service on our platform.
Mondee Group Note
Mondee Group LLC (“Mondee Group”) is a limited liability company owned by Gundumogula. Mondee Holdings LLC extended a loan to Mondee Group in the original principal amount of $19,282,363.27 pursuant to that certain Secured Non-Recourse Promissory Note, dated as of March 25, 2016 (the “Mondee Group Note”). The Mondee Group Note was subsequently transferred to Mondee, Inc. In connection therewith, the parties entered into a Pledge and Security Agreement dated as March 25, 2016, pursuant to which, among other things, Mondee Group pledged 14,708 Class A Units to (the “Mondee Group Class A Units”), and granted a security interest in all of Mondee Group’s rights, title and interest in and to, the Mondee Group Class A Units and any proceeds therefrom. On consummation of the Business Combination, the Mondee Group Note was in accordance with its terms, as the same may be amended.
On May 18, 2022, the parties entered into a First Amendment to Secured Non-Recourse Promissory Note (the “Amendment”) with respect to the Mondee Group Note. Pursuant to the Amendment, the principal and interest on the Mondee Group Note may be repaid, at the sole discretion and election of Mondee Group, in cash, units of the Parent (or New Mondee Common Stock received in redemption of, as a distribution on or in exchange for the units of the Parent in connection with the closing of the Business Combination) or a combination of both. As set forth above, the Mondee Group Note was repayable at the closing of the Business Combination. Should Mondee Group exercise its option to repay the Mondee Group Note solely in New Mondee Common Stock the maximum aggregate amount of New Mondee Common Stock that may be transferred thereby in satisfaction of the outstanding principal and interest thereunder, would not exceed 2.5% of the issued and outstanding shares of New Mondee Common Stock.
On July 18, 2022 the related party loan receivable was settled upon the consummation of the Business Combination by receipt of New Mondee Common Stock and through the acquisition of certain assets and
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liabilities of Metaminds Technologies Pvt. Ltd. The total amount settled, including interest incurred, was $22,335,782. The purchase price paid for the acquisition of certain assets and liabilities of Metaminds Technologies Pvt. Ltd was $2,000,000 and the remaining balance was received in the form of New Mondee Common Stock shares.
UATP Servicing Agreement
Pursuant to a UATP Servicing Agreement dated May 11, 2021, the Company sold certain airline tickets using prepaid UATP credit cards arranged by Mondee Group, in exchange for a service fee equal to 10% of the revenue derived from the sale of such airline tickets. Mondee Group led the fund raising and arranged the funds that were used to purchase prepaid UATP credit cards at a discount from their face value from a certain airline.
ExploreTrip Loan Agreement
Pursuant to that certain Loan Agreement, dated October 16, 2012 (the “ExploreTrip Loan Agreement”), Gundumogula extended a loan to ExploreTrip, Inc., a Delaware corporation (“ExploreTrip”), a wholly-owned subsidiary of Mondee. At the time the ExploreTrip Loan Agreement was executed, the loan amount was equal to $189,000. Gundumogula may demand repayment of this loan at any time. Prasad Gundumogula is the Chief Executive Officer of Mondee as well as a material shareholder.
Unit Issuance Agreement
Mondee Holdings, LLC (“Mondee Holdings”) will issue up to 3,600,000 Class G Units of Mondee Holdings to Lenders, in accordance with each Lender’s pro rata portion for each LOI Unit Issuance Date (of which there are four), pursuant to the Unit Issuance Agreement (the “Original Unit Issuance Agreement”) dated as of December 31, 2021. Lenders include: West Virginia Direct Lending LLC; TCW Skyline Lending LP; NJ/ TCW Direct Lending LLC; TCW Brazos Fund LLC; TCW Direct Lending Structured Solutions 2019 LLC; US Specialty Insurance Company; Safety National Casualty Corp; Reliance Standard Life Insurance Company; and North Haven Credit Partners. The Original Unit Issuance Agreement was amended, effective as of December 31, 2021, to amend the definition of “Transaction Units,” and revise the frequency of “Transaction Trigger Dates.” On July 8, 2022, Mondee Holdings and the Lenders entered into an Amended and Restated Unit Issuance Agreement, the amendment extended the trigger date to issue 3,600,000 of Class G units related to the consummation of the transaction to July 31, 2022. In the event the company completes the consummation of the business by or before July 31, 2022 the company will be subject to issue up to 3,000,000 in Class G units which is dependent on the aggregate amount of the loan after giving effect to the business combination. On July 17, 2022, based on the prepayment of $41,200,000 aggregate amount of the loans, the Company issued 3,000,000 Class G units to the Lenders.
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MANAGEMENT
Unless the context otherwise requires, any reference in this section of this prospectus to “New Mondee” refers to New Mondee and its consolidated subsidiaries after giving effect to the Business Combination.
Executive Officers and Directors
The following table sets forth the names, ages, and positions of our executive officers and directors as of the date of this prospectus:
|
Name
|
| |
Age*
|
| |
Position
|
|
| Executive Officers | | | | | | | |
| Prasad Gundumogula | | | 47 | | | Founder, Chief Executive Officer, and Director (Chairman) | |
| Orestes Fintiklis | | | 42 | | | Chief Corporate Strategy and Business Development Officer and Director (Vice-Chairman) | |
| Dan Figenshu | | | 44 | | | Chief Financial Officer | |
| Venkat Pasupuleti | | | 59 | | | Chief Technology Officer | |
| Jim Dullum | | | 69 | | | Chief Operating Officer | |
| Non-Employee Directors | | | | | | | |
| Asi Ginio | | | 49 | | | Director | |
| Mona Aboelnaga Kanaan | | | 54 | | | Director | |
| Roopa Purushothaman | | | 44 | | | Director | |
| Noor Sweid | | | 41 | | | Director | |
| Pradeep Udhas | | | 63 | | | Director | |
*
As of May 13, 2022.
Set forth below is information concerning directors and executive officers of New Mondee upon completion of the Business Combination.
Executive Officers
Prasad Gundumogula, 47, is the co-founder of Mondee and served as Chairman of the Board and Chief Executive Officer since 2015. Mr. Gundumogula serves as the Chief Executive Officer and Chairman of the Board of Directors of New Mondee. Under his stewardship, Mondee has emerged as a rapid-growth travel technology company and market place with a portfolio of globally recognized brands, grown substantially in revenue, and executed some key strategic acquisitions that expanded the portfolio to fuel future growth. Prior to his current role, Mr. Gundumogula served as Chief Operating Officer, Chief Technology Officer of Mondee, where he crafted Mondee’s vision, as well as played foundational roles in executing this vision. Prior to Mondee’s founding, Mr. Gundumogula was the Founder and CEO of Explore Trip Inc, where he pioneered a world-class system-based travel technology solution and state-of-the-art content hub platform. Previously, Mr. Gundumogula founded Metaminds Global Solutions, where he created highly scalable logistics systems and Artificial & Business Intelligence based solutions that added value to companies such as Lowe’s and Mercedes Benz. Mr. Gundumogula is a seasoned entrepreneur with an excellent track record of founding multiple transformative ventures and nurturing them from startups to multi-millions dollar businesses. Mr. Gundumogula holds both a master’s degree and a bachelor’s degree in computer science from Andhra University. We believe Mr. Gundumogula is qualified to serve as a director of New Mondee due to his experience in the industry and deep knowledge of the Company as its founder.
Orestes Fintiklis, 42, serves as Chief Corporate Strategy and Business Development Officer and as Vice-Chairman of the Board of New Mondee. Mr. Fintiklis served as ITHAX’s Chief Executive Officer from October 2020 until the Closing Date and Chairman of ITHAX’s Board from January 2021 until the Closing Date. He has more than 15 years of experience in hospitality investment and asset management and is the Founder and Managing Partner of Ithaca Capital Partners, a private equity real estate investment management
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company. In the past four years alone, Ithaca has acquired and/or asset-managed five hospitality businesses, including the acquisition of iconic and award-winning hotels such as the JW Marriott Panama and W Hotel Bogota (which, in 2021, readers of Condé Nast Traveler voted as the No. 1 best hotel in South America). He oversees all aspects of Ithaca, including sourcing, acquisitions, structuring, strategy, asset management and disposals. Prior to Ithaca, Mr. Fintiklis joined Dolphin Capital Partners in June 2007, and served as a partner from December 2013 to January 2017. Dolphin Capital Partners raised approximately $600 million of equity since June 2007 and raised and invested a total of approximately $1.1 billion of equity since December 2005 into multiple hotels and resorts. Prior to that, he was an attorney at Clifford Chance LLC in London and Brussels from August 2004 to August 2006. Mr. Fintiklis has a bachelor’s degree in law (Jurisprudence) from Oxford University (England), where he graduated first in his class, and holds a Master’s Degree in Business Administration with distinction from INSEAD Business School (France). He is a director in multiple hospitality and real estate private companies and is an active member of Young Presidents Organization, a chief executive leadership organization. We believe that Mr. Fintiklis is qualified to serve as a director of New Mondee due to his extensive investment background, experience as an executive, and his global network of business contacts.
Dan Figenshu, 44, served as Mondee’s Chief Financial Officer since September 2021, and serves as the Chief Financial Officer of New Mondee. Mr. Figenshu is currently responsible for overseeing all financial, accounting, SEC reporting, and treasury functions at Mondee. Prior to his current role, he served as Chief Operating Officer / Chief Financial Officer of Rocketrip, Inc., which was acquired by Mondee in September 2020. At Rocketrip, a venture-backed travel-tech start-up, he oversaw finance, accounting, legal, human resources, and operations. Before joining Rocketrip in 2017, Mr. Figenshu led finance organizations at two different media companies: Mic Network, Inc. and Glenn Beck’s The Blaze, where he also sat on the Board of Directors. Earlier in his career, he held finance and operations leadership roles at Random House and Simon & Schuster. Mr. Figenshu has more than 20 years of finance and operations experience in companies ranging from Series-A startups tomulti-billion dollar media conglomerates. Mr. Figenshu received his bachelor’s degree in finance from the Wallace E. Carroll School of Management at Boston College.
Venkat Pasupuleti, 59, served as Mondee’s Chief Technology Officer since January 2017, and currently serves as the Chief Technology Officer of New Mondee. He leads the technology team that drives innovation and transformation in the industry through disruptive technology platforms. Prior to joining the company, Mr. Pasupuleti served as Chief Operations Officer of Explore Trip Inc. where he played a critical role in operations and in the development of a world-class, expert, system-based travel technology solution. Prior to that, Mr. Pasupuleti served as Vice President at Avesta Computers, leading the West Coast operations and Program Management services. Earlier, Mr. Pasupuleti was founder and CEO of Zoom Interview Inc, which developed a new generation technology skill assessment platform. Earlier in his career, he served as Program Director and Country Head at e2e technologies Inc, where he was responsible for M&A, Strategic Consulting and Program Management practices, and prior to that, he served as Head — Business Applications Group at Mastek, a global IT solutions company. Mr. Pasupuleti received a Bachelor’s Degree in Commerce from Andhra University and a Master’s Degree in Management from Bombay University.
Jim Dullum, 69, served as Mondee’s Chief Operating Officer since November 2021 and on Mondee’s Advisory Board from 2012 to 2016. Mr. Dullum currently serves as the Chief Operating Officer of New Mondee. Prior to joining the Company, Mr. Dullum headed the Global Travel & Transportation Business for EDS, an HP company that became the largest processor of airline reservation transactions by 2007, through acquisitions and outsourcing of airline and global distribution system (GDS) operations and a leading provider of IT services to global airline, hotel, logistics and other travel companies. Subsequently, Mr. Dullum was an advisor to Travel port Worldwide Limited, has been Chief Operating Officer of Fare portal, Inc., a travel technology company and one of the largest Online Travel Agencies (OTAs), as well as Managing Partner of Fieldstone Equity, a private equity and business management firm since its co-founding in 2010. Mr. Dullum was also a Principal and Business Development Leader of Business Travel International of Americas (BTIA), which merged to become BCD, one of the largest global Travel Management Companies (TMCs). He started, operated and sold Execunet Travel, a corporate travel company that developed one of the first transactional front-end systems on an airline GDS, has been the Vice-Chairman of Citi corp CIMS, a travel information and transaction provider for travel agencies, and also has been CEO of Corvus Consulting, a travel marketing automation consulting business that has since been sold to Citi
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corp. Mr. Dullum sits on the Advisory Board of the Georgia Institute of Technology School of Mechanical Engineering, holds a Bachelor of Science in Mechanical Engineering (cum laude) from Georgia Institute of Technology and has an MBA from Harvard Graduate School of Business.
Non-Employee Directors
Asi Ginio serves as a director of New Mondee. Mr. Ginio has over 20 years of experience with Tourico Holidays Inc., a global travel wholesale and bedbank company that he co-founded in April 1999 (“Tourico”), and has served as the Chief Product Officer, Chief Operating Officer and Chief Executive Officer. In 1999, Mr. Ginio established the Tourico Holidays product development team and deployed its unique Permanent Room Block “PRB” strategy, which created a new industry standard and significantly improved the company value proposition and profit margins. In 2013, Mr. Ginio helped establish Tourico Holidays Travel Academy (“THTA”) which offers an exclusive opportunity for college graduates to jumpstart careers in the travel industry and Travel Global Systems (“TGS”), a proprietary travel software company. From January 2013 to May 2017, he oversaw Tourico’s global distribution and revenue management of over 35,000 direct hotel contracts and 4500 worldwide clients, including online travel agencies, airlines, rewards programs, tour operators, travel clubs and more. In June 2017, Tourico was acquired by Cinven Limited and Canada Pension Plan Investment Board and Mr. Ginio was selected as Hotelbed’s Commercial Strategy Director and Tourico Holidays Chief Executive Officer. Under his leadership, Tourico grew to become the third largest bedbank company with over 760 employees in 39 locations and over $1 billion in sales. Mr. Ginio holds a B.Sc in Hotel Management from Johnson and Wales University in Rhode Island and is a mentor at NYU Tisch Center HI Hub Incubator. We believe Mr. Ginio is qualified to serve as a director of New Mondee due to his experience as an executive in the global travel wholesale and bedbank industry.
Mona Aboelnaga Kanaan serves as a director of New Mondee. Ms. Aboelnaga Kanaan is Managing Partner at K6 Investments LLC, a private investment firm she founded in 2011, which invests globally in the financial services, technology, consumer products and entertainment industries. Earlier in her career, Ms. Aboelnaga Kanaan was President and Chief Executive Officer of Proctor lnvestment Managers LLC (“Proctor”), a private equity firm she co-founded in 2002, which invested in traditional and alternative asset management companies. Ms. Aboelnaga Kanaan oversaw Proctor’s strategic development, acquisition program, and international distribution strategy. She sold Proctor to National Bank of Canada in 2006 and continued as Proctor’s President and Chief Executive Officer until 2013. Currently, Ms. Aboelnaga Kanaan serves as a member of the board of directors of Webster Financial Corporation (NYSE: WBS), where she chairs the technology committee and is a member of the executive and risk committees. She is the first US- based member of the board of Perpetual Limited (ASX: PPT), an Australian-based diversified global financial services company, and serves on the investment and people committees. With a passion for financial inclusion and innovation, Ms. Aboelnaga Kanaan also serves as a director and audit committee chair of FinTech Acquisition Corp Vl (NASDAQ: FTVI), on the Board of Advisors of Ibancar, a FinTech company specializing in collateralized auto lending in Spain, and on the Advisory Board and FinTech Task Force of Dubai-based VC Fund, Global Ventures. Previously, she served as a director of Siguler Guff Small Business Credit Opportunities Fund and Peridiem Global Investors (on behalf of National Australia Bank). Ms. Aboelnaga Kanaan is a Trustee of The Chapin School, the Fashion Institute of Technology of the State University of New York, and International House, New York (a graduate student housing non-profit organization), and a member of the Council on Foreign Relations. She is also a Leadership Fellow of the National Association of Corporate Directors. We believe Ms. Aboelnaga Kanaan is qualified to serve as a director of New Mondee because she is an experienced chief executive officer, entrepreneur, private equity investor, and corporate director with over 30 years of experience in the financial services sector and over 21 years of experience in leadership roles.
Roopa Purushothaman serves as a director of New Mondee. Ms. Purushothaman has served as the Chief Economist and Head of Policy Advocacy at Tata Sons Private Limited since September 2017. Previously, she was MD and Head of Research at Everstone Capital, an investment group that manages assets in excess of $6 billion across private equity, real estate, green infrastructure, credit and venture capital. Until 2006, she was a Vice President and Economist at Goldman Sachs, where she co-authored the widely read report, “Dreaming with BRICs: The Path to 2050.” In 2018, Ms. Purushothaman also co-authored the book “Bridgital Nation: Solving Technology’s People Problem,” written with N. Chandrasekaran, the Chairman of the Tata Group. She has served on the Prime Minister of India’s Advisory Council on Urban
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Infrastructure and is the founder of Avasara Leadership Institute, a non-profit educational institution focusing on accelerating academic and leadership outcomes for adolescent girls in India. Avasara has worked with over 2,000 girls through after-school programs, scholarship programs and Avasara Academy, a residential secondary school. Ms. Purushothaman has a B.A. in International Studies and Ethics, Politics, and Economics from Yale University and a Masters of Science Economics from the London School of Economics. We believe Ms. Purushothaman is qualified to serve as a director of New Mondee due to her economic expertise and background in private equity and real estate.
Noor Sweid serves as a director of New Mondee. Ms. Sweid has been the founder and general partner of Global Ventures, a Dubai-based venture capital firm, since 2018. She is a founder, investor, and operator. Identified by Forbes magazine as one of the “World’s Top 50 Women in Tech,” Ms. Sweid’s previous roles include chief investment officer at The Dubai Future Foundation from 2016 until 2017, and founder of ZenYoga studio chain (acquired by Cedarbridge) from 2006 until 2014. Furthermore, she was the first Arab woman to scale, conduct an initial public offering of and operate a public company in the MENA region, listing Depa PLC, an interior solutions company on the NASDAQ Dubai and the London Stock Exchange (DEPA:DU) for approximately US$1.1 billion in April 2008. Additionally, Ms. Sweid has been the chairperson of the Middle East Venture Capital Association since 2018, a director for TechWadi since 2017, a director for the Karman Fellowship since 2021, and a director for the Global Private Capital Association since 2022. Ms. Sweid has also been the independent board director for Clue Health since 2020. Ms. Sweid holds a bachelors’ degrees in Finance and Economics from Boston College, an MBA from MIT Sloan, and began her career as a biotechnology and pharmaceutical strategy consultant in the US. She is a fellow of the inaugural class of the Finance Leaders Fellowship and a member of the Aspen Global Leadership Network, and is recognized as a Young Global Leader by the World Economic Forum. We believe Ms. Sweid is qualified to serve as a director of New Mondee because of her extensive management history and experience in technology sectors.
Pradeep Udhas serves as a director of New Mondee. Mr. Udhas currently serves as a Senior Advisor at KPMG India, which he co-founded in 1994. In his 28 years of service at KPMG India, Mr. Udhas served as a Senior Partner and various other senior positions. Previously, he served as the Managing Partner for Greater Pacific Capital, a UK based private equity firm’s India operations from May 2008 to May 2010. From May 2000 to October 2004, Mr. Udhas served as the Founder and CEO of e2e Technologies, a United States-based solution architecture firm. Prior to that, he was a Director in IBM, US serving many positions from 1984 to 1993. Mr. Udhas currently serves as a member of the Founder’s Circle of Avasara Leadership Academy, and as a member of the board of The Indus Entrepreneurs, a global entrepreneur mentorship organization, based out of Silicon Valley. He previously served on the executive council of NASSCOM, an Indian IT industry think-tank from April 2000 to April 2002, on the advisory board of St. Xavier’s College, Mumbai from April 2012 to May 2014, and on the national board of the Indo-American Chamber of Commerce from September 2012 to September 2014. In February 2022, Mr. Udhas co-founder the Lorraine Music Academy, a music education technology (“Edtech”) and entertainment firm. Mr. Udhas holds a BS of Biology from St. Xavier’s College, Mumbai and MBA Information Technology from Union College, New York. We believe Mr. Udhas is qualified to serve as a director of New Mondee due to his financial background and extensive experience in technology leadership and strategic growth.
Family Relationships
There are no family relationships among any of New Mondee’s directors or executive officers.
Board Composition
New Mondee’s business and affairs are organized under the direction of the New Mondee Board. The New Mondee Board will meet on a regular basis and additionally as required.
In accordance with the terms of the Bylaws, New Mondee’s Board may establish the authorized number of directors from time to time by resolution. New Mondee’s Board consists of 7 members. In accordance with the Bylaws, New Mondee’s Board will be divided into three classes with staggered three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following
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election. New Mondee’s Board is divided among the three classes as follows:
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the Class I Directors are Asi Ginio, and Noor Sweid, and their terms will expire at the annual meeting of stockholders to be held in 2023;
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the Class II Directors are Pradeep Udhas, Roopa Purushothaman, and Mona Aboelnaga Kanaan, and their terms will expire at the annual meeting of stockholders to be held in 2024; and
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the Class III Directors are Orestes Fintiklis and Prasad Gundumogula, and their terms will expire at the annual meeting of stockholders to be held in 2025.
As nearly as possible, each class will consist of one-third of the Directors.
The division of New Mondee’s Board into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.
Director Independence
Our Board has determined that each of the directors on our Board, other than Prasad Gundumogula and Orestes Fintiklis, qualify as “independent directors,” as defined under the rules of Nasdaq, and our Board consists of a majority of “independent directors,” as defined under the rules of the SEC and Nasdaq relating to director independence requirements. In addition, we are subject to the rules of the SEC and Nasdaq relating to the membership, qualifications, and operations of the audit committee, as discussed below. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with New Mondee and all other facts and circumstances the Board deemed relevant in determining their independence, including the beneficial ownership of securities of New Mondee by each non-employee Director and the transactions described in the section titled “Certain Relationships and Related Person Transactions.”
Controlled Company Exemption
Immediately following the Closing, Mondee Stockholder beneficially owns, in the aggregate, more than 50% of the combined voting power for the election of New Mondee’s Board. As a result, New Mondee is a “controlled company” within the meaning of the Nasdaq listing rules and may elect not to comply with certain corporate governance standards, including, but not limited to, requirements that:
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a majority of New Mondee’s Board consist of directors who qualify as “independent” as defined under Nasdaq listing rules;
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New Mondee’s Board have a compensation committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;
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New Mondee’s Board have a nominating and corporate governance committee composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
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New Mondee’s Board conduct an annual performance evaluation of the compensation committee and the nominating and corporate governance committee.
New Mondee may elect to rely on these and any additional exemptions for so long as it remains a “controlled company.” Accordingly, you may not have the same protections as those afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that New Mondee ceases to be a “controlled company” and the shares of New Mondee Common Stock continue to be listed on Nasdaq, New Mondee will be required to comply with these requirements within the applicable transition periods. See “Risk Factors — Risks Related to Our Organizational and Structure — We currently rely upon the “controlled company” exemption under Nasdaq Stock Market Listing Rules, pursuant to which “controlled companies” are exempt from certain corporate governance requirements otherwise applicable under Nasdaq listing rules.”
Role of New Mondee’s Board in Risk Oversight/Risk Committee
One of the key functions of our Board will be informed oversight of our risk management process. Our Board does not anticipate having a standing risk management committee, but rather anticipates
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administering this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. In particular, the our Board will be responsible for monitoring and assessing strategic risk exposure and our Audit Committee will have the responsibility to consider and discuss major financial risk exposures and the stepsour management will take to monitor and control such exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee will also monitor compliance with legal and regulatory requirements. The Compensation Committee will also assess and monitor whether our compensation plans, policies and programs comply with applicable legal and regulatory requirements.
Committees of the New Mondee Board
Our Board reconstituted our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee upon the consummation of the Business Combination and adopted a new Charter for each of these Committees, which complies with the applicable requirements of current SEC and Nasdaq rules. We intend to comply with future requirements to the extent applicable. Following the consummation of the Business Combination, copies of the Charters for each Committee will be available on the investor relations portion of our website.
Audit Committee
The Audit Committee consists of three (3) or more members of the New Mondee Board, namely Pradeep Udhas, Roopa Purushothaman, and Mona Aboelnaga Kanaan, each of whom the Board has determined satisfies the independence requirements under Nasdaq listing standards and Rule 10A- 3(b)(1) of the Exchange Act. The Chair of the Audit Committee is Pradeep Udhas. New Mondee’s Board has determined that at least one (1) member of the Audit Committee, Pradeep Udhas, is an “Audit Committee financial expert” within the meaning of SEC regulations. Each member of the Audit Committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the Board has examined each Audit Committee Member’s scope of experience and the nature of their employment.
The primary purpose of the Audit Committee is to discharge the responsibilities of the New Mondee Board with respect to the corporate accounting and financial reporting processes, systems of internal control and financial statement audits, and to oversee the independent registered public accounting firm. Specific responsibilities of the Audit Committee will include, but will not be limited to:
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helping the New Mondee Board oversee corporate accounting and financial reporting processes;
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managing the selection, engagement, qualifications, independence and performance of a qualified firm to serve as the independent registered public accounting firm to audit the financial statements;
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reviewing, discussing and resolving any audit problems or difficulties with management and the independent auditors;
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discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, the interim and year-end operating results;
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establishing and developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
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monitoring and enforcing compliance with New Mondee’s Code of Ethics;
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reviewing related person transactions;
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obtaining and reviewing (1) a report by the independent registered public accounting firm at least annually that describes internal quality control procedures, (2) any material issues with such procedures and any steps taken to deal with such issues when required by applicable law, and (3) all relationships between the independent accountant and New Mondee or any of its subsidiaries to assess the independence of the independent auditors; and
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•
approving or, as permitted, pre-approving, audit and permissible non-audit services to be performed by the independent registered public accounting firm.
Compensation Committee
The Compensation Committee consists of two (2) or more members of the Board, namely Roopa Purushothaman and Asi Ginio. The Chair of the Compensation Committee is Roopa Purushothaman. The Board has determined that each Member of the Compensation Committee is independent under the Nasdaq listing standards and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.
The primary purpose of the Compensation Committee is to discharge the responsibilities of the New Mondee Board in overseeing the compensation policies, plans and programs and to review and determine the compensation to be paid to Executive Officers, Directors and other senior management, as appropriate. Specific responsibilities of the Compensation Committee will include, but not be limited to:
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reviewing and approving annually the corporate goals and objectives applicable to the compensation of the chief executive officer and evaluating at least annually the chief executive officer’s performance in light of those goals and objectives;
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reviewing and approving the compensation of the chief executive officer, other executive officers and senior management;
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reviewing and administering the equity incentive plans and other benefit programs;
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assisting in complying with reporting requirements related to executive compensation;
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reviewing, adopting, amending and terminating incentive compensation and equity plans, severance agreements, profit sharing plans, bonus plans, change-of-control protections and any other compensatory arrangements for the executive officers and other senior management; and
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reviewing and establishing general policies relating to compensation and benefits of the employees, including the overall compensation philosophy.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of three (3) or more members, namely Mona Aboelnaga Kanaan, Noor Sweid, and Asi Ginio. The Chair of the Nominating and Corporate Governance Committee is Mona Aboelnaga Kanaan. The Board has determined that each member of the Nominating and Corporate Governance Committee is independent under the Nasdaq listing standards.
Specific responsibilities of the Nominating and Corporate Governance Committee will include, but will not be limited to:
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identifying and evaluating candidates, including the nomination of incumbent Directors for reelection and nominees recommended by stockholders, to serve on the New Mondee Board;
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considering and making recommendations to the New Mondee Board regarding the composition and chairmanship of the committees of the New Mondee Board;
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reviewing stockholder proposals and recommending New Mondee Board responses;
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developing and making recommendations to the New Mondee Board regarding corporate governance guidelines and matters, including in relation to corporate social responsibility; and
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overseeing periodic evaluations of the performance of the New Mondee Board, including its individual directors and committees.
Compensation Committee Interlocks and Insider Participation
None of the Members of New Mondee’s Compensation Committee has ever been an Executive Officer or employee of New Mondee. None of New Mondee’s Executive Officers currently serve, or has served during
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the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more Executive Officers that will serve as a Member of New Mondee Board or Compensation Committee.
Code of Ethics
Our Board has adopted a Code of Ethics, applicable to all of New Mondee’s employees, Executive Officers and Directors. The Code of Ethics is available at the investors section of New Mondee’s website at https://www.mondee.com/investors. Information contained on or accessible through the website is not a part of this prospectus, and the inclusion of the website address in this prospectus is an inactive textual reference only. Any amendments to the Code of Ethics, or any waivers of its requirements, are expected to be disclosed as required by SEC and Nasdaq rules. The reference to New Mondee’s website address does not constitute incorporation by reference of the information contained at or available through New Mondee’s website, and you should not consider it to be a part of this prospectus.
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EXECUTIVE AND DIRECTOR COMPENSATION
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us “ or “our” refer to the business of Mondee and its subsidiaries prior to the consummation of the Business Combination and to New Mondee and its subsidiaries following the consummation of the Business Combination.
ITHAX
The following disclosure concerns the compensation of ITHAX’s officers prior to the Business Combination. Unless the context otherwise requires, all references to “we,” “us,” or “our” in this section refer to ITHAX.
None of our executive officers or directors have received any cash compensation for services rendered to us. Our Sponsor, executive officers and directors, or any of their respective affiliates will not be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations to the extent such expenses exceed the amount required to be retained in the trust account, unless the Business Combination is consummated. Our audit committee will review on a quarterly basis all payments that may be made to our Sponsor, executive officers or directors, or our or their affiliates, if any. Any such payments prior to an initial business combination will be made from funds held outside the trust account. Other than quarterly audit committee review of any such reimbursements, we do not expect to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their out-of-pocket expenses incurred in connection with our activities on our behalf in connection with identifying and consummating an initial business combination. Other than these payments and reimbursements, if any, no compensation of any kind, including finder’s and consulting fees, will be paid by the company to our Sponsor, executive officers and directors, or any of their respective affiliates, prior to completion of our initial business combination. There have not been any material out-of-pocket expenses subject to reimbursement incurred or accrued as of the date of this prospectus, and we do not anticipate any such expenses to be incurred or accrued prior to Closing.
After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting or management fees from the combined company. All of these fees have been fully disclosed to stockholders, to the extent then known, in the proxy solicitation materials or tender offer materials furnished to our stockholders in connection with a proposed business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed business combination, because the directors of the post-combination business will be responsible for determining executive officer and director compensation. Any compensation to be paid to our executive officers will be determined, or recommended to the board of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority of the independent directors on our board of directors.
We do not intend to take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial business combination, although it is possible that some or all of our executive officers and directors may negotiate employment or consulting arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target business but we do not believe that the ability of our management to remain with us after the consummation of our initial business combination will be a determining factor in our decision to proceed with any potential business combination. We are not party to any agreements with our executive officers and directors that provide for benefits upon termination of employment.
MONDEE
Our Executive and Director Compensation
Our named executive officers for the fiscal year ended December 31, 2021, which consist of Chief Executive Officer, Chief Financial Officer, Chief Technology Officer and Chief Operating Officer are:
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Prasad Gundumogula, our Chief Executive Officer;
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Dan Figenshu, our Chief Financial Officer;
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Venkat Pasupuleti, our Chief Technology Officer;
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Jim Dullum, our Chief Operating Officer
The named executive officer and director compensation described in this section discusses our 2021 compensation programs. Following the consummation of the Business Combination, our compensation committee may choose to implement different compensation programs for our named executive officers and directors.
Summary Compensation Table
The following table provides information regarding the compensation provided to our named executive officers during the fiscal year ended December 31, 2021.
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Name and Principal Position
|
| |
Year
|
| |
Salary
($) |
| |
Bonus
($) |
| |
Stock
Awards ($) |
| |
Option
Awards ($) |
| |
Non-Equity
Deferred Incentive Plan Compensation ($) |
| |
Non-Equity
Deferred Compensation Earnings ($) |
| |
All Other
Compensation ($) |
| |
Total
($) |
| |||||||||||||||||||||||||||
|
Prasad Gundumogula,
Chief Executive Officer |
| | | | 2021 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 3,743,774(1) | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 3,743,774 | | |
|
Dan Figenshu,
Chief Financial Officer |
| | | | 2021 | | | | | $ | 280,000 | | | | | $ | 28,000(2) | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 308,000 | | |
|
Venkat Pasupuleti,
Chief Technology Officer |
| | | | 2021 | | | | | $ | 172,800 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 172,800 | | |
|
Jim Dullum,
Chief Operating Officer |
| | | | 2021 | | | | | $ | 300,000(3) | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 0 | | | | | $ | 50,000(4) | | |
(1)
Mr. Gundumogula’s Stock Awards represent compensation he received for his role as Chief Executive Officer of the Company, but are issued in Mondee Holdings, LLC and not in the Company.
(2)
Mr. Figenshu’s cash bonus was received in 2021 as part of his previous role and the associated responsibilities as the Chief Operating Officer / Chief Financial Officer of Rocketrip.
(3)
Mr. Dullum is compensated at $25,000 per month on a consulting basis, until the Closing is complete, at which time he will be converted to a full-time employee of the Company.
(4)
Mr. Dullum’s base salary is $300,000 because he receives $25,000 a month until the Closing, but he was only compensated $50,000 in 2021 because he started his consulting work with Mondee in November 2021.
Narrative to the Summary Compensation Table
The compensation committee annually reviews and approves compensation for our named executive officers. The compensation committee considers recommendations by our Chief Executive Officer for the compensation of all other named executive officers. Compensation for our Chief Executive Officer typically has been recommended by the chairman of our Board, which is reviewed and subject to approval by the compensation committee.
Compensation paid based on performance, including any award under the current equity incentive plan, will be subject to a recoupment (“clawback”) policy. In the event of a restatement of incorrect financial results, this policy will enable the Board or the Compensation Committee to seek reimbursement from award recipients of any portion of an award that would not have been earned based on corrected financial results if fraud or willful misconduct contributed to such noncompliance.
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Annual Base Salary
We believe that a competitive base salary is essential in attracting and retaining key executive talent. The base salary established for each of our named executive officers is intended to reflect each individual’s responsibilities, experience, position, prior performance and other discretionary factors deemed relevant by our compensation committee. Mr. Gundumogula waived his base salary in June 2020, to reduce our financial burden given the impacts of COVID-19.
The chart below reflects the actual base salaries approved by the compensation committee for our named executive officers during the fiscal year ended December 31, 2021.
|
Name
|
| |
2021 Base Salary
|
| |||
|
Prasad Gundumogula, Chief Executive Officer
|
| | | $ | 0 | | |
|
Dan Figenshu, Chief Financial Officer
|
| | | $ | 280,000 | | |
|
Venkat Pasupuleti, Chief Technology Officer
|
| | | $ | 172,800 | | |
|
Jim Dullum, Chief Operating Officer
|
| | | $ | 300,000(1) | | |
(1)
Mr. Dullum’s base salary is $300,000 because he receives $25,000 a month until the Closing, but he was only compensated $50,000 in 2021 because he started his consulting work with Mondee in November 2021.
Employment Agreements with Our Named Executive Officers
Our named executive officers are each party to an employment agreement with us. The discussion below summarizes the material terms of the named executive officer employment agreements.
Employment Agreement with Prasad Gundumogula
In September 2011, Mondee entered into an employment agreement with Prasad Gundumogula to serve as its Chief Technology Officer. Pursuant to an amendment to the employment agreement effective June 2015, Mr. Gundumogula began serving as Chief Executive Officer, with a base salary of $300,000 per year. Pursuant to an amendment effective as of June 1, 2020 through December 31, 2021, Mr. Gundumogula waived his right to any cash salary or bonus, while he still maintains eligibility to participate in employee benefit or group insurance plans maintained from time to time by Mondee. In May 2022, Mr. Gundumogula entered into an employment agreement with Mondee, effective at the Closing. Under the terms of the new employment agreement, Mr. Gundumogula will serve as Chief Executive Officer with a base salary of $600,000 per year paid in cash in equal installments. The form of consideration may be changed with the approval of Mr. Gundumogula and the chair of the compensation committee. Mr. Gundumogula will be eligible to receive discretionary bonus compensation with a target amount of up to 50% of his base salary for each complete calendar year that he is employed by Mondee, commencing in 2022. The form of consideration may be in cash or equity and change at the discretion of the Board (or a committee thereof). Mr. Gundumogula will be awarded 100,000 shares of New Mondee Common Stock at the Closing in accordance with this provision. The employment agreement further provides that Mr. Gundumogula will receive a payment of $10 million upon termination if termination takes place within the first five years after the effective date of the employment agreement. Up to 50% of this payment upon termination may be paid in New Mondee Common Stock at the discretion of the Board (or a committee thereof). Mr. Gundumogula’s new employment agreement supersedes all prior agreements.
Employment Agreement with Dan Figenshu
In September 2021, Mondee entered into an employment agreement with Dan Figenshu, its Chief Financial Officer. Mr. Figenshu’s employment agreement provides for an annual base salary and eligibility to participate in employee benefit or group insurance plans maintained from time to time by Mondee. Additionally, Mr. Figenshu’s employment agreement provides for an initial grant of an equity award at Closing with a target value of $1,196,000, based on the price per share as of the Closing, which became fully vested at the time of Closing. Mr. Figenshu will be considered for annual equity awards in each subsequent
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year and the size and structures of any annual equity award granted to Mr. Figenshu will be established at the time of grant by the compensation committee. Mr. Figenshu’s base salary and his annual target bonus will be evaluated by the compensation committee on a regular basis during the normal course of business.
Employment Agreement with Venkat Pasupuleti
In January 2017, Mondee entered into an employment agreement with Venkat Pasupuleti, its Chief Technology Officer. In May 2022, Mr. Pasupuleti entered into an employment agreement with Mondee, effective at the Closing. Under the terms of the new employment agreement, Mr. Pasupuleti will serve as Chief Technology Officer with a base salary of $200,000 per year paid in cash in equal installments. Mr. Pasupuleti will be eligible to receive discretionary bonus compensation with a target amount of up to 50% of his base salary for each complete calendar year that he is employed by Mondee, commencing in 2022. The form of consideration may be in cash or equity and change at the discretion of the Board (or a committee thereof). Mr. Pasupuleti’s new employment agreement supersedes all prior agreements.