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As filed with the Securities and Exchange Commission on November 28, 2022

 

Registration No. 333-267010

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

Amendment No. 1 to

 

FORM S-1/A

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

RUBICON TECHNOLOGIES, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

Delaware   88-3703651
(State or Other Jurisdiction of
Incorporation or Organization)
  (I.R.S. Employer
Identification No.)

 

100 West Main Street Suite #610

Lexington, KY 40507

(844) 479-1507

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

 

Philip Rodoni

Chief Executive Officer

100 West Main Street Suite #610

Lexington, KY 40507

(844) 479-1507

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

 

Copy to:

Evan M. D’Amico

Gibson, Dunn & Crutcher LLP

1050 Connecticut Ave. NW

Washington, D.C. 20036

Tel: (202) 955-8500

 

 

 

Approximate date of commencement of proposed sale to the public: From time to time 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, please 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Securities Exchange Act of 1934:

 

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

 

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

 

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

 

 

 

 

Table of Contents

 

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION — DATED November 28, 2022

 

PRELIMINARY PROSPECTUS

 

 

Up to 120,880,138 Shares of Class A Common Stock

Up to 14,204,375 Warrants

 

 

 

This prospectus relates to the resale from time to time by the selling securityholders named in this prospectus, including Jefferies, LLC, an underwriter in the initial public offering of Founder SPAC (the “Selling Securityholders”), of (a) up to an aggregate of 120,880,138 shares of Class A Common Stock, including (i) 19,612,903 shares of Class A Common Stock issued to an affiliate pursuant to the Merger Agreement (as defined below), (ii) 1,470,968 shares of Class A Common Stock issuable to an affiliate as Earn-Out Class A Shares (as defined below) pursuant to the Merger Agreement, (iii) up to 52,475,827 shares of Class A Common Stock issued or issuable upon exchange of Class B Units (as defined below) held by certain of our directors, officers and affiliates that were issued pursuant to the Merger Agreement, (iv) up to 3,935,687 shares of Class A Common Stock issuable to certain of our directors, officers and affiliates upon exchange of an equivalent number of Class B Units that are issuable as Earn-Out Units (as defined below) pursuant to the Merger Agreement, (v) 12,100,000 shares of Class A Common Stock issued to the PIPE Investors (as defined below), (vi) 160,000 shares of Class A Common Stock issued to the New Equity Holders (as defined below), (vii) up to an aggregate of 14,204,375 shares of Class A Common Stock issuable upon the exercise of 14,204,375 Private Warrants (as defined below), (viii) up to an aggregate of 6,746,250 shares of Class A Common Stock converted from Founder Class B Shares (as defined below) in connection with the Domestication (as defined below), (ix) up to 216,473 shares of Class A Common Stock upon the settlement of 815,032 deferred stock units (“DSUs”) issued pursuant to the Merger Agreement as consideration to certain Phantom Unitholders and Rubicon Management Rollover Holders who were no longer employed by Rubicon or its subsidiaries at the time of the DSU award, and (x) up to 9,957,655 shares of Class A Common Stock issuable upon the settlement of 9,957,655 restricted stock units (“RSUs”) awarded to certain directors and officers of Rubicon pursuant to the Incentive Plan, and (b) up to an aggregate of 14,204,375 Private Warrants.

 

The shares of Class A Common Stock being offered for resale in this prospectus represent, as of the date of this prospectus, approximately 62.0% of our total outstanding shares of Common Stock assuming the cash exercise of all Private Warrants (referenced in subclause (b) above), issuance and exchange of all Earn-Out Interests for Class A Common Stock (referenced in subclauses (a)(ii) and (a)(iv) above), and vesting of all outstanding DSUs and RSUs (referenced in subclauses (a)(ix) and (a)(x) above, respectively), in each case, as registered for resale in this prospectus). The sale of some or all of the securities being offered in this prospectus, following any applicable vesting, satisfaction of earn-out conditions, exchange or lock-up periods, could have adverse effects on the market for our Class A Common Stock, including increasing volatility, limiting the availability of an active market and/or resulting in a significant decline in the public trading price. Despite any potential adverse effects, the Selling Securityholders may still experience a positive rate of return on the securities they purchased due to the differences in the purchase prices of which they purchased the securities described above. See the sections entitled “Summary—Information Related to Offered Securities” and “Risk Factors — Risks Related to Ownership of Our Securities.”

 

This prospectus also relates to the issuance by us of up to an aggregate of 14,204,375 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants. This prospectus also covers any additional securities that may become issuable by reason of share splits, share dividends or other similar transactions.

 

The shares of Class A Common Stock registered for resale in this prospectus were acquired at effective purchase prices ranging from $0.00 to $15.52 per share, some of which are considerably below $2.40, the market price of a share of Class A Common Stock on November 25, 2022, and Private Warrants registered for resale in this prospectus were acquired at a purchase price of $1.00 per Private Warrant, in each case as set forth in further detail in the section titled “Summary—Information Related to Offered Securities.” The public offering price in Founder SPAC’s initial public offering was $10.00 per unit, with each unit consisting of one Founder Class A Share and one-third of one Public Warrant.

 

 

Table of Contents

 

We will not receive any proceeds from the sale of shares of Class A Common Stock or Warrants by the Selling Securityholders pursuant to this prospectus.

 

We may receive up to an aggregate of approximately $345.2 million from the cash exercise of the Warrants. The exercise price of our Warrants is $11.50 per warrant. However, the last reported sales price of our Class A Common Stock on November 25, 2022 was $2.40. The likelihood that Warrant holders will exercise their Warrants, and therefore any amount of cash proceeds that we may receive, is dependent upon the trading price of our Class A Common Stock. If the trading price for our Class A Common Stock continues to be less than $11.50 per share, we do not expect Warrant holders to exercise their Warrants. Similarly, the Private Warrants may be exercised on a cashless basis and we will not receive any proceeds from such exercise, even if the Private Warrants are in-the-money. We expect to use the net proceeds from the exercise of such securities, if any, for general corporate purposes, which may include acquisitions or other strategic investments. We will have broad discretion over the use of any proceeds from the exercise of such securities. Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of Warrants when planning for our operational funding needs. See the section entitled “Risk Factors—Risks Related to the Ownership of Our Securities.” We also may receive proceeds from the issuance and sale of shares of Class A Common Stock that we may elect to make to the Yorkville Investor pursuant to the SEPA (as defined below), from time to time in our discretion, once such shares are registered for resale on an effective registration statement. See “Certain Financing Transactions—SEPA” for a description of how the price we may sell shares of Class A Common Stock to the Yorkville Investor is calculated pursuant to the SEPA.

 

Each Selling Securityholder will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholder for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholder in disposing of its securities; provided, however, that pursuant to the A&R Registration Rights Agreement (as defined below), 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, New York Stock Exchange (“NYSE”) listing fees and fees and expenses of our counsel and our independent registered public accounting firm, and certain fees incurred in connection with a Selling Securityholder’s exercise of certain block trade, piggyback and underwritten offering rights.

 

We are registering the securities for resale pursuant to the Selling Securityholders’ registration rights under certain agreements between us and the Selling Securityholders. Our registration of the securities covered by this prospectus does not mean that either we or the Selling Securityholders will offer or sell any of the shares of Class A Common Stock or Warrants. The Selling Securityholders or their permitted transferees may offer, sell or distribute all or a portion of their shares of Class A Common Stock or Warrants publicly or through private transactions at prevailing market prices or at negotiated prices. We provide more information about how the Selling Securityholders may sell the Class A Common Stock or Warrants in the section entitled “Plan of Distribution.”

 

You should read this prospectus, any prospectus supplements and the documents filed as exhibits to the registration statement of which this prospectus forms a part carefully before you invest in our securities.

 

Our Class A Common Stock and our Public Warrants are listed on the New York Stock Exchange, under the symbols “RBT” and “RBT WS,” respectively. On November 25, 2022, the closing price of our Class A Common Stock was $2.40 and the closing price of our Public Warrants was $0.061.

 

 

 

We are an “emerging growth company” and a “smaller reporting company” under federal securities laws and are subject to reduced public company reporting requirements.

 

 

 

Investing in our securities involves a high degree of risk. See the section entitled “Risk Factors” beginning on page 14 of this prospectus to read about factors you should consider before buying our securities.

 

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

 

The date of this prospectus is               , 2022.

 

 

 

 

Table of Contents

 

TABLE OF CONTENTS

 

    Page
TABLE OF CONTENTS   i
INTRODUCTORY NOTE REGARDING THE BUSINESS COMBINATION   ii
ABOUT THIS PROSPECTUS   vi
MARKET, RANKING AND OTHER INDUSTRY DATA   vii
TRADEMARKS, SERVICE MARKS AND TRADE NAMES   vii
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS   viii
SUMMARY   1
THE OFFERING   9
SUMMARY HISTORICAL FINANCIAL INFORMATION OF RUBICON   12
SUMMARY UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION   13
RISK FACTORS   14
USE OF PROCEEDS   47
DIVIDEND POLICY   48
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION   49
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   55
BUSINESS   82
MANAGEMENT   95
EXECUTIVE AND DIRECTOR COMPENSATION   102
PRINCIPAL SECURITYHOLDERS   110
SELLING SECURITYHOLDERS   112
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS   122
DESCRIPTION OF SECURITIES   130
SECURITIES ELIGIBLE FOR FUTURE SALE   136
PLAN OF DISTRIBUTION   140
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES   143
LEGAL MATTERS   147
EXPERTS   147
WHERE YOU CAN FIND MORE INFORMATION   147
INDEX TO FINANCIAL STATEMENTS   F-1

 

i

Table of Contents

 

INTRODUCTORY NOTE REGARDING THE BUSINESS COMBINATION AND CERTAIN OTHER TRANSACTIONS

 

On August 15, 2022 (the “Closing” and such date, the “Closing Date”), we consummated the business combination (the “Business Combination”) pursuant to that certain Agreement and Plan of Merger, dated December 15, 2021 (the “Merger Agreement”), by and among Founder SPAC, a Cayman Islands exempted company (together with its successors, including after the Domestication (as defined below), “Founder”), Ravenclaw Merger Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Founder (“Merger Sub”), Ravenclaw Merger Sub Corporation 1, a Delaware corporation and wholly owned subsidiary of Founder (“Merger Sub Inc. 1”), Ravenclaw Merger Sub Corporation 2, a Delaware corporation and wholly owned subsidiary of Founder (“Merger Sub Inc. 2”), Ravenclaw Merger Sub Corporation 3, a Delaware corporation and wholly owned subsidiary of Founder (“Merger Sub Inc. 3” and, together with Merger Sub Inc. 1 and Merger Sub Inc. 2, each a “Blocker Merger Sub”), Boom Clover Business Limited, a British Virgin Islands corporation (“Blocker Company 1”), NZSF Frontier Investments Inc., a Delaware corporation (“Blocker Company 2”), PLC Blocker A LLC, a Delaware limited liability company (“Blocker Company 3” and, together with Blocker Company 1 and Blocker Company 2, each a “Blocker Company” and collectively, the “Blocker Companies”), and Rubicon Technologies, LLC, a Delaware limited liability company (“Holdings LLC”).

 

Pursuant to the Merger Agreement, among other things, (a) Founder deregistered as an exempted company under the Cayman Islands Companies Act (As Revised) and continued and domesticated as a Delaware corporation under Section 388 of the Delaware General Corporation Law (the “Domestication”), and in connection therewith, changed its name from Founder SPAC to Rubicon Technologies, Inc. (“Rubicon”), (b) Merger Sub merged with and into Holdings LLC (the “Merger”), with Holdings LLC surviving the Merger as a wholly owned subsidiary of Rubicon, and (c) in a series of sequential two-step mergers (i) each Blocker Merger Sub merged with and into its corresponding Blocker Company, with each Blocker Company surviving as a wholly owned subsidiary of Rubicon, following which (ii) each surviving Blocker Company merged with and into Rubicon, with Rubicon surviving the merger (collectively the “Blocker Mergers” and, together with the Merger, the “Mergers”). The transactions contemplated by the Merger Agreement, including the Mergers, are collectively referred to in this prospectus as the “Business Combination”.

 

As a result of and upon the effective time of the Domestication, (a) each then-issued and outstanding Class A ordinary share, par value $0.0001 per share, of Founder (“Founder Class A Shares”) automatically converted into one share of Class A common stock, par value $0.0001 per share, of Rubicon (“Class A Common Stock”), (b) each then-issued and outstanding Class B ordinary share, par value $0.0001 per share, of Founder (“Founder Class B Shares” and, together with Founder Class A Shares, “Founder Ordinary Shares”), converted into one share of Class A Common Stock, pursuant to the Sponsor Agreement, dated December 15, 2021, by and among Founder, Founder SPAC Sponsor LLC (“Sponsor”), Holdings LLC, and certain insiders of Founder (the “Sponsor Agreement”), (c) each then-issued and outstanding public warrant of Founder, each representing a right to acquire one Founder Class A Share for $11.50 (a “Founder Public Warrant”), converted automatically, on a one-for-one basis, into a public warrant of Rubicon (a “Public Warrant”) that represents a right to acquire one share of Class A Common Stock for $11.50 pursuant to Section 4.5 of the Warrant Agreement, dated October 14, 2021, by and between Founder and Continental Stock Transfer and Trust Company (as amended by the Warrant Agreement Amendment (as defined below), the “Warrant Agreement”), (d) each then-issued and outstanding private placement warrant of Founder, each representing a right to acquire one Founder Class A Share for $11.50 (a “Founder Private Placement Warrant”), converted automatically, on a one-for-one basis, into a private placement warrant of Rubicon (the “Private Warrant” and together with the Public Warrants, the “Warrants”) that represents a right to acquire one share of Class A Common Stock for $11.50 pursuant to Section 4.5 of the Warrant Agreement, and (e) each then-issued and outstanding unit of Founder, each representing a Founder Class A Share and one-half of a Founder Public Warrant (a “Founder Unit”), that had not been previously separated into the underlying Founder Class A Share and one-half of one Founder Public Warrant upon the request of the holder thereof, was separated and automatically converted into one share of Class A Common Stock and one-half of one Public Warrant. No fractional Public Warrants were issued upon separation of the Founder Units. In addition, the certificate of incorporation of Rubicon (the “Charter”) authorizes Class V common stock, par value $0.0001 per share (“Class V Common Stock” and together with the Class A Common Stock, “Common Stock”). Class A Common Stock is entitled to economic rights and one vote per share and Class V Common Stock is entitled to one vote per share with no economic rights. In connection with the consummation of the Business Combination, Continental Stock Transfer and Trust Company and Rubicon amended the Warrant Agreement, to among other things, reflect the change in name and the Domestication (the “Warrant Agreement Amendment”).

 

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Following the Merger, among other things, Rubicon was issued Class A Units in Holdings LLC (“Class A Units”) and all preferred units, common units, and incentive units of Holdings LLC (including such convertible instruments, the “Rubicon Interests”) outstanding as of immediately prior to the Merger were automatically recapitalized into Class A Units and Class B Units of Holdings LLC (“Class B Units”), as authorized by the Eighth Amended and Restated Limited Liability Company Agreement of Holdings LLC (“A&R LLCA”) that was adopted at the time of the Merger. Following the Blocker Mergers, (a) holders of Rubicon Interests immediately before the Closing, other than the Blocker Companies (the “Blocked Unitholders”), were issued Class B Units (the “Rubicon Continuing Unitholders”), (b) Rubicon Continuing Unitholders were issued a number of shares of Class V Common Stock equal to the number of Class B Units issued to the Rubicon Continuing Unitholders, (c) Blocked Unitholders were issued shares of Class A Common Stock (as a result of the Blocker Mergers), and (d) following the adoption of the equity incentive award plan of Rubicon adopted at the Closing (the “2022 Plan”) and the effectiveness of a registration statement on Form S-8 filed by Rubicon on October 19, 2022, holders of phantom units of Holdings LLC immediately prior to the Closing (“Rubicon Phantom Unitholders”) and those current and former directors, officers and employees of Holdings LLC entitled to certain cash bonuses (the “Rubicon Management Rollover Holders”) were awarded restricted stock units of Rubicon (“RSUs”) or deferred stock units (“DSUs”) (in each case depending on their employment status at the time of the award), and such RSUs and DSUs will vest into shares of Class A Common Stock on February 11, 2023, the date that is 180 days following the Closing. In addition to the securities issuable at the Closing and pursuant to the 2022 Plan, certain of the Rubicon Management Rollover Holders received one-time cash payments (the “Cash Transaction Bonuses”). In addition, pursuant to the Merger Agreement, (i) Blocked Unitholders immediately before the Closing received a right to receive a pro rata portion of 1,488,519 shares of Class A Common Stock (the “Earn-Out Class A Shares”) and (ii) Rubicon Continuing Unitholders immediately before the Closing received a right to receive a pro rata portion of 8,900,840 Class B Units (“Earn-Out Units”) and an equivalent number of shares of Class V Common Stock (“Earn-Out Class V Shares”, and together with Earn-Out Class A Shares and Earn-Out Units, “Earn-Out Interests”), in each case, depending upon the performance of Class A Common Stock during the five (5) year period after the Closing.

 

Concurrent with the execution of the Merger Agreement, Founder entered into certain Subscription Agreements, dated as of December 15, 2021, by and between Founder, on the one hand, and certain investors (“PIPE Investors”) on the other hand (collectively, the “Subscription Agreements”), pursuant to which, among other things, concurrent with the Closing, Rubicon issued and sold to the PIPE Investors an aggregate of 11,100,000 shares of Class A Common Stock, at a per share price of $10.00, for an aggregate purchase price of $111,000,000, on the terms and subject to the conditions set forth therein. On August 12, 2022, certain of the current PIPE Investors and new PIPE Investors entered into additional Subscription Agreements to purchase an aggregate of 1,000,000 shares of Class A Common Stock, at a per share price of $10.00, for an aggregate purchase price of $10,000,000 (together with the original Subscription Agreements, the “PIPE Financing” or “PIPE Investment”).

 

Concurrent with the execution of the Merger Agreement, the Sponsor and certain insiders of Founder (the “Insiders”) entered into the Sponsor Agreement with Founder and Holdings LLC, pursuant to which the Sponsor and the Insiders agreed, among other things, not to transfer any Class A Common Stock or Private Warrants (or any shares of Class A Common Stock issuable upon conversion or exercise thereof) until the earlier of (i) February 11, 2023 (180 days after the Closing Date) and (ii) the date after the Closing Date on which Rubicon completes a liquidation, merger, or similar transaction that results in all of Rubicon’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property. In the event that Rubicon waives, releases, or terminates a Lock-Up Agreement (as defined below) with respect to any shares or holders, the Sponsor and the Insiders will be granted a similar waiver, release, or termination with respect to a pro rata portion of the securities held by them and subject to the foregoing restrictions.

 

Concurrent with the execution of the Merger Agreement, certain holders of Rubicon Interests entered into lock-up agreements with Founder and Holdings LLC (the “Lock-Up Agreements”). Pursuant to the Lock-Up Agreements, each holder agreed to certain transfer restrictions with respect to the securities such holder received as transaction consideration pursuant to the Merger Agreement, until the earlier of (i) February 11, 2023 (180 days after the Closing Date) and (ii) the date after the Closing on which Rubicon completes a liquidation, merger, or similar transaction that results in all of Rubicon’s stockholders having the right to exchange their equity holdings for cash, securities or other property. The holders of Rubicon Interests further agreed pursuant to the Lock-Up Agreements not to exchange Class B Units for Class A Common Stock during this restricted period. In the event that Rubicon waives, releases, or terminates the lock-up provision in any other Lock-Up Agreement, then the other holders subject to the Lock-Up Agreements will be granted a similar waiver, release or termination with respect to a pro rata portion of the securities held thereby and subject to the foregoing restrictions. Between entry into the Merger Agreement and Closing, additional holders of Rubicon Interests entered into Lock-Up Agreements on the same terms.

 

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Pursuant to that certain Rubicon Equity Investment Agreement entered into on May 25, 2022 (the “Rubicon Equity Investment Agreement”), by and among Holdings LLC and certain of its equityholders (the “New Equity Holders”) who are affiliated with Andres Chico (a member of our board of directors) and Jose Miguel Enrich (a beneficial owner of greater than 10% of the issued and outstanding Common Stock). Concurrent with the Closing and in satisfaction of the obligations thereunder, (a) Rubicon caused to be issued to the New Equity Holders 880,000 Class B Units pursuant to the Merger Agreement, (b) Rubicon issued 160,000 shares of Class A Common Stock to the New Equity Holders, and (c) Sponsor forfeited 160,000 Founder Class B Shares.

 

In connection with the extraordinary general meeting of Founder SPAC held on August 2, 2022 to approve the Business Combination and other related matters (the “Founder Special Meeting”), holders of 31,260,777 Founder Class A Shares (or approximately 98.8% of the issued and outstanding Founder Class A Shares on such date) exercised their right to redeem those shares for cash at a price of approximately $10.176 per share. On August 4, 2022, Founder, Holdings LLC and ACM ARRT F LLC, a Delaware limited liability company (“ACM Seller”, together with such other parties to which obligations of ACM Seller were novated, the “FPA Sellers”), entered into an agreement (the “Forward Purchase Agreement”) for an OTC Equity Prepaid Forward Transaction. The primary purpose of entering into the Forward Purchase Agreement was to help ensure that Founder’s initial listing application with the NYSE was approved, increasing the likelihood that the transaction would close. Pursuant to the Forward Purchase Agreement, prior to the consummation of the Business Combination, at an average purchase price of $10.15 per share, the FPA Sellers purchased an aggregate of 7,082,616 Founder Class A Shares from certain holders that elected to redeem Founder Class A Shares for cash and reversed such election (the “Redeeming Holders”), of which 666,667 shares were Share Consideration (as defined in the Forward Purchase Agreement). Pursuant to the Forward Purchase Agreement, each of the FPA Sellers waived its redemption rights under the governing documents of Founder in connection with the Closing. As a result of the Forward Purchase Agreement, at the Business Combination, holders of 24,178,161 Founder Class A Shares (or approximately 76.5% of the issued and outstanding Founder Class A Shares on such date) exercised their right to redeem those shares for cash at a price of approximately $10.176 per share, resulting in an aggregate redemption payment of approximately $246.0 million from Founder’s trust account. Following these redemptions, at the Closing we received approximately $75.8 million from Founder’s trust account, without accounting for the payment of transaction costs, payments under the Forward Purchase Agreement and Cash Transaction Bonuses. As a result of consummation of the Mergers and accounting for the foregoing redemption payments and receipt of funds from Founder’s trust account, we received approximately $73.8 million in net proceeds from the Business Combination after accounting for our payment of approximately $25.4 million of transaction costs, aggregate payments of $68.7 million by us to the FPA Sellers under the Forward Purchase Agreement, net proceeds of $121.0 million from the PIPE Investment, and the payment by us of an aggregate of $28.9 million in Cash Transaction Bonuses. Following the Closing, we are entitled to certain payments from the FPA Sellers upon the sale of Recycled Shares (as defined in the Forward Purchase Agreement) and we are obligated to make issuances of shares of Class A Common Stock to the FPA Sellers upon certain of such sales by the FPA Sellers (the “Reissued Shares”). At maturity, we will be obligated to pay the FPA Sellers an aggregate of $30.0 million net of certain shares acquired by the FPA Sellers pursuant to the Forward Purchase Agreement.

 

On August 15, 2022, prior to the Closing, Founder, Sponsor, and Holdings LLC entered into a forfeiture agreement (the “Sponsor Forfeiture Agreement”), whereby Sponsor forfeited 1,000,000 Founder Class B Shares immediately prior to the Closing.

 

At the Closing, Rubicon and Holdings LLC entered into a Tax Receivable Agreement (the “Tax Receivable Agreement” or “TRA”) with Rubicon Continuing Unitholders and Blocked Unitholders (the “TRA Holders”). Pursuant to the Tax Receivable Agreement, among other things, Rubicon is required to pay to the TRA Holders 85% of certain of Rubicon’s realized (or in certain cases deemed realized) tax savings as a result of certain tax benefits related to the transactions contemplated by the Merger Agreement and future exchanges of Class B Units for Class A Common Stock or cash.

 

At the Closing, Founder entered into an amended and restated registration rights agreement (the “A&R Registration Rights Agreement”) with the Sponsor, Holdings LLC, and certain holders of Rubicon Interests (the “Rubicon Legacy Holders” and together with the Sponsor and any persons who thereafter become party to the agreement, the “RRA Holders”). Pursuant to the A&R Registration Rights Agreement, within 30 days of the Closing Date, Rubicon was required to file a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), registering for resale (i) all outstanding shares of Class A Common Stock held by the RRA Holders immediately following the Closing, (ii) all shares of Class A Common Stock issuable upon exercise, conversion or exchange of any option, warrant or convertible security held directly or indirectly by a RRA Holder immediately following the Closing, (iii) any Warrants or shares of Class A Common Stock that may be acquired by the RRA Holders upon the exercise of a Warrant or other right to acquire Class A Common Stock held by a RRA Holder immediately following the Closing, (iv) any shares of Class A Common Stock or Warrants otherwise acquired or owned by a RRA Holder following the date of the A&R Registration Rights Agreement to the extent that such securities are “restricted securities” (as defined in Rule 144 promulgated under the Securities Act (“Rule 144”)) or are otherwise held by an “affiliate” (as defined in Rule 144) of Rubicon, and (v) any other equity security of Rubicon or its subsidiaries issued or issuable with respect to any of the foregoing pursuant to a reorganization, stock split, stock dividend, or like transaction. Rubicon thereafter is required to maintain a registration statement that is continuously effective and to cause the registration statement to regain effectiveness in the event that it ceases to be effective. The RRA Holders have certain “demand” and “piggyback” registration rights under the agreement. Rubicon will bear the expenses incurred in connection with the filing of any registration statements pursuant to the A&R Registration Rights Agreement, including the registration statement of which this prospectus forms a part, which registers all shares of Class A Common Stock and Warrants held by or otherwise issuable to the RRA Holders as of the date hereof.

 

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On August 31, 2022, Rubicon entered into a Standby Equity Purchase Agreement (the “SEPA”) with YA II PN, Ltd., a Cayman Islands exempt limited partnership (the “Yorkville Investor”), pursuant to which (a) Rubicon issued the Yorkville Investor 200,000 shares of Class A Common Stock, which represented an initial up-front commitment fee (the “Yorkville Commitment Shares”), and (b) assuming satisfaction of certain conditions and subject to the limitations set forth in the SEPA, Rubicon has the right, from time to time to issue and sell to the Yorkville Investor up to $200.0 million in shares of Class A Common Stock until the earlier of September 1, 2025 (the first day of the month next following the 36-month anniversary of the SEPA) or the date on which the facility has been fully utilized, in each case, with such sales first subject to the Securities and Exchange Commission (the “SEC”) declaring effective a registration statement covering the resale of such shares of Class A Common Stock.

 

The descriptions of the agreements set forth above are not complete and are subject to and qualified in their entirety by reference to the full text of the applicable agreement, copies of which are filed as exhibits to the registration statement of which this prospectus forms a part and are incorporated herein by reference. For additional information regarding the transactions and agreements discussed above, see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information,” “Certain Financing Transactions,” “Certain Relationships and Related Party Transactions,” “Description of Securities” and “Securities Eligible for Future Sale.”

 

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ABOUT THIS PROSPECTUS

 

This prospectus is part of a registration statement on Form S-1 that we filed with the SEC using a “shelf” registration process. Under this shelf registration process, we and the Selling Securityholders 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 from time to time through any means described in the section entitled “Plan of Distribution” of this prospectus or any prospectus supplement. More specific terms of any securities that the Selling Securityholders offer and sell may be provided in a prospectus supplement that describes, among other things, the specific amounts and prices of the Class A Common Stock and/or Warrants being offered and the terms of the offering.

 

A prospectus supplement may also add, update or change information included in this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in such prospectus supplement modifies or supersedes such statement. Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded will be deemed not to constitute a part of this prospectus. You should rely only on the information contained in this prospectus and any applicable prospectus supplement. See “Where You Can Find More Information.”

 

Neither we nor the Selling Securityholders have authorized anyone to provide any information or to make any representations other than those contained in this prospectus and any accompanying prospectus supplement. We and the Selling Securityholders take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the securities offered hereby and only under circumstances and in jurisdictions where it is lawful to do so. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus or any applicable prospectus supplement. This prospectus is not an offer to sell securities, and it is not soliciting an offer to buy securities, in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any prospectus supplement is accurate only as of the date on the front of those documents, regardless of the time of delivery of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

For investors outside the United States: neither we nor the Selling Securityholders have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.

 

This prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration statement of which this prospectus is a part, and you may obtain copies of those documents as described below under “Where You Can Find More Information.”

 

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MARKET, RANKING AND OTHER INDUSTRY DATA

 

Certain information contained in this document relates to or is based on studies, publications, surveys, and other data obtained from third-party sources and Rubicon’s own internal estimates and research. While we believe these third-party sources to be reliable as of the date of this prospectus, we have not independently verified the market and industry data contained in this prospectus or the underlying assumptions relied on therein. Finally, while we believe our own internal research is reliable, such research has not been verified by any independent source. These estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus.

 

TRADEMARKS

 

This prospectus contains references to trademarks, trade names and service marks belonging to other entities. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements about the anticipated benefits of the Business Combination and the financial condition, results of operations, earnings outlook, and prospects of Rubicon. Forward-looking statements appear in a number of places in this prospectus including, without limitation, in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” 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. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. You should understand that the following important factors, in addition to those factors described elsewhere in this prospectus, could affect the future results of Rubicon and could cause those results or other outcomes to differ materially from those expressed or implied in such forward-looking statements, including Rubicon’s ability to:

 

access, collect and use personal data about consumers;

 

execute its business strategy, including monetization of services provided and expansions in and into existing and new lines of business;

 

anticipate the impact of the coronavirus disease 2019 (“COVID-19”) pandemic and its effect on business and financial conditions;

 

manage risks associated with operational changes in response to the COVID-19 pandemic;

 

realize the benefits expected from the Business Combination;

 

anticipate the uncertainties inherent in the development of new business lines and business strategies;

 

retain and hire necessary employees;

 

increase brand awareness;

 

attract, train and retain effective officers, key employees or directors;

 

upgrade and maintain information technology systems;

 

acquire and protect intellectual property;

 

meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness;

 

effectively respond to general economic and business conditions;

 

maintain the listing of the Company’s securities on the NYSE or an inability to have its securities listed on another national securities exchange;

 

obtain additional capital, including use of the debt market;

 

enhance future operating and financial results;

 

anticipate rapid technological changes;

 

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comply with laws and regulations applicable to its business, including laws and regulations related to data privacy and insurance operations;

 

stay abreast of modified or new laws and regulations applying to its business;

 

anticipate the impact of, and respond to, new accounting standards;

 

anticipate the rise in interest rates and other inflationary pressures which increase the cost of capital;

 

anticipate the significance and timing of contractual obligations;

 

maintain key strategic relationships with partners and distributors;

 

respond to uncertainties associated with product and service development and market acceptance;

 

manage to finance operations on an economically viable basis;

 

anticipate the impact of new U.S. federal income tax law, including the impact on deferred tax assets;

 

successfully defend litigation; and

 

  successfully deploy the proceeds from the Business Combination and any proceeds from shares of Class A Common Stock sold pursuant to the SEPA.

 

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this prospectus are more fully described under the heading “Risk Factors” and elsewhere in this prospectus. Forward-looking statements are not guarantees of performance and speak only as of the date hereof. The forward-looking statements are based on the current and reasonable expectations of Rubicon’s management but are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statements. There can be no assurance that future developments will be those that have been anticipated or that we will achieve or realize these plans, intentions or expectations.

 

All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

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

 

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SUMMARY

 

This summary highlights certain significant aspects of our business and the offering and is a summary of information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read this entire prospectus, including the information presented under the sections titled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Information,” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus before making an investment decision. Unless the context indicates otherwise, references in this prospectus to the “Company,” “we,” “us,” “our” and similar terms prior to the Closing are intended to refer to Founder SPAC, and after the Closing, to Rubicon Technologies, Inc. and its consolidated subsidiaries. 

 

Business Summary

 

Overview

 

Founded in 2008, we are a digital marketplace for waste and recycling and a global leader in providing cloud-based waste and recycling solutions to businesses and governments. As a digital challenger to status quo waste companies, we have developed and commercialized proven, cutting-edge solutions that bring transparency and environmental innovation to the waste and recycling industry, enabling customers to make data-driven decisions that can lead to more efficient and effective operations and yield more sustainable outcomes.

 

Underpinning the digital marketplace for waste and recycling services is a cutting-edge, modular, digital platform that powers a modern, digital experience and delivers data-driven insights and transparency for our customers and hauling and recycling partners. We provide our waste generator customers with a digital marketplace that delivers pricing transparency, self-service capabilities, and a seamless customer experience while helping them achieve their environmental goals. We enhance our hauling and recycling partners’ economic opportunities by democratizing access to large, national accounts that typically engage suppliers at the corporate level. By providing telematics-based and waste-specific solutions as well as access to group purchasing efficiencies, we help large national accounts optimize their businesses. We help governments provide more advanced waste and recycling services that allow them to serve their local communities more effectively by digitizing their routing and back-office operations and using our computer vision technology to combat recycling material contamination at the source.

 

Over the past decade, this value proposition has allowed us to scale our platform considerably. Our digital marketplace now services over 8,000 customers, including numerous large, blue-chip customers such as Apple, Dollar General, Starbucks, Walmart, Chipotle, and FedEx, and encompasses over 8,000 hauling and recycling partners across North America. We have also deployed our technology in over 70 municipalities within the United States and operate in 20 countries. Furthermore, we have secured a robust portfolio of intellectual property, having been awarded more than 50 patents, with over 100 pending, and 20 trademarks.

 

Strengths and Competitive Advantages

 

Our business model provides a transparent marketplace that digitizes the waste and recycling sector for private companies and municipalities. We gain, maintain, and grow our customer relationships by providing what we believe are superior solutions that can help waste generators save money. We believe we have expertise and competitive advantages that will allow us to continue to maintain and grow our market share.

 

Cloud-Based Model Reduces Costs and Benefits from the Network Effect

 

Our business model is highly scalable because of our digital, cloud-based nature, which does not depend on owning any physical infrastructure such as trucks or waste facilities. Without any physical infrastructure and the working capital requirements inherent in those operations, we can efficiently and effectively deploy our platform around the world without the capital investment or the exposure that comes along with owning and operating this infrastructure.

 

Our platform also benefits from significant network effects. As more waste generator customers join our platform, increased waste and recycling volumes improve our ability to negotiate with haulers and recyclers. Increased waste and recycling volumes also create efficiencies within haulers’ and recyclers’ routes and operations, because the marginal cost of servicing additional locations within an existing route is comparatively low, which can improve service and pricing for our customers. Additionally, as the network expands, the amount of data we collect increases, allowing us to learn and further improve our solutions, benefiting all network participants. As our pricing improves with haulers and recyclers and as our expanding data asset improves our ability to deliver new circular solutions, our overall value proposition improves for our waste generator customers.

 

 

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Business Model and Customer Interests are Aligned Benefiting Us and Providing Greater Value to Customers

 

Our platform provides service and cost transparency to both our customers and partners along with automated business processes, allowing them to make informed decisions based on their priorities, whether it’s business growth, cost savings, or environmental outcomes.

 

Our incentives are aligned with our customers, both economically and environmentally. Landfill owners and operators often generate revenues through collection volumes and tipping fees, so they are incentivized to collect bins more frequently than necessary even when they are not full. Because we do not own landfills, we are not motivated by maximizing volumes and / or tipping fees. Therefore, we can work with our customers to optimize service levels for their business needs. In practice, we advise our waste generator customers on the implementation of new source separated recycling programs and educate store-level employees on how to safely and efficiently manage such program implementation and execution. Additionally, we will work upstream with our customers to design and effect reverse supply chain programs to aggregate valuable waste stream materials at central locations, or even to design programs that create internalized, circular solutions or reduce waste at the source.

 

Further, using our proprietary computer vision-based technology and our team of subject matter experts to examine the contents of a waste stream, we can assess the material composition of the waste stream. This information provides multiple benefits, including providing more detailed information about the contents and allowing customers to identify opportunities to divert certain materials from landfills. Using this information, we and our customers can generate better environmental outcomes, and, to the extent we can sell the materials to recycling and processing facilities, we can also create significant economic benefits.

 

For RUBICONPro, RUBICONPremier, and RUBICONSmartCity, our SaaS offerings, the core of services is about maximizing the use of scarce resources. We do this by optimizing routes and full fleet operations, by providing data for preventative vehicle maintenance, and by focusing on improving driver safety and behavior, which can improve outcomes for all constituents: drivers, supervisors, governments officials, and residents.

 

Superior Technology

 

Our user-friendly platform is vertically integrated and gives us control of all critical operations and transaction elements, which facilitates a fast, simple, and consistent user experience. We believe our ground-breaking technology is what the industry has needed for many years.

 

Our technology can affect all parties within the waste and recycling ecosystem:

 

We service waste generators’ needs through our network of haulers and recyclers and with vendor management, compliance, invoicing, payments, and receipts managed on our digital platform. We service requests through our proprietary customer portal RUBICONConnect or directly from waste generators via FMS / OMS system integrations, with real-time confirmation of service.

 

We equip haulers and recyclers with technology to detect location, load, and capacity. Haulers and recyclers digitally receive dispatched orders to be configured into their existing routes.

 

Municipal fleets are equipped with telematics and AI cameras to collect data for asset optimization. The resultant operational efficiencies can drive taxpayer savings, turning a garbage truck into a “roaming data center” that can deliver critical infrastructure assessments for governments all while performing its primary functions.

 

Our technology also helps implement advanced recycling programs, coordinating multiple vendors, directing the waste feedstock to specific processing facilities, and tracking end-destinations for traceability.

 

We enable data-driven waste management for all our partners, and integrated landfill operators process volumes contracted to us.

 

 

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Depth & Quality of Hauling & Recycling Network Benefits All Constituent Parties

 

We work with a network of more than 8,000 hauling and recycling partners. The scale of our network means we have access to vastly more hauling and recycling options through our digital platform. Our ability to access this extensive network benefits our customers and enables us to mitigate business risks for our customers associated with sole sourcing, including labor shortages, cost offsets (overages, contamination, etc.), and unaccommodating supplier scheduling.

 

The stickiness of the supplier side of our marketplace is ensured by the valuable services we provide them. Foremost is that we offer our hauling and recycling partners new business opportunities to service our waste generator customers. Given that many of our customers have a national or even global presence, often the only way a local supplier can get access to these important locations is through us.

 

We also offer our hauling and recycling partners a digital platform that is simple and efficient and can help them improve their routing, fleet operations, and driver behavior.

 

Lastly, we offer the benefits of scale to even the smallest hauler/recycler through a buying consortium where haulers and recyclers can save money on items critical to their businesses (fuel, parts, tires, insurance, etc.). We have not yet monetized this buying consortium but have plans to do so in the near term.

 

Number of Blue-chip Customers Creating Barrier to Entry

 

Our platform has been validated by a diverse group of over 8,000 customers in businesses and governments, most of which are under long-term contracts. Our typical customer agreement has a term of 3 years, providing confidence in and visibility towards future revenue streams. Our large and national accounts have also attracted many haulers and recyclers to the platform. Some of our blue-chip customers include Apple, Starbucks, Walmart, Dollar General, Chipotle, and FedEx.

 

Our Growth Strategies

 

The foundation of our business is our digital marketplace platform where it seamlessly transacts with our customers and hauling and recycling partners. The majority of our revenue is generated via this digital marketplace, which allows us to capture additional revenue streams through solutions designed to modernize hauling and recycling operations. We believe we have multiple proven avenues for future growth, including through increasing our geographic reach and the depth of our customer, hauling, and recycling networks in those markets.

 

Organic Customer Growth Through New Customer and Contract Wins Based on the Strengths of our Solutions

 

We have built a first-class sales and marketing organization that has helped build our base of more than 8,000 customers. We combine cutting-edge and sorely needed technology solutions with deep subject matter expertise in a mission-critical sector. Our products are designed to save customers money, provide for a more transparent and seamless customer experience, and help customers achieve positive environmental outcomes. This differentiated proposition creates a strong product-market fit within an industry that is ripe for change.

 

Additionally, we are uniquely capable of providing a “one-stop-shop” solution for all the waste generator customers’ waste and recycling needs. We offer a tiered solution, beginning with simply auditing and administering an incumbent hauler’s existing program for waste generators, through to the creation and provisioning of a full zero-waste program.

 

Organic customer growth is expected to continue to be a core driver of growth for us for the foreseeable future as a result of these and other strengths.

 

Growing Revenues with Existing Customers

 

We have proven our ability to expand our customer relationships. This is achieved both by expanding our geographic penetration across a customer’s footprint over time as well as by working collaboratively with our customers to identify incremental services that can be offered to further enhance their waste and recycling programs. Our waste generator account managers are empowered and incentivized to expand our existing customer relationships. Underscoring our ability to expand our existing customer relationships, revenue net retention stood at approximately 118% as of September 30, 2022.

 

 

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Adding More Service Capabilities

 

We have demonstrated our ability to expand our capabilities in the past. We have expanded our waste marketplace service capabilities to over 150 material types and multiple fleet types, and even beyond waste and recycling. We intend to continue to add service capabilities and invest in product development and have the platform, vision, and data to fuel growth.

 

From a customer perspective, we currently service national and SMB waste generator accounts, predominately within the U.S. market. Through our SaaS-based offerings, we have already expanded our footprint internationally and expect to continue this expansion – first by leading with technology, then by building out digital marketplace offerings in these markets.

 

As our business expands in its breadth and depth, we will continue to refine how we monetize our products and relationships. Today we earn money from licensing our technology, from waste and recycling services within our digital marketplace, and by participating in recyclable commodity sales transactions. By servicing all the constituents within the waste and recycling ecosystem, we have gathered valuable datasets that we have begun and will continue to offer on their own as data subscriptions. Further, we expect to be a larger player in establishing recycling and recyclable commodity marketplaces.

 

International Expansion within Existing Markets and into New Markets

 

We believe we are a global innovator in the waste and recycling industry and have successfully deployed our solutions in 20 countries though we currently generate the vast majority of our revenue within the United States. We intend to continue selling our solutions globally.

 

Strategic Acquisitions

 

We intend to grow by acquiring other businesses and the customers they serve. We have proven our ability to identify and execute on attractive acquisition targets. We have acquired and successfully integrated multiple businesses and have established a repeatable process for identifying and integrating complementary companies. Furthermore, we have spent considerable efforts building relationships across the industry, helping to build a large pipeline of additional acquisition opportunities.

 

 

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Organizational Structure

 

The diagram below depicts a simplified version of our equity ownership and organizational structure immediately following the Business Combination, assuming no Warrant exercises and not accounting for any issuances of shares of Class A Common Stock to the Yorkville Investor pursuant to the SEPA. For more information regarding the Business Combination, see “Introductory Note Regarding the Business Combination.” Percentages set forth below reflect the voting power and implied ownership interest in Rubicon, but do not give effect to the exercise of Warrants or exchange of any Class B Units.

 

 

 

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Summary of Risk Factors

 

An investment in our securities involves risks and uncertainties. You should carefully consider the following risks as well as the other information included in this prospectus, including “Cautionary Note Regarding Forward-Looking Statements,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus, before investing in our securities. See “Risk Factors” for a more detailed discussion of the risk factors listed below.

 

Risk Related to Our Business and Industry

 

 

We have a history of net losses and project net losses in future periods. We may not appropriately manage our expenses, nor achieve nor maintain profitability in the future.

 

 

We may be unable to manage our growth effectively.

 

 

The waste and recycling industry is highly competitive, and if we cannot successfully compete in the marketplace, our business, financial condition and operating results may be materially adversely affected.

 

 

Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.

 

 

Our customers and the third parties with whom we contract, including waste haulers, are participants in the waste and recycling industry and are therefore subject to a number of unique risks specific to this industry, which directly or indirectly subjects our business to many of the same risks to which their respective operations are subject.

 

 

Demand for our solutions is subject to volatility in our accounts’ and our haulers’ underlying businesses.

 

  Demand for our solutions can be affected by changes in recyclable commodity prices and quantities.

 

Risks Related to Ownership of Our Securities

 

Certain existing shareholders purchased securities in Rubicon 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 Rubicon may not experience a similar rate of return.

 

  Substantial future sales of shares of Class A Common Stock could cause the market price of our shares of Class A Common stock to decline.

 

The issuances of additional shares of Class A Common Stock under certain of our contracts and arrangements may result in dilution of holders of Class A Common Stock and have a negative impact on the market price of the Class A Common Stock.

 

A significant portion of the total outstanding shares of Class A Common Stock (or shares of Class A Common Stock that may be issued in the future pursuant to an exchange or redemption of Class B Units) are subject to lock-up restrictions, but may be sold into the market in the near future. This could cause the market price of our securities to drop significantly.

 

The Public 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 a majority of the then-outstanding Public Warrants approve of such amendment.

 

There can be no assurance that the Class A Common Stock and Public Warrants will continue to be listed on NYSE and that we will continue to comply with the continued listing standards of NYSE.

 

The market price and trading volume of Class A Common Stock may be volatile and could decline significantly following the Business Combination.

 

Rubicon may be subject to securities litigation, which is expensive and could divert management attention.

 

 

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Risks Related to Operating as a Public Company

 

Our management does not have prior experience in operating a public company.

 

Rubicon will depend on distributions from Holdings LLC to pay any taxes and other expenses, including payments under the Tax Receivable Agreement.

 

Rubicon is required to pay to the TRA Holders most of the tax benefits Rubicon receives from tax basis step-ups (and certain other tax benefits) attributable to its acquisition of Legacy Rubicon Units (as defined below) in connection with the Business Combination and in the future, and the amount of those payments is expected to be substantial.

 

In certain circumstances, Holdings LLC will be required to make distributions to us and the continuing members of Holdings LLC, and the distributions that Holdings LLC will be required to make may be substantial.

 

Risks Related to our Indebtedness

 

Our current liquidity, including negative cash flows and a lack of existing financial resources, raises substantial doubt about our ability to continue as a going concern, which may materially and adversely affect our business, financial condition, results of operations and prospects.

 

 

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Corporate Information

 

We were incorporated on April 26, 2021 as a Cayman Islands exempted company, and on August 15, 2022, in connection with the Domestication and the Business Combination, became a Delaware corporation and changed our name to Rubicon Technologies, Inc. See “Introductory Note Regarding the Business Combination.” Our principal executive office is located at 100 W Main Street, Suite 610, Lexington, Kentucky 40507, and our telephone number is (844) 479-1507. Our website address is www.rubicon.com. The information contained in or accessible from our website does not constitute part of and is not incorporated into this prospectus or the registration statement of which it forms a part, and you should not consider it part of this prospectus. We have included our website address in this prospectus solely as an inactive textual reference.

 

 

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THE OFFERING

 

Issuer  

Rubicon Technologies, Inc.

     
Shares of Class A Common Stock offered by us  

Up to 14,204,375 shares of Class A Common Stock that may be issued upon exercise of the Private Warrants.

     

Shares of Class A Common Stock offered by the Selling Securityholders

 

 

Up to an aggregate of 120,880,138 shares of Class A Common Stock, including (i) 19,612,903 shares of Class A Common Stock issued to an affiliate pursuant to the Merger Agreement, (ii) 1,470,968 shares of Class A Common Stock issuable to an affiliate as Earn-Out Class A Shares pursuant to the Merger Agreement, (iii) up to 52,475,827 shares of Class A Common Stock issued or issuable upon exchange of Class B Units held by certain of our directors, officers and affiliates that were issued pursuant to the Merger Agreement, (iv) up to 3,935,687 shares of Class A Common Stock issuable to certain of our directors, officers and affiliates upon exchange of an equivalent number of Class B Units that are issuable as Earn-Out Units pursuant to the Merger Agreement, (v) 12,100,000 shares of Class A Common Stock issued to the PIPE Investors, (vi) 160,000 shares of Class A Common Stock issued to the New Equity Holders, (vii) up to an aggregate of 14,204,375 shares of Class A Common Stock issuable upon the exercise of 14,204,375 Private Warrants, (viii) up to an aggregate of 6,746,250 shares of Class A Common Stock converted from Founder Class B Shares in connection with the Domestication, (ix) up to 216,473 shares of Class A Common Stock upon the settlement of 216,473 DSUs issued pursuant to the Merger Agreement as consideration to certain Phantom Unitholders and Rubicon Management Rollover Holders who were no longer employed by Rubicon or its subsidiaries at the time of the DSU award, and (x) up to 9,957,655 shares of Class A Common Stock issuable upon the settlement of 9,957,655 RSUs awarded to certain directors and officers of Rubicon pursuant to the Incentive Plan.

     
Warrants Offered by the Selling Securityholders  

Up to 14,204,375 Private Warrants.

     
Exercise Price of Warrants  

$11.50 per share, subject to adjustment as described herein.

     

Shares of Common Stock outstanding prior to exercise of all Warrants

 

165,041,221 shares of Common Stock, which represents 50,154,768 shares of Class A Common Stock and 114,886,453 shares of Class V Common Stock (as of November 28, 2022).

     

Shares of Common Stock outstanding assuming exercise of all Warrants

 

195,058,072 shares of Common Stock, which represents 77,949,500 shares of Class A Common Stock and 114,886,453 shares of Class V Common Stock (based on total shares outstanding as of November 28, 2022).

 

 

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Use of Proceeds  

We will not receive any proceeds from the sale of shares of Class A Common Stock or Private Warrants by the Selling Securityholders. We will receive up to an aggregate of approximately $163.4 million from the exercise of the Private Warrants, assuming the exercise in full of all of the Private Warrants for cash (however, Private Warrants may be exercised on a cashless basis and we may not receive any proceeds from such exercise, even if the Private Warrants are in-the money). We expect to use the net proceeds from the exercise of the Private Warrants, if any, for general corporate purposes. See “Use of Proceeds.

     

Redemption

 

The Warrants are redeemable in certain circumstances. See “Description of Securities — Warrants” for further discussion.

     
Business Combination - Related Lock-Up Agreements  

Certain of our securityholders, including certain Selling Securityholders, are subject to certain restrictions on transfer until the termination of applicable lock-up periods. See “Securities Eligible for Future Sale—Lock-Up Agreements” for further discussion.

     
Market for Common Stock and Warrants  

Our Class A Common Stock and Public Warrants are currently traded on the NYSE under the symbols “RBT” and “RBT WS,” respectively.

     
Risk Factors   See “Risk Factors” and other information included in this prospectus for a discussion of factors you should consider before investing in our securities.

 

We may receive up to an aggregate of approximately $345.2 million from the cash exercise of the Warrants. The exercise price of our Warrants is $11.50 per warrant. However, the last reported sales price of our Class A Common Stock on November 25, 2022 was $2.40. The likelihood that Warrant holders will exercise their Warrants, and therefore any amount of cash proceeds that we may receive, is dependent upon the trading price of our Class A Common Stock. If the trading price for our Class A Common Stock continues to be less than $11.50 per share, we do not expect Warrant holders to exercise their Warrants. Similarly, the Private Warrants may be exercised on a cashless basis and we will not receive any proceeds from such exercise, even if the Private Warrants are in-the-money. We expect to use the net proceeds from the exercise of such securities, if any, for general corporate purposes, which may include acquisitions or other strategic investments. We will have broad discretion over the use of any proceeds from the exercise of such securities. Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of Warrants when planning for our operational funding needs.

 

INFORMATION RELATED TO OFFERED SECURITIES

 

The following table includes information relating to the shares of Class A Common Stock and Warrants being registered for resale by the Selling Securityholders, including the average price each Selling Securityholder paid for such securities and the potential profit relating to the sale of such securities. The following table is in part based off the Company’s internal records and is for illustrative purposes only. The table should not be relied upon for any purpose outside of its illustrative nature. Many of the securities registered for resale were acquired as a result of investments in the Company and related awards made by the Company prior to the Closing. Consequently, as seen in the table below, some of the Selling Securityholders may realize a positive rate of return on the sale of their securities covered by this prospectus even if the market price per share of Class A Common Stock is significantly below the $10.00 per share offering at the time of Founder’s IPO, at which price the public shareholders would experience a negative rate of return on their investment. For more information regarding the composition of each Selling Securityholder’s securities registered for resale, see the section entitled “Selling Securityholders”.

 

 

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Selling Securityholder   Number of
Offered
Securities
    Effective Purchase
Price per
Offered
Security
    Potential profit Per
Offered
Security (1)
 
Merger Consideration / Earn-Out Interests(2)     77,495,385     $ 3.45     $ (1.05
RSUs and DSUs (3)     10,217,924     $ 0.00     $ 2.40  
PIPE (4)     13,200,000     $ 10.00     $ (7.60 )
Rubicon Equity Investment Agreement (5)     240,000     $ 7.69     $ (5.29
Founder Shares (6)     6,746,250     $ 0.00371     $ 2.39629424  
Private Warrants (7)     14,204,375     $ 1.00     $ (0.94

 

 

(1) Based on the closing price of our shares of Class A Common Stock on November 25, 2022 of $2.40. For Private Warrants, based on the closing price of our Public Warrants on November 25, 2022 of $0.061.
(2) Represents shares of Class A Common Stock issued or issuable to former equity holders of Rubicon Technologies, LLC. Represents the weighted average price per share held by Phil Rodoni, Jevan Anderson, William Meyer, Tom Owston, Ambassador Paula J. Dobriansky, RUBCN RUBCN Holdings LP, RUBCN IV LP, RUBCN Holdings V LP, Jose Miguel Enrich, RGH, Inc., Guardians of New Zealand Superannuation, MBI Holdings LP, and Brent Callinicos. Shares of Class A Common Stock represented were acquired at an average range of $0.00 to $15.52 per share; securities acquired for no cash consideration include interests awarded to such person for services rendered to Rubicon Technologies, LLC.
(3) Represents RSUs and DSUs, each of which upon vesting becomes one share of Class A Common Stock. The awards were issued for no cash consideration to current and former directors, officers, employees and consultants for services rendered to the Company. The underlying Class A Common Stock registered for resale in which these RSUs and DSUs vest are held by Phil Rodoni, Nate Morris, Alexander Naumov, Benjamin Meadows, Charles Zinkowski, Chris Gurley, John Daniel Wilkins, Donald Muller, Jacqueline Beason, Jon Morrison, Kerri Faber, Maui Cheska Orozco, Michael Wilson, Nate Marquardt, Ryan Kistenfeger, Sarah Sanders, Shawn Nugent, Stephanie Batey, Timothy Lamb, and Victoria Thornton.
(4) Represents shares of Class A Common Stock acquired as PIPE Investments by Caroc Corporation, David Manuel Gutierrez Muguerza, Felipe Esteve Recolons, Guardians of New Zealand Superannuation, Ignatius Limited Partnership, Jorge Esteve Recolons, MBI Holdings LP, Palantir Technologies Inc., Raul Manuel Gutierrez Muguerza, Sabius Limited Partnership, SCP Opportunity XXXVIII LP, Sergio Manuel Gutierrez Muguerza, Tierra Norte L.P., Wickford Investments LP, Bolis Holdings LP, DGR Holdings LP, Pequeno Holdings LP, and Alex Klinghoffer.
(5) Represents shares of Class A Common Stock issued pursuant to the Rubicon Equity Investment Agreement to David Manuel Gutierrez Muguerza, MBI Holdings LP, Raul Manuel Gutierrez Muguerza, and Sergio Manuel Gutierrez Muguerza.
(6) Represents shares of Class A Common Stock that converted on a one-to-one basis at the Business Combination from Founder Class B Shares. Sponsor acquired these securities for $25,000 prior to the IPO.
(7) Represents Private Warrants acquired by Jefferies LLC and Sponsor pursuant to Private Placement Warrant Purchase Agreements entered into with the Company on October 14, 2021.

 

 

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SUMMARY HISTORICAL FINANCIAL INFORMATION OF RUBICON

 

The following table sets forth selected historical financial information derived from Holdings LLC’s (i) unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021, (ii) unaudited condensed consolidated balance sheets as of September 30, 2022 and 2021, (iii) audited consolidated statements of operations for the years ended December 31, 2021 and 2020, and (iv) audited consolidated balance sheets as of December 31, 2021 and 2020, each of which is included elsewhere in this prospectus. The unaudited condensed consolidated financial statements were prepared on a basis consistent with our audited consolidated financial statements and, in the opinion of management, include all adjustments of a normal, recurring nature that are necessary for the fair presentation of the financial statements.

 

The historical results included below and elsewhere in this prospectus are not necessarily indicative of the future performance of Rubicon. The information presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the consolidated financial statements and related notes appearing elsewhere in this prospectus.

 

Selected Consolidated Statement of Operations Data:

 

   For the
Nine Months Ended
September 30,
   For the
Years Ended
December 31,
 
(in thousands, except unit data) 

2022

(unaudited)

  

2021

(unaudited)

   2021   2020 
Total Revenue  $509,395   $419,762   $583,050   $539,373 
Total Costs and Expenses   747,761    466,265    655,657    590,774 
Loss from operations   (238,366)   (46,503)   (72,607)   (51,401)
Other Income (Expense)                    
Gain on forgiveness of debt   -    10,900    10,900    - 
Other expense   (1,994)   (730)   (1,055)   (427)
Interest expense, net   (12,264)   (7,461)   (11,453)   (8,209)
Total Other Income (Expense)   (25,312)   2,711    (2,214)   (8,636)
Loss Before Income Tax Expense (Benefit)   (263,678)   (43,792)   (74,821)   (60,037)
Income Tax Expense (Benefit)   60    (961)   (1,670)   (1,454)
Net Loss  $(263,738)  $(42,831)  $(73,151)  $(58,583)

 

Selected Consolidated Balance Sheet Data:

 

   As of
September 30,
   As of
December 31,
 
(in thousands) 

2022

(unaudited)

  

2021

(unaudited)

   2021   2020 
Cash and cash equivalents  $4,464   $7,638   $10,617   $6,021 
Accounts receivable, net   58,662    47,649    42,660    45,019 
Total Assets   191,859    173,555    175,641    159,899 
Accounts payable   58,498    53,688    47,531    41,915 
Line of credit   30,095    25,000    29,916    29,373 
Accrued expenses   162,428    54,685    65,538    48,990 
Long-term debt, net of debt issuance costs   69,543    52,291    51,000    47,024 
Total Liabilities   346,488    204,596    236,945    181,085 
Stockholders’/Members’ (Deficit) Equity   (154,629)   (31,041)   (61,304)   (21,186)

 

 

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SUMMARY UNAUDITED CONDENSED COMBINED PRO FORMA FINANCIAL INFORMATION

 

The following summary unaudited pro forma condensed combined financial data gives effect to the Merger and the other transactions contemplated by the Merger Agreement described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” Founder was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Mergers were treated as the equivalent of Holdings LLC issuing stock for the net assets of Founder, accompanied by a recapitalization. The net assets of Founder were stated at their historical value within the pro forma financial statements with no goodwill or other intangible assets recorded.

 

The summary unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 combines the historical unaudited statement of operations of Founder for the six months ended June 30, 2022 with the historical unaudited condensed consolidated statement of operations of Holdings LLC for the nine months ended September 30, 2022.

 

The summary unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2021 combines the historical audited statement of operations of Founder for the period from April 26, 2021 (inception) through December 31, 2021 with the historical audited consolidated statement of operations of Holdings LLC for the fiscal year ended December 31, 2021. The unaudited pro forma statements of operations give effect to the relevant transactions as if they had been consummated on January 1, 2021.

 

The summary unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the historical financial statements of Holdings LLC and Founder and the accompanying notes, which are included elsewhere in this prospectus.

 

Statement of Operations Data for the Nine Months Ended September 30, 2022     
Revenue  $509,395 
Net loss attributable to Rubicon Technologies, Inc.  $(22,082)
Net loss per share attributable to common stockholders - basic and diluted  $(0.45)
Weighted average common shares outstanding - basic and diluted   48,670,776 
      
Statement of Operations Data for the Year Ended December 31, 2021     
Revenue  $583,050 
Net loss attributable to Rubicon Technologies, Inc.  $(96,927)
Net loss per share attributable to common stockholders - basic and diluted  $(1.99)
Weighted average common shares outstanding - basic and diluted   48,670,776 

 

 

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RISK FACTORS

 

Investing in our securities involves substantial risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed below you should carefully consider the specific risks and other information set forth in this prospectus, including “Cautionary Note Regarding Forward-Looking Statements,” “Unaudited Pro Forma Condensed Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes thereto included elsewhere in this prospectus. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus or any prospectus supplement are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

 

Risks Related to Our Business and Industry

 

We have a history of net losses and project net losses in future periods. We may not appropriately manage our expenses, nor achieve nor maintain profitability in the future.

 

We have experienced net losses in each year since inception, including net losses of $73.2 million and $58.6 million for the fiscal years ended December 31, 2021 and 2020, respectively, and $263.7 million and $42.8 million for the nine months ended September 30, 2022 and 2021, respectively, and we may incur net losses in the future. While we project net losses to continue in future periods, it is difficult for us to predict our future results of operations, and we expect our operating expenses to increase significantly over the next several years as we continue to hire additional personnel, expand our operations and infrastructure, integrate completed acquisitions, make and integrate future acquisitions and invest in product development. In addition to the expected costs to grow our business, we also expect to incur significant additional legal, accounting and other expenses as a public company. Our indebtedness also bears interest at rates as high as 15%, which requires us to commit significant amounts to interest expense. If we fail to increase our revenue to offset the increases in our operating expenses, we may not achieve or sustain profitability in the future.

 

We may be unable to manage our growth effectively.

 

Our growth strategy places significant demands on our financial, operational and management resources. To continue our growth, we may need to add administrative, managerial and other personnel, and may need to make additional investments in operations and systems and this expansion will require us to increase our spending on working capital. We cannot assure you that we will be able to find and train qualified personnel, or do so on a timely basis, or to expand or otherwise modify our operations and systems to the extent, and in the time, required, or that we will be able to fund this expansion and increased spending on working capital from operating cash flows, debt or equity financing or other sources.

 

We are eligible to be treated as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which we refer to as the Sarbanes-Oxley Act or “SOX”, (2) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements and (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if we have total annual gross revenue of $1.0 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31 or, if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, we would cease to be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our Class A Common Stock less attractive because we may rely on these exemptions. If some investors find our Class A Common Stock less attractive as a result, there may be a less active trading market for our Class A Common Stock and our stock price may be more volatile.

 

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Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date that we are no longer an “emerging growth company” as defined in the JOBS Act. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future.

 

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected, and expect to continue, to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

We are an emerging growth company and smaller reporting company and as such are subject to various risks unique only to emerging growth companies and smaller reporting companies, including but not limited to, no requirement to provide an assessment of the effectiveness of internal controls over financial reporting.

 

We are an “emerging growth company” as defined in the JOBS Act. We will remain an emerging growth company until the earlier of (i) December 31, 2026, the last day of the fiscal year following the fifth anniversary of the date of the first sale of Founder’s initial public offering (the “IPO”); (ii) the last day of the fiscal year in which we have total annual gross revenues of $1.0 billion or more; (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under applicable SEC rules.

 

We expect that we will remain an emerging growth company for the foreseeable future but cannot retain our emerging growth company status indefinitely and will no longer qualify as an emerging growth company on or before December 31, 2026. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.

 

For so long as we remain an emerging growth company, we are permitted and intend to rely on exemptions from specified disclosure requirements that are applicable to other public companies that are not emerging growth companies. These exemptions include:

 

being permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements, with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

not being required to comply with the requirement of auditor attestation of our internal controls over financial reporting;

 

not being required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

 

reduced disclosure obligations regarding executive compensation; and

 

  not being required to hold a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

 

Additionally, as an emerging growth company and smaller reporting company our status as such carries various unique risks such as the risk that our financial statements may not be comparable to those of other public companies, and the risk that we will not be required to provide an assessment of the effectiveness of our internal controls over financial reporting until our second annual report following our initial public offering.

 

For as long as we continue to be an emerging growth company, we expect that we will take advantage of the reduced disclosure obligations available to us as a result of that classification. We have taken advantage of certain of those reduced reporting burdens in this prospectus. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

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An emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to avail ourselves of this extended transition period and, as a result, we will not be required to adopt new or revised accounting standards on the dates on which adoption of such standards is required for other public reporting companies.

 

We are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act, and have elected to take advantage of certain of the scaled disclosure available for smaller reporting companies.

 

If we fail to put in place appropriate and effective internal control over financial reporting and disclosure controls and procedures, we may suffer harm to our reputation and investor confidence levels.

 

Prior to the consummation of the Business Combination, we were not required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404. As a public company, we have significant requirements for enhanced financial reporting and internal controls.

 

The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our consolidated financial statements, and harm our operating results. In addition, we will be required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for the fiscal year ending December 31, 2022. 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. This assessment will need to include disclosure of any material weaknesses identified by our management in its internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing, and possible remediation. Testing and maintaining internal controls may divert our management’s attention from other matters that are important to our business. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date that we are no longer an “emerging growth company” as defined in the JOBS Act.

 

In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies that we may not be able to remediate in time to meet the deadline imposed by SOX for compliance with the requirements of Section 404. In addition, we may encounter problems or delays in completing the remediation of any deficiencies identified by our independent registered public accounting firm in connection with the issuance of their attestation report. Our testing, or the subsequent testing (if required) by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected on a timely basis. Any material weaknesses could result in a material misstatement of our annual or quarterly consolidated financial statements or disclosures that may not be prevented or detected. The existence of any material weakness would require management to devote significant time and incur significant expense to remediate any such material weakness, and management may not be able to remediate any such material weakness in a timely manner.

 

If we fail to implement the requirements of Section 404 in the required timeframe once we are no longer an emerging growth company or a smaller reporting company, we may be subject to sanctions or investigations by regulatory authorities, including the SEC and NYSE. Furthermore, if we are unable to conclude that our internal controls over financial reporting are effective, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our securities could decline, and we could be subject to sanctions or investigations by regulatory authorities. Failure to implement or maintain effective internal control over financial reporting and disclosure controls and procedures required of public companies could also restrict our future access to the capital markets.

 

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The waste and recycling industry is highly competitive, and if we cannot successfully compete in the marketplace, our business, financial condition and operating results may be materially adversely affected.

 

Our industry is highly competitive. Competition in the waste and recycling industry is typically based on the quality of services, ease of doing business, and price. We encounter intense competition from governmental, quasi-governmental and private sources in all aspects of our operations. We principally compete with large national waste management companies, counties and municipalities that maintain and manage their own waste collection and disposal operations and regional and local companies of varying sizes and financial resources. Our industry also includes companies that specialize in certain discrete areas of waste management, operators of alternative disposal facilities, companies that seek to use parts of the waste stream as feedstock for renewable energy and other by-products, and other waste brokers that rely upon haulers in local markets to address customer needs. Any shortage of haulers or negative impact on our relationship with haulers in local markets may adversely affect our ability to serve our customers and result in a negative impact to our customer relationships, revenue and growth potential. In recent years, the waste and recycling industry has seen some additional consolidation, which has reduced the number of haulers, though the industry remains intensely competitive.

 

We compete with national waste management companies who may have significantly greater resources than we do and some of whom have and may internally develop services and solutions similar to ours. Counties and municipalities may have financial competitive advantages to us because of their ability to collect tax revenues and issue tax-exempt financing with the associated governmental underwriting bond ratings. In addition, some of our competitors may have lower costs, debt levels or financial expectations than we do, allowing them to reduce their prices to expand their reach or to win competitively-bid contracts, including large national accounts and exclusive franchise arrangements with municipalities. When this happens, we may lose customers and be unable to execute our pricing strategy, resulting in a negative impact to our revenue growth from yield on base business. Any failure to effectively compete would adversely affect our business, financial condition and results of operations.

 

Weakness in the U.S. economy may expose us to credit risk for amounts due from governmental entities, large national accounts, industrial customers and others.

 

Weakness in the U.S. economy, including contractions caused by the COVID-19 pandemic, reduces the amount of taxes collected by various governmental entities. We provide services to a number of these entities, including numerous municipalities. These governmental entities may suffer financial difficulties resulting from a decrease in tax revenue and may ultimately be unable or unwilling to pay amounts owed to us. In addition, weakness in the economy may cause other customers, including our large national accounts, or industrial or environmental services clients, to suffer financial difficulties and ultimately to be unable or unwilling to pay amounts owed to us. Purchasers of our recyclable commodities can be particularly vulnerable to financial difficulties in times of commodity price volatility. The inability of our customers to pay us in a timely manner or to pay increased rates, particularly governmental entities and large national accounts, could negatively affect our business, financial condition and results of operations.

 

The COVID-19 pandemic has adversely affected our business and may continue to do so in the future.

 

During 2021 and continuing into 2022, federal, state and local governments throughout North America, Europe, Asia and other parts of the world have imposed varying degrees of restriction on social, commercial and economic activity to slow the spread of COVID-19. The pandemic and related measures have had a significant adverse impact on many sectors of the economy, including the waste and recycling industry. The resulting business closures, increases in unemployment and loss of consumer financial stability and confidence resulted in waste and recycling volume declines and reductions in customers’ waste service needs, which adversely affected our business as well as those of our customers and others within the waste and recycling industry.

 

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Our business and the waste and recycling industry have been adversely, and may be materially adversely affected, by the COVID-19 pandemic and the global response. Primarily due to the impact of COVID-19, a number of our customers either closed operations for a period of time and/or reduced operations or on-site work, particularly those in the restaurant and foodservice industries, resulting in the production of less waste and recyclable materials and, consequently, less demand for waste brokerage services. Several of our customers ultimately declared bankruptcy due to the impact of the pandemic. Additionally, within the waste and recycling industry, during the early stages of the pandemic, there was a decrease in the availability of haulers and other industry participants, primarily due to labor shortages. We also incurred some costs related to health, safety and financial security of our workforce during the COVID-19 pandemic, including increased automation in connection with transitioning our workforce to work-from-home. Costs increased for others within the waste and recycling industry as well, in part due to increased vendor costs particularly with respect to owners and operators of landfills and hauling services, many of which guaranteed full-time hourly employees compensation for a 40-hour work week regardless of any service decreases or reduced work schedules. It could be necessary for us and others within the waste and recycling industry to incur additional such costs in the future related to pandemic conditions or in connection with transitioning back to an in-office work environment.

 

We received $10.8 million in loans under the U.S. federal government’s Paycheck Protection Program established under the CARES Act. The receipt and any forgiveness of these loans was dependent on us having initially qualified for the loans and qualifying for forgiveness based on the funds being used for certain expenditures such as payroll costs and rent. We initially elected to repay $2.3 million of the loans during the year ended December 31, 2020, but the full $10.8 million amount of the loans was forgiven in March and June 2021. The SBA and other government communications have however indicated that all loans in excess of $2.0 million will be subject to audit and that those audits could take up to seven years to complete. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” Note 5 – Contingencies and uncertainties/COVID-19 pandemic and Note 19 – Subsequent events in the notes to our audited consolidated financial statements included elsewhere in this prospectus.

 

A broad-based economic slowdown resulting from prolonged negative effects of COVID-19 or otherwise could have significant adverse consequences for the financial condition of our customers or suppliers. As a result, customers may seek to reduce service levels or terminate contracts, or they may be unable to timely pay outstanding receivables owed to us, each of which would adversely affect our results of operations and cash flows. Additionally, such factors have, at times, made it more challenging to negotiate, renew or expand service contracts with acceptable pricing terms. Volume changes can fluctuate dramatically by line of business and decreases in volumes in higher margin businesses, such as what we have seen with COVID-19, can impact key financial metrics. Additionally, if stay-at-home orders and work from home trends continue or are re-instated, the demand for our services from our commercial and public customers could continue to or further negatively impact us. To the extent the landfills and waste haulers experience a deterioration in financial condition or operational capability as a result of the impacts of COVID-19 or another economic slowdown, we may experience material supply chain disruptions and delays, which could also increase our operating costs. If a large portion of our employee base or our hauler base were to become ill, it could impact our ability to provide timely and reliable service. Additionally, the transition of most of our back-office employees to work-from-home increases various operational risks, including potential exposure to cyber incidents, loss of data, fraud, internal control challenges and other disruptions as a consequence of more employees accessing our systems and information remotely in the course of their ordinary work. Many within the waste and recycling industry were exposed to these same risks as well.

 

The COVID-19 pandemic has adversely affected many industries as well as the economies and financial markets of many countries, initially causing a significant deceleration of economic activity. This slowdown reduced production, decreased demand for a broad variety of goods and services, diminished trade levels and led to widespread corporate downsizing, causing a sharp increase in unemployment. Although many of these impacts have lessened, there are still significant global supply chain issues impacting many different industries. We have also seen significant disruption of and extreme volatility in the global capital markets, which could increase the cost of, or entirely restrict access to, capital. The long-term impact of this outbreak on the United States and world economies is uncertain and these adverse impacts could worsen, impacting all segments of the global economy, and could result in a significant recession or worse, any of which could impact our business.

 

Considerable uncertainty still surrounds the COVID-19 virus and the new strains identified globally as well as the extent and effectiveness of responses taken on a local, national, and global level, including the roll-out and long-term efficacy of vaccines. While we expect the pandemic and related events will have a negative effect on our business and could accelerate or magnify one or more of the risks described in “Risk Factors” or elsewhere in this prospectus, the full extent and scope of the impact on our business and industry as well as on national, regional and global markets and economies is highly uncertain and cannot be predicted. Accordingly, our ability to conduct our business in the manner and on the timelines previously done or presently planned could be adversely affected. Any of the foregoing risks, or other direct or indirect effects of the COVID-19 pandemic that are not currently foreseeable, could materially and adversely affect our business, financial condition and results of operations.

 

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Our sales cycles can be long and unpredictable, and our sales efforts require considerable investment of time and expense. If our sales cycle lengthens or we invest substantial resources pursuing unsuccessful sales opportunities, our operating results and growth would be harmed.

 

We have historically incurred significant costs and experienced long sales cycles when selling to customers. The decision to adopt our modules may require the approval of multiple technical and business decision makers, including security, compliance, operations, finance and treasury, marketing, and IT. In addition, before our customers will commit to deploying our modules at scale, they often require extensive education about our modules and significant customer support time or pilot programs, engage in protracted pricing negotiations and seek to secure development resources. In addition, sales cycles for our customers are inherently complex and unpredictable. These complex and resource intensive sales efforts could place additional strain on our development and engineering resources. Further, even after our customers contract to use our platform, they may require extensive integration or deployment resources from us before they become active customers, which has at times extended to multiple quarterly periods following the execution of the agreement. Finally, our customers may choose to develop their own solutions that do not include any or all of our modules. They also may demand reductions in pricing as their usage of our modules increases, which could have an adverse impact on our gross margin. If we are unable to increase the revenue that we derive from these customers, then our business, results of operations and financial condition may be adversely affected.

 

Our management team will have broad discretion over the use of the net proceeds from our sale of shares of Class A Common Stock pursuant to the SEPA, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.

 

Our management team will have broad discretion as to the use of the net proceeds from our sale of shares of Class A Common Stock pursuant to the SEPA, if any, and we could use such proceeds for purposes other than those currently contemplated. Accordingly, you will be relying on the judgment of our management team with regard to the use of those net proceeds, and you will not have the opportunity to vote on or otherwise determine how or whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management team to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.

 

We may have environmental liabilities that are not covered by our insurance, regardless of whether we are at fault.

 

We may incur environmental liabilities arising from our operations or third parties with whom we do business. Even if we obtain legally enforceable representations, warranties and indemnities from the parties with whom we do business, these protections may not fully cover the liabilities or these parties may not have sufficient funds to perform their obligations. Some environmental laws and regulations may impose strict, joint and several liability in connection with releases of regulated substances into the environment, and can impose liability on parties who were not to blame. New or increased regulation of substances, such as PFAS or other emerging contaminants, could also lead to increased or previously unauthorized remediation costs or litigation risk. Therefore, in some situations we could be exposed to liability as a result of our conduct that was lawful at the time it occurred or the conduct of, or conditions caused by, third parties for which we are not at fault. Further, we maintain insurance with respect to these environmental liabilities, but in certain cases we have determined to do so with high deductibles. If we were to incur substantial liability for environmental damage, our insurance coverage may be inadequate to cover such liability. Also, due to the variable condition of the insurance market, we have experienced, and may experience in the future, increased insurance retention levels and increased premiums or unavailability of insurance. As we assume more risk for insurance through higher retention levels, we may experience more variability in our insurance reserves and expense. If we were to incur liability for environmental damage, environmental clean-ups, corrective action or damage not covered by insurance or in excess of the amount of our coverage, our business, financial condition and results of operations could be adversely affected.

 

Our customers and the third parties with whom we contract, including waste haulers, are participants in the waste and recycling industry and are therefore subject to a number of unique risks specific to this industry, which directly or indirectly subjects our business to many of the same risks to which their respective operations are subject.

 

We participate within the waste and recycling industry by providing consulting and management services to our customers for waste removal, waste management, logistics, and recycling solutions. Many of our customers and each of the parties with whom we contract on behalf of our customers, including waste haulers, operate within the waste and recycling industry, some of which may also construct, own and operate landfills, recycling facilities and transfer stations, and own or lease and operate collection and transfer trucks and other equipment used for collection, transfer and disposal of waste. As a result, our future financial performance and success is dependent in large part upon the viability of the waste and recycling industry and the success and survival of industry participants. However, waste and recycling industry participants and their operations are subject to a number of unique risks, including:

 

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  Fluctuations in the cost of fuel and other petrochemicals – Landfill operators and waste haulers need diesel fuel and other petrochemicals to run a significant portion of their operations and prices for these commodities fluctuate significantly based on international, political and economic circumstances, as well as other factors beyond their control, such as supply shortages and actions by the Organization of the Petroleum Exporting Countries and other oil and gas producers, regional production patterns, weather conditions and environmental concerns. As fuel prices increase, these companies’ direct operating costs increase, adversely affecting their business. The war in Ukraine may also adversely affect the commodities markets, including trading prices and volatility.

 

  Fluctuations in commodity prices – Landfill operators and waste haulers purchase or collect and process recyclable materials, including paper, cardboard, plastics, aluminum and other metals for sale to third parties, and prices for these recyclable commodities are volatile and subject to a number of factors outside of their control, including economic conditions and governmental action such as the Chinese government’s 2017 imposition of strict limitations and 2021 ban on the import of recyclable commodities as well as international regulation on the trade of these materials such as the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, which imposed new restrictions on the trade of plastic beginning January 1, 2021. The resulting price increase for recycling services in communities and at businesses in the U.S. has resulted in some recyclers and customers reducing or eliminating their recycling service. These and other factors have caused recyclable commodity prices to fall and operating costs of those in the waste and recycling industry to increase, adversely affecting their business.

 

  The capital-intensive nature of the industry – The waste and recycling industry is capital intensive and the waste haulers we contract with depend significantly on cash flow from operations and access to capital to operate and grow their respective businesses. Any inability to generate and raise sufficient capital could increase our costs and cause these companies to reduce or cease operations.

 

  Accruals closure and post-closure activities – Landfill operators have significant financial obligations for capping and closure activities once a landfill reaches its permitted capacity as well as for environmental remediation and other post-closure activities. Further, these capital requirements may increase above their current estimates due to changes in federal, state or local government requirements and other factors beyond their control. Operators establish accruals and trust funds to cover these costs, but actual obligations may exceed their expectations. Any failure of operators to properly estimate these future capital requirements could adversely affect their financial condition and jeopardize the future viability of their business. Any closures of landfill operators may negatively impact the ability of waste haulers to meet our customers’ demands or may result in increased transportation or other costs associated with disposal of our customers’ waste.

 

  Alternatives to landfill disposal – Many state and local governments are developing comprehensive plans to reduce the volume of solid waste deposited in landfills through waste planning, composting, recycling or other programs such as extended producer responsibility regulations, which are designed to make producers fund the post-use life cycle of their products by providing recycling programs or otherwise taking their post-use products back from consumers. Many communities are also mandating waste reduction at the source and prohibiting disposal of waste, such as food and yard waste, at landfills. There is also a trend of voluntarily diverting waste to landfill alternatives, such as recycling and composting, while also working to reduce the amount of waste being generated. Many of the largest U.S. companies have or intend to set zero-waste goals in which they strive to send no waste to landfills. These actions, as well as the actions of our customers to reduce waste or seek disposal alternatives, have reduced and may in the future further reduce the volume of waste going to landfills in certain areas, which may affect operators’ financial condition, and therefore their ability to operate landfills at full capacity and could adversely affect their operating results.

 

  Governmental regulations – The waste and recycling industry is highly regulated with a complex array of laws, rules, orders and interpretations governing environmental protection, health, safety, land use, zoning, transportation and related matters. These regulations and related enforcement actions can significantly restrict operations by imposing: limitations on siting and constructing new or expanding existing waste disposal, transfer, recycling or processing facilities; limitations or levies on collection and disposal prices, rates and volumes; limitations or bans on disposal or transportation of out-of-state waste or certain categories of waste; mandates regarding management of solid waste, including requirements to recycle, divert or otherwise process certain waste, recycling and other streams; or limitations or restrictions on the recycling, processing or transformation of waste, recycling and other streams. Additionally, landfill operations emit anthropogenic methane, identified as a greenhouse gas, and vehicle fleets emit, among other things, carbon dioxide, which also is a greenhouse gas, and efforts to curtail the emission of these and other greenhouse gases and to ameliorate the effects of climate change continue to progress. Although passage of comprehensive, federal climate change legislation may not occur in the near term, any such legislation, if enacted, could significantly restrict and impose significant costs on the waste and recycling industry.

 

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  The ability to obtain and maintain required permits and approvals – The waste and recycling industry is highly regulated and landfill and hauler owners and operators are required to obtain and maintain permits and approvals to operate their business, including to open or operate new landfills and transfer stations, or to expand the permitted capacity of existing landfills or increase acceptable volume at transfer stations, and these permits and approvals have become more difficult and expensive to obtain and maintain. These permits are also often subject to resistance from citizen or other groups and other political pressures. The inability to obtain or renew required permits and approvals or significant cost increases in doing so would adversely affect the ability of landfill and hauler owners and operators to operate their business.

 

  Operational and safety risks, including the risk of personal injury – Operating landfills, transfer stations, large fleets of trucks and other waste-related assets involves the use of dangerous equipment and coming into contact with hazardous substances. These activities involve risks, including risk of accidents, equipment defects, malfunctions and failures, improper use, fire and explosion, any of which could result in environmental liability, personal injury, loss of life, business interruption or property damage or destruction. These types of events have happened in the past and will happen in the future. Any substantial losses of an owner or operator not covered by insurance could have a material adverse effect on the business, results of operations and financial condition of the waste haulers with whom we contract.

 

  Labor union activity and work stoppages – Labor unions are very active in the waste and recycling industry, representing a meaningful percentage of the workforce. These unions are continuously recruiting additional employees, and these efforts will likely continue in the future. If unionized workers engage in strikes, work stoppages or other slowdowns, the operations of one or more companies could be significantly disrupted, which could have an adverse effect on their ability to operate their business and results of operations.

 

  Multiemployer pension plans – Many companies operating in the waste and recycling industry participate in trustee-managed multiemployer defined benefit pension plans, a number of which are either “critical” or “endangered,” meaning participating employers may be obligated to provide significant amounts of additional funding to these plans. Additionally, upon termination of a multiemployer pension plan, or in the event an employer determines to withdraw from a plan or a mass withdrawal of contributing employers, participating companies would be required to make payments for their proportionate share of the plan’s unfunded vested liabilities. These payments could be substantial and could adversely affect the companies’ financial condition.

 

If any of the foregoing risks or other risks adversely affects those in the waste and recycling industry, including the waste haulers and landfill operators with whom we contract, it could cause them to raise the prices that they charge us and our customers. Any reduction in the demand for their services could also cause certain haulers and operators to consider offering services and solutions similar to ours, increasing our direct competition. Further, any events that impact the viability of their business as presently conducted or proposed to be conducted in the future or reduce the number of waste and recycling facilities or haulers could have an adverse effect on the demand for certain of our services or increase the cost thereof. Therefore, any of the foregoing risks or others that adversely affect participants in the waste and recycling industry could similarly have an adverse effect on our business, financial condition and results of operations.

 

Demand for our solutions is subject to volatility in our accounts’ and our haulers’ underlying businesses.

 

Our sales are based on accounts’ demand for solutions to manage waste and recycling needs. This sector periodically experiences economic declines and may be exacerbated by other economic, environmental and social factors. If participants in this sector reduce spending or allocate future funding in a manner that results in fewer projects, then our accounts’ underlying business may be impacted and demand for our solutions may decrease or our rate of contract renewals may decrease. A prolonged decrease in such spending may harm our results of operations. Our accounts may request discounts or extended payment terms on new arrangements or seek to extend payment terms on existing arrangements due to lower levels of infrastructure spending or for other reasons, all of which may reduce revenue. For example, during the COVID-19 pandemic, a number of our customers in the restaurant and foodservice industries ceased or significantly scaled back operations, adversely affecting our results. We may not be able to adjust our operating expenses to offset such discounts or other arrangements because a substantial portion of our operating expenses relate to personnel, facilities, and marketing programs. The level of personnel and related expenses may not be able to be adjusted quickly and is based, in significant part, on our expectations for future revenues and demand.

 

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Our sales are also premised on the availability of haulers to transport our accounts’ waste and recyclable materials. If there is volatility within the waste and recycling industry or decreased availability of adequate haulers or other necessary vendors we may not be able to meet our customers’ needs, which would adversely affect our business. Any increase in hauler or vendor costs may also adversely affect our margins or may require us to offset such expenses or to pass these increased expenses on to our customers which may further negatively impact our relationship with our accounts and demand for our solutions.

 

Demand for our solutions can be affected by changes in recyclable commodity prices and quantities.

 

Certain of our customers collect and process, purchase or sell recyclable materials such as paper, cardboard, plastics, aluminum and other metals, and utilize our solutions and services in connection with these activities. The sale prices of and the demand for recyclable commodities are frequently volatile and when they decline, demand for our solutions will be affected. The market demand for recyclable commodities is volatile due to changes in economic conditions and numerous other factors beyond our and our customers’ control. The value of plastics are influenced by the volatility of crude oil prices, and in 2020 there was a resulting decline in the value of plastic recyclables associated with the precipitous drop in the value of crude at the onset of the COVID-19 pandemic. The value of paper products is often influenced by quality concerns, which have resulted in the imposition of restrictions by other countries, including China, on the import of certain recyclables. For instance, in 2017 the Chinese government imposed strict limits on the import of recyclable materials, including by restricting the amount of contaminants allowed in imported recycled paper. These limitations significantly decreased the global demand for recyclable commodities and resulted in lower commodity prices. The war in Ukraine may also adversely affect the commodities markets, including trading prices and volatility. Additionally, future regulation, tariffs, international trade policies or initiatives may result in further reduced demand. Any decrease in recyclable commodity prices or other facts which cause the profitability of recycling operations to decline could adversely affect demand for our solutions and have an adverse effect on our business, financial condition and results of operations.

 

Our charter provides, subject to limited exceptions, that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for certain stockholder litigation matters, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or stockholders.

 

Our charter provides that, unless Rubicon selects or consents in writing to the selection of an alternative forum, to the fullest extent permitted by applicable law: (a) the sole and exclusive forum for any complaint asserting any internal corporate claims, to the fullest extent permitted by law, and subject to applicable jurisdictional requirements, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have, or declines to accept, jurisdiction, another state court or a federal court located within the State of Delaware); and (b) the sole and exclusive forum for any complaint asserting a cause of action arising under the Securities Act, to the fullest extent permitted by law, shall be the federal district courts of the United States of America. For purposes of the foregoing, “internal corporate claims” means claims, including claims in the right of Rubicon that are based upon a violation of a duty by a current or former director, officer, employee or stockholder in such capacity, or as to which Delaware General Corporation Law (the “DGCL”) confers jurisdiction upon the Court of Chancery. Any person or entity purchasing or otherwise acquiring any interest in any shares of Class A Common Stock or Class V Common Stock will be deemed to have notice of and consented to the provisions of this provision.

 

This choice of forum provision may limit a Rubicon stockholder’s ability to bring a claim in a forum that it finds favorable for disputes with us or any of our directors, officers or employees, which may discourage lawsuits with respect to such claims. There is uncertainty as to whether a court would enforce this provision. If a court ruled the choice of forum provision was inapplicable or unenforceable in an action, Rubicon may incur additional costs to resolve such action in other jurisdictions. The choice of forum provision is intended to apply to the fullest extent permitted by law to the above-specified types of actions and proceedings, and is intended to require, in each case, to the fullest extent permitted by law, that (i) any claims arising under the Securities Act be brought in the federal district courts of the United States in accordance with clause (b) of the choice of forum provision, and (ii) any derivative actions, including those brought to enforce any duty or liability created by the Exchange Act be brought in the United States District Court for the District of Delaware in accordance with clause (a) of the choice of forum provision. The provision does not apply to any direct claims brought by Rubicon’s stockholders on their own behalf, or on behalf of any class of similarly situated stockholders, under the Exchange Act. Rubicon stockholders will not be deemed, by operation of the choice of forum provision, to have waived Rubicon’s obligation to comply with all applicable federal securities laws and the rules and regulations thereunder.

 

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Our Cybersecurity and Technology Related Risks

 

If we fail to continue to improve and enhance the functionality, performance, reliability, design, security, or scalability of our platform in a manner that responds to our customers’ evolving needs, our business may be adversely affected.

 

The on-demand commerce and digital ordering markets are characterized by rapid technological change, frequent new product and service introductions, and evolving industry standards. Our success has been based on our ability to identify and anticipate the needs of our customers and design and maintain a platform that provides them with the tools they need to operate their businesses in a manner that is productive and meets or exceeds their expectations. Our ability to attract new customers, retain revenue from existing customers, and increase sales to both new and existing customers will depend in large part on our ability to continue to improve and enhance the functionality, performance, reliability, design, security, and scalability of our platform. Additionally, to achieve and maintain market acceptance for our platform, we must effectively integrate with new or existing solutions that meet changing customer demands in a timely manner.

 

As we expand our platform and services, and as the number of our customers with higher volume sales increases, we expect that we will need to offer increased functionality, scalability and support, including to keep our platform, systems, and services secure, which requires us to devote additional resources to such efforts. To the extent we are not able to enhance our platform’s functionality in order to maintain its utility and security, enhance our platform’s scalability in order to maintain its performance and availability, or improve our support functions in order to meet increased customer service demands, our business, operating results, and financial condition could be adversely affected.

 

The success of enhancements, new features and services depends on several factors, including the timely completion, introduction and market acceptance of the feature, service or enhancement by customers, as well as our ability to seamlessly integrate all of our product and service offerings and develop adequate selling capabilities in new markets. We may make significant investments in new modules or enhancements that may not achieve expected returns. The continual improvement and enhancement of our platform requires significant investment and we may not have the resources to make such investment. Our improvements and enhancements may not result in our ability to recoup our investments in a timely manner, or at all. The improvement and enhancement of the functionality, performance, reliability, design, security, and scalability of our platform is expensive and complex, and to the extent we are not able to perform it in a manner that responds to our customers’ evolving needs, our business, operating results, and financial condition will be adversely affected.

 

Quality problems, defects, errors, failures, or vulnerabilities in our solutions or services could harm our reputation and adversely affect our business, financial condition, results of operations, and prospects.

 

Our solutions are, in some cases, highly complex and incorporate advanced technologies that we attempt to make interoperable with the products of other providers. Despite testing prior to release, our solutions may contain undetected defects or errors. Further, the combined use of our solutions with those of other providers may cause errors or failures, or it may expose undetected defects, errors, or failures in our solutions. These defects, errors, or failures could affect performance of the solutions and damage the businesses of our accounts, as well as delay the development or release of new offerings or new versions of solutions. Allegations of unsatisfactory performance in any of these situations could damage our reputation in the market and our relationships with our accounts, cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in analyzing, correcting, or redesigning the solutions, cause us to lose accounts, subject us to liability for damages, and divert our resources from other tasks, any one of which could adversely affect our business, financial condition, results of operations, and prospects. We may also be required to provide full replacements or refunds for such defective product. We cannot assure you that such remediation would not harm our business, financial condition, results of operations, and prospects.

 

If our security measures or those of our third-party cloud data hosts, cloud computing platform providers, or third-party service partners, are breached and unauthorized access is obtained to an account’s data, our data or our IT systems our services may be perceived as not being secure, accounts may curtail or stop using our services, and we may incur significant legal and financial exposure and liabilities.

 

As we digitize and use cloud and web-based technologies to leverage account data to deliver a more complete account experience, we are exposed to increased security risks and the potential for unauthorized access to, or improper use of, our and our accounts’ information. Certain of our services involve the storage and transmission of accounts’ proprietary information, and security breaches could expose us to a risk of loss of this information, litigation, and possible liability. Although we devote resources to maintaining our security and integrity, we may not prevent security incidents.

 

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The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the world have increased. These threats, some of which we have experienced, include but are not limited to identity theft, unauthorized access, domain name system attacks, wireless network attacks, viruses and worms, ransomware attacks, advanced persistent threat, application centric attacks, peer-to-peer attacks, phishing, backdoor trojans, and distributed denial of service attacks. Any of the foregoing could attack our accounts’ data (including their employees’ personal data), our data (including colleagues’ personal data), or our IT systems. It is virtually impossible for us to entirely eliminate this risk. Like all solutions, our products are vulnerable to cyber-attacks. For example, in April 2021 we discovered a ransomware event in which an unauthorized third party gained access to our network. Although the April 2021 incident was fully remediated and no incidents to date of which we have knowledge have had a material impact on our business, financial condition or results of operations, the impact of cyber-attacks could disrupt the proper functioning of our solutions or services, cause errors in the output of our accounts’ work, allow unauthorized access to sensitive, proprietary, or confidential information of ours or our accounts, and other destructive outcomes.

 

Additionally, third parties may attempt to fraudulently induce colleagues or accounts into disclosing sensitive information such as usernames, passwords, or other information in order to gain access to our accounts’ data, our data, or our IT systems. Malicious third parties may also conduct attacks designed to temporarily deny accounts access to our services. Any security breach could result in a loss of confidence in the security of our products and services, damage our reputation, negatively impact our future sales, disrupt our business, and lead to regulatory inquiry and legal liability.

 

Material portions of our business require the Internet infrastructure to be reliable.

 

Part of our future success continues to depend on the use of the Internet as a means to perform transactions electronically, including, for example, document digitization. This in part requires ongoing maintenance of the Internet infrastructure, especially to prevent interruptions in service, as well as additional development of that infrastructure. This requires a reliable network backbone with the necessary speed, data capacity, security, and timely development of complementary products for providing reliable Internet access and services. If this infrastructure fails to be sufficiently developed or be adequately maintained, our business would be harmed because users may not be able to access our portals.

 

Our General Business Risks

 

The success of our business depends, in part, on our ability to execute on our acquisition strategy.

 

A portion of our historical growth has occurred through acquisitions, and we anticipate continued growth through acquisitions in the future. We are presently evaluating, and we expect to continue to evaluate on an ongoing basis, a variety of possible acquisition transactions. We cannot predict the timing of any contemplated transactions, and there can be no assurances that we will identify suitable acquisition opportunities or, if we do identify such opportunities, that any transaction can be consummated on terms acceptable to us. A significant change in our business or the economy, an unexpected decrease in our cash flows or any restrictions imposed by our debt may limit our ability to obtain the necessary capital for acquisitions or otherwise impede our ability to complete an acquisition. Certain proposed acquisitions or dispositions may also trigger a review by the U.S. Department of Justice, or “DOJ”, and the U.S. Federal Trade Commission, or “FTC”, under their respective regulatory authority, focusing on the effects on competition, including the size or structure of the relevant markets and the pro-competitive benefits of the transaction. Any delay, prohibition or modification required by regulatory authorities could adversely affect the terms of a proposed acquisition or could require us to modify or abandon an otherwise attractive acquisition opportunity. The failure to identify suitable transaction partners and to consummate transactions on acceptable terms could have a material adverse effect on our business, financial condition and results of operations.

 

Acquisitions also involve risks that the businesses acquired will not perform as expected, that our judgments concerning the value, strengths and weaknesses of acquired businesses will prove wrong or that we will incur unanticipated costs as a result of a transaction. We may become liable for certain unforeseen pre-acquisition liabilities of an acquired business, including, among others, tax liabilities, environmental liabilities, contingent consideration and liabilities for employment practices. In addition, an acquisition could result in the impairment of client relationships and other acquired assets such as goodwill. We may also incur costs and experience inefficiencies to the extent an acquisition expands the services, markets or geographies in which we operate due to our limited exposure and experience. Acquisitions can also involve post-transaction disputes regarding a number of matters, including a purchase price or working capital adjustment, earn-out or other contingent payments, environmental liabilities, and indemnification or other obligations. Acquisitions also place significant demands on our management’s time, which may divert their attention from our day-to-day business operations, and may lead to significant due diligence and other expenses regardless of whether we pursue or consummate any acquisition. We may also not be able to manage our growth through acquisitions due to the number and the diversity of the businesses we have acquired or for other reasons. Acquisitions may require that we incur additional debt to finance the transaction, which could be substantial and limit our operating flexibility or, alternatively, acquisitions may require that we issue stock as consideration, which could dilute share ownership. If any of these risks were to occur, our business, financial condition and results of operations may be adversely affected.

 

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Any inability to successfully integrate our recent or future acquisitions, or realize their anticipated benefits, could have a material adverse effect on us.

 

Acquisitions have required, and in the future will require, that we integrate into our existing operations separate companies that historically operated independently or as part of another, larger organization, and had different systems, processes and cultures. Risks involved with the successful integration of an acquired business include, but are not limited to:

 

  assimilating personnel and operating and administrative departments, including finance;

 

  integrating operations under differing legal and regulatory regimes and any governmental contracting work;

 

  diverting management’s attention and that of the acquired business;

 

  merging and updating different accounting and financial reporting systems and policies, including with respect to revenue recognition, and systems of internal controls;

 

  merging computer, technology and other information networks and systems;

 

  disrupting relationships with or losses of key clients and suppliers of our business or the acquired business;

 

  interfering with, or loss of momentum in, our ongoing business or that of the acquired company;

 

  failure to retain our key personnel or that of the acquired company; and

 

  delays or cost-overruns in the integration process.

 

We may not be able to successfully integrate any business we have acquired or may acquire, or may not be able to do so in a timely, efficient or cost-effective manner. Our inability to effectively complete the integration of new businesses on schedule and in an orderly manner could increase costs and lower profits. Our inability to manage our growth through acquisitions, including the integration process, and to realize the anticipated benefits of an acquisition could have a material adverse effect on our business, financial condition and results of operations.

 

A large percentage of our revenue is tied to a small number of customers, such that the loss of any of these customers could materially and adversely affect our business, results of operations and financial condition.

 

We derive a significant portion of our revenues from two customers. For the years ended December 31, 2021 and 2020, we derived approximately 30% and 28%, respectively, of our total revenues from these customers. For the nine months ended September 30, 2022 and 2021, we derived approximately 27% and 29%, respectively, of our total revenues from these customers. We cannot assure you that these customers will continue to contract with us on terms or at rates currently in effect, or will not elect to contract with our competitors or attempt to perform the services we provide themselves. Further, as of September 30, 2022, December 31, 2021 and 2020, approximately 22%, 23% and 23%, respectively, of our aggregate accounts receivable and contract assets were due from these two customers. The contract term with these two customers ranges from 2 to 3 years, but one of the customers has the right to terminate without penalty with 60 days advance written notice. These contracts do not include any minimum purchase requirements for the customers and were made in the ordinary course of business. As a result, these customers could stop purchasing our services, reduce their purchase levels or request reduced pricing structures at any time. We may therefore need to adapt our pricing and marketing strategies in response to a customer who may seek concessions in return for its continued or increased business. In addition, a macroeconomic downturn or any other cause of consolidation in our industry or among our other customers could significantly increase the market share and bargaining power of a limited number of customers and give them significant additional leverage to negotiate more favorable terms and place greater demands on us. The loss of either of these customers, if not offset by revenues from new or other existing customers, or any inability of either customer to pay amounts as and when due, could adversely affect our business, financial condition and results of operations.

 

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Our business depends on customers using our platform, and any loss of customers or decline in their use of our platform could materially and adversely affect our business, results of operations, and financial condition.

 

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers, to have them increase their deployment and use of our platform, and to increase or maintain transaction volume on our platform. Although our customers generally have multi-year contracts with us, they can typically terminate the agreement without penalty by providing as little as 30 days written notice and may elect not to renew the agreement following the expiration date. In addition, if our customers do not increase their use of our platform or adopt and deploy additional modules, then our revenue may decline and our results of operations may be harmed. Customers may not renew their contracts with us or reduce their use of our platform for any number of reasons, including if they are not satisfied with our platform or modules, the value proposition of our platform or our ability to meet their needs and expectations, security or platform reliability issues, or if they decide to build their own solution internally. Additionally, consumers may change their purchasing habits or reduce their orders from our current customers, which could harm their business and reduce their use of our platform. We cannot accurately predict our customers’ usage levels and the loss of customers or their usage levels of our modules may each have a negative impact on our business, results of operations, and financial condition and may cause our expansion rate to decline. If a significant number of customers cease using or reduce their usage of our platform, then we may be required to spend significantly more on sales and marketing than we currently plan to spend in order to maintain or increase revenue from our customers. Such additional sales and marketing expenditures could adversely affect our business, results of operations, and financial condition.

 

Clients may elect to terminate our contracts and manage operations internally.

 

It is possible that our clients may elect to not renew contracts for our solutions. Alternatively, clients may elect to drop maintenance on certain modules that they ultimately decide not to use. This could adversely affect our revenues and profits. Additionally, they may inadvertently allow our intellectual property or other information to fall into the hands of third parties, including our competitors, which could adversely affect our business.

 

Selling products and services into the public sector poses unique challenges.

 

We derive a portion of our revenue from sales of software-as-a-service and professional services to state, county, and city governments, other federal or municipal agencies, and other public entities. We expect that sales to public sector clients will continue to account for a portion of our revenue in the future. We face many risks and challenges associated with contracting with governmental entities, including:

 

  Resource limitations caused by budgetary constraints, which may provide for a termination of executed contracts due to a lack of future funding;

 

  Long and complex sales cycles;

 

  Contract payments at times being subject to achieving implementation milestones, and we may have differences with clients as to whether milestones have been achieved;

 

  Political resistance to the concept of contracting with third parties to provide IT solutions;

 

  Legislative changes affecting a local government’s authority to contract with third parties;

 

  Varying bid procedures and internal processes for bid acceptance; and

 

  Various other political factors, including changes in governmental administrations and personnel.

 

Each of these risks is outside our control. If we fail to adequately adapt to these risks and uncertainties, our financial performance could be adversely affected.

 

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If we fail to attract and retain qualified management and skilled technical personnel, our business may be adversely affected.

 

Our long-term success depends, in significant part, upon the continued service and performance of our senior management and other key personnel. We rely on knowledgeable, experienced and skilled technical personnel, particularly analysts, product developers and service personnel to provide our services, often in a stringent regulatory environment. Certain of our employees, including our senior management and the key employees of the various businesses we have acquired, have exceptionally strong knowledge of our businesses, sectors and clients. Their departure could lead to the loss of know-how and information of value to us, and their departure could pose a risk to key client relationships. Our continued growth will also depend upon our ability to attract and retain additional skilled management and other key employees, including in new markets, whether organically or through acquisitions. For certain of positions, there may be a limited number of qualified people to fulfill the roles, whether limited based on scarcity with respect to the particular skillset, within a given geography or otherwise. The loss of the services of one or more members of our management team or of qualified employees and other key personnel, or the inability to identify, hire and retain the key personnel that may be necessary to grow our business, could have a material adverse effect on our business, financial condition and results of operations.

 

Our international operations subject us to additional risks that could adversely affect our business.

 

We have activities outside of the United States and work with some international third-party providers, including product developers in Europe. Our operations, those of the third parties with which we work as well as those of our customers, are therefore subject to regulatory, economic, political and other events and uncertainties in countries where these operations are located. Further, our growth strategy includes expansion into additional international markets. In addition to the risks discussed elsewhere herein that are common to both our domestic and international operations, we face risks specific to our foreign activities, including but not limited to:

 

  political, social, economic and financial instability, including wars, civil unrest, acts of terrorism and other conflicts, including the war in Ukraine;

 

  difficulties and increased costs in developing, staffing and simultaneously managing a large number of varying foreign operations as a result of distance, language and cultural difference;

 

  restrictions and limitations on the transfer or repatriation of funds and fluctuations in currency exchange rates;

 

  complying with varying legal and regulatory environments in multiple foreign jurisdictions, including privacy laws such as the E.U. General Data Protection Regulation, export controls and trade and economic sanctions laws and regulations and anti-corruption laws and regulations of the United States and various international jurisdictions, including the Foreign Corrupt Practices Act;

 

  laws and business practices that favor local competitors or prohibit foreign ownership of certain businesses;

 

  potential for privatization and other confiscatory action; and

 

  other dynamics in international jurisdictions, any of which could result in substantial additional legal or compliance costs, liabilities or obligations for us or could require us to significantly modify our current business practices or even exit a given market.

 

Foreign operations bring increased complexity and the costs of managing or overseeing foreign operations, including adapting and localizing services or systems to specific regions and countries, can be material. Further, international operations carry inherent uncertainties regarding the effect of local or domestic actions, such as the unpredictable impact of the referendum vote in the United Kingdom to leave the European Union (Brexit) and the uncertainty regarding the terms that govern its exit, any of which could be material. These and other risks related to our foreign operations, or the associated costs or liabilities, could have a material adverse effect on our business, financial condition and results of operations.

 

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We may be unable to protect our proprietary rights.

 

Many of our product and service offerings incorporate proprietary information, trade secrets, know-how, and other intellectual property rights. We rely on a combination of contracts, patents, copyrights, and trade secret laws to establish and protect our proprietary rights in our technology. We cannot be certain that we have taken all appropriate steps to deter misappropriation of our intellectual property. There has also been an apparent evolution in the legal standards and regulations courts and the U.S. patent office may apply in favorably evaluating software patent rights. We are not currently involved in any material intellectual property litigation; however, we may be a party to such litigation in the future to protect our proprietary information, trade secrets, know-how, and other intellectual property rights. We cannot assure you that third parties will not assert infringement or misappropriation claims against us with respect to current or future products. Any claims or litigation, with or without merit, could be time-consuming, costly, and a diversion to management. Any such claims and litigation could also cause delays or require us to enter into royalty or licensing arrangements. Such royalty or licensing arrangements, if required, may not be available on terms acceptable to us, if at all. Therefore, litigation to defend and enforce our intellectual property rights could have a material adverse effect on our business, regardless of the final outcome of such litigation.

 

We rely on software licensed from, and services rendered by, third parties in order to provide our modules and run our business.

 

We rely on software licensed from, and services rendered by, third parties in order to provide our modules and run our business. Third-party software and services may not continue to be available on commercially reasonable terms, or at all. Any loss of the right to use, or any failures of, third-party software or services could result in delays in our ability to provide our modules or run our business until equivalent software or services are developed by us or, if available, identified, obtained and integrated, which could be costly and time-consuming and may not result in an equivalent module, any of which could cause an adverse effect on our business and operating results. Further, customers could assert claims against us in connection with such service disruption or cease conducting business with us altogether. Even if not successful, a claim brought against us by any of our customers would likely be time-consuming and costly to defend and could seriously damage our reputation and brand, making it harder for us to sell our modules.

 

Pending or future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements.

 

As a large company with international operations, across the U.S. and Canada in particular, we are, and from time to time become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary course of our business, including with respect to alleged infringement of third-party patents and other intellectual property rights, commercial, corporate and securities, labor and employment, wage and hour and other claims. Additionally, our participation in the waste and recycling industry, even though we are only an indirect market participant that does not own or operate any landfill or hauling operations, subjects us to additional claims that many other companies in other industries are not likely to face. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly and often divert management’s attention from day-to-day operations. For example, we may incur costs to defend against litigation brought by government agencies and private parties who allege we are in violation of our permits and applicable environmental laws and regulations, or who assert claims alleging nuisance, environmental damage, personal injury or property damage. Additionally, in recent years, wage and employment laws have changed regularly and become increasingly complex, which has fostered litigation, including purported class actions. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is uncertain. We may be required to pay fines or judgments, which could be significant, or to implement corrective measures, or we may have our permits and licenses modified or revoked as a result of these actions. We establish accruals for our estimates of the costs associated with lawsuits, regulatory, governmental and other legal proceedings. We could underestimate such accruals. Such shortfalls could result in significant unanticipated charges to income. A significant judgment against us, the loss of a significant permit or license, or the imposition of a significant fine or other expenses in excess of any accrual or reserve could have a material adverse effect on our business, financial condition and results of operations. See Note 16 – Commitments and contingencies in our audited consolidated financial statements included elsewhere in this prospectus.

 

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Risks Related to Our Indebtedness

 

Our current liquidity, including negative cash flows and a lack of existing financial resources, raises substantial doubt about our ability to continue as a going concern, which may materially and adversely affect our business, financial condition, results of operations and prospects.

 

Pursuant to ASC 205, Presentation of Financial Statements, we are required to and do evaluate at each annual and interim financial statement period whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the consolidated financial statements are issued. Based on the definitions in the relevant accounting standards and our history of operating losses and negative cash flows, we currently project that we will not have sufficient cash on hand or available liquidity under existing arrangements to meet our projected liquidity needs for the next 12 months, which raises substantial doubt about our ability to continue as a going concern.

 

Although we have taken, and plan to continue to take, proactive measures to enhance our liquidity position and provide additional financial flexibility, including, among other things, negotiation with respect to the New Debt Facilities and receipt of binding commitments for the Financing Commitment, there can be no assurance that these measures, including the timing and terms thereof, will be successful or sufficient. Any new financing may also lead to increased costs, increased interest rates, additional and more restrictive financial covenants and other lender protections, and whether we will be able to successfully complete any such refinancing will depend on market conditions, the negotiations with those lenders and investors, and our financial performance. The Financing Commitment and the New Debt Facilities are also proposed to include potential equity financing, the terms of which could cause substantial dilution to existing stockholders. In addition, we are formulating additional plans to extend cash availability, including modifying our operations to further reduce spending, but these steps may not produce the anticipated results or provide any benefit at all. While management believes that our plan to address the pending debt maturities is probable of being achieved, and our financial statements have accordingly been prepared assuming that we will continue as a going concern, there can be no assurance the necessary financing will be available on terms acceptable to us, or at all. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 19, Liquidity, and Note 20, Subsequent Events, in our unaudited condensed consolidated financial statements included elsewhere in this prospectus.

 

If we are unable to obtain adequate additional capital resources to fund our liquidity needs, we will not be able to continue to operate our business pursuant to our current business plan, which would require us to further modify our operations to reduce spending to a sustainable level by, among other things, delaying, scaling back or eliminating some or all of our ongoing or planned investments in corporate infrastructure, business development, sales and marketing, product development and other activities, selling certain business lines or assets or we may be forced to discontinue our operations entirely and/or liquidate our assets, in which case it is likely that equity investors would lose most or all of their investment. The substantial doubt about our ability to continue as a going concern may also affect the price of our common stock and our credit rating, negatively impact relationships with third parties with whom we do business, including customers, vendors, lenders and employees, prevent us from identifying, hiring or retaining the key personnel that may be necessary to operate and grow our business and limit our ability to raise additional capital. Any of the foregoing factors could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

Our substantial levels of indebtedness could adversely affect our business.

 

As of September 30, 2022, we had approximately $99.6 million of indebtedness, consisting of $69.5 million in borrowings under our term loan (including a subordinated term loan in the amount of $20.0 million) and $30.1 million under our revolving credit facility. As of December 31, 2021, we had approximately $103.6 million of indebtedness, consisting of $73.7 million in borrowings under our term loan (including a subordinated term loan in the amount of $20.0 million) and $29.9 million under our revolving credit facility. Our indebtedness could have important consequences for us and our investors, including, but not limited to:

 

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  increasing our vulnerability to, and reducing our flexibility to respond to, general adverse economic and industry conditions;

 

  requiring the dedication of a substantial portion of cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund operations, working capital, capital expenditures, acquisitions, joint ventures or other future business opportunities;

 

  exposing us to the risk of increased interest rates on our borrowings under our credit facility, which is at variable rates of interest;

 

  limiting flexibility in planning for, or reacting to, changes in our business, market conditions and the competitive environment, placing us at a competitive disadvantage compared to our competitors who are less highly leveraged;

 

  limiting our ability to borrow additional funds (including the ability to issue equity as part of such borrowing) and increasing the cost of any such borrowing;

 

  Diluting our investors in the event such existing borrowings are converted in shares of Class A Common Stock; and

 

  limiting our ability to refinance existing borrowings absent the consent of certain of our creditors.

 

In addition, as our indebtedness matures, or if we are unable to service our high level of indebtedness, we may need to restructure or refinance all or a portion of our indebtedness, sell material assets or operations or raise additional debt or equity capital. We may not be able to effect any of these actions on a timely basis, on commercially reasonable terms, or at all, and these actions may not be sufficient to meet our capital requirements. Furthermore, we may not be able to invest in our business and as a result, we may not be able to achieve our forecasted results of operations.

 

The interest rates under our existing indebtedness are significant – LIBOR plus 9.5% for our term loan, 15.0% for our subordinated term loan and SOFR plus 5.6% for our revolving credit facility bears interest. Our ability to make payments on debt (including interest), to repay existing or future indebtedness when due, to fund operations and significant planned capital expenditures and to support our growth strategy will depend on our ability to generate cash in the future. Our ability to produce cash from operations is, and will be, subject to a number of risks, including those described above in “—Risks Related to Our Business and Industry” and elsewhere in this prospectus. Our ability to repay debt will also depend on external factors that are outside of our control, including economic, financial, competitive, legislative, regulatory and other factors. If we are unable to make required interest and principal payments on our indebtedness, it would result in an event of default under the agreements governing such indebtedness, which may result in the acceleration of some or all of our outstanding indebtedness and foreclosure on the assets that secure such indebtedness.

 

Although our debt agreements contain restrictions on the incurrence of additional indebtedness, the amount of indebtedness that could be incurred in the future in compliance with these restrictions could be substantial, thereby exacerbating the risks associated with our high level of indebtedness. For example, under our credit facility, we may borrow up to $20.0 million in the form of a term loan and, subject to outstanding letters of credit, up to $60.0 million under our revolving credit facility.

 

Any of the foregoing risks could adversely affect our business, financial condition and results of operations. For additional information on our indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources” and Note 19, Liquidity, and Note 20, Subsequent Events, in our unaudited condensed consolidated financial statements included elsewhere in this prospectus.

 

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The terms and covenants in our existing indebtedness restrict our ability to engage in some business and financial transactions, which could adversely affect our business.

 

Our credit facility has restrictive covenants that limit our and our subsidiaries’ ability to, among other things:

 

  pay dividends, redeem capital stock and make other restricted payments and investments;

 

  sell assets or merge, consolidate, or transfer all or substantially all of our subsidiaries’ assets;

 

  engage in certain transactions with affiliates;

 

  amend or otherwise modify our governing documents;

 

  incur or guarantee additional debt;

 

  impose dividend or other distribution restrictions on our subsidiaries; and

 

  create liens on our subsidiaries’ assets.

 

In addition, our credit facility contains financial maintenance covenants that, among other things, require us to maintain minimum qualified billed and unbilled receivables and to not exceed a specified borrowing base or net leverage ratio tested at the end of each quarter. Among other things, we may not be able to borrow money under our credit facility if we are unable to comply with the financial and other covenants included therein. Our credit facility also contains certain customary representations and warranties, affirmative covenants and events of default with acceleration rights (including, among other things, an event of default upon a material adverse change in our business condition (financial or otherwise), operations, properties or prospects, change of management, or change of control). If an event of default occurs, our lenders will be entitled to take various actions, including the acceleration of amounts due under our credit facility and all actions permitted to be taken by a secured creditor. Our revolving credit facility also includes a lockbox arrangement, which provides for receipts to be swept daily to reduce borrowings outstanding at the discretion of the lender. Our term loan also includes a qualified equity contributions requirement of $50.0 million during the period on or prior to June 30, 2022 and, because the Mergers did not occur prior to this date, we did not satisfy the equity contributions requirement, giving the lender the right to use our available funds under our revolving credit facility as term loan collateral.

 

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Any future debt that we incur may contain additional and more restrictive negative covenants and financial maintenance covenants. These restrictions could limit our ability to obtain debt financing, repurchase stock, pay dividends, refinance or pay principal on our outstanding debt, complete acquisitions for cash or debt or react to changes in our operating environment or the economy.

 

Our failure to comply with our obligations or the agreements governing any future indebtedness may result in an event of default under the applicable agreement. A default, if not cured or waived, may permit acceleration of some or all of our other indebtedness and trigger other termination and similar rights under other contracts. We cannot be certain that we will be able to remedy any defaults and, if our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay the accelerated indebtedness or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all, any of which could have a material adverse effect on our business, financial condition and results of operations.

 

The required interest payments on our indebtedness under the credit facility may be impacted by reforms related to the London Interbank Offered Rate (“LIBOR”). The variable interest rates applicable under the credit facility are linked to LIBOR as the benchmark rate for establishing such rates. Recent national, international, and other regulatory guidance and reform proposals regarding LIBOR are requiring certain LIBOR tenors to be discontinued or become unavailable by the end of 2021 and LIBOR to be fully discontinued or become unavailable as a benchmark rate by June 2023. Although one or more of our credit facilities includes mechanics to facilitate the adoption by us and our lenders of an alternative benchmark rate for use in place of LIBOR, no assurance can be made that such alternative benchmark rate will perform in a manner similar to LIBOR or result in interest rates that are at least as favorable to us as those that would have resulted had LIBOR remained in effect, which could result in an increase in our interest expense and other debt service obligations. In addition, the overall credit market may be disrupted as a result of the replacement of LIBOR or in the anticipation thereof, which could have an adverse impact on our ability to refinance, reprice, or amend our existing indebtedness or incur additional indebtedness on favorable terms or at all.

 

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and Note 19, Liquidity, and Note 20, Subsequent Events, in our unaudited condensed consolidated financial statements included elsewhere in this prospectus.

 

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Risks Related to Ownership of Our Securities

 

Certain existing shareholders purchased securities in Rubicon 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 Rubicon may not experience a similar rate of return.

 

Certain shareholders in Rubicon, including certain Selling Securityholders, acquired shares of Class A Common Stock (or Class B Units) or Private Warrants at prices below, in some cases considerably below, the current trading price of our Class A Common Stock or for no cash consideration at all and may experience a positive rate of return based on the current trading price.

 

The Selling Securityholders acquired the Class A Common Stock offered for resale at effective purchase prices ranging from $0.00 to $15.52 per share. The Selling Securityholders receiving RSUs and DSUs will acquire Class A Common Stock for no cash consideration. Given the relatively lower purchase prices that some of our shareholders paid to acquire securities and exercise prices that some of our shareholders may pay to exercise Private Warrants to acquire shares of Class A Common Stock compared to the current trading price of our shares of Class A Common Stock, these shareholders, some of whom are our Selling Securityholders pursuant to this or other registration statements we are obligated to file to register the resale of shares of Class A Common Stock, 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 of Class A Common Stock at the time that such shareholders choose to sell their shares of Class A Common Stock. Investors who purchased units in Founder SPAC’s initial public offering, who purchased Founder Class A Shares on the NYSE following the IPO or who purchase our Class A Common Stock on the NYSE 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.

 

Investors who purchase our Class A Common Stock and Private Warrants on the NYSE 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 shares of Class A Common Stock on November 25, 2022 of $2.40 and their respective purchase prices, the Selling Securityholders may receive potential profits up to $2.40 per share. See the section titled “Summary—Information Related to Offered Securities” for additional information regarding the prices paid by and potential profits the Selling Securityholders may earn on sales of the securities registered hereunder.

 

Substantial future sales of shares of Class A Common Stock could cause the market price of our shares of Class A Common stock to decline.

 

We have agreed, at our expense, to prepare and file this and other registration statements with the SEC providing for the resale of shares of Class A Common Stock. The shares of Class A Common Stock being offered for resale in this prospectus represent approximately 62.0% of our total outstanding shares of Common Stock as of the date of this prospectus (after giving effect to the cash exercise of Private Warrants, issuance and exchange of Earn-Out Interests for Class A Common Stock and vesting of RSUs and DSUs, in each case, as registered for resale in this prospectus).

 

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After this registration statement and any others we file in respect of the resale of shares of Class A Common Stock become effective, and until such time that they are no longer effective, these registration statements will permit the resale of the applicable securities.

 

Potential new issuances of Class A Common Stock include (a) the exercise of all Warrants, (b) the vesting of all RSU and DSU awards, (c) the utilization of the SEPA, and (d) settlement of the Deferred Fee Arrangements in stock:

 

Obligation  When Issuable(1)  Class A
Common Stock
Issuable(2), (3)
   Percentage of Total
Shares of
Common Stock(4)
 
Warrants (5)  Currently exercisable at the discretion of the holder   30,016,851    15.4%
RSUs and DSUs (6)  February 10-11, 2023   10,174,128    5.8%
SEPA(7), (9)  Upon an effective registration statement for the resale of securities issuable thereunder   100,000,000    37.7%
Deferred Fee Arrangements (8), (9), (10)   December 15, 2022 – February 15, 2023   11,974,904    6.8%

 

 

(1)Represents the date on which Rubicon may issue shares of Class A Common Stock or the securityholder may obligate Rubicon to issue such number of shares of Class A Common Stock. The above does not purport to detail all of the conditions of such exercise or issuance obligations and you are encouraged to read the terms and conditions of each of the agreements set forth above.

(2)Does not give effect to any interest or penalties accrued under such obligation.

(3)Where such issuance is to be made based on a variable future rate (e.g., VWAP), the above assumes a $2.00 VWAP without any discounts, as applicable.

(4)Represents such issuance’s percentage of the total number of shares of Common Stock, after giving effect to such issuance.

(5)Assumes the cash exercise of all Warrants.

(6)Represents only those shares issued pursuant to RSUs and DSUs that are included in this registration statement of which this prospectus forms a part.

(7)Assumes issuance without giving effect to the SEPA Exchange Cap (as defined below).

(8)Such obligation may be settled in cash. For purposes of this disclosure, we assume such obligation is settled in shares of Class A Common Stock, pursuant to the terms of such obligation.

(9)The shares issuable pursuant to this obligation are not registered for resale pursuant to this registration statement and prospectus and will be issued as restricted securities.

(10)Includes 440,529 shares of Class A Common Stock issued pursuant to a Deferred Fee Arrangement.

 

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The resale, or expected or potential resale, of a substantial number of our shares of Class A Common Stock in the public market could adversely affect the market price for our shares of Class A Common Stock and make it more difficult for you to sell your shares of Class A Common Stock at times and prices that you feel are appropriate. In particular, as a result of the SEPA, the Yorkville Investor is an “underwriter” as such term is defined in Section 2(a)(11) of Securities Act, and the SEPA contemplates that the Yorkville Investor expects to resell any shares of Class A Common Stock we may issue and sell pursuant thereto. The FPA Sellers may also resell a significant number of shares of Class A Common Stock in the market. Furthermore, we expect that, because there will be a large number of shares registered pursuant to this and other registration statements, the applicable selling securityholders will continue to offer such covered securities for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time.

 

In addition, because the current market price of our Class A Common Stock is higher than the price certain selling securityholders paid for their securities, there is more likelihood that selling securityholders holding shares of Class A Common Stock will sell their shares as soon as the applicable registration statement is declared effective and any applicable lock-up restrictions expire.

 

See the section entitled “Certain Financing Transactions” for additional information regarding the SEPA, the Forward Purchase Agreement, and Deferred Fee Arrangements.

 

The issuances of additional shares of Class A Common Stock under certain of our contracts and arrangements may result in dilution of holders of Class A Common Stock and have a negative impact on the market price of the Class A Common Stock.

 

Pursuant to the Forward Purchase Agreement, we may issue up to $30.0 million of FPA Maturity Consideration for no additional consideration upon a maturity event set forth in the Forward Purchase Agreement. As a result, these shares of Class A Common Stock will be issued below the current trading price of the Class A Common Stock of $2.40 on November 25, 2022. The Forward Purchase Agreement matures the earlier of (a) August 15, 2025 (three years from Closing), or (b) upon notice from the FPA Sellers if (i) the VWAP from August 15, 2022 through November 13, 2022 (within the first 90 days following Closing), is less than $3.00 per Share for 20 trading days during any 30 trading day period or (ii) the VWAP from November 14, 2022 (the 91st day following the Closing), is less than $5.00 per Share for 20 trading days during any 30 trading day period. At the close of market on October 20, 2022, the VWAP price of Class A Common Stock was less than $3.00 per Share for 20 consecutive trading days; however, we have not yet received notice from the ACM Seller to accelerate the Maturity Date and trigger payment of the FPA Maturity Consideration. The decision of the ACM Seller to cause an acceleration of the Maturity Date is at its sole discretion and the amount of Class A Common Stock to be issued as FPA Maturity Consideration is dependent on a trailing VWAP of the Class A Common Stock and how many securities the FPA Sellers are required to return to us at the Maturity Date. For example, if the FPA Sellers held 5,000,000 Recycled Shares on the Maturity Date, there were no Terminated Shares sold prior to the Maturity Date, and the FPA Maturity Consideration was issuable at $2.00 per share, we would be required to issue to the FPA Sellers 10,000,000 new shares of Class A Common Stock (representing approximately 5.7% of the total number of shares of Common Stock outstanding at Closing, after giving effect to such issuance) and the FPA Sellers would retain the 5,000,000 Recycled Shares.

 

Pursuant to certain deferred fee arrangements entered into with certain of our advisors in connection with the consummation of the Business Combination, we have issued 440,529 shares of Class A Common Stock and may issue an aggregate of approximately $23.1 million of additional shares of Class A Common Stock in satisfaction of the outstanding amounts owed thereunder pursuant to the terms therein (the “Deferred Fee Arrangements”). Under these arrangements, at our election, we may pay such amounts in cash and/or equity within four to six months following the Closing (December 15, 2022 through February 15, 2023). Any shares issued upon such election shall be issued at the 10 trading day VWAP prior to any such election. Without giving effect to any other potential future issuance and assuming (a) that the full amounts with respect to the Deferred Fee Arrangements set forth above are paid in Class A Common Stock, and (b) the VWAP in which we issue shares is $5.00, such additional issuances would represent in the aggregate approximately 5.1 million additional shares of Class A Common Stock or approximately 3.0% of the total number of shares of Common Stock outstanding on November 28, 2022, after giving effect to only such issuance. If the 10-day VWAP price is $2.00, such additional issuances would represent in the aggregate approximately 12 million additional shares of Class A Common Stock or approximately 6.8% of the total number of shares of Common Stock outstanding on November 28, 2022, after giving effect to only such issuance. The timing, frequency, and the price at which we issue shares of Class A Common Stock are subject to market prices and management’s decision to repay such amount in equity, if at all. Any shares of Class A Common Stock issued pursuant to these arrangements will need to be registered for resale on a Form S-1 registration statement.

 

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Pursuant to the SEPA, we may issue and sell up to $200.0 million of shares of Class A Common Stock to the Yorkville Investor. The price at which we may issue and sell shares will be at 97% of the lowest daily VWAP of the Class A Common Stock during the three trading days following a notice to sell to the Yorkville Investor, provided that we are subject to certain caps on the amount of shares of Class A Common Stock that we may sell on any single day. The shares of Class A Common Stock issuable under the SEPA will be registered for resale on a different registration statement. Without giving effect to the SEPA Exchange Cap (as defined below) or any other potential future issuance other than pursuant to the SEPA, and assuming that (a) the full amounts with respect to the SEPA set forth above are paid in Class A Common Stock, (b) the beneficial ownership limitations set forth in the SEPA are waived, and (c) the issue price for such sales is $5.00 per share, such additional issuances would represent in the aggregate approximately 40.0 million additional shares of Class A Common Stock or approximately 19.5% of the total number of shares of Common Stock outstanding on November 28, 2022, after giving effect to only such issuance. If the per share issue price is $2.00, such additional issuances would represent in the aggregate approximately 100.0 million additional shares of Class A Common Stock or approximately 37.7% of the total number of shares of Common Stock outstanding on November 28, 2022, after giving effect to only such issuance. If the beneficial ownership limitations are not waived, at a $5.00 and $2.00 issue price per share of Class A Common Stock, such issuances would represent approximately 17.9 million additional shares of Class A Common Stock, respectively, or approximately 9.99% of the total number of shares of Common Stock outstanding at Closing. The timing, frequency, and the price at which we issue shares of Class A Common Stock are subject to market prices and management’s decision to sell shares of Class A Common Stock, if at all. Any shares of Class A Common Stock issued pursuant to this arrangement will need to be registered for resale on a Form S-1 registration statement. For more information see “Certain Financing Transactions—SEPA.”

 

If and when we issue securities, such recipients, upon effectiveness of a Form S-1 registration statement registering such securities for resale, may resell all, some or none of such shares in their discretion and at different prices subject to the terms of the applicable agreement. As a result, investors who purchase shares from such recipients at different times will likely pay different prices for those shares, and so may experience different levels of dilution (and in some cases substantial dilution) and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase as a result of future issuances or issuances and sales made by Rubicon to such aforementioned parties or others at prices lower than the prices such investors paid for their shares. In addition, if we issue a substantial number of shares to such parties, or if investors expect that we will do so, the actual sales of shares or the mere existence of an arrangement with such parties may adversely affect the price of our securities or make it more difficult for us to sell equity or equity-related securities in the future at a desirable time and price, or at all.

 

The issuance, if any, of Class A Common Stock would not affect the rights or privileges of Rubicon’s existing stockholders, except that the economic and voting interests of existing stockholders would be diluted, potentially substantially. Although the number of shares of Class A Common Stock that existing stockholders own would not decrease as a result of these additional issuances, the shares of Class A Common Stock owned by existing stockholders would represent a smaller percentage of the total outstanding shares of Class A Common Stock after any such issuance, potentially significantly smaller.

 

See the section entitled “Certain Financing Transactions” for additional information regarding the SEPA, the Forward Purchase Agreement, and Deferred Fee Arrangements.

 

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The Warrants are exercisable for Class A Common Stock, which may increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

 

Rubicon has an aggregate of 30,016,851 Warrants issued and outstanding, representing the right to purchase an equivalent number of shares of Class A Common Stock in accordance with the terms of the Warrant Agreement. The exercise price of the Warrants is $11.50 per share. Without giving effect to the issuance of any shares of Class A Common Stock pursuant to the Forward Purchase Agreement, the Deferred Fee Arrangements or the SEPA, the shares of Class A Common Stock issued upon such exercises would represent approximately 15.4% of the total number of shares of Common Stock outstanding on November 28, 2022, after giving effect to such exercises. To the extent such Warrants are exercised, additional shares of Class A Common Stock will be issued, which will result in dilution to Rubicon’s existing holders 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 Class A Common Stock. However, there is no guarantee that the Warrants will ever be in the money prior to their expiration, and as such, the Warrants may expire worthless.

 

The Public Warrants may never be in the money, and they may expire worthless and the terms of such Public Warrants may be amended in a manner adverse to a holder if holders of at least a majority of the then-outstanding Public Warrants approve of such amendment.

 

The Public Warrants were issued in registered form pursuant to the Warrant Agreement. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval of 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. Notwithstanding the foregoing, any amendment to the terms of the Private Warrants only requires the consent of the Company and the holders of a majority of the Private Warrants.

 

We may receive up to an aggregate of approximately $345.2 million from the cash exercise of the Warrants. The exercise price of our Warrants is $11.50 per warrant. However, the last reported sales price of our Class A Common Stock on November 25, 2022 was $2.40. The likelihood that Warrant holders will exercise their Warrants, and therefore any amount of cash proceeds that we may receive, is dependent upon the trading price of our Class A Common Stock. If the trading price for our Class A Common Stock continues to be less than $11.50 per share, we do not expect Warrant holders to exercise their Warrants. Similarly, the Private Warrants may be exercised on a cashless basis and we will not receive any proceeds from such exercise, even if the Private Warrants are in-the-money. We expect to use the net proceeds from the exercise of such securities, if any, for general corporate purposes, which may include acquisitions or other strategic investments. We will have broad discretion over the use of any proceeds from the exercise of such securities. Any proceeds from the exercise of such securities would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of Warrants when planning for our operational funding needs.

 

We may redeem your unexpired Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Warrants worthless.

 

Rubicon may redeem outstanding Warrants prior to their exercise at a time that is disadvantageous to you, thereby significantly impairing the value of such warrants. Rubicon has the option to redeem not less than all of the outstanding Warrants at any time during the exercise period, at a price of $0.01 per Warrant, upon not less than 30 days’ prior written notice of redemption to each Warrant holder, (i) provided that the last reported sale price of the Class A Common Stock equals or exceeds $18.00 per share on each of 20 trading days within a 30 trading day period commencing after the Warrants become exercisable and ending on the third trading day prior to the notice of redemption to Warrant holders, and (ii) provided that there is an effective registration statement with respect to the Class A Common Stock underlying such Warrants, and a current prospectus relating thereto, available throughout the 30-day redemption or Rubicon has elected to require the exercise of the Warrants on a “cashless basis.”

 

If and when the Warrants become redeemable by Rubicon, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force you (i) to exercise your Warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your Warrants at the then-current market price when you might otherwise wish to hold your Warrants, or (iii) to accept the nominal redemption price which, at the time that the outstanding Warrants are called for redemption, is likely to be substantially less than the market value of your Warrants.

 

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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 (2) may not compensate the holders for the value of the Warrants.

 

As of November 25, 2022, the last reported sale of price of the Class A Common Stock was $2.40 per share, which is below the threshold required for redemption.

 

In the event we elect to redeem the outstanding Warrants, we will mail notice of redemption by first class mail, postage prepaid, not less than thirty days prior to the redemption date to the registered holders of the Warrants to be redeemed at their last addresses as they appear on the registration books. Any notice mailed in such manner will be conclusively presumed to have been duly given whether or not the registered holder received such notice. If you do not exercise your Warrants prior to the redemption date, you would only receive the nominal redemption price for your Warrants upon surrender thereof.

 

There can be no assurance that we will continue to comply with the continued listing standards of NYSE.

 

Our Class A Common Stock and Public Warrants are currently listed on NYSE. If NYSE delists Rubicon’s securities for failure to meet the continued listing standards, Rubicon and its stockholders could face significant material adverse consequences including:

 

  a limited availability of market quotations for our securities;

 

  reduced liquidity for our securities;

 

  a determination that Class A Common Stock are a “penny stock” which would require brokers trading in Class A 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;

 

  a limited amount of news and analyst coverage; and

 

  a decreased ability to issue additional securities or obtain additional financing in the future.

 

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our Class A Common Stock and Public Warrants are listed on the NYSE, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if Rubicon was no longer listed on the NYSE, its securities would not be covered securities and it would be subject to regulation in each state in which it offers its securities.

 

Under certain circumstances, holders of Rubicon Interests will be entitled to Earn-Out Interests, which will increase the number of shares eligible for future resale in the public market and result in dilution of our stockholders.

 

After the Closing, subject to the terms and conditions set forth in the Merger Agreement, the holders of Rubicon Interests (excluding, for the avoidance of doubt, Rubicon Phantom Unitholders and Rubicon Management Rollover Holders), as applicable, have a right to receive their pro rata portion of a number of Earn-Out Interests (subject to equitable adjustment for share splits, share dividends, combinations, recapitalizations and the like after the Closing, including to account for any equity securities into which such shares are exchanged or converted) as additional consideration based on the performance of the Class A Common Stock during the five (5) year period after the Closing. Blocked Unitholders immediately before the Closing will be entitled to receive a pro rata portion of 1,488,519 Earn-Out Class A Shares and Rubicon Continuing Unitholders immediately before the Closing will be entitled to receive a pro rata portion of 8,900,840 Earn-Out Units and an equivalent number of Earn-Out Class V Shares.

 

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Certain holders of Rubicon Interests will be entitled to a contingent right to receive Earn-Out Interests that is conditioned on specific circumstances, of which the occurrence is uncertain, and the failure of any of such circumstances to occur could create potential negative effects such as an increased risk of litigation.

 

Subject to the terms and conditions set forth in the Merger Agreement, the holders of Rubicon Interests (excluding, for the avoidance of doubt, Rubicon Phantom Unitholders and Rubicon Management Rollover Holders), as applicable, will be entitled to receive their pro rata portion of a number of Earn-Out Interests (subject to equitable adjustment for share splits, share dividends, combinations, recapitalizations and the like after the Closing, including to account for any equity securities into which such shares are exchanged or converted) as additional consideration based on the performance of the Class A Common Stock during the five (5) year period after the Closing (the “Earn-Out Period”), as set forth below upon satisfaction of any of the following conditions (each, an “Earn-Out Condition”):

 

(1) 50% of the Earn-Out Interests if the VWAP of the Class A Common Stock equals or exceeds $14.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for twenty (20) of thirty (30) consecutive trading days during the Earn-Out Period;

 

(2) 50% of the Earn-Out Interests if the VWAP of the Class A Common Stock equals or exceeds $16.00 per share (as adjusted for stock splits, stock dividends, reorganizations, and recapitalizations) for twenty (20) of any thirty (30) consecutive trading days during the Earn-Out Period.

 

Whether the Earn-Out Conditions will be met is uncertain and depends on factors that may be out of Rubicon’s direct control, such as market conditions and its stock price. The failure of either Earn-Out Condition to occur could give rise to potential litigation and other negative effects because of management’s business decisions, which may negatively impact Rubicon’s stock price.

 

A significant portion of the total outstanding shares of Class A Common Stock (or shares of Class A Common Stock that may be issued in the future pursuant to an exchange or redemption of Class B Units) are subject to lock-up restrictions, but may be sold into the market in the near future. This could cause the market price of our securities to drop significantly.

 

Pursuant to the Sponsor Agreement, the Sponsor and each Insider agreed not to transfer any Founder Class B Shares or Founder Private Placement Warrants (or any shares of Class A Common Stock issuable upon conversion or exercise thereof) until the earlier of (i) February 11, 2023 (180 days after the Closing Date) and (ii) the date after the Closing on which Rubicon completes a liquidation, merger, or similar transaction that results in all of Rubicon’s stockholders having the right to exchange their shares of Class A Common Stock for cash, securities or other property. Sponsor holds 6,746,250 shares of Class A Common Stock (after accounting for the forfeiture of 160,000 Founder Class B Shares pursuant to the Rubicon Equity Investment Agreement and 1,000,000 Founder Class B Shares pursuant to the Sponsor Forfeiture Agreement) and 12,623,125 Private Warrants (exercisable into 12,623,125 shares of Class A Common Stock).

 

Pursuant to the Lock-Up Agreements, each holder agreed to certain transfer restrictions with respect to its Class A Common Stock and/or Class B Units received as transaction consideration pursuant to the Merger Agreement, until the earlier of (i) February 11, 2023 (180 days after the Closing Date) and (ii) the date after the Closing on which Rubicon completes a liquidation, merger, or similar transaction that results in all of Rubicon’s stockholders having the right to exchange their equity holdings for cash, securities or other property. The holders of Rubicon Interests further agreed pursuant to the Lock-Up Agreements not to exchange Class B Units for Class A Common Stock during this restricted period. As of the Closing Date, there are approximately 138.5 million shares of Class A Common Stock (or Class B Units otherwise exchangeable for shares of Class A Common Stock) subject to these restrictions.

 

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We entered into the following agreements whereby we issued or have agreed to issue unregistered securities that would require an effective registration statement on Form S-1 or Form S-3 (as applicable) for the resale thereof:

 

  Pursuant to the Subscription Agreements, Rubicon issued 12.1 million shares of Class A Common Stock to the PIPE Investors.

 

  Pursuant to the Rubicon Equity Investment Agreement, Rubicon issued 160,000 shares of Class A Common Stock to the New Equity Holders.

 

  Pursuant to the Deferred Fee Arrangements, Rubicon has issued 440,529 shares of Class A Common Stock and may issue up to $23.1 million of additional shares of Class A Common Stock.
     
  Pursuant to the SEPA, Rubicon issued 200,000 shares of Class A Common Stock to the Yorkville Investor as an initial commitment fee and may issue up to $200.0 million of Class A Common Stock to the Yorkville Investor pursuant to the terms thereof.
     
  Pursuant to the DSUs, Rubicon will issue 815,032 shares of Class A Common Stock to certain Phantom Unitholders and Rubicon Management Rollover Holders who were no longer employed by Rubicon or its subsidiaries at the time of the DSU award.

 

Once these shares are registered for resale or in a primary offering, they can be sold in the public market upon issuance, subject to Rule 144 limitations applicable to affiliates and vesting restrictions.

 

The market price and trading volume of Class A Common Stock has been and may continue to be volatile and has declined and could further decline significantly following the Business Combination.

 

Stock markets, including the NYSE, the NYSE Amex and the Nasdaq Capital Market, have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for Class A Common Stock and Public Warrants, the market price of Class A Common Stock and Public Warrants may be volatile and could decline significantly. In addition, the trading volume in Class A Common Stock and Public Warrants may fluctuate and cause significant price variations to occur. If the market price of Class A Common Stock and Public Warrants declines significantly, you may be unable to resell your shares and warrants at or above the market price of Class A Common Stock and Public Warrants as of the date of the consummation of the Business Combination. We cannot assure you that the market price of Class A Common Stock and Public Warrants will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:

 

  the realization of any of the risk factors presented in this prospectus;

 

  actual or anticipated differences in our estimates, or in the estimates of analysts, for the Company’s revenues, results of operations, level of indebtedness, liquidity or financial condition;

 

  additions and departures of key personnel;

 

  failure to comply with the requirements of NYSE;

 

  failure to comply with the Sarbanes-Oxley Act or other laws or regulations;

 

  future issuances, sales or resales, or anticipated issuances, sales or resales, of Class A Common Stock;

 

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  perceptions of the investment opportunity associated with Class A Common Stock relative to other investment alternatives;

 

  the performance and market valuations of other similar companies;

 

  future announcements concerning Rubicon’s business or its competitors’ businesses;

 

  broad disruptions in the financial markets, including sudden disruptions in the credit markets;

 

  speculation in the press or investment community;

 

  actual, potential or perceived control, accounting or reporting problems;

 

  changes in accounting principles, policies and guidelines;

 

  general economic and political conditions, such as the effects of the COVID-19 outbreak, recessions, interest rates, local and national elections, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism, including the outbreak of war in Ukraine; and
     
  future issuances of Class A Common Stock at or below then-current trading prices, including pursuant to the Forward Purchase Agreement and SEPA.

 

In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their securities. This type of litigation could result in substantial costs and divert Rubicon’s management’s attention and resources, which could have a material adverse effect on Rubicon.

 

If securities or industry analysts do not publish research, publish inaccurate or unfavorable research or cease publishing research about us, our share price and trading volume could decline significantly.

 

The market for Class A Common Stock will depend in part on the research and reports that securities or industry analysts publish about Rubicon or its business. Securities and industry analysts do not currently, and may never, publish research on Rubicon. If no securities or industry analysts commence coverage of Rubicon, the market price and liquidity for Class A Common Stock could be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover Rubicon downgrade their opinions about Class A Common Stock, publish inaccurate or unfavorable research about Rubicon, or cease publishing about Rubicon regularly, demand for Class A Common Stock could decrease, which might cause its share price and trading volume to decline significantly.

 

Future issuances of debt securities and equity securities may adversely affect us, including the market price of Class A Common Stock, and may be dilutive to existing stockholders.

 

There is no assurance that Rubicon will not incur debt or issue equity ranking senior to Class A Common Stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting Rubicon’s operating flexibility. Additionally, any convertible or exchangeable securities that Rubicon issues in the future may have rights, preferences and privileges more favorable than those of Class A Common Stock. Because Rubicon’s decision to issue debt or equity in the future will depend on market conditions and other factors beyond Rubicon’s control, it cannot predict or estimate the amount, timing, nature or success of Rubicon’s future capital raising efforts. As a result, future capital raising efforts may reduce the market price of Class A Common Stock and be dilutive to existing stockholders.

 

We do not intend to pay cash dividends for the foreseeable future.

 

Subject to its obligations under the Tax Receivable Agreement, Rubicon currently intends to retain its future earnings, if any, to finance the further development and expansion of its business (including by re-investing such future earnings in Rubicon) and does not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be subject to the Tax Receivable Agreement, A&R LLCA, and at the discretion of the board of directors of Rubicon (the “Board”) and will depend on Rubicon’s financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as the Board deems relevant.

 

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Rubicon is a holding company with no material assets other than its interest in Holdings LLC. We intend to cause Holdings LLC to make distributions to holders of Class A Units and Class B Units such that the total cash distribution from Holdings LLC to the holders is sufficient to enable each holder to pay all applicable taxes on taxable income allocable to such holder (the “Tax Distributions”). Rubicon will use the Tax Distributions to pay any taxes it owes and satisfy its obligations under the Tax Receivable Agreement. In addition, Holdings LLC is expected to reimburse Rubicon for corporate and other overhead expenses.

 

The A&R LLCA provides that the Tax Distributions will be made to holders of Class A Units and Class B Units (including Rubicon) at the highest combined effective U.S. federal, state, and local marginal rate of tax applicable to an individual resident in the U.S. for the fiscal year. Rubicon anticipates that the Tax Distributions it will receive from Holdings LLC may, in certain periods, exceed Rubicon’s actual tax liabilities and obligations to make payments under the Tax Receivable Agreement. The Board, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, to pay dividends on the Class A Common Stock or to re-invest in Holdings LLC. Rubicon will have no obligation to distribute such cash (or other available cash other than any declared dividend) to its stockholders. We also expect, if necessary, to undertake ameliorative actions, which may include pro rata or non-pro rata reclassifications, combinations, subdivisions or adjustments of outstanding Class A Units pursuant to the A&R LLCA, to maintain one-for-one parity between Class A Units held by Rubicon and shares of Class A Common Stock.

 

We may be subject to securities litigation, which is expensive and could divert management attention.

 

The market price of Class A Common Stock may be volatile and, in the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. Rubicon may be the target of this type of litigation in the future. Securities litigation against Rubicon could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm its business.

 

Other Risks Related to Operating as a Public Company

 

Our management does not have prior experience in operating a public company.

 

Our management does not have prior experience in managing a publicly traded company. As such, the management team may encounter difficulties in successfully or effectively managing Rubicon’s transition to a public company and in complying with its reporting and other obligations under federal securities laws and other regulations and in connection with operating as a public company. Their lack of prior experience in dealing with the reporting and other obligations and laws pertaining to public companies could result in the management of Rubicon being required to devote significant time to these activities which may result in less time being devoted to the management and growth of Rubicon. Additionally, Rubicon will be required to hire additional 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. Rubicon may be required to incur significant expense in connection with these efforts.

 

Rubicon will depend on distributions from Holdings LLC to pay any taxes and other expenses, including payments under the Tax Receivable Agreement.

 

Rubicon is a holding company and its only business is to act as the managing member of Holdings LLC, and its only material assets are Class A Units representing approximately 30.9% of the membership interests of Holdings LLC. Rubicon does not have any independent means of generating revenue. We anticipate that Holdings LLC will continue to be treated as a partnership for U.S. federal income tax purposes and, as such, generally will not be subject to any entity-level U.S. federal income tax. Instead, taxable income will be allocated to the members of Holdings LLC. Accordingly, Rubicon will be required to pay income taxes on its allocable share of any net taxable income of Holdings LLC. We intend to cause Holdings LLC to make pro rata distributions to each of its members, including Rubicon, in an amount intended to enable each member to pay all applicable taxes on taxable income allocable to such member and to allow Rubicon to make payments under the Tax Receivable Agreement. In addition, Holdings LLC will reimburse Rubicon for corporate and other overhead expenses. If the amount of tax distributions to be made exceeds the amount of funds available for distribution, Rubicon shall receive a tax distribution payment before the other members of Holdings LLC receive any distribution and the balance, if any, of funds available for distribution shall be distributed to the other members of Holdings LLC pro rata in accordance with their assumed tax liabilities. To the extent that Rubicon needs funds, and Holdings LLC is restricted from making such distributions under applicable laws or regulations, or is otherwise unable to provide such funds, it could materially and adversely affect Rubicon’s ability to pay taxes and other expenses, including payments under the Tax Receivable Agreement, and affect our liquidity and financial condition. Although we do not currently expect to pay dividends, such restrictions could also affect Rubicon’s ability to pay any dividends (if declared) in the future.

 

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Rubicon is required to pay to the TRA Holders most of the tax benefits Rubicon receives from tax basis step-ups (and certain other tax benefits) attributable to its acquisition of Legacy Rubicon Units in connection with the Business Combination and in the future, and the amount of those payments is expected to be substantial.

 

Rubicon has entered into the Tax Receivable Agreement with the TRA Holders. The Tax Receivable Agreement provides for payment by Rubicon to the TRA Holders of 85% of the amount of the net cash tax savings, if any, that Rubicon realizes (or, under certain circumstances, is deemed to realize) as a result of (i) increases in tax basis (and utilization of certain other tax benefits) resulting from Rubicon’s acquisition of preferred and common units of Holdings LLC (the “Legacy Rubicon Units”) in connection with the Business Combination and in Class B Unit future exchanges, (ii) certain favorable tax attributes (such as net operating losses attributable to pre-merger tax periods) Rubicon acquired in the Blocker Mergers and (iii) any payments Rubicon makes to the TRA Holders under the Tax Receivable Agreement (including tax benefits related to imputed interest). Rubicon will retain the benefit of the remaining 15% of these net cash tax savings.

 

The term of the Tax Receivable Agreement commenced upon the completion of the Business Combination and will continue until all tax benefits that are subject to the Tax Receivable Agreement have been utilized or have expired, unless we exercise our right to terminate the Tax Receivable Agreement (or it is terminated due to a change in control or our breach of a material obligation thereunder), in which case Rubicon will be required to make the termination payment specified in the Tax Receivable Agreement. In addition, payments we make under the Tax Receivable Agreement will be increased by any interest accrued from the due date (without extensions) of the corresponding tax return.

 

The actual tax benefit, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, as further set forth in this prospectus. For the sake of illustration, assuming all outstanding Class B Units are exchanged for shares of Class A Common Stock, the estimated tax benefits to Rubicon subject to the Tax Receivable Agreement would be approximately $394.7 million and the related undiscounted payment to the TRA Holders equal to 85% of the benefit would be approximately $335.5 million, assuming (i) exchanges occurred on the same day, (ii) a share price of $10.00 per share of Class A Common Stock, (iii) no material changes in relevant tax law, (iv) a constant combined effective income tax rate of 24.017% and (v) that we have sufficient taxable income in each year to realize on a current basis the increased depreciation, amortization and other tax benefits that are the subject of the Tax Receivable Agreement. The actual future payments to the TRA Holders will vary based on the factors discussed below, and estimating the amount and timing of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, as the calculation of amounts payable depends on a variety of factors and future events. We expect to receive distributions from Holdings LLC in order to make any required payments under the Tax Receivable Agreement. However, we may need to incur debt to finance payments under the Tax Receivable Agreement to the extent such distributions or our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.

 

The actual tax benefit, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending on a number of factors, including the price of our Class A Common Stock at the time of the exchange; the timing of future exchanges; the extent to which exchanges are taxable; the amount and timing of the utilization of tax attributes; the amount, timing and character of Rubicon’s income; the U.S. federal, state and local tax rates then applicable; the depreciation and amortization periods that apply to the increases in tax basis; the timing and amount of any earlier payments that Rubicon may have made under the Tax Receivable Agreement; and the portion of Rubicon’s payments under the Tax Receivable Agreement that constitute imputed interest or give rise to depreciable or amortizable tax basis. As a result of the increases in the tax basis (including actual and deemed increases) of the tangible and intangible assets of Holdings LLC attributable to the initial acquisitions and exchanged Holdings LLC interests, the Blocker Mergers, and certain other tax benefits, the payments that Rubicon will be required to make to the beneficiaries under the Tax Receivable Agreement will be substantial. There may be a material negative effect on our financial condition and liquidity if, as described below, the payments under the Tax Receivable Agreement exceed the actual benefits Rubicon receives in respect of the tax attributes subject to the Tax Receivable Agreement and/or distributions to Rubicon by Holdings LLC are not sufficient to permit Rubicon to make payments under the Tax Receivable Agreement.

 

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In certain circumstances, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual tax benefits, if any, that Rubicon actually realizes.

 

The Tax Receivable Agreement provides that if (i) Rubicon exercises its right to early termination of the Tax Receivable Agreement in whole (that is, with respect to all benefits due to all beneficiaries under the Tax Receivable Agreement) or in part (that is, with respect to some benefits due to all beneficiaries under the Tax Receivable Agreement), (ii) Rubicon experiences certain changes in control, (iii) the Tax Receivable Agreement is rejected in certain bankruptcy proceedings, (iv) Rubicon fails (subject to certain exceptions) to make a payment under the Tax Receivable Agreement within 180 days after the due date, or (v) Rubicon materially breaches its obligations under the Tax Receivable Agreement, Rubicon will be obligated to make an early termination payment to holders of rights under the Tax Receivable Agreement equal to the present value of all payments that would be required to be paid by Rubicon under the Tax Receivable Agreement. The amount of such payments will be determined on the basis of certain assumptions in the Tax Receivable Agreement, including (i) the assumption that Rubicon would have enough taxable income to fully utilize the tax benefit resulting from the tax assets that are the subject of the Tax Receivable Agreement, (ii) the assumption that any item of loss, deduction, or credit generated by a basis adjustment or imputed interest arising in a taxable year preceding the taxable year that includes an early termination will be used by Rubicon ratably from such taxable year through the earlier of (x) the scheduled expiration of such tax item or (y) 15 years; (iii) the assumption that any non-amortizable assets are deemed to be disposed of in a fully taxable transaction on the fifteenth anniversary of the earlier of the basis adjustment and the early termination date; (iv) the assumption that U.S. federal, state and local tax rates will be the same as in effect on the early termination date, unless scheduled to change; and (v) the assumption that any exchangeable units of Holdings LLC (other than those held by Rubicon) outstanding on the termination date are deemed to be exchanged for an amount equal to the market value of the corresponding number of shares of Class A Common Stock on the termination date. Any early termination payment may be made significantly in advance of the actual realization, if any, of the future tax benefits to which the termination payment relates. The amount of the early termination payment is determined by discounting the present value of all payments that would be required to be paid by Rubicon under the Tax Receivable Agreement at a rate equal to the lesser of (a) 6.5% and (b) LIBOR (as defined in the Tax Receivable Agreement), plus 400 basis points.

 

Moreover, as a result of an elective early termination, a change in control or Rubicon’s material breach of its obligations under the Tax Receivable Agreement, Rubicon could be required to make payments under the Tax Receivable Agreement that exceed its actual cash savings. Thus, Rubicon’s obligations under the Tax Receivable Agreement could have a substantial negative effect on its financial condition and liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. We cannot assure you that we will be able to finance any early termination payment. It is also possible that the actual benefits ultimately realized by us may be significantly less than were projected in the computation of the early termination payment. We will not be reimbursed if the actual benefits ultimately realized by us are less than were projected in the computation of the early termination payment.

 

Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we will determine and the Internal Revenue Service (“IRS”) or another tax authority may challenge all or part of the tax basis increases, as well as other related tax positions we take, and a court could sustain such challenge. If any tax benefits that have given rise to payments under the Tax Receivable Agreement are subsequently disallowed, Rubicon would be entitled to reduce future amounts otherwise payable to a holder of rights under the Tax Receivable Agreement to the extent the holder has received excess payments. However, the required final and binding determination that a holder of rights under the applicable Tax Receivable Agreement has received excess payments may not be made for a number of years following commencement of any challenge, and Rubicon will not be permitted to reduce its payments under the Tax Receivable Agreement until there has been a final and binding determination, by which time sufficient subsequent payments under such Tax Receivable Agreement may not be available to offset prior payments for disallowed benefits. Rubicon will not be reimbursed for any payments previously made under the Tax Receivable Agreement if the basis increases described above are successfully challenged by the IRS or another taxing authority. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement that are significantly in excess of the benefit that Rubicon actually realizes in respect of the increases in tax basis (and utilization of certain other tax benefits) and Rubicon may not be able to recoup those payments, which could adversely affect Rubicon’s financial condition and liquidity.

 

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In certain circumstances, Holdings LLC will be required to make distributions to us and the continuing members of Holdings LLC, and the distributions that Holdings LLC will be required to make may be substantial.

 

Holdings LLC is expected to continue to be treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to U.S. federal income tax. Instead, taxable income will be allocated to its members, including Rubicon. Pursuant to the A&R LLCA, Holdings LLC will make pro rata tax distributions to its members, including Rubicon, which generally will be pro rata based on the ownership of Holdings LLC units, calculated using an assumed tax rate, to enable each of the members to pay taxes on that member’s allocable share of Holdings LLC’s net taxable income. Under applicable tax rules, Holdings LLC is required to allocate net taxable income disproportionately to its members in certain circumstances. Because tax distributions will be determined based on assumptions, including an assumed tax rate that is the highest combined effective marginal tax rate applicable to an individual resident in the U.S. for the taxable year, but will be made pro rata based on ownership of Holdings LLC units, Holdings LLC will be required to make tax distributions that, in the aggregate, will likely exceed the aggregate amount of taxes payable by its members with respect to the allocation of Holdings LLC’s income.

 

Funds used by Holdings LLC to satisfy its tax distribution obligations will generally not be available for reinvestment in its business and these the tax distributions Holdings LLC will be required to make may be substantial.

 

As a result of potential differences in the amount of net taxable income allocable to us and to other members of Holdings LLC, as well as the use of an assumed tax rate in calculating Holdings LLC’s Tax Distribution obligations, we may receive distributions significantly in excess of our tax liabilities and obligations to make payments under the Tax Receivable Agreement. We may choose to manage these excess distributions through a number of different approaches, including through the payment of dividends to our holders of Class A Common Stock or by applying them to other corporate purposes.

 

The IRS might challenge the tax basis step-ups and other tax benefits we receive in connection with the Business Combination and the related transactions and in connection with future acquisitions of Class B Units.

 

The Rubicon Continuing Unitholders may exchange Class B Units for shares of our Class A Common Stock in the future or, at the election of Rubicon in its sole discretion, for cash. The Blocker Mergers and exchanges by Rubicon Continuing Unitholders in the future may result in increases in the tax basis of the assets of Holdings LLC that otherwise would not have been available. These increases in tax basis are expected to increase, or deemed to increase (for U.S. tax purposes) Rubicon’s depreciation and amortization and, together with other tax benefits, reduce the amount of tax that Rubicon would otherwise be required to pay, although it is possible that the IRS might challenge all or part of these tax basis increases or other tax benefits, and a court might sustain such a challenge. Rubicon’s ability to achieve benefits from any tax basis increases or other tax benefits will depend upon a number of factors, as discussed below, including the timing and amount of our future income. We will not be reimbursed for any payments previously made under the Tax Receivable Agreement if the basis increases or other tax benefits described above are successfully challenged by the IRS or another taxing authority (other than by an off-set against future payments under the Tax Receivable Agreement). As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement in excess of our ultimate cash tax savings.

 

We may incur tax and other liabilities attributable to Blocked Unitholders as a result of certain reorganization transactions.

 

In connection with the Blocker Mergers, Rubicon will issue Blocked Unitholders shares of Class A Common Stock as merger consideration. As the successor to these merged entities, Rubicon generally will succeed to and be responsible for any outstanding or historical tax or other liabilities of the Blocker Companies, including any liabilities incurred as a result of the Blocker Mergers. Any such liabilities for which Rubicon is responsible could have an adverse effect on our liquidity and financial condition.

 

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Future changes to tax laws or our effective tax rate could materially and adversely affect our company and reduce net returns to our stockholders.

 

Our tax treatment is subject to the enactment of, or changes in, tax laws, regulations and treaties, or the interpretation thereof, tax policy initiatives and reforms under consideration and the practices of tax authorities in various jurisdictions, all of which could change on a prospective or retroactive basis. Such changes may include (but are not limited to) the taxation of operating income, investment income, dividends received or (in the specific context of withholding tax) dividends paid, or the taxation of partnerships and other passthrough entities. We are unable to predict what tax reform may be proposed or enacted in the future or what effect such changes would have on our business, but such changes, to the extent they are brought into tax legislation, regulations, policies or practices, could affect our financial position and overall or effective tax rates in the future, reduce post-tax returns to our stockholders, and increase the complexity, burden and cost of tax compliance.

 

Our businesses are subject to income taxation in the United States. Tax rates at the federal, state and local levels in the United States may be subject to significant change. If our effective tax rate increases, our operating results and cash flow could be adversely affected. Our effective income tax rate can vary significantly between periods due to a number of complex factors, including projected levels of taxable income in each jurisdiction, tax audits conducted and settled by various tax authorities, and adjustments to income taxes upon finalization of income tax returns.

 

We may be required to pay additional taxes because of the U.S. federal partnership audit rules and potentially also state and local tax rules.

 

Under the U.S. federal partnership audit rules, subject to certain exceptions, audit adjustments to items of income, gain, loss, deduction, or credit of an entity (and any holder’s share thereof) are determined, and taxes, interest, and penalties attributable thereto, are assessed and collected at the entity level. Holdings LLC (or any of its applicable subsidiaries or other entities in which Holdings LLC directly or indirectly invests that are classified as partnerships for U.S. federal income tax purposes) may be required to pay additional taxes, interest and penalties as a result of an audit adjustment, and Rubicon, as a member of Holdings LLC (or such other entities), could be required to indirectly bear the economic burden of those taxes, interest, and penalties even though we may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. Audit adjustments for state or local tax purposes similarly could result in Holdings LLC (or any of its applicable subsidiaries or other entities in which Holdings LLC directly or indirectly invests) being required to pay or indirectly bear the economic burden of state or local taxes and associated interest and penalties.

 

Under certain circumstances, Holdings LLC or an entity in which Holdings LLC directly or indirectly invests may be eligible to make an election to cause members of Holdings LLC (or such other entity) to take into account the amount of any understatement, including any interest and penalties, in accordance with such member’s share in Holdings LLC in the year under audit. We will decide whether or not to cause Holdings LLC to make this election (subject to the terms of the A&R LLCA); however, there are circumstances in which the election may not be available and, in the case of an entity in which Holdings LLC directly or indirectly invests, such decision may be outside of our control. If Holdings LLC or an entity in which Holdings LLC directly or indirectly invests does not make this election, the then-current members of Holdings LLC (including Rubicon) could economically bear the burden of the understatement.

 

If Holdings LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, Rubicon and Holdings LLC might be subject to potentially significant tax inefficiencies, and Rubicon would not be able to recover payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits were subsequently determined to have been unavailable due to such status.

 

We intend to operate such that Holdings LLC does not become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. A “publicly traded partnership” is an entity that otherwise would be treated as a partnership for U.S. federal income tax purposes, the interests of which are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. From time to time the U.S. Congress has considered legislation to change the tax treatment of partnerships and there can be no assurance that any such legislation will not be enacted or if enacted will not be adverse to us.

 

If Holdings LLC were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, significant tax inefficiencies might result for Rubicon and Holdings LLC, including as a result of Rubicon’s inability to file a consolidated U.S. federal income tax return with Holdings LLC. In addition, Rubicon may not be able to realize tax benefits covered under the Tax Receivable Agreement and would not be able to recover any payments previously made by it under the Tax Receivable Agreement, even if the corresponding tax benefits (including any claimed increase in the tax basis of Holdings LLC’s assets) were subsequently determined to have been unavailable.

 

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USE OF PROCEEDS

 

All of the Class A Common Stock and Private Warrants offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. The Company will not receive any of the proceeds from these sales. The Company will receive up to an aggregate of approximately $163.4 million from the exercise of the Private Warrants, assuming the exercise in full of all of the Private Warrants for cash.

 

The exercise price of our Warrants is $11.50 per warrant. However, the last reported sales price of our Class A Common Stock on November 25, 2022 was $2.40. The likelihood that Warrant holders will exercise their Warrants, and therefore any amount of cash proceeds that we may receive, is dependent upon the trading price of our Class A Common Stock. If the trading price for our Class A Common Stock continues to be less than $11.50 per share, we do not expect Warrant holders to exercise their Warrants. Similarly, the Private Warrants may be exercised on a cashless basis and we will not receive any proceeds from such exercise, even if the Private Warrants are in-the-money. Unless we inform you otherwise in a prospectus supplement, the Company intends to use the net proceeds from the exercise of such Private Warrants for general corporate purposes, which may include acquisitions or other strategic investments or repayment of outstanding indebtedness. Any proceeds from the exercise of Warrants would increase our liquidity, but we are not currently budgeting for any cash proceeds from the exercise of Warrants when planning for our operational funding needs. The Company will have broad discretion over the use of any such proceeds. There is no assurance that the holders of the Private Warrants will elect to exercise any or all of such Private Warrants.

 

The Selling Securityholders will pay any underwriting discounts and commissions and expenses incurred by the Selling Securityholders for brokerage, accounting, tax or legal services or any other expenses incurred by the Selling Securityholders in disposing of the securities covered by this prospectus; provided, however, that pursuant to the A&R Registration Rights Agreement, 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, NYSE listing fees and fees and expenses of our counsel and our independent registered public accounting firm, and certain fees incurred in connection with a Selling Securityholder’s exercise of certain block trade, piggyback and underwritten offering rights. See “Shares Eligible for Future Sale—Registration Rights” for additional information regarding these obligations.

 

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DIVIDEND POLICY

 

We have not paid any cash dividends on Common Stock to date. The Board may from time to time consider whether or not to institute a dividend policy. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of the Board, subject to restrictions under Delaware law. The Company’s ability to declare dividends will also be limited by restrictive covenants pursuant to existing and any future debt financing.

 

We are a holding company with no material assets other than our interest in Holdings LLC. We intend to cause Holdings LLC to make distributions to holders of Class A Units and Class B Units in amounts such that the total cash distributions from Holdings LLC to the holders are sufficient to enable each holder to pay all applicable taxes on taxable income allocable to such holder and other obligations under the Tax Receivable Agreement as well as any cash dividends declared by us.

 

The A&R LLCA generally provides that pro rata cash Tax Distributions will be made to holders of Class A Units and Class B Units (including Rubicon) at certain assumed tax rates. We anticipate that the distributions we will receive from Holdings LLC may, in certain periods, exceed our actual tax liabilities and obligations to make payments under the Tax Receivable Agreement. The Board, in its sole discretion, will make any determination from time to time with respect to the use of any such excess cash so accumulated, which may include, among other uses, to pay dividends on the Class A Common Stock. We will have no obligation to distribute such cash (or other available cash other than any declared dividend) to our stockholders. We also expect, if necessary, to undertake ameliorative actions, which may include pro rata or non-pro rata reclassifications, combinations, subdivisions or adjustments of outstanding Class A Units pursuant to the A&R LLCA, to maintain one-for-one parity between Class A Units held by us and shares of Class A Common Stock.

 

See “Description of Securities—Capital Stock.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

Capitalized terms used but not defined herein shall have the meanings ascribed to them in this prospectus.

 

We are providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Mergers. The unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes.

 

The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022 combines the historical unaudited statement of operations of Founder for the six months ended June 30, 2022 with the historical unaudited consolidated statement of operations of Holdings LLC for the nine months ended September 30, 2022. The unaudited pro forma condensed combined statement of operations for the fiscal year ended December 31, 2021 combines the historical audited statement of operations of Founder for the period from April 26, 2021 (inception) through December 31, 2021 with the historical audited consolidated statement of operations of Holdings LLC for the fiscal year ended December 31, 2021. The unaudited pro forma statements of operations give effect to the Mergers as if they had been consummated on January 1, 2021. As the Mergers were consummated on August 15, 2022, Holding LLC’s historical unaudited condensed statement of operations for the nine months ended September 30, 2022 includes revenues and expenses attributable to Founder for the period August 16, 2022 through September 30, 2022.

 

The Mergers were consummated on August 15, 2022 and, therefore, Founder assets and liabilities are included in the historical balance sheet of Holdings LLC as of September 30, 2022 and no pro forma balance sheet is presented.

 

The unaudited pro forma condensed combined financial information was derived from and should be read in conjunction with the following historical financial statements and the accompanying notes, which are included elsewhere in and/or incorporated by reference into the prospectus to which this Unaudited Pro Forma Condensed Combined Financial Information is attached:

 

  The historical unaudited financial statements of Founder as of and for the six months ended June 30, 2022, and the historical audited consolidated financial statements of Founder as of and for the period from April 26, 2021 (inception) through December 31, 2021; and

 

  The historical unaudited condensed financial statements of Holdings LLC as of and for the nine months ended September 30, 2022, and the historical audited condensed financial statements of Holdings LLC as of and for the fiscal year ended December 31, 2021.

 

The foregoing historical financial statements have been prepared in accordance with GAAP.

 

The unaudited pro forma condensed combined financial information should also be read together with the audited and unaudited historical condensed financial statements of each of Holdings LLC and Founder and the accompanying notes, as well as the disclosures contained in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and other financial information included elsewhere in and/or incorporated by reference into this prospectus.

 

Description of the Mergers

 

On December 15, 2021, Founder entered into the Merger Agreement with Merger Sub, Holdings LLC, and the other parties thereto, whereby, among other things, (i) Founder, a Cayman Islands exempted company, redomesticated as a Delaware corporation, and in connection therewith was renamed “Rubicon Technologies, Inc.” and (ii) Merger Sub merged with and into Holdings LLC, with Holdings LLC surviving the merger as a wholly owned subsidiary of Rubicon. Immediately prior to the redomestication, Holdings LLC changed its name to “Rubicon Technologies Holdings, LLC.”

 

Pursuant to the Merger Agreement, in consideration of the transactions set forth above, Holdings LLC equity holders received Class A Common Stock, Class V Common Stock and/or Class B Units, in each case as set forth in the Merger Agreement and as further described elsewhere in this prospectus. The aggregate merger consideration issued to Holdings LLC equity holders at Closing was 19,846,915 shares of Class A Common Stock at a deemed value of $10.00 per share and 118,677,877 contingently redeemable Class B Units (and an equivalent number of Class V Common Stock) at a deemed value of $10.00 per share, for an aggregate merger consideration of $1,385.3 million. Of these, 577,190 contingently redeemable Class B Units (and an equivalent number of Class V Common Stock) are held in reserve by Rubicon to be issued to certain former Holdings LLC equity holders as merger consideration upon completion and delivery of the requisite letters of transmittal and related documentation, in each case, as required by the Merger Agreement.

 

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In connection with Closing, Rubicon issued 160,000 shares of Class A Common Stock to certain investors pursuant to the Rubicon Equity Investment Agreement, and 160,000 Founder Class B Shares were forfeited by Sponsor immediately prior to the Closing. In addition, pursuant to the Sponsor Forfeiture Agreement, Sponsor forfeited an additional 1,000,000 Founder Class B Shares immediately prior to the Closing. After giving effect to this forfeiture and the forfeiture under the Rubicon Equity Investment Agreement, Sponsor held 6,746,250 Founder Class B Shares, which converted to 6,746,250 shares of Class A Common Stock at the time of the Domestication. In connection with the Closing, Rubicon issued to the PIPE Investors an additional 12,100,000 shares of Class A Common Stock (at a price of $10.00 per share), for a total aggregate purchase price of $121.0 million.

 

Accounting for the Mergers

 

The Mergers will be accounted for akin to a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. The Mergers will not be treated as a change in control of Holdings LLC as RGH, Inc. controlled (x) Holdings LLC through its rights to nominate the majority of the members of the board of managers of Holdings LLC under Holdings LLC’s existing operating agreement and (y) Rubicon through its control of the board of managers of Holdings LLC and, pursuant to Section 8.7(a)(i) of the Merger Agreement, such board’s right prior to Closing to nominate seven of the nine initial directors to be appointed to the Board effective upon the Closing (the “Rubicon Nominees”). Pursuant to Section 8.7(a)(i) of the Merger Agreement, effective at the Closing, one of the Rubicon Nominees serves as the chairman of the Board and all Rubicon Nominees continue to control and serve on the Board until at least the 2023 annual shareholder meeting of Rubicon. Under the guidance in ASC 805 for transactions between entities under common control, the assets, liabilities, and noncontrolling interests of Holdings LLC and Founder are recognized at their carrying amounts on the date of the Mergers.

 

Under this method of accounting, Founder will be treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Mergers will be treated as the equivalent of Holdings LLC issuing stock for the net assets of Founder, accompanied by a recapitalization. The net assets of Founder will be stated at their historical value within the pro formas with no goodwill or other intangible assets recorded.

 

Basis of Pro Forma Presentation

 

The historical financial information has been adjusted to give pro forma effect to the transaction accounting required for the Mergers and the PIPE Financing. The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the combined entity upon the Closing.

 

The unaudited pro forma condensed combined financial information is for illustrative purposes only and does not necessarily reflect what Rubicon’s financial condition or results of operations would have been had the Mergers occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of Rubicon. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed. Founder and Holdings LLC have not had any historical relationship prior to the Mergers. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

 

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Unaudited Pro Forma Condensed Statement of Operations

For the Nine Months Ended September 30, 2022

(In thousands, except share and per share amounts)

 

    For the
Six Months Ended
June 30,
2022
    For the
Nine Months Ended September 30,
2022
             
    Founder SPAC
(as reported)
    Rubicon
Technologies, LLC
(as reported)
    Transaction
Adjustments
    Pro Forma
Combined
 
Revenue                                
Service     -       437,755       -       437,755  
Recyclable commodity     -       71,640       -       71,640  
Total Revenue     -       509,395       -       509,395  
                                 
Costs and Expenses                                
Cost of revenue (exclusive of amortization and depreciation)                                
Service     -       423,382       -       423,382  
Recyclable commodity     -       65,856       -       65,856  
Total cost of revenue (exclusive of amortization and depreciation)     -       489,238       -       489,238  
Sales and marketing     -       13,336       -       13,336  
Product development     -       28,336       -       28,336  
General and administrative     -       212,520       12,053 (ii)     224,573  
Amortization and depreciation     -       4,331       -       4,331  
Formation and operating costs     1,059       -       -       1,059  
Total Costs and Expenses     1,059       747,761       12,053       760,873  
Loss from operations     (1,059 )     (238,366 )     (12,053 )     (251,478 )
                                 
Other Income (Expense):                                
Interest earned     248       1       (248 )(gg)     1  
Gain (loss) on change in fair value of warrant liabilities     -       (436 )     -       (436 )
Gain (loss) on change in fair value of earn-out liabilities     -       67,100       -       67,100  
Gain (loss) on change in fair value of forward purchase option derivative     -       (76,919 )     -