As filed with the U.S. Securities and Exchange Commission on January 17, 2025

Registration No. 333-284004

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

Form F-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Heidmar Maritime Holdings Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Marshall Islands		4412		N/A
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

 

 

89 Akti Miaouli

Piraeus 18538, Greece

+30 216-002-4900

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

 

 

Puglisi & Associates

850 Library Avenue, Suite 204

Newark, DE 19711

(302) 738-6680

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

 

 

Copies to:

 

Keith Billotti, Esq. Seward & Kissel LLP One Battery Park Plaza New York, NY 10004 (212) 574-1200		Ross D. Carmel Jeffrey P. Wofford Sichenzia Ross Ference Carmel LLP 1185 Avenue of the Americas, 31st Floor New York, New York 10036 (212) 930-9700

 

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after the effectiveness of this registration statement and all other conditions to the proposed Business Combination described herein have been satisfied or waived.

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

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

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer)		☐
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)		☐

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933.

 

Emerging growth company		☒

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, 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 term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

 

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

 

 

 

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

 

PRELIMINARY PROXY STATEMENT/PROSPECTUS - SUBJECT TO COMPLETION,

DATED JANUARY 17, 2025

 

PROXY STATEMENT OF MGO GLOBAL INC.		PROSPECTUS OF HEIDMAR MARITIME HOLDINGS CORP.

BUSINESS COMBINATION PROPOSED —YOUR VOTE IS VERY IMPORTANT

To the Stockholders of MGO Global Inc.:

You are cordially invited to attend the Special Meeting of Stockholders (the “Special Meeting”) of MGO Global Inc., a Delaware corporation (which we refer to as “MGO,” “we,” “us” or “our”). The Special Meeting will be held on     , 2025, at     , Eastern Standard Time, via a virtual meeting. You may attend the Special Meeting via a live interactive webcast at www.virtualshareholdermeeting.com/MGOL2025SM. You will need the 16-digit meeting control number that is printed on your proxy card to enter the Special Meeting. MGO recommends that you log in at least 15 minutes before the Special Meeting to ensure you are logged in when the Special Meeting starts. Please note that you will not be able to attend the Special Meeting in person.

Only MGO Stockholders as of the close of business on December 18, 2024 (which is referred to as the “Record Date”) are entitled to notice of, and to vote at, the Special Meeting.

At the Special Meeting, you will be asked to consider and vote on a proposal to adopt the Business Combination Agreement, dated June 18, 2024 (as amended on December 17, 2024, and as it may be subsequently amended, the “Business Combination Agreement”), among Heidmar Maritime Holdings Corp., a Marshall Islands corporation (“Holdings”), MGO, Heidmar Inc., a Marshall Islands corporation (“Heidmar”), HMR Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Holdings (“Merger Sub”), and Rhea Marine Ltd. and Maistros Shipinvest Corp. (together, the “Heidmar Shareholders”).

Pursuant to the Business Combination Agreement, MGO, Heidmar, Holdings, Merger Sub and the Heidmar Shareholders will effect a business combination involving the following transactions (collectively, the “Business Combination”):

 

(a)

Merger Sub will merge (the “Merger”) with and into MGO, with MGO continuing as the surviving entity and a wholly owned subsidiary of Holdings;

 

(b)

each issued and outstanding MGO Share prior to the effective time of the Merger will be converted into the right to receive a fraction of a Holdings Share to be determined, with Holdings issuing those shares to the stockholders of MGO (the “MGO Stockholders”) at the closing of the Business Combination (the “Closing”);

 

(c)

immediately after the effective time of the Merger, the Heidmar Shareholders will transfer all of their shares of common stock of Heidmar to Holdings (the “Heidmar Share Acquisition”), with Heidmar becoming a wholly owned subsidiary of Holdings; and

 

(d)

Holdings will issue to the Heidmar Shareholders and MGO’s financial advisor (as the agreed consideration for advisory services provided to MGO): (i) at the Closing, a number of Holdings Shares equal to (a) the aggregate number of Holdings Shares issuable to the MGO Stockholders at the Closing, times (b) 16.6667 (the “Heidmar Share Consideration”) and (ii) after the Closing and upon the

satisfaction of certain earnout conditions set forth in the Business Combination Agreement, additional Holdings Shares equal to 10% of the Heidmar Share Consideration (the “Earnout Shares”), with 2.64% of each issuance being distributed to MGO’s financial advisor.

Following the Closing, both MGO and Heidmar will be wholly owned subsidiaries of Holdings, and the Holdings Shares will be publicly listed on Nasdaq. MGO expects that the MGO Stockholders will hold 5.66% and the Heidmar Shareholders will hold 94.34% (including shares that Holdings will distribute to MGO’s financial advisor) of the Holdings Shares after the Closing, without taking into account the issuance of any Earnout Shares. Pursuant to the Business Combination Agreement, any MGO Shares that MGO issues prior to Closing will not change these percentages.

Immediately following the completion of the Business Combination, the Heidmar Shareholders will control a majority of the voting power of the outstanding Holdings Shares. As a result, Holdings will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a company of which more than 50% of the voting power For the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

•

the requirement that a majority of the Holdings Board consist of “independent directors” as defined under the rules of Nasdaq;

 

•

the requirement that the Holdings Board form a compensation committee composed of at least two independent directors with a written charter addressing the committee’s responsibilities; and

 

•

the requirement that nominees of the Holdings Board be selected by either (a) independent directors constituting a majority of the Holdings Board’s independent directors or (b) a nominations committee comprised solely of independent directors.

As a foreign private issuer, Holdings must disclose in its next annual report on Form 20-F that it is a controlled company and the basis for that determination. Following the Business Combination, Holdings intends to utilize some or all of these exemptions. As a result, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

At the time they entered into the Business Combination Agreement, MGO and Holdings entered into voting and support agreements (“Voting and Support Agreements”) with certain officers and directors of MGO who collectively held a majority of the issued and outstanding MGO Shares (the “MGO Principals”). Since that time, MGO and Holdings have also entered into Voting and Support Agreements with certain investors (together with the MGO Principals, the “Supporting Investors”) that have purchased MGO Shares from MGO through its at-the-market facility and through other issuances. Pursuant to the Voting and Support Agreements, each Supporting Investor has agreed, among other things, to vote his, her or its shares in favor of approval of the Business Combination Agreement, the Business Combination and the other transactions contemplated thereby and not to transfer his, her or its MGO Shares (subject to certain exceptions).

On the Record Date, the Supporting Investors owned 46.9% of the outstanding MGO Shares. Accordingly, the Voting and Support Agreements ensure that at least 46.9% of the outstanding MGO Shares will vote in favor of the Business Combination and Business Combination Agreement at the Special Meeting. This means that only a small portion of the MGO Shares held by stockholders that are not Supporting Investors (no more than 3.2% of the total MGO Shares outstanding on the Record Date) will be needed to approve these measures.

At the Special Meeting, you will also be asked to consider and vote on a proposal for the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Business Combination Agreement at the time of the Special Meeting.

The Board of Directors of MGO (the “MGO Board”), after considering the factors more fully described in the enclosed proxy statement/prospectus, unanimously: (1) determined that it is in the best interest of MGO and its stockholders to enter into the Business Combination Agreement; and (2) approved MGO’s execution, delivery and performance of the Business Combination Agreement and the consummation of the Business Combination and the other transactions contemplated by the Business Combination Agreement.

The MGO Board unanimously recommends that you vote:

 

(1)	“FOR” the adoption of the Business Combination Agreement; and

 

(2)	“FOR” the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Business Combination Agreement at the time of the Special Meeting.

The accompanying proxy statement/prospectus provides detailed information about the Special Meeting, the Business Combination Agreement and the Business Combination, and the proposals to be considered at the Special Meeting. A copy of the Business Combination Agreement is attached as Annex A.

The accompanying proxy statement/prospectus also describes the actions and determinations of the MGO Board in connection with its evaluation of the Business Combination Agreement and the Business Combination. Please read the proxy statement/prospectus and its annexes, including the Business Combination Agreement, carefully and in their entirety, as they contain important information.

Even if you plan to virtually attend the Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card (a proxy card and a prepaid reply envelope are enclosed for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you virtually attend the Special Meeting and vote at the Special Meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote against the adoption of the Business Combination Agreement.

If you hold your shares through a bank, broker or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the Special Meeting. In most cases you may vote over the internet or telephone. Your bank, broker or other nominee cannot vote on either of the proposals to be considered at the Special Meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or be voted at the Special Meeting, and that will have the same effect as voting against the adoption of the Business Combination Agreement.

YOUR VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN.

If you have any questions or need assistance voting your shares, please contact our Director of Communications.

 

As noted above, the MGO Board unanimously recommends that MGO Stockholders vote “FOR” the adoption of the Business Combination Agreement and the above-described proposal relating to the adjournment of the Special Meeting. We would like to thank you for your support and look forward to the successful completion of the Business Combination.

Very truly yours,

 

Maximiliano Ojeda

Chairman and Chief Executive Officer

MGO Global Inc.

THE U.S. SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE TRANSACTION OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

 

This proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the Special Meeting. We urge you to carefully read this entre document and all Annexes, including the Business Combination Agreement. You should also carefully consider the risk factors described in “Risk Factors” beginning on page 45 of this proxy statement/prospectus.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of the transactions described in this proxy statement/prospectus, passed upon the fairness of the Business Combination Agreement or the transactions contemplated thereby, or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

 

This proxy statement/prospectus is dated     , 2025, and is first being mailed to the stockholders of MGO on or about     , 2025.

MGO GLOBAL INC.

813 NE 17th Terrace, Unit A

Fort Lauderdale, Florida 33304

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

OF MGO GLOBAL INC.

TO BE HELD ON      2025

TO THE STOCKHOLDERS OF MGO GLOBAL INC.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the “Special Meeting”) of MGO Global Inc., a Delaware corporation (“MGO,” “we,” “us” or “our”), will be held on     , 2025, at     , Eastern Standard Time, via a virtual meeting. You may attend the Special Meeting via a live interactive webcast at www.virtualshareholdermeeting.com/MGOL2025SM. You will need the 16-digit meeting control number that is printed on your proxy card to enter the Special Meeting. MGO recommends that you log in at least 15 minutes before the Special Meeting to ensure you are logged in when the Special Meeting starts. Please note that you will not be able to attend the Special Meeting in person. The Special Meeting will be held for the sole purpose of considering and voting upon the following proposals (the “Proposals”):

 

1)

to consider and vote on the proposal (the “Business Combination Proposal”) to adopt the Business Combination Agreement, dated June 18, 2024 (as amended on December 17, 2024, and as it may be subsequently amended, the “Business Combination Agreement”), among Heidmar Maritime Holdings Corp., a Marshall Islands corporation (“Holdings”), MGO, Heidmar Inc., a Marshall Islands corporation (“Heidmar”), HMR Merger Sub Inc., a Delaware corporation and wholly owned subsidiary of Holdings (“Merger Sub”), and Rhea Marine Ltd. and Maistros Shipinvest Corp. (together, the “Heidmar Shareholders”), pursuant to which MGO, Merger Sub, Holdings, Heidmar and Heidmar Shareholders will effect a business combination involving the following transactions (collectively, the “Business Combination”):

 

(a)

Merger Sub will merge (the “Merger”) with and into the MGO, with MGO continuing as the surviving entity and a wholly owned subsidiary of Holdings;

 

(b)

each issued and outstanding share of common stock of MGO (collectively, the “MGO Shares”) prior to the effective time of the Merger will be converted into the right to receive a fraction of a common share of Holdings (a “Holdings Share”) to be determined, with Holdings issuing those shares to the MGO Stockholders at the closing of the Business Combination (the “Closing”);

 

(c)

immediately after the effective time of the Merger, the Heidmar Shareholders will transfer all their shares of common stock of Heidmar to Holdings (the “Heidmar Share Acquisition”), with Heidmar becoming a wholly owned subsidiary of Holdings; and

 

i

(d)

Holdings shall issue to the Heidmar Shareholders and MGO’s financial advisor (as the agreed consideration for advisory services provided to MGO): (i) at Closing, a number of Holdings Shares equal to (x) the aggregate number of Holdings Shares issuable to the MGO Stockholders at Closing, times (y) 16.6667 (the “Heidmar Share Consideration”) and (ii) after the Closing and upon the satisfaction of certain earnout conditions set forth in the Business Combination Agreement, additional Holdings Shares equal to 10% of the Heidmar Share Consideration (the “Earnout Shares”), with 2.64% of each issuance being distributed to MGO’s financial advisor;

 

2)

to consider and vote on any proposal to adjourn the Special Meeting (the “Adjournment Proposal”), from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Business Combination Agreement at the time of the Special Meeting; and

 

3)	to transact any other business that may properly come before the Special Meeting.

Only MGO Stockholders as of the close of business on December 18, 2024 (which is referred to as the “Record Date”) are entitled to notice of, and to vote at, the Special Meeting.

The Board of Directors of MGO (the “MGO Board”) unanimously recommends that you vote: (1) “FOR” the adoption of the Business Combination Agreement; and (2) “FOR” the adjournment of the Special Meeting, from time to time, to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to adopt the Business Combination Agreement at the time of the Special Meeting. MGO Stockholders do not have dissenters’ or appraisal rights in connection with the Merger pursuant to Section 262 of the Delaware General Corporation Law (which is referred to as the “DGCL”).

Even if you plan to attend the Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card (a proxy card and a prepaid reply envelope are enclosed for your convenience) or grant your proxy electronically over the internet or by telephone (using the instructions found on the proxy card). If you attend the Special Meeting and vote at the Special Meeting, your vote will revoke any proxy that you have previously submitted. If you fail to return your proxy or to attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and will have the same effect as a vote against the adoption of the Business Combination Agreement.

If you hold your shares through a bank, broker or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the Special Meeting. In most cases you may vote over the internet or telephone. Your bank, broker or other nominee cannot vote on either of the proposals to be considered at the Special Meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or voted at the Special Meeting, and that will have the same effect as voting against the adoption of the Business Combination Agreement.

By Order of the Board of Directors,

Corporate Secretary

Fort Lauderdale, Florida

Dated:     , 2025

 

ii

IMPORTANT INFORMATION

Even if you plan to attend the Special Meeting, we encourage you to submit your proxy as promptly as possible: (1) over the internet; (2) by telephone; or (3) by signing, dating and returning the enclosed proxy card (a proxy card and a prepaid reply envelope are enclosed for your convenience). You may revoke your proxy or change your vote at any time before your proxy is voted at the Special Meeting.

If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of shares held in “street name.” If you hold your shares in “street name,” you will receive instructions from your bank, broker or other nominee that you must follow in order to submit your voting instructions and have your shares counted at the Special Meeting. In most cases you may vote over the internet or telephone. Your bank, broker or other nominee cannot vote on either of the Proposals to be considered at the Special Meeting without your instructions. Without your instructions, your shares will not be counted for purposes of a quorum or voted at the Special Meeting, and that will have the same effect as voting against the adoption of the Business Combination Agreement.

If you are a stockholder of record, voting at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must provide a “legal proxy” from the bank, broker or other nominee that holds your shares in order to vote at the Special Meeting.

We encourage you to read the accompanying proxy statement/prospectus and its annexes, carefully and in their entirety.

If you have any questions concerning the Business Combination, the Special Meeting or the accompanying proxy statement/prospectus, would like additional copies of the accompanying proxy statement/prospectus, Business Combination Agreement contained in the annexes or any other documents filed by MGO with the U.S. Securities and Exchange Commission (the “SEC”), such information is available without charge upon written or oral request. If you have any questions or need assistance with voting, please contact MGO’s Director of Communications.

 

 

iii

ADDITIONAL INFORMATION

MGO files annual, quarterly and other reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the “SEC”), some of which are incorporated by reference herein. See “Where You Can Find More Information.”

You can obtain copies of documents filed by MGO, without charge, from the SEC’s website at www.sec.gov.

You may also obtain copies of documents filed by MGO with the SEC from MGO’s website at https://www.mgoglobalinc.com/investor-relations/.

You can also request copies of this proxy statement/prospectus, without charge, by requesting them in writing or by telephone from the appropriate company at the following addresses and telephone numbers.

 

MGO Global Inc. 813 NE 17th Terrace, Unit A Fort Lauderdale, Florida 33304 Telephone: (347)-913-3316		Heidmar Maritime Holdings Corp. Puglisi & Associates 850 Library Avenue, Suite 204 Newark, DE 19711 (302) 738-6680

In addition, if you have questions about the Business Combination or the Special Meeting, need additional copies of this proxy statement/prospectus or need to obtain proxy cards or other information related to the proxy solicitation, you may contact     , MGO’s Director of Communications.

 

You will not be charged for any of the documents that you request. If you would like to request documents, please do so by     , 2025 (which is five Business Days before the date of the Special Meeting) in order to receive them before the Special Meeting.

 

iv

TABLE OF CONTENTS

 

ADDITIONAL INFORMATION			vi
FORWARD-LOOKING STATEMENTS			vii
ABOUT THIS PROXY STATEMENT/PROSPECTUS			x
CONVENTIONS WHICH APPLY TO THIS PROXY STATEMENT/PROSPECTUS			x
IMPORTANT INFORMATION ABOUT GAAP AND NON-GAAP FINANCIAL MEASURES			x
TRADEMARKS AND TRADE NAMES			xi
FREQUENTLY USED TERMS			1
FREQUENTLY ASKED QUESTIONS			5
SUMMARY			19
RISK FACTORS			45
GENERAL INFORMATION			86
THE SPECIAL MEETING OF MGO STOCKHOLDERS			87
PROPOSALS TO BE CONSIDERED BY MGO’S STOCKHOLDERS			93
THE BUSINESS COMBINATION			95
THE BUSINESS COMBINATION AGREEMENT			119
ANCILLARY DOCUMENTS			128
CERTAIN TAX CONSIDERATIONS			130
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			139
BUSINESS OF HOLDINGS BEFORE THE BUSINESS COMBINATION			152
INFORMATION ABOUT HEIDMAR			154
HEIDMAR’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION			180
INFORMATION ABOUT MGO			196
MANAGEMENT OF HOLDINGS AFTER THE BUSINESS COMBINATION			197
DESCRIPTION OF HOLDINGS SECURITIES			202
HEIDMAR EXECUTIVE COMPENSATION			209
COMPARISON OF STOCKHOLDER’S RIGHTS			210
REPUBLIC OF MARSHALL ISLANDS COMPANY CONSIDERATIONS			216
RELATED PARTY TRANSACTIONS			220
BENEFICIAL OWNERSHIP OF HOLDINGS			224
SHARES ELIGIBLE FOR FUTURE SALE			225
PRICE RANGE OF SECURITIES AND DIVIDENDS			228
LEGAL MATTERS			229
EXPERTS			229
ENFORCEMENT OF CIVIL LIABILITIES			229
HOUSEHOLDING INFORMATION			231
TRANSFER AGENT			231
WHERE YOU CAN FIND MORE INFORMATION			231
INDEX TO FINANCIAL STATEMENTS			F-1
ANNEX A: Business Combination Agreement			A-1
ANNEX B: Fairness Opinion of Newbridge			B-1
ANNEX C: Form of Voting and Support Agreement			C-1
ANNEX D: Form of Lock-up/Leak-out Agreement			D-1
ANNEX E: Amended and Restated Articles of Association of Holdings			E-1

 

v

ADDITIONAL INFORMATION

No person is authorized to give any information or to make any representation with respect to the matters that the accompanying proxy statement/prospectus describes other than those contained in the accompanying proxy statement/prospectus, and, if given or made, the information or representation must not be relied upon as having been authorized by Holdings, Heidmar or MGO. The accompanying proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy securities or a solicitation of a proxy in any jurisdiction where, or to any person to whom, it is unlawful to make such an offer or a solicitation. Neither the delivery of the accompanying proxy statement/prospectus nor any distribution of securities made under the accompanying proxy statement/prospectus will, under any circumstances, create an implication that there has been no change in the affairs of Holdings, MGO or Heidmar since the date of the accompanying proxy statement/prospectus or that any information contained therein is correct as of any time subsequent to such date.

 

vi

FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus and other documents incorporated by reference into this proxy statement/prospectus include or may include “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act regarding, among other things, the plans, strategies and prospects, both business and financial, of MGO, Holdings and Heidmar. These statements are based on the beliefs and assumptions of the management of MGO, Holdings and Heidmar. Although the parties believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, none of MGO, Holdings or Heidmar can assure you that they will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “predicts,” “projects,” “forecasts,” “may,” “might,” “will,” “could,” “should,” “would,” “seeks,” “plans,” “scheduled,” “possible,” “continue,” “potential,” “anticipates” or “intends” or similar expressions; provided that the absence of these does not means that a statement is not forward-looking. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this proxy statement/prospectus, any prospectus supplement, and the documents incorporated by reference herein and therein might not occur, and our actual results could differ materially from those anticipated in these forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statement contained in this proxy statement/prospectus, any prospectus supplement, and the documents incorporated by reference herein and therein, whether as a result of new information, future events or otherwise, except as required by law.

In addition to these important factors and matters discussed elsewhere herein, and in the documents incorporated by reference herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include:

 

•

the number and percentage of MGO’s Stockholders voting against the proposals

 

•

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

 

•

the ability to obtain and/or maintain the listing of Holdings’ securities on Nasdaq following the Business Combination;

 

•

availability of financing and refinancing, our ability to obtain financing and comply with the restrictions and other covenants in our financing arrangements;

 

•

availability of skilled crew members other employees and the related labor costs;

 

•

work stoppages or other labor disruptions by our employees or the employees of other companies in related industries;

 

•

changes in our operating expenses;

 

•

planned, pending or recent acquisitions, business strategy and expected capital spending or operating expenses, including drydocking, surveys and upgrades;

 

•

compliance with governmental, tax, environmental and safety regulation, any non-compliance with U.S. regulations;

 

•

the impact of increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance, or ESG, policies;

 

•

Foreign Corrupt Practices Act of 1977, or FCPA, or other applicable regulations relating to bribery;

 

vii

•

the impact of the discontinuance of the London Interbank Offered Rate, or LIBOR, after June 30, 2023 on interest rates of our debt, including the Blue Fin Pool Facility, that reference LIBOR;

 

•

general economic conditions and conditions in the oil industry;

 

•

the cyclical nature of the shipping industry;

 

•

general market conditions, including fluctuations in charter hire rates and vessel values;

 

•

changes in demand for tanker and dry bulk vessel capacity;

 

•

changes in our operating expenses, including bunker prices, drydocking and insurance costs;

 

•

the strength of world economies;

 

•

fluctuations in currencies and interest rates;

 

•

the volatility of the price of our common shares;

 

•

the loss of a large customer or significant business relationship;

 

•

new environmental regulations and restrictions, whether at a global level stipulated by the International Maritime Organization, and/or imposed by regional or national authorities such as the European Union or individual countries;

 

•

vessel breakdowns and instances of off-hire;

 

•

potential liability from pending or future litigation;

 

•

the impact of an interruption in or failure of our information technology and communications systems, including the impact of cyber-attacks, upon our ability to operate;

 

•

potential conflicts of interest involving members of the Holdings Board and senior management;

 

•

the failure of counter parties to fully perform their contracts with us;

 

•

changes in credit risk with respect to our counterparties on contracts;

 

•

our dependence on key personnel and our ability to attract, retain and motivate key employees;

 

•

our ability to obtain indemnities from customers;

 

•

changes in laws, treaties or regulations;

 

•

our incorporation under the laws of Marshall Islands and the different rights to relief that may be available compared to other countries, including the United States;

 

•

general domestic and international political conditions of events, including “trade wars”;

 

•

any further changes in U.S. trade policy that could trigger retaliatory actions by the affected countries;

 

•

potential disruption of shipping routes due to accidents, environmental factors, political events, international hostilities including the ongoing developments in the Ukraine region, acts by terrorists or acts of piracy on ocean-going vessels;

 

•

the impact of adverse weather and natural disasters;

 

•

Heidmar’s profitability and growth depend on the demand for shipping vessels and global economic conditions, and the impact of consumer confidence and consumer spending on shipping volume and charter rates;

 

•

if global economic conditions weaken, it could have a material adverse effect on Heidmar’s business, financial condition and results of operations;

 

•

if Heidmar does not compete successfully with new entrants or established companies with greater resources, its shipping business growth and results of operations may be adversely affected;

 

viii

•

Heidmar operates carriers worldwide and, as a result, its business has inherent operational risks, which may reduce its revenue or increase its expenses, and Heidmar may not be adequately covered by insurance; and

 

•

Heidmar is dependent upon on a limited number of significant pool partners for its managed vessels.

We caution readers of this proxy statement/prospectus not to place undue reliance on these forward-looking statements.

All forward-looking statements made in this proxy statement/prospectus are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this proxy statement/prospectus, and we expressly disclaim any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, changes in future operating results over time or otherwise.

 

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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This document, which forms part of a registration statement on Form F-4 filed with the U.S. Securities and Exchange Commission, or SEC, by Holdings (File No. 333-284004), constitutes a prospectus of Holdings under Section 5 of the U.S. Securities Act of 1933, as amended, or the Securities Act, with respect to the securities Holdings will issue if the Business Combination described below is consummated. This document also constitutes a notice of meeting and a proxy statement under Section 14(a) of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to the Special Meeting of MGO Stockholders at which MGO Stockholders will be asked to consider and vote upon proposals to Business Combination Proposal and Adjournment Proposal.

CONVENTIONS WHICH APPLY TO THIS PROXY STATEMENT/PROSPECTUS

In this proxy statement/prospectus, unless otherwise specified or the context otherwise requires, “$,” “USD” and “U.S. dollar” each refer to the United States dollar.

The number of MGO Shares outstanding provided in this proxy statement/prospectus represents the number of MGO Shares outstanding on January 10, 2025, including the 6,315,000 Units sold by MGO on December 24, 2024, and assuming that each Common Warrant included in the Units is exercised on a cashless basis for 5.1677 MGO Shares, which is based on a Reset Price (as defined below) for the Common Warrants equal to $0.5515 per MGO Share, the closing price of the MGO Shares on January 10, 2025.

The number of Holdings Shares outstanding provided in this proxy statement/prospectus represents the number of Holdings Shares outstanding immediately following the Closing, assuming that:

 

(a)

the number of MGO Shares outstanding at Closing is equal to 9,269,001 MGO shares outstanding as of January 10, 2024 plus the number of MGO Shares that may be issued upon to the exercise of the Common Warrants, determined as provided above, and

 

(b)

Holdings will issue Holdings Shares in respect of MGO Shares at a ratio of one Holdings Share for every 30 MGO Shares.

For a further description of the Common Warrant adjustment provision see the sections entitled “Summary - Recent Development Offering of Units”, “The Business Combination - The Unit Offering and the Business Combination” and “Unaudited Pro Forma Condensed Combined Financial Information.” The combination of these adjustment provisions will likely cause MGO Shareholders who do not hold Common Warrants substantial dilution to their percentage ownership in MGO and therefore Holdings, if their shares are held at the Closing.

IMPORTANT INFORMATION ABOUT GAAP AND NON-GAAP FINANCIAL MEASURES

Each of MGO’s and Heidmar’s financial statements included in this proxy statement/prospectus have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for financial information and pursuant to the rules and regulations of the SEC. This proxy statement/prospectus includes certain references to financial measures that were not prepared in accordance with U.S. GAAP, including EBITDA. The presentation of this non-U.S. GAAP information is not meant to be considered in isolation or as a substitute for Heidmar’s consolidated financial results prepared in accordance with U.S. GAAP.

 

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TRADEMARKS AND TRADE NAMES

The Heidmar name, logos and other trademarks of Heidmar appearing in this proxy statement/prospectus are the property of Heidmar. Solely for convenience, some of the trademarks logos and trade names referred to in this proxy statement/prospectus are presented without the ^® and ^™ symbols, but such references are not intended to indicate, in any way, that we or Heidmar will not assert, to the fullest extent under applicable law, our or Heidmar’s rights or the rights of the applicable licensors to these trademarks and trade names. This proxy statement/prospectus contains additional trademarks and trade names of others. All trademarks and trade names appearing in this proxy statement/prospectus are, to our knowledge, the property of their respective owners. We do not intend our use or display of other companies’ trademarks copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

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FREQUENTLY USED TERMS

Unless otherwise stated in this proxy statement/prospectus or the context otherwise requires:

“Advisory Agreement” means the M&A Advisory Agreement between MGO and Maxim, dated February 2, 2024.

“Affiliate” means, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlled” and “controlling” have meanings correlative thereto.

“Ancillary Documents” means each agreement, instrument, certificate or document to be executed or delivered by any of the Parties in connection with or pursuant to the Business Combination Agreement, including the Lock-Up/Leak-Out Agreements, and the Voting and Support Agreements.

“Business Combination” means the transactions contemplated by the Business Combination Agreement, including the Merger and the Heidmar Share Acquisition.

“Business Combination Agreement” means the Business Combination Agreement, dated June 18, 2024, between MGO, Heidmar, Holdings, Merger Sub and the Heidmar Shareholders, as amended on December 17, 2024, and as it may be subsequently amended.

“Business Day” means any day other than a Saturday, Sunday or a legal holiday on which commercial banking institutions in New York, New York, London, England, or Athens, Greece, are authorized to close for business.

“Closing” means the closing of the Business Combination.

“Common Warrant” means one of the warrants to purchase MGO Shares issued as part of the Units sold by MGO on December 24, 2024.

“DGCL” means the Delaware General Corporation Law, as amended.

“Earnout Shares” means a number of Holdings Shares equal to 10% of the Heidmar Share Consideration that are issuable to the Heidmar Shareholders upon the fulfillment of certain performance targets by Holdings.

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

“Exchange Rate” means with respect to a particular currency for a particular day, the closing rate of exchange for that currency into Dollars on such date as published by Bloomberg.

“Heidmar” means Heidmar Inc., a company organized and existing under the laws of the Republic of the Marshall Islands.

“Heidmar Share Acquisition” means the acquisition by Holdings of all of the outstanding Heidmar Shares in exchange for the Heidmar Share Consideration and, if applicable, the Earnout Shares.

“Heidmar Share Consideration” means the aggregate consideration to be paid to the Heidmar Shareholders and Maxim, which will consist of a number of Holdings Shares equal to (a) the aggregate number of Holdings Shares issuable to the MGO Stockholders as MGO Merger Consideration, times (b) 16.6667.

“Heidmar Shareholders” means Rhea Marine Ltd. and Maistros Shipinvest Corp., who together own 100% of the Heidmar Shares.

“Heidmar Shares” means the Class A Shares and Class B Shares of Heidmar.

 

1

“Holdings” means Heidmar Maritime Holdings Corp., a company organized and existing under the laws of the Republic of the Marshall Islands.

“Holdings Board” means the Board of Directors of Holdings following the Business Combination.

“Holdings Shares” means the registered common shares, with $0.01 par value per share, of Holdings.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder.

“IPO” means the initial public offering of the MGO Shares pursuant to the final prospectus, dated January 12, 2023, and filed with the SEC on January 12, 2023.

“Issuance Ratio” means the number of MGO Shares that will convert into one Holdings Share at the Closing, which will be determined prior to Closing in order to (i) satisfy Nasdaq listing requirements and (ii) facilitate efficient trading of the Holdings Shares on the public markets. The Issuance Ratio will affect the number of Holdings Shares outstanding after Closing but it will not affect the percentage of Holdings Shares held by the former MGO Stockholders, on the one hand, and the Heidmar Shareholders, on the other hand.

“JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

“Maxim” means Maxim Group LLC.

“Merger” means the merger of Merger Sub with and into MGO, with MGO continuing as the surviving entity and a wholly owned subsidiary of Holdings.

“Merger Effective Time” means the time that MGO, Merger Sub and Holdings cause the Merger to be consummated by filing the executed Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 251 of the Delaware General Corporation Law, or at such later time as may be agreed by MGO and Merger Sub (with the prior written consent of Heidmar) in writing and specified in the Certificate of Merger.

“Merger Sub” means HMR Merger Sub Inc., a Delaware corporation.

“Merger Sub Shares” means the shares of common stock, par value $0.001 per share, of Merger Sub.

“MGO” means MGO Global Inc.

“MGO Board” means the Board of Directors of MGO.

“MGO Charter” means the Amended and Restated Certificate of Incorporation of MGO dated August 29, 2022, as the same may be amended or modified from time to time after the date hereof.

“MGO Equity Awards” means, collectively, the MGO Restricted Stock, MGO Restricted Stock Units and the MGO Options.

“MGO Equity Plan” means MGO’s 2022 Equity Incentive Plan, as amended and restated from time to time.

“MGO Merger Consideration” means, with respect to each MGO Share outstanding on the Closing Date, a fraction of a Holdings Share issuable in respect of such MGO Share, which fraction will be determined prior to Closing in order to (i) satisfy Nasdaq listing requirements and (ii) facilitate efficient trading of the Holdings Shares on the public markets.

“MGO Options” means each outstanding option granted under the MGO Equity Plan.

 

2

“MGO Principals” means certain officers and directors of MGO who signed a Voting and Support Agreement with MGO and Holdings.

“MGO Restricted Stock” means each outstanding restricted stock award granted under the MGO Equity Plan.

“MGO Restricted Stock Units” means each outstanding restricted stock unit granted under the MGO Equity Plan.

“MGO Securities” means, collectively, the MGO Shares, the MGO Restricted Stock, the MGO Restricted Stock Units, the MGO Options and the MGO Warrants.

“MGO Stockholder” means a holder of MGO Shares.

“MGO Stockholder Approval” means the approval and adoption of the Proposals by the Requisite Vote of MGO Stockholders at the Special Meeting.

“MGO Shares” means the shares of common stock of MGO.

“Nasdaq” means the Nasdaq Capital Market LLC.

“Organizational Documents” means, with respect to any Person, its articles of incorporation and bylaws, memorandum and articles of association or similar organizational documents, in each case, as amended.

“PCAOB” means the U.S. Public Company Accounting Oversight Board (or any successor thereto).

“Pre-Funded Warrant” means one of the pre-funded warrants, each exercisable to purchase one MGO Share, issued as part of the Units sold by MGO on December 24, 2024, all of which have been exercised.

“Record Date” means December 18, 2024, the record date for the Special Meeting.

“Registration Statement” means the registration statement on Form F-4 of which this proxy statement/prospectus is a part.

“Requisite Vote” means the approval of at least a majority of the outstanding MGO Shares that are entitled to vote at the Special Meeting as of the Record Date present, in person or by proxy, and voting at the Special Meeting.

“SEC” means the U.S. Securities and Exchange Commission (or any successor Governmental Authority).

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Shareholders’ Agreement” means the shareholders’ agreement between Holdings and the Heidmar Shareholders to be entered into at the Closing.

“Special Meeting” means the special stockholders’ meeting of MGO at which the MGO Stockholders will vote on the Stockholder Proposals.

“SOX” means the U.S. Sarbanes-Oxley Act of 2002, as amended.

“Supporting Investors” means certain MGO Stockholders that have signed Voting and Support Agreements with MGO and Holdings, including the MGO Principals and certain investors that have purchased newly issued MGO Shares from MGO through its at-the-market facility and through other issuances.

“Trading Day” means any day on which Holdings Shares are actually traded on Nasdaq (or the exchange on which Holdings Shares are then listed).

 

3

“Transactions” means collectively the Merger, Share Acquisition and the other transactions contemplated by the Business Combination Agreement and the Ancillary Documents.

“Unit” means one of the 6,315,000 Units sold by MGO on December 24, 2024, with each Unit consisting of (a) either one MGO Share or one Pre-Funded Warrant, and (b) one Common Warrant.

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

“Voting and Support Agreements” means agreements entered into between MGO, Holdings and each of the Supporting Investors, pursuant to which each Supporting Investor agreed, among other things, to vote his, her or its MGO Shares in favor of the Business Combination and the Business Combination Agreement at the Special Meeting.

 

4

FREQUENTLY ASKED QUESTIONS MGO STOCKHOLDERS

The following questions and answers are intended to briefly address some commonly asked questions regarding the Business Combination, the Business Combination Agreement and the Special Meeting of MGO Stockholders. These questions and answers may not address all questions that may be important to you as a MGO Stockholder. Please refer to the section of this proxy statement/prospectus entitled “Summary” and the more detailed information contained elsewhere in this proxy statement/prospectus, the annexes to and the information incorporated by reference into this proxy statement/prospectus, which you should read carefully and in their entirety. You may obtain the information incorporated by reference into this proxy statement/prospectus without charge by following the instructions under the section of this proxy statement/prospectus entitled “Where You Can Find More Information.”

Q: Why am I receiving these materials?

A: On June 18, 2024, MGO entered into the Business Combination Agreement with Heidmar, Holdings and other parties providing for a business combination between MGO and Heidmar, as a result of which, MGO and Heidmar will become wholly owned subsidiaries of Holdings. The MGO Board is furnishing this proxy statement/prospectus and form of proxy card to the MGO Stockholders in connection with the solicitation of proxies in favor of the Business Combination Proposal and the Adjournment Proposal (collectively, the “Proposals”) to be voted on at the Special Meeting. This proxy statement/prospectus includes information that Holdings and MGO are required to provide to you under the SEC rules and is designed to assist you in voting on the matters presented at the Special Meeting. MGO Stockholders of record as of the close of business on December 18, 2024, the Record Date, may attend the Special Meeting and are entitled and requested to vote on the Proposals.

Q: When and where is the Special Meeting?

A: The Special Meeting will be held on     , 2025, at     , Eastern Time, online at www.virtualshareholdermeeting.com/MGOL2025SM.

Q: What is the proposed Merger and what effects will it have on MGO?

A: . If the Business Combination Proposal is approved by the requisite number of MGO Shares, and the other closing conditions under the Business Combination Agreement are satisfied or waived, Merger Sub, a wholly owned subsidiary of Holdings, will merge with and into MGO, with MGO continuing as the surviving corporation. As a result of the Merger, MGO will become a wholly owned subsidiary of Holdings. Additionally, each issued and outstanding MGO Share will be converted into the right to one Holdings Share.

Q. What are the Units? the Pre-Funded Warrants? and the Common Warrants?

On December 24, 2024, MGO consummated a registered offering of 6,315,000 units (the “Units”), with each Unit consisting of:

 

•

either one MGO Share or one pre-funded warrant to acquire an MGO Share (the “Pre-Funded Warrants”); and

 

•

a common stock purchase warrant to acquire one MGO Share (the “Common Warrants”).

Each Pre-Funded Warrant was exercisable for the purchase of one MGO Share at a nominal price ($0.00001 per share), and each Pre-Funded Warrant has been exercised as of the date of this proxy statement/prospectus. The Common Warrants do not become exercisable until their exercise has been approved by a vote of the MGO Stockholders. MGO has scheduled a Special Meeting of Stockholders on January 24, 2025 to approve the exercise of the Common Warrants.

Each Common Warrant may be exercised to acquire one MGO Share for $1.425, with the number of shares and price per share subject to adjustment as set forth below. A holder may exercise a Common Warrant beginning on the trading date after MGO notifies the holders of the Common Warrants that MGO has received the approval of its stockholders for the exercise of the Common Warrants (the “Warrant Approval Date”) and ending on the earlier of (a) December 24, 2029 and (b) the date of Closing of the Business Combination.

 

5

The exercise price of an MGO Share deliverable upon the exercise of a Common Warrant and the number of MGO Shares that may be purchased thereby are both subject to adjustment on the date that is four trading days after the Warrant Approval Date, or, if a Common Warrant is exercised earlier than such date, the trading date before the date on which such Common Warrant is exercised (the “Reset Date”). The exercise price per MGO Share would adjust to equal the lowest volume weighted average price of an MGO Share during the period beginning four trading days prior to the Warrant Approval Date and ending on the Reset Date, provided, that price is lower than $1.425 and subject to a floor of $0.19 (the “Reset Price”). Once the exercise price of a Common Warrant has been reset as described above, the number of shares for which that Common Warrant may be exercised will be adjusted from one MGO Share to a number of MGO Shares equal to $1.425 divided by the Reset Price.

A holder of a Common Warrant may exercise that warrant either by (a) paying an amount equal to the Reset Price times the number of MGO Shares for which that warrant may be exercised or (b) electing an “alternative cashless exercise” in which the holder will surrender its Common Warrant without payment in exchange for twice the number of MGO Shares for which that Common Warrant could be exercised on a cash basis.

As of January 10, 2025 MGO had outstanding 9,269,001 MGO Shares and 6,315,000 Common Warrants. All Pre-Funded Warrants have been exercised. Unless otherwise stated, the number of MGO Shares outstanding provided in this proxy statement/prospectus represents the number of MGO Shares outstanding on January 10, 2025, and assumes that each Common Warrant included in the Units is exercised prior to Closing on a cashless basis for 5.1677 MGO Shares, which is based on a Reset Price for the Common Warrants equal to $0.5515 per MGO Share, the closing price of the MGO Shares on January 10, 2025.

Investors who purchased Units in the offering will not be able to vote the MGO Shares purchased in the offering at the Special Meeting because the offering was conducted after the Record Date. All Common Warrants will either be exercised prior to the Closing or will expire worthless, and Holdings will not issue any warrants in connection with the Business Combination.

For more information on the offering of Units, the Pre-Funded Warrants and the Common Warrants, see MGO’s Current Report on Form 8-K, filed on December 30, 2024, which is incorporated by reference into this proxy statement/prospectus.

Q: What will I receive if the Business Combination is consummated?

A: At the Merger Effective Time, each MGO Share issued and outstanding immediately prior to the effective time of the Merger will be cancelled and automatically converted into and become the right to receive a fraction of a validly issued, fully paid and non-assessable Holdings Share to be determined (the “MGO Merger Consideration”). Holdings will issue those shares to the MGO Stockholders at Closing.

Nasdaq Listing Rules require that the expected initial trading price of the Holdings Shares on the Closing Date be at least $4.00 per share, and Heidmar will target a higher initial trading price of approximately $10.00 per share in order to facilitate efficient trading on the public markets.

On January 10, 2024, there were 9,269,001 MGO Shares outstanding, plus 6,315,000 Common Warrants. The Common Warrants do not become exercisable until their exercise has been approved by a vote of the MGO Stockholders, and once approved, each Common Warrant is initially exercisable for one MGO Share; however, that number of shares will increase if the exercise price of a Common Warrant resets to a new price based on the market prices of the MGO Shares over the period during which the Reset Price is determined. Under the Business Combination Agreement, Holdings is required to issue to the MGO Stockholders one Holdings Share for each MGO Share and to the Heidmar Shareholders (and MGO’s financial advisor), an aggregate number of Holdings Shares equal to 16.6667 times the aggregate number of Holdings Shares issued to the MGO Stockholders.

Given the number of MGO Shares currently outstanding (and issuable upon the exercise of the Common Warrants), this exchange ratio will likely result in an expected initial trading price below Nasdaq’s standards.

 

6

Accordingly, the First Amendment to the Business Combination Agreement contains a provision that allows Heidmar, in its sole discretion, to reduce the number of Heidmar Shares to be issued to the MGO Stockholders and the Heidmar Shareholders (and MGO’s financial advisor) on a proportionate basis, as necessary to achieve Heidmar’s target trading price and accordingly to meet the Nasdaq standards and facilitate efficient trading on the public markets. Any adjustment to the number of Holdings Shares issued at Closing cannot change the relative ownership of the MGO Stockholders, on the one hand, and the Heidmar Shareholders, on the other hand, and specifically cannot result in the MGO Stockholders receiving, in the aggregate, less than 5.66% of the Holdings Shares issued at Closing.

The number of MGO Shares that will convert into a single Holdings Share is referred to as the “Issuance Ratio,” and the Issuance Ratio will also be proportionally reflected in the number of Holdings Shares to be issued in respect of each Heidmar Share. Heidmar will determine the Issuance Ratio prior to the Closing in order to (i) ensure that Holdings satisfies Nasdaq listing requirements and (ii) target a trading price of approximately $10.00 per share to facilitate efficient trading of the Holdings Shares on the public markets. In selecting the Issuance Ratio, Heidmar will take into account, among other factors, the total enterprise value of Heidmar and MGO as a combined entity, the trading price of MGO Shares prior to Closing and the number of MGO Shares that will be outstanding on the date of Closing after giving effect to the exercise of the Common Warrants. Although Heidmar expects to target a trading price of approximately $10.00 per share, this is a general target. Factors beyond the control of Heidmar and MGO could cause the initial trading price of Holdings Shares to be materially different than this target, including market conditions, market perceptions of the Holdings business that are different than those Heidmar and MGO anticipate, and other factors, including those set forth under “Risk Factors” in this proxy statement/prospectus.

The Issuance Ratio that Heidmar selects will significantly depend on the number of MGO Shares outstanding at Closing, which, in turn, depends on the number of MGO Shares underlying the Common Warrants. The exercise price of the Common Warrants is subject to reset based on the public trading price of the MGO Shares, and if the exercise price resets to a price below $1.425 per share, then the number of MGO Shares underlying the Warrants will increase proportionally. Thus, the public trading price of the MGO Shares will directly affect the number of MGO Shares outstanding at Closing and the number of Holdings Shares issuable at Closing. For example, at an exercise price of $0.5515 per share (the closing price of the MGO Shares on January 10, 2025), a total of 32,634,180 MGO Shares would underly the Common Warrants and, after their exercise, a total of 41,903,181 MGO Shares would be outstanding at Closing. If the Issuance Ratio were one-to-one, then Holdings would issue an aggregate of 41,903,181 Holdings Shares to the MGO Stockholders and an aggregate of 698,386,342 Holdings Shares to the Heidmar Shareholders and MGO’s financial advisor, for an aggregate of 740,289,522 Holdings Shares outstanding. If Heidmar believes that quantity may not support an initial trading price that does not meet Nasdaq standards or the efficient trading of the Holdings Shares on the public markets, Heidmar may elect to change the Issuance Ratio such that a higher number of MGO Shares would convert into one Holdings Share and thereby decrease the number of Holdings Shares outstanding at Closing, while preserving the relative ownership of the MGO Stockholders and Heidmar Shareholders.

The Issuance Ratio will only affect the number of Holdings Shares issued in the Business Combination. Any adjustment to the Issuance Ratio will not affect the percentage ownership that the MGO Stockholders and Heidmar Shareholders will receive in Holdings after the Closing, with the MGO Stockholders receiving 5.66% and the Heidmar Shareholders and MGO’s financial advisor receiving 94.34% of the Holdings Shares (without taking into account any Earnout Shares). Accordingly, the Issuance Ratio will not affect the percentage of Holdings Shares that you will receive for your MGO Shares upon Closing of the Business Combination.

Information set forth in this proxy statement/prospectus assumes an Issuance Ratio of 30 MGO Shares for every Holdings Share. Prior to the Closing, MGO will announce the final Issuance Ratio by filing with the Securities Exchange Commission on EDGAR a Current Report on Form 8-K that includes this information.

MGO expects that the Holdings Shares will be listed for trading on Nasdaq and that the Holdings Shares that MGO Stockholders will receive as MGO Merger Consideration will be registered under the Registration Statement of which this proxy statement/prospectus is a part and thereafter be freely tradeable by the MGO Stockholders that are not Affiliates of Holdings.

 

7

The Business Combination Agreement does not contain any provision that would adjust the Holdings Shares to be issued based on fluctuations in the trading prices of either the Heidmar Shares or MGO Shares or currency exchange rates prior to Closing. The value of the MGO Merger Consideration to MGO Stockholders will depend on the trading price of Holdings Shares at the time the Business Combination is completed.

For a full description of the MGO Merger Consideration, see the section of this proxy statement/prospectus entitled “The Business Combination — Effect of the Business Combination on Existing MGO Shares.”

Q: What portion of the Holdings Shares will the former MGO Stockholders own immediately following the Business Combination?

A: Under the terms of the Business Combination Agreement, after the Closing, the Heidmar Shareholders will own 94.34% of Holdings (including shares that Holdings will distribute to MGO’s financial advisor) and the MGO Stockholders will own 5.66% of Holdings, without taking into account the issuance of any Earnout Shares. The Issuance Ratio chosen by Heidmar prior to Closing will not affect these percentages. See “What are the Earnout shares” below. Pursuant to the Business Combination Agreement, any MGO Shares that MGO issues prior to Closing will not change these percentages.

Q: Who will serve on the Holdings Board and management?

A: After Closing, Heidmar will determine the size and the identity of the officers of Holdings and the members of the Holdings Board; provided, that a majority of the directors of Holdings will be independent directors under the rules of Nasdaq. Pankaj Khanna, the current Chief Executive Officer of Heidmar, will be the initial Chief Executive Officer of Holdings and a member of the Holdings Board. For more information about the Holdings Board and the management of Holdings, see “Management of Holdings After the Business Combination.”

Q: Who is entitled to vote at the Special Meeting?

A: Only MGO Stockholders of record as of the close of business on the Record Date will be entitled to vote at the Special Meeting. If you hold your MGO Shares in “street name” and you do not instruct your broker, bank, trust or other nominee how to vote your shares, then, because the Proposals are “non-routine matters,” your broker, bank, trust or other nominee would not have discretionary authority to vote your shares on the Proposals. Instructions on how to vote shares held in “street name” are described under the question “How may I vote?” below.

Q: How may I vote?

A: For MGO Stockholders of record: If you are eligible to vote at the Special Meeting and are a stockholder of record, you may cast your shares in any of four ways:

 

•

by voting over the Internet using the website indicated on the enclosed proxy card;

 

•

by telephone using the toll-free number on the enclosed proxy card;

 

•

by signing, dating and returning the enclosed proxy card in the postage-paid envelope provided; or

 

•

by attending the Special Meeting in a virtual format and voting by virtual ballot.

If you hold your MGO Shares in “street name” you must instruct your broker, bank, trust or other nominee how to vote your shares; otherwise, because the Proposals are “non-routine matters,” your broker, bank, trust or other nominee would not have discretionary authority to vote your shares on the Proposals. Your broker, bank, trust or other nominee has enclosed a voting instruction form with this proxy statement/prospectus. We encourage you to authorize your broker, bank, trust or other nominee to vote your shares “FOR” each of the Proposals by following the instructions provided on the voting instruction form.

 

8

If you submit your proxy by internet, telephone or mail, and you do not subsequently revoke your proxy, your MGO Shares will be voted in accordance with your instructions.

Even if you plan to attend the Special Meeting and vote by ballot, you are encouraged to vote your MGO Shares by proxy. You may still vote your MGO Shares by ballot at the Special Meeting even if you have previously voted by proxy. If you attend the Special Meeting in a virtual format and vote by virtual ballot, your previous vote by proxy will not be counted.

Q: How many votes do I have?

A: Each holder of MGO Shares is entitled to cast one vote on each matter properly brought before the Special Meeting for each MGO Share that such holder owned as of the Record Date.

Q: May I attend the Special Meeting and vote in person?

A: MGO will hold the Special Meeting in a virtual meeting format only on the virtual meeting website. You will not be able to attend the Special Meeting physically in person. Once admitted to the Special Meeting, MGO Stockholders may vote their shares by following the instructions available on the meeting website. To vote during the Special Meeting, you must do so by logging into www.virtualshareholdermeeting.com/MGOL2025SM using the 16-digit control number included in your proxy materials.

We recommend that you submit your proxy via the Internet or by telephone by following the instructions on the enclosed proxy card, or by signing, dating and returning the enclosed proxy card in the postage-paid envelope provided — even if you plan to attend the Special Meeting in a virtual format. We encourage all stockholders to vote electronically. If you properly and timely submit your proxy, the individuals named as your proxy holders will vote your shares as you have directed. If you attend the Special Meeting in a virtual format and vote by virtual ballot, your vote by virtual ballot will revoke any proxy previously submitted.

Q: What matters will be voted on at the Special Meeting?

A: You are being asked to consider and vote on the following proposals:

 

•

to approve the Business Combination Proposal; and

 

•

to approve the Adjournment Proposal.

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

A: The affirmative vote of a majority of the issued and outstanding MGO Shares entitled to vote thereon is required to approve the Business Combination Proposal. This means that the Business Combination Proposal will be approved if the number of shares voted “FOR” such proposal is greater than 50% of the total number of outstanding MGO Shares entitled to vote at the Special Meeting.

The affirmative vote of a majority of the issued and outstanding MGO Shares virtually present via the special meeting website or represented by proxy and entitled to vote at the Special Meeting is required to approve the Adjournment Proposal. This means that the Adjournment Proposal will be approved if the number of shares voted “FOR” such proposal is greater than 50% of the total number of outstanding MGO Shares virtually present via the special meeting website or represented by proxy and entitled to vote at the Special Meeting.

At the time they entered into the Business Combination Agreement, MGO and Holdings entered into voting and support agreements (“Voting and Support Agreements”) with certain officers and directors of MGO who collectively held a majority of the issued and outstanding MGO Shares (the “MGO Principals”). Since that time, MGO and Holdings have also entered into Voting and Support Agreements with certain investors (together with

 

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the MGO Principals, the “Supporting Investors”) that have purchased MGO Shares from MGO through its at-the-market facility and through other issuances. Pursuant to the Voting and Support Agreements, each Supporting Investor has agreed, among other things, to vote his, her or its shares in favor of approval of the Business Combination Agreement, the Business Combination and the other transactions contemplated thereby and not to transfer his, her or its MGO Shares (subject to certain exceptions).

On the Record Date, the Supporting Investors owned 46.9% of the outstanding MGO Shares. Accordingly, the Voting and Support Agreements ensure that at least 46.9% of the outstanding MGO Shares will vote in favor of the Business Combination and Business Combination Agreement at the Special Meeting. This means that only a small portion of the MGO Shares held by stockholders that are not Supporting Investors (no more than 3.2 % of the total MGO Shares outstanding on the Record Date) will be needed to approve these measures.

Q: How does the MGO Board recommend that I vote?

A: On June 3, 2024, the MGO Board, after considering various factors, including the unanimous recommendations of the Special Committee of independent MGO Board members and MGO’s senior management, advice from MGO’s financial advisor and the receipt of a fairness opinion presentation from Newbridge Securities Corporation, an independent valuation firm and the other factors described in the section of the proxy statement/prospectus entitled “The Business Combination — Recommendation of the MGO Board and Reasons for the Business Combination,” unanimously (i) determined that the Business Combination Agreement and the Transactions are advisable and fair to, and in the best interests of, MGO and its stockholders; (ii) approved the execution of the Business Combination Agreement and the consummation of the Transactions; (iii) recommended that the MGO Stockholders approve and adopt the Business Combination Agreement and the Transactions, including the Merger and (iv) directed that the adoption of the Business Combination Agreement be submitted to MGO Stockholders for consideration at the Special Meeting.

The MGO Board recommends that you vote “FOR” the Business Combination Proposal and “FOR” the Adjournment Proposal.

In considering the recommendations of the MGO Board MGO Stockholders should be aware that the MGO Board and executive officers have interests in the Business Combination that are different from, or in addition to, their interests as MGO Stockholders generally. These interests may include, among others, the payment of severance benefits and Holdings’ agreement to indemnify the MGO Board and executive officers against certain claims and liabilities. For a more complete description of these interests, see “The Business Combination—Interests of Certain Persons in the Business Combination.”

Q: What do I need to do now?

A: MGO encourages you to read this proxy statement/prospectus, including all documents incorporated by reference into this proxy statement/prospectus, and its annexes carefully and in their entirety. Then as promptly as possible, follow the instructions on the enclosed proxy card to submit your proxy electronically over the Internet or by telephone, so that your shares can be voted at the Special Meeting. MGO encourages all stockholders to vote electronically. Alternatively, if you do not have access to a touch-tone phone or the Internet, you may sign, date and return the enclosed proxy card in the postage-paid envelope provided. If you hold your MGO Shares in “street name”, your broker, bank, trust or other nominee has enclosed a voting instruction form with this proxy statement/prospectus. Please do not send your stock certificate(s) with your proxy card. See “How may I vote?” in this section of this proxy statement/prospectus for more information.

 

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Q: Should I send in my stock certificate(s) now?

A: No. If you are a record holder, after the Merger is consummated, under the terms of the Business Combination Agreement, you will receive a letter of transmittal instructing you to send your stock certificate(s) to the paying agent in order to receive the MGO Merger Consideration for each MGO Share represented by such stock certificate(s). You should use the letter of transmittal to exchange your stock certificates for the MGO Merger Consideration to which you are entitled upon Closing. If you hold your shares in “street name,” please contact your broker, bank, trust or other nominee for instructions as to how to effect the surrender of your MGO Shares in exchange for the MGO Merger Consideration in accordance with the terms of the Business Combination Agreement. Please do not send in your stock certificates now.

Q: If I am an MGO Stockholder but do not know where my stock certificates are, how will I get the MGO Merger Consideration for my MGO Shares?

A: If the Merger is consummated, the transmittal materials you will receive after Closing will include the procedures that you must follow if you cannot locate your stock certificate(s). This will include an affidavit that you will need to sign attesting to the loss of your stock certificates. You may also be required to post a bond as indemnity against any potential loss.

Q: What happens if the Business Combination is not consummated?

A: If the Business Combination Agreement is not adopted by MGO Stockholders or if the Business Combination is not consummated for any other reason, MGO Stockholders will not receive any consideration for their MGO Shares. Instead, MGO will remain an independent public company, MGO Shares will continue to be listed and traded on Nasdaq and registered under the Exchange Act and MGO will continue to file periodic reports with the SEC.

Q: Do any of MGO’s directors or officers have interests in the Business Combination that may be in addition to or differ from those of MGO Stockholders generally?

A: Yes. In considering the recommendation of the MGO Board with respect to the Business Combination Proposal, you should be aware that MGO’s directors and executive officers may have interests in the Business Combination different from, or in addition to, the interests of MGO Stockholders generally. These interests may include, among others, the payment of severance benefits and Holdings’ agreement to indemnify the MGO Board and executive officers against certain claims and liabilities. The MGO Board was aware of and considered these interests, to the extent such interests existed at the time, among other matters, in evaluating and negotiating the Business Combination Agreement and the Business Combination, in approving the Business Combination Agreement and the Business Combination and the other Transactions contemplated by the Business Combination Agreement, and in recommending that the Business Combination Agreement be adopted by MGO Stockholders.

For a description of the interests of MGO’s directors and executive officers in the Business Combination, see the section of the proxy statement/prospectus entitled “The Business Combination — Interests of Certain Persons in the Business Combination.”

Q: What is the difference between holding shares as a stockholder of record and as a beneficial owner?

A: If your MGO Shares are registered directly in your name with MGO’s transfer agent, Transhare Corporation, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement/prospectus and your proxy card have been sent directly to you by MGO. As the stockholder of record you have the right to vote by proxy, which involves granting your voting rights directly to MGO or to a third party, or to vote by ballot at the Special Meeting.

If your shares are held through a broker, bank, trust or other nominee, you are considered the beneficial owner of those shares. In that case, this proxy statement/prospectus has been forwarded to you by your broker, bank, trust

 

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or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank, trust or other nominee how to vote your shares. Without your voting instructions, because of the non-routine nature of the Proposals, your broker, bank, trust or other nominee may not vote your shares with respect to the Proposals. However, if you hold your shares in “street name” and give voting instructions to your broker, bank, trust or other nominee with respect to one of the Proposals, but give no instruction as to the other Proposals, then those shares will be deemed present at the Special Meeting for purposes of establishing a quorum at the Special Meeting, will be voted as instructed with respect to the Proposal as to which instructions were given, and will not be voted with respect to any other Proposal.

Q: What is a proxy?

A: A proxy is your legal designation of another person, referred to as a “proxy,” to vote your MGO Shares. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement/prospectus.” The document used to designate a proxy to vote your MGO Shares is called a “proxy card.” The MGO Board has designated Maximiliano Ojeda, the Chief Executive Officer of MGO, with full power of substitution, as proxy for the Special Meeting.

Q: Can I change or revoke my proxy?

A: You may change or revoke your previously submitted proxy at any time before the Special Meeting or, if you attend the Special Meeting, by voting by ballot at the Special Meeting.

If you hold your shares as a record holder, you may change or revoke your proxy in any one of the following ways:

 

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by re-voting at a subsequent time by Internet or by telephone following the instructions on the enclosed proxy card;

 

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by signing a new proxy card with a date later than your previously delivered proxy and submitting it following the instructions on the enclosed proxy card;

 

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by delivering a signed revocation letter to MGO’s Corporate Secretary, at MGO’s mailing address on the first page of this proxy statement/prospectus before the Special Meeting, which states that you have revoked your proxy; or

 

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by attending the Special Meeting in a virtual format and voting by virtual ballot.

Attending the Special Meeting virtually will not in and of itself revoke a previously submitted proxy. You must specifically vote by virtual ballot at the virtual Special Meeting in order for your previous proxy to be revoked.

Your latest dated proxy card, Internet or telephone vote is the one that is counted.

If your shares are held in “street name” by a broker, bank, trust or other nominee, you may change your voting instructions by following the instructions of your broker, bank, trust or other nominee.

Q: If an MGO Stockholder gives a proxy, how will the shares be voted?

A: Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the Business Combination

 

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Proposal and “FOR” the Adjournment Proposal. However, if you hold your shares in “street name” and give voting instructions to your broker, bank, trust or other nominee with respect to one of the Proposals, but give no instruction as to the other Proposals, then those shares will be voted as instructed with respect to the Proposal as to which instructions were given and will not be voted with respect to any other Proposal.

Q: I understand that a quorum is required in order to conduct business at the Special Meeting. What constitutes a quorum?

A: The presence of MGO Stockholders holding a majority of the outstanding MGO Shares entitled to vote at the Special Meeting constitutes a quorum. As of the close of business on Record Date, there were 2,904,001 MGO Shares outstanding and entitled to be voted at the Special Meeting. If you submit a properly executed proxy by Internet, telephone or mail, you will be considered a part of the quorum. In addition, abstentions will be counted for purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum; however, if you hold your shares in “street name” and give voting instructions to your broker, bank, trust or other nominee with respect to one of the Proposals, then those shares will be deemed present at the Special Meeting for purposes of establishing a quorum at the Special Meeting. If a quorum is not present, the holders of a majority in voting power of the MGO Shares, present or represented by proxy, and entitled to vote at the Special Meeting, or any officer entitled to preside at or act as secretary of the Special Meeting, may adjourn the Special Meeting pursuant to MGO’s bylaws.

Q: How can I obtain a proxy card?

A: If you lose, misplace or otherwise need to obtain a proxy card, please follow the applicable procedure below.

 

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For MGO Stockholders of record: Please call Dodi Handy, Director of Communications, at (407) 960-4636.

 

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For holders in “street name”: Please contact your account representative at your broker, bank or other similar institution.

Q: What happens if I sell or otherwise transfer my MGO Shares after the close of business on the Record Date but before the Special Meeting?

A: The Record Date is earlier than both the date of the Special Meeting and the date the Business Combination is expected to occur. If you sell or transfer your MGO Shares after the close of business on the Record Date but before the Special Meeting, unless special arrangements (such as the provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your MGO Shares and each of you notifies MGO in writing of such special arrangements, you will transfer the right to receive the MGO Merger Consideration, if the Merger is consummated, to the person to whom you sell or transfer your MGO Shares, but you will retain your right to vote these shares at the Special Meeting. Even if you sell or otherwise transfer your MGO Shares after the close of business on the Record Date, you are encouraged to complete, date, sign and return the enclosed proxy card or vote via the Internet or telephone.

Q: What should I do if I receive more than one set of voting materials?

A: You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please vote via the Internet or telephone (or complete, date, sign and return) with respect to each proxy card and voting instruction card that you receive.

 

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Q: What happens if I sell or otherwise transfer my MGO Shares after the Special Meeting but before the Merger Effective Time?

A: If you sell or transfer your MGO Shares after the Special Meeting but before the Merger Effective Time, you will have transferred the right to receive the MGO Merger Consideration to the person to whom you sell or transfer your MGO Shares. In order to receive the MGO Merger Consideration, you must hold your MGO Shares through the Merger Effective Time.

Q: Who will count the votes?

A: The inspector of elections appointed for the Special Meeting, a representative of our proxy advisory, Broadridge Financial Solutions, Inc. and its affiliates (collectively, “Broadridge”), will tabulate votes cast by proxy or by ballot at the Special Meeting. The inspector of elections will also determine whether a quorum is present.

Q: Who will solicit votes for and bear the cost and expenses of this proxy solicitation?

A: The cost of this proxy solicitation will be borne by MGO. MGO’s directors, officers and employees will solicit proxies in person, by mail, telephone, facsimile and email, or by other electronic means. We will pay these directors, officers and employees no additional compensation for these services. We will reimburse banks, brokers and other nominees for their reasonable, out-of-pocket expenses incurred in forwarding this proxy statement/prospectus and related materials to, and obtaining instructions relating to such materials from, beneficial owners of MGO Shares.

Q: Where can I find the voting results of the Special Meeting?

A: MGO has retained a representative of Broadridge to serve as independent inspector of elections in connection with the Special Meeting. MGO intends to notify MGO Stockholders of the results of the Special Meeting by filing with the SEC a Current Report on Form 8-K.

Q: Will I be subject to U.S. federal income tax upon the exchange of my MGO Shares for Holdings Shares and cash pursuant to the Merger?

A: The receipt of Holdings Shares in exchange for MGO Shares pursuant to the Merger will not be a taxable transaction for U.S. federal income tax purposes. The Merger is intended to qualify as either a reorganization within the meaning of Section 368 of the Code or transfer to a controlled corporation within the meaning of Section 351 of the Code.

See the section of the proxy statement/prospectus entitled “Material U.S. Federal Income and Marshall Islands Tax Considerations — Material U.S. Federal Income Tax Considerations — Tax Consequences of the Merger” for a more detailed description of the material U.S. federal income tax consequences of the Merger.

Q: What will happen in the Business Combination?

A: The Business Combination involves a series of Transactions pursuant to which MGO and Heidmar will combine their businesses, which will be held as separate subsidiaries of Holdings, with the MGO Stockholders and the Heidmar Shareholders surrendering their direct ownership of MGO and Heidmar, respectively, in exchange for ownership interests in Holdings.

The Business Combination will involve the following Transactions:

 

(a)

Merger Sub will merge (the “Merger”) with and into MGO, with MGO continuing as the surviving entity and a wholly owned subsidiary of Holdings;

 

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(b)

each issued and outstanding MGO Shares prior to the effective time of the Merger will be converted into the right to receive a fraction of a Holdings Share to be determined, with Holdings issuing those shares to the MGO Stockholders at Closing;

 

(c)

immediately after the effective time of the Merger, the Heidmar Shareholders will transfer all their Heidmar Shares to Holdings (the “Heidmar Share Acquisition”), with Heidmar becoming a wholly owned subsidiary of Holdings; and

 

(d)

Holdings will issue to the Heidmar Shareholders and MGO’s financial advisor (as the agreed consideration for advisory services provided to MGO): (i) at the Closing the Heidmar Share Consideration and (ii) after the Closing and upon the satisfaction of certain earnout conditions set forth in the Business Combination Agreement, the Earnout Shares, with 2.64% of each issuance being distributed to MGO’s financial advisor.

Please see the section entitled “The Business Combination” for additional information.

Holdings has applied to list the Holdings Shares on Nasdaq under the symbol “HMR” upon the Closing. The Holdings Shares have not yet been approved for listing on Nasdaq, and it is possible that Nasdaq will not provide this approval. If Nasdaq does not approve the Holdings Shares for listing, then the Business Combination will not occur.

Q: When do you expect the Business Combination to be consummated?

A: MGO and Heidmar are working toward consummating the Business Combination as quickly as possible and currently anticipate that the Business Combination will close promptly following the Special Meeting of MGO stockholders, provided that all other conditions to the Closing have been satisfied or waived. For a description of the conditions to the completion of the Business Combination, see the section entitled “The Business Combination Agreement — Conditions to Closing of the Business Combination.”

Q: Can the Business Combination Agreement be terminated?

A: Yes, the Business Combination Agreement can be terminated and the Business Combination may be abandoned, even after if the Heidmar Shareholders and/or the MGO Stockholders have provided their approval, under the following circumstances:

 

(a)

by mutual written consent of MGO and Heidmar;

 

(b)

by written notice by either MGO or Heidmar to the other at the occurrence of certain events, including if the conditions to closing the Business Combination have not been satisfied or waived by February 10, 2025;

 

(c)

by written notice by Heidmar to MGO at the occurrence of certain events, including a breach by MGO of any of its representations, warranties, covenants or agreements contained in the Business Combination Agreement that results in a failure of certain conditions set forth in the Business Combination Agreement, or if MGO is formally delisted from Nasdaq or receives a notice of delisting from Nasdaq and is not reasonably able to cure the deficiency within three months of the date of notice; and

 

(d)

by written notice by MGO to Heidmar in the event that Heidmar breaches any of its representations, warranties, covenants or agreements contained in the Business Combination Agreement that results in a failure of certain conditions set forth in the Business Combination Agreement.

For more information, see the section entitled “The Business Combination Agreement—Termination”.

Pursuant to the Business Combination Agreement, during the Interim Period, MGO and Heidmar have agreed not to, among other things, solicit, initiate or knowingly facilitate or assist the making, submission or announcement of, or intentionally encourage, any Acquisition Proposal, engage in or participate in discussions or negotiations

 

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that would reasonably be expected to lead to an Acquisition Proposal and negotiate or enter into any letter of intent or other similar agreement in furtherance of any Acquisition Proposal. For purposes of the foregoing, (i) an “Acquisition Proposal” means any inquiry, proposal or offer, or any indication of interest in making an offer or proposal, from any person at any time relating to an Alternative Transaction, and (ii) an “Alternative Transaction” means with respect to either of MGO or Heidmar, a transaction (other than the transactions contemplated by the Business Combination Agreement) concerning the sale of (x) all or any material part of the business or assets of such company, on a consolidated basis together with its Subsidiaries, or (y) 15% or more of the issued and outstanding shares or other equity interests or profits of such company, in any case, whether such transaction takes the form of a sale of shares or other equity interests, assets, merger, consolidation, issuance of debt securities, management contract, joint venture or partnership, or otherwise.

Q: What are the conditions that must be satisfied in order to consummate the Business Combination and can MGO or Heidmar waive the closing conditions?

A: There are a number of conditions to the consummation of the Business Combination. For a summary of the conditions that must be satisfied or waived prior to the consummation of the Business Combination, see the section of this proxy statement/prospectus entitled “The Business Combination Agreement — Conditions to Closing of the Business Combination.” Certain notable conditions to Closing include that:

 

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the Holdings Shares shall have been approved for listing on the Nasdaq, subject to official notice of issuance;

 

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the representations and warranties of Heidmar, Holdings, Merger Sub and MGO are true and correct subject to the applicable standards set forth in the Business Combination Agreement;

 

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each of Heidmar, Holdings, Merger Sub and MGO have performed or complied, in all material respects, with their covenants and agreements required to be performed or complied with by it under the Business Combination Agreement at or prior to the Sanction Date, as applicable;

 

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since the date of the Business Combination Agreement, there shall not have occurred or existed any “material adverse effect” in respect of Heidmar;

 

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no governmental authority of competent jurisdiction shall have enacted any law or order in effect at the time of Closing which has the effect of making the Business Combination or other ancillary Transactions illegal or otherwise prohibiting consummation of the Business Combination or ancillary Transactions;

 

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the approval of the MGO Stockholders of the Business Combination;

 

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the articles of incorporation and bylaws of Holdings have been amended and restated as described in this proxy statement/prospectus; and

 

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the Registration Statement being declared effective by the SEC.

Heidmar and MGO, or both parties together, have the right to waive certain conditions to closing, with such waiver being in the sole discretion of one party or both parties individually. If a party or parties were to waive any closing condition, that waiver may lead the Business Combination to close under circumstances adverse to MGO and the MGO Stockholders. For a more detailed description of the potential risks if closing conditions are waived, see the section of this proxy statement/prospectus entitled “Risk Factors —Risks  Relating to the Business Combination.”

Q: Are there any other risks to me from the Business Combination that I should consider?

A: Yes. There are risks associated with all business combinations, including the Business Combination. See the sections of the proxy statement/prospectus entitled “Forward-Looking Statements” and “Risk Factors.”

 

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Q: What if during the check-in time or during the Special Meeting I have technical difficulties or trouble accessing the virtual meeting website?

A: If MGO experiences technical difficulties during the Special Meeting (e.g., a temporary or prolonged power outage), it will determine whether the Special Meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the Special Meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In any such situation, MGO will promptly notify stockholders of the decision via the virtual meeting website.

Technical support will be ready to assist you with any individual technical difficulties you may have accessing the virtual meeting website. Contact information for technical support will appear on the virtual meeting login page prior to the start of the Special Meeting.

Q: How can I obtain more information about MGO?

A: You can find more information about MGO from various sources described in the section of the proxy statement/prospectus entitled “Where You Can Find More Information.”

Q: Who can help answer my questions?

A: If you have any questions concerning the Business Combination, the Special Meeting or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your MGO Shares, please contact MGO’s Director of Communications.

 

Q: What will the business of Holdings be if the Business Combination is consummated?

A: The business of Holdings will be a combination of the businesses of MGO and Heidmar. See “Summary — Parties to the Business Combination — Heidmar” and “— MGO.”

Q: How has the announcement of the Business Combination affected the trading price of MGO’s Shares?

A: On June 18, 2024, the last trading date before the public announcement of the Business Combination, the MGO Shares closed at $4.584 per share. On January 10, 2025, the trading date immediately prior to the date of this proxy statement/prospectus, the MGO Shares closed at $0.5515 per share.

Q: What will the Heidmar Shareholders receive in the Business Combination?

A: In exchange for the Heidmar Shares, Holdings will issue to the Heidmar Shareholders:

 

•

upon consummation of the Heidmar Share Acquisition, a number of Holdings Shares equal to (a) the aggregate number of Holdings Shares issuable to the MGO Stockholders as MGO Merger Consideration, times (b) 16.6667 (the “Heidmar Share Consideration”); and

 

•

if and when Holdings meets certain performance targets after the Closing a number of Holdings Shares equal to 10% of the Heidmar Share Consideration (the “Earnout Shares”).

 

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The Business Combination Agreement contemplates that 2.64% of the Heidmar Share Consideration and any Earnout Shares will be issued to MGO’s financial advisor, Maxim, as compensation under its Advisory Agreement with MGO, with the remaining Heidmar Share Consideration and Earnout Shares being issued to the Heidmar Shareholders. See “The Business Combination Agreement—Consideration to the Heidmar Shareholders in the Business Combination” for additional details on this consideration.

Q: What are the Earnout Shares?

A: The Earnout Shares will consist of a number of Holdings Shares equal to 10% of the Heidmar Share Consideration. Holdings will only issue the Earnout Shares to the Heidmar Shareholders if Holdings achieves any one of the following financial milestones during the 12 months ending December 31, 2025:

 

•

revenue that is equal to or more than $45.0 million;

 

•

earnings before interest, taxes, depreciation and amortization, or EBITDA, equal to or more than $30 million; and

 

•

net income equal to or more than $25 million.

Each of these measures will be calculated to eliminate (without duplication) (i) the effects of the Transactions, including fees and expenses, taxes incurred, paid or recognized, any gain or loss on disposition, and any one-time accounting charges, adjustments or write-downs, in each case directly attributable to the Transactions, and (ii) any revenue, net income, or component of EBITDA of MGO consolidated into the financial statements of Holdings.

Q: Did the MGO Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

A: Yes. MGO retained Newbridge Securities Corporation (“Newbridge”) to provide a fairness opinion to the MGO Board. On June 17, 2024, Newbridge delivered its opinion to the MGO Board as to the fairness, from a financial point of view, to the unaffiliated holders of Relevant MGO Shares (as defined in the Business Combination Agreement) of the Share Consideration (as defined in the Business Combination Agreement) to be issued by Holdings pursuant to the Business Combination Agreement. For a description of the opinion issued by Newbridge to the MGO Board, please see “The Business Combination—Opinion of the Financial Advisor to the MGO Board.”

 

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RISK FACTORS

The risk factors below provide certain information regarding risks and uncertainties relating to Holdings and its securities, Heidmar, and the Business Combination. We are also incorporating by reference into this proxy statement/prospectus risk factors pertaining to MGO from the public filings of MGO (see “Where You Can Find More Information”).

The risks and uncertainties described below (or incorporated by reference herein) are not the only risks and uncertainties that MGO, Heidmar and Holdings will face following the Business Combination. Additional risks and uncertainties not presently known to MGO, Heidmar or Holdings or that those parties currently deem immaterial may also impair Holdings’ business operations. If any of these risks actually occur, Holdings’ business, financial condition and results of operations could suffer. As a result, the trading price of the Holdings Shares could decline, perhaps significantly, and you could lose all or part of your investment. The risks discussed below (or incorporated by reference herein) also include forward-looking statements and Holdings’ actual results and performance may differ substantially from those discussed in these forward-looking statements. See the section entitled “Forward-Looking Statements.”

Risks Related to the Business Combination

The consummation of the Business Combination is subject to the closing conditions contained in the Business Combination Agreement and could be delayed or may never occur.

The consummation of the Business Combination is subject to the closing conditions contained in the Business Combination Agreement and could be delayed or may never occur. Accordingly, any shares of common stock of MGO offered and purchased (including newly issued MGO Shares sold under MGO’s at-the-market program or through other capital raising activities) following the announcement of the Business Combination but prior to the Closing is an investment in MGO. The Business Combination is subject to the approval of the MGO Stockholders, and it is possible that events could occur that would prevent this approval from being obtained. The closing conditions that must be satisfied or waived before the Closing can occur are specified in the Business Combination Agreement and include: (i) the representations and warranties of MGO, Heidmar and the Heidmar Shareholders being true and correct subject to the materiality standards contained in the Business Combination Agreement; (ii) material compliance by the parties of their respective pre-closing covenants and agreements, subject to the standards contained in the Business Combination Agreement; (iii) the absence of any Material Adverse Effect (as defined in the Business Combination Agreement) with respect to Heidmar since the effective date of the Business Combination Agreement that is continuing and uncured; (iv) the expiration or termination, as applicable, of any waiting period (and any extension thereof) applicable to the consummation of the Business Combination Agreement under any antitrust laws; (v) that no governmental authority of competent jurisdiction shall have enacted any law or order in effect at the time of Closing which has the effect of making the Business Combination or other ancillary Transactions illegal or otherwise prohibiting consummation of the Business Combination or ancillary Transactions; (vi) the Registration Statement (as defined below) being declared effective by the SEC; (vii) the articles of incorporation and bylaws of Holdings having been amended and restated as set forth in an exhibit to the Business Combination Agreement; (viii) the entry into certain ancillary agreements as of the Closing; (ix) the approval of the listing of the Holdings Shares on Nasdaq (or another national securities exchange), and (x) the receipt of certain closing deliverables. MGO and Heidmar may not satisfy all of the closing conditions in the Business Combination Agreement. If the closing conditions are not satisfied or waived, the Business Combination will not occur, or will be delayed pending later satisfaction or waiver, which could have a material adverse effect on the Company’s business, results of operations, cash flows and financial position.

Further, the aggregate percentages of Holdings Shares to be issued to the holders of MGO Shares on one hand and the Heidmar Shareholders on the other immediately after the consummation of the Business

 

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Combination is fixed pursuant to the Business Combination Agreement. Accordingly, the issuance of new MGO Shares following announcement of the Business Combination Agreement, including through the Company’s at-the-market sales program or other capital raises, will not increase the aggregate ownership percentage of Holdings Shares to be issued to holders of MGO Shares following consummation of the Business Combination, but will dilute the Holdings ownership percentage that each individual holder of MGO Shares would receive.

MGO and Heidmar will incur significant transaction and transition costs in connection with the Business Combination.

MGO, Holdings and Heidmar have incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination, including legal, accounting, consulting, investment banking and other fees, expenses and costs. In addition, Holdings will incur significant costs operating as a public company following the consummation of the Business Combination and may also incur additional costs to retain key employees. Generally, transaction expenses incurred in connection with the Business Combination will be paid by the party incurring those expenses, and many of those expenses might not be paid until after the Closing. Accordingly, these expenses could result in Holdings having less money following the Closing to spend on other aspects of its business, particularly if the actual expenses turn out to be higher than anticipated.

Legal proceedings in connection with the Business Combination, the outcomes of which are uncertain, could delay or prevent the completion of the Business Combination.

In connection with transactions like the proposed Business Combination, it is not uncommon for lawsuits to be filed against the parties and/or their respective directors and officers alleging, among other things, that the proxy statement/prospectus provided to shareholders contains false and misleading statements and/or omits material information concerning the transaction. Although no such lawsuits have yet been filed in connection with the Business Combination, it is possible that such actions may arise and, if they do arise, to seek, among other things, injunctive relief and an award of attorneys’ fees and expenses. Defending such lawsuits could require MGO, Heidmar and Holdings to incur significant costs and draw the attention of MGO’s and Heidmar’s management teams away from the consummation of the Business Combination and the management of their respective businesses. Further, the defense or settlement of any lawsuit or claim that remains unresolved at the time the Business Combination is consummated may adversely affect Holdings’ business, financial condition, results of operations and cash flows. Such legal proceedings could delay or prevent the Business Combination from being consummated within the expected timeframe.

The announcement of the proposed Business Combination could disrupt Heidmar’s relationships with its customers, suppliers, business partners and others, as well as its operating results and business generally.

Risks relating to the announcement of the Business Combination on Heidmar’s business include the following:

 

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its employees may experience uncertainty about their future roles, which might adversely affect Heidmar’s ability to retain and hire key personnel and other employees;

 

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customers, suppliers, business partners and other parties with which Heidmar maintains business relationships may experience uncertainty about its future and seek alternative relationships with third parties, seek to alter their business relationships with Heidmar or fail to extend an existing relationship with Heidmar; and

 

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Heidmar has expended and will continue to expend significant costs, fees and expenses for professional services and transaction costs in connection with the proposed Business Combination.

If any of the aforementioned risks were to materialize, they could lead to significant costs which may impact Holdings’ results of operations and cash available to fund its business.

 

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After the Business Combination, Holdings may be exposed to unknown or contingent liabilities and may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price.

It is possible that the due diligence conducted in relation to Heidmar and MGO and their respective businesses did not identify all material issues or risks associated with these companies or the industries in which they compete.

Furthermore, factors outside of the parties’ control could arise later. As a result of these factors, Holdings may be exposed to liabilities and incur additional costs and expenses and be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if the due diligence has identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with the parties’ preliminary risk analysis. If any of these risks materialize, this could have a material adverse effect on the Holdings’ financial condition and results of operations and could contribute to negative market perceptions about Holdings’ securities.

Due to potential fluctuations in the market value of Holdings Shares, MGO Stockholders cannot be sure of the market value of the consideration that they will receive in the Business Combination.

After the Closing, the Heidmar Shareholders will own 94.34% of Holdings (including shares that Holdings will distribute to MGO’s financial advisor), and the MGO Stockholders will own 5.66% of Holdings, without taking into account the issuance of any Earnout Shares. Pursuant to the Business Combination Agreement, any MGO Shares that MGO issues prior to Closing will not change these percentages.

The consideration that eligible MGO Stockholders will receive upon consummation of the Business Combination Agreement is one Holdings Common Share for each share of MGO Common Stock (an “MGO Share”). In addition, the Heidmar Shareholders will receive, for each Heidmar Share, a number of Holdings Shares equal to (a) the aggregate number of Holdings Shares issuable to the MGO Stockholders as MGO Merger Consideration, times (b) 16.6667, divided by (c) the outstanding shares of Heidmar. Prior to the Closing, there has not been and will not be an established public trading market for Holdings Shares. The market value of Holdings Shares will reflect the combination of MGO and Heidmar under the terms of the Business Combination. Further, the MGO Merger Consideration will not be adjusted to reflect any changes in the number of MGO Shares outstanding, the market value of MGO Shares or currency Exchange Rates.

The First Amendment to the Business Combination Agreement permits Heidmar to adjust the number of Holdings Shares to be issued at the Closing, so long as any change preserves the relative ownership of the MGO Stockholders on the one hand and the Heidmar Shareholders on the other hand, including that the MGO Stockholders will own, in aggregate, at least 5.66% of the outstanding Holdings Shares immediately after Closing. Heidmar would make any change only to the extent necessary to (i) satisfy Nasdaq listing requirements and (ii) facilitate efficient trading of the Holdings Shares on the public markets, and the amendment requires that any change not have a negative impact on Holdings’ ability to qualify for listing on Nasdaq.

Changes in the price of MGO Shares may result from a variety of factors, including, among others, changes in MGO’s business, operations or prospects, regulatory considerations, governmental actions, legal proceedings and general business, market, industry, political or economic conditions. Many of these factors are beyond MGO’s control. As a result, the aggregate market value of the Holdings Shares that a MGO Stockholder is entitled to receive at the Closing could vary significantly from the value of the equivalent MGO Shares on the date of the Business Combination Agreement, the date of this proxy statement/prospectus or at other times, and MGO Stockholders will neither know nor be able to calculate the value of the MGO Merger Consideration they would receive upon the Closing. MGO Stockholders are urged to obtain current market quotations for MGO Shares.

If the Business Combination is not completed by the Outside Date either MGO or Heidmar may have the right to terminate the Business Combination Agreement.

If the conditions to the obligations of Heidmar and MGO to consummate the Business Combination Agreement are not satisfied or waived (if applicable) by February 10, 2025, either MGO or Heidmar may have

 

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the right to terminate the Business Combination Agreement. MGO or Heidmar may elect to terminate the Business Combination Agreement in certain other circumstances, including if the MGO Stockholders fail to approve the Transactions at their respective shareholder meetings, and MGO and Heidmar can mutually decide to terminate the Business Combination Agreement at any time prior to the Merger Effective Time, before or after the required MGO Stockholder Approval.

The Business Combination Agreement contains restrictions on the ability of Heidmar and MGO to pursue alternatives to the Business Combination.

The Business Combination Agreement contains provisions that may discourage a third party from submitting a competing business combination proposal that might result in greater value to the Heidmar Shareholders or the MGO Stockholders than the Business Combination. These provisions include, among others, a general prohibition on Heidmar and MGO from soliciting or entering into discussions with any third party regarding, among other things, any business combination proposal, during the Interim Period.

Certain MGO Stockholders who hold close to a majority of the MGO Shares have entered into agreements to vote in favor of the Transactions.

MGO and Holdings have entered into Voting and Support Agreements with certain MGO Stockholders (the “Supporting Investors”), including certain directors and officers of MGO (the “MGO Principals”) and certain investors that have purchased MGO Shares from MGO through its at-the-market facility and through other issuances. Pursuant to these agreements, the Supporting Investors have agreed, among other things, to vote their MGO Shares in favor of all the proposals presented for approval by MGO’s stockholders in respect of the Business Combination, including voting in favor of the Business Combination and to approve the Business Combination Agreement and not to transfer his, her or its MGO Shares (subject to certain exceptions).

On the Record Date, the Supporting Investors owned 46.9% of the outstanding MGO Shares. Accordingly, the Voting and Support Agreements ensure that at least 46.9% of the outstanding MGO Shares will vote in favor of the Business Combination and Business Combination Agreement at the Special Meeting. This means that only a small portion of the MGO Shares held by stockholders that are not Supporting Investors (no more than 3.2% of the total MGO Shares outstanding on the Record Date) will be needed to approve these measures.

Even if the Business Combination Agreement is approved by the MGO Stockholders, closing of the Business Combination still requires that certain closing conditions be satisfied or waived. It is possible that MGO, Heidmar and/or Holdings will fail to satisfy one or more conditions and this failure may not be waived by the other parties. If the closing conditions are not satisfied or waived by the applicable parties, the Business Combination will not occur, or will be delayed pending later satisfaction or waiver, and such delay may cause MGO, Holdings or Heidmar to lose some or all of the intended benefits of the Business Combination.

Further, satisfying the conditions to, and the completion of, the Business Combination may take longer and could cost more than Heidmar and MGO expect. Any delay or additional costs incurred in connection with completing the Business Combination could materially affect the benefits that Heidmar and MGO expect to achieve from the Business Combination.

Termination of the Business Combination Agreement could negatively impact MGO and Heidmar.

If the Business Combination is not completed for any reason, including as a result of MGO Stockholders declining to adopt the Business Combination Agreement or declining to approve the proposals required to effect the Business Combination, the ongoing businesses of MGO and Heidmar may be adversely impacted and, without realizing any of the anticipated benefits of completing the Business Combination, MGO and Heidmar would be subject to a number of risks, including the following:

 

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MGO may experience negative reactions from the financial markets, including negative impacts on MGO’s stock price (including to the extent that the current market price reflects a market assumption that the Business Combination will be completed);

 

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Heidmar may experience negative reactions from its customers, vendors and employees;

 

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MGO and Heidmar will have incurred substantial expenses and will be required to pay certain costs relating to the Business Combination, whether or not the Business Combination is completed; and

 

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since the Business Combination Agreement restricts the conduct of MGO’s and Heidmar’s businesses prior to completion of the Business Combination, each of MGO and Heidmar may not have been able to take certain actions during the pendency of the Business Combination that would have benefitted it as an independent company, and the opportunity to take such actions may no longer be available.

If the Business Combination is consummated, MGO Stockholders will experience immediate and material dilution.

After the Closing, the MGO Stockholders will own 5.66% of Holdings Shares, and the Heidmar Shareholders will own 94.34% of Holdings Shares (including shares that Holdings will distribute to MGO’s financial advisor), without taking into account the issuance of any Earnout Shares. Pursuant to the Business Combination Agreement, any MGO Shares that MGO issues prior to Closing will not change these percentages. As such, the MGO Stockholders will experience immediate and material dilution upon Closing.

Holdings’ ability to be successful following the Business Combination will depend upon the efforts of the Heidmar’s officers and the loss of such persons could negatively impact the operations and profitability of the post-Business Combination business.

Holdings’ ability to be successful following the Business Combination will be dependent upon the efforts of the certain key personnel of Heidmar. Although the parties expect key personnel to remain with Holdings following the Business Combination, there can be no assurance that they will do so. It is possible that Heidmar will lose some key personnel, the loss of which could negatively impact the operations and profitability of Holdings. Furthermore, following the Closing, certain of the key personnel of Heidmar may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause Holdings to have to expend time and resources helping them become familiar with such requirements.

The directors and officers of Holdings have not had experience managing a business like MGO’s and may not succeed in attracting capable managers, which could cause MGO’s business and financial condition to suffer.

None of the officers and directors of MGO will remain as officers or directors of MGO following the Business Combination. The officers and directors of Holdings following the Business Combination will be determined by Heidmar and will consist primarily of officers and directors of Heidmar. Heidmar is a commercial manager of ocean-going transport vessels, which is a very different business from the business that MGO manages, which is to design, manufacture, license, distribute, advertise and sell a range of products. Holdings may fail to find and employ capable and experienced personnel to manage and operate MGO’s business upon the Closing. If so, MGO’s business and its financial condition could suffer.

Risks Related to U.S. Federal Income Taxation of the Business Combination

The IRS may not agree that Holdings (i) should be treated as a non-U.S. corporation for U.S. federal income tax purposes and (ii) should not be treated as a “surrogate foreign corporation” for U.S. federal income tax purposes.

Under current U.S. federal income tax law, a corporation generally will be considered to be a U.S. corporation for U.S. federal income tax purposes only if it is created or organized in the United States or under the law of the United States or of any State or the District of Columbia. Accordingly, under generally applicable U.S. federal income tax rules, Holdings, which is not created or organized in the United States or under the law of the United States or of any State but is instead a Republic of the Marshall Islands incorporated entity and a tax resident of

 

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Greece, would generally be classified as a non-U.S. corporation. Section 7874 of the Code, and the Treasury regulations promulgated thereunder, however, contain specific rules that may cause a non-U.S. corporation to be treated as a U.S. corporation for U.S. federal income tax purposes. If it were determined that Holdings is treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, Holdings would be liable for U.S. federal income tax on its income just like any other U.S. corporation and certain distributions made by Holdings to Non-U.S. holders (as defined in “Certain Tax Considerations—U.S. Federal Income Tax Considerations”) of Holdings would be subject to U.S. withholding tax. In addition, even if Holdings is not treated as a U.S. corporation, it may be subject to unfavorable treatment as a “surrogate foreign corporation” in the event that ownership attributable to former MGO Stockholders exceeds a threshold amount. If it were determined that Holdings is treated as a surrogate foreign corporation for U.S. federal income tax purposes under Section 7874 of the Code and the Treasury regulations promulgated thereunder, dividends paid by Holdings would not qualify for “qualified dividend income” treatment, and U.S. Affiliates of Holdings after the completion of the Business Combination, including MGO, could be subject to increased taxation under the inversion gain rules and Section 59A of the Code.

Holdings believes it should not be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code or as a surrogate foreign corporation. However, whether the requirements for such treatment have been satisfied must be finally determined after the completion of the Business Combination, by which time there could be adverse changes to the relevant facts and circumstances. Furthermore, the interpretation of Treasury regulations relating to the required ownership of Holdings is subject to uncertainty and there is limited guidance regarding their application. Accordingly, there can be no assurance that the IRS will not take a contrary position to those described above or that a court will not agree with a contrary position of the IRS in the event of litigation. You are urged to consult your tax advisor to determine the tax consequences if the classification of Holdings as a non-U.S. corporation is not respected or if Holdings is treated as a surrogate foreign corporation.

If Holdings is a passive foreign investment company for United States federal income tax purposes for any taxable year, U.S. holders of Holdings Shares could be subject to adverse United States federal income tax consequences.

If Holdings is or becomes a “passive foreign investment company,” or a PFIC, within the meaning of Section 1297 of the Code for any taxable year during which a U.S. holder holds Holdings Shares, certain adverse U.S. federal income tax consequences may apply to such U.S. holder. A non-U.S. corporation, such as Holdings, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year in which, after applying certain look-through rules, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Passive income generally includes dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains. Heidmar does not believe that Holdings will be treated as a PFIC for its current taxable year and does not expect to become one in the near future. However, PFIC status depends on the composition of a company’s income and assets and the fair market value of its assets from time to time, as well as on the application of complex statutory and regulatory rules that are subject to potentially varying or changing interpretations.

If Holdings determines that it is a PFIC for any taxable year, Holdings will endeavor to provide, and will endeavor to cause its non-U.S. subsidiaries that are PFICs, to provide, U.S. holders with tax information necessary to enable a U.S. holder to make a qualified electing fund (QEF) election with respect to Holdings and its non-U.S. subsidiaries.

If Holdings is treated as a PFIC, a U.S. holder of Holdings Shares may be subject to adverse U.S. federal income tax consequences, such as taxation at the highest marginal ordinary income tax rates on capital gains and on certain actual or deemed distributions, interest charges on certain taxes treated as deferred, and additional reporting requirements. U.S. holders of Holdings Shares should consult with their tax advisors regarding the potential application of these rules.

 

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The Business Combination may not qualify as a non-taxable transaction for U.S. federal income tax purposes.

If the Business Combination does not qualify as a non-taxable transaction for U.S. federal income tax purposes, the receipt of Holdings Shares in exchange for MGO Shares pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. A U.S. Holder of MGO Shares that receives Holdings Shares pursuant to the Merger will generally recognize taxable gain or loss equal to the difference between (i) the sum of the fair market value of the Holdings Shares received as consideration in the Merger and (ii) its adjusted tax basis in the MGO Shares surrendered in the exchange.

Risks Related to Heidmar and Holdings

For purposes of this section, the words “we,” “our,” “us,” and the “Company” refer to Heidmar and its subsidiaries.

Risks Related to Heidmar’s Business and Industry

If we cannot meet our customers’ quality and compliance requirements, we may not be able to operate our managed vessels profitably, which could have an adverse effect on our future performance, results of operations, cash flows and financial position.

Customers, in particular those in the shipping industry, have an increasingly high focus on quality and compliance standards with their suppliers across the entire value chain, including the shipping and transportation segment. Our continuous compliance with these standards and quality requirements is vital for our operations. Related risks could materialize in multiple ways, including a sudden and unexpected breach in quality and/or compliance concerning one or more vessels, or a continuous decrease in the quality concerning one or more vessels occurring over time. Moreover, continuous increasing requirements from oil industry constituents can further complicate our ability to meet the standards. If we fail to comply, either suddenly or over a period of time, with our pooling, management and charter agreements or the expectations or requirements of our customers, or if customers, in particular oil operators, increase their requirements above and beyond what we deliver, this may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

We rely on our charterers and pool members to provide the vessels we manage, and if they do not perform adequately or terminate their relationships with us, our costs may increase and our business, financial condition, and results of operations could be adversely affected.

Our asset-light business model means that we do not own any vessels. Instead, we rely on third parties and related parties to provide the vessels that we commercially manage, charter and operate. Should we experience complications with any of these vessels, we may need to delay or cancel charters. We face the risk that any of the companies that are engaged in the Heidmar Pools may not fulfill their contracts and deliver their services on a timely basis, or at all. We have experienced, and may in the future experience, operational complications with our charterers. The ability of our charterers to effectively satisfy our requirements could also be impacted by a charterer’s financial difficulty or damage to their operations caused by fire, terrorist attack, piracy, natural disaster, public health threats, or other events, including the ongoing conflicts between Russia and Ukraine and Israel and Hamas. The failure of any of our managed or chartered vessels to perform to our expectations could result in delayed or cancelled charters and harm our business. Our reliance on our and the Heidmar Subsidiaries’ pooling arrangements and our inability to fully control any operational difficulties without them could have a material adverse effect on our business, financial condition and results of operations.

 

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As we expand the fleet for which we provide vessel management services, we may not be able to recruit suitable employees and crew for our managed vessels, which may limit our growth and cause our financial performance to suffer.

As we continue to expand the fleet we manage, we will need to recruit suitable and reliable agents and administrative and management personnel. Recruiting new employees has become challenging in many industries and markets, and we may not be able to hire suitable employees to support our expansion. If we are unable to recruit suitable employees and crews, we may not be able to provide our services to customers at an appropriate level of quality or at all. This could limit our growth and cause our financial performance to suffer.

The vessels that enter into the Heidmar Pools may cease operating in that pool.

We enter into pooling contracts with a number of shipping companies, pursuant to which they contribute one or more vessels to a Heidmar Pool, and we assume the commercial management and operation of the vessels. Typically, any participant in a Heidmar Pool has the right to withdraw any or all its vessels upon notice in accordance with the terms of the relevant pool agreement. We cannot assure you that the vessels that currently participate in the Heidmar Pools will continue that participation. While the pool agreements typically include cancellation fees at full rates for 30 days and half-rate for the following 90 days, these do not replace the full revenue a vessel would earn for the pool or ensure its vitality for the longer term. If, for any reason vessels cease to participate in the Heidmar Pools, or the Heidmar Pools are significantly restricted, the net revenues paid to us and our counterparties by the pool could decrease. In addition, one or more pool participants could use their ability to withdraw vessels from a pool in an effort to negotiate a reduction of our fees. Any of these, could have an adverse effect on our financial condition and results of operations.

If we fail to effectively manage the operating costs of the vessels in our pools, this could harm our reputation and our financial performance.

Our commercial management and operation of vessels, includes many aspects of the costs of their operation, including negotiating fees and the costs of fuel. Although our clients typically bear these costs, if we fail to properly manage the costs of a given pool, its efficiency and profitability would decline. Further, our reputation for profitable vessel management would be harmed. These could adversely affect our results of operations.

The profitability of each Heidmar Pool is substantially dependent on the utilization we can achieve for its vessels, so our failure to maintain a high utilization would harm our reputation and our results of operations.

Participation in our pools is intended to enhance the financial performance of our customers’ vessels, in part through higher vessel utilization. If we fail to find customers to engage the vessels we manage in a given pool, the profitability of that pool will decline. Further, our income from a pool consists in part on commissions on freight and demurrage. Accordingly, low vessel utilization would adversely impact our results of operations. In addition, if our pools fail to deliver appropriate vessel utilization, our charterers may decline to keep their vessels in the Heidmar Pools, which would adversely affect our business and its growth. Factors affecting fleet utilization include, but are not limited to: supply of and demand for vessels in the seaborne transportation industry, dry-docking days, as well as any other event that would render a vessel unable to earn revenue.

When a tanker changes ownership or technical management, it may lose customer approvals.

Most users of seaborne oil transportation services require vetting of a vessel before it approves that vessel to service its account. This represents a risk to our company as it is difficult to efficiently employ a vessel until its vetting approvals are in place. As commercial managers of seaborne oil transportation services, we conduct inspections and assessments of our customers’ vessels. These inspections must be carried out regularly for a vessel to have valid approvals from users of seaborne oil transportation services. Any change in a vessel’s ownership or technical manager causes that vessel to lose its approval status, which means it must be

 

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re-inspected and re-assessed by the users of seaborne oil transportation services. Increasingly longer voyages in the very large cruise carrier (VLCC) trade, as well as trading route disruptions from various regional conflicts could make timely vetting inspections challenging and thus could result in vessels not obtaining vetting approvals in time to secure their next employment at market rates.

High prices of fuel, or bunker, as well as a lack of availability of fuel, may adversely affect our net income.

Fuel is a significant, if not the largest, expense in shipping when vessels are under voyage charter. As a result, a lack of availability of fuel and/or an increase in the price of fuel beyond our expectations at the time of charter negotiation may adversely affect our profitability. The price and supply of fuel is unpredictable and fluctuates based on events outside our control, particularly economic developments in emerging markets such as China and India, the status of trade relations between countries, including the United States and China, global economic conditions, including recession and inflation, geopolitical developments, supply of and demand for oil and gas, actions by the Organization of Petroleum Exporting Countries, or OPEC, and other oil and gas producers and production cuts, war and geopolitical conflicts, including the armed conflicts between Russia and Ukraine and Israel and Hamas, unrest in oil producing countries and regions, regional production patterns and environmental concerns and regulations. Further increases in fuel prices in the future may reduce the profitability and competitiveness of our business versus other forms of transportation, such as truck or rail. Other future regulations may have a similar impact.

In the highly competitive international seaborne transportation industry, we may not be able to compete for charters with new entrants or established companies with greater resources, and as a result we may be unable to employ our managed vessels profitably.

We manage, charter and operate vessels in a highly competitive and highly fragmented market, and face competition both to identify and secure vessels to operate and manage as well for goods to transport. Competition for vessels arises primarily from other pooling companies and vessel owners and depends on our relationships with vessel owners and customers, the type and age of a vessel and desirability of vessels based on quality and other factors, amongst other things. Competition for seaborne transportation of goods and products is intense and depends on charter rates and the location, size, age, condition and acceptability of the vessel and its operators to charterers. Due in part to the highly fragmented market, competitors with greater resources could operate larger fleets than we may operate and thus be able to offer lower charter rates and terms to vessel owners. We therefore may be unable to retain or attract new customers or charterers on attractive terms or at all, which may have a material adverse effect on our business, financial condition and results of operations. Although we believe that no single competitor has a dominant position in the markets in which we compete, we are aware that certain competitors may be able to devote greater financial and other resources to certain activities than we can, resulting in a significant competitive threat to us. Vessels in the Heidmar Pools operate in a highly competitive market and our existing and potential competitors may have significantly greater financial resources than us. We cannot give assurances that we will continue to compete successfully with our competitors or that these factors will not erode our competitive position in the future.

We face substantial competition in trying to expand relationships with existing customers and obtain new customers.

The process of obtaining new charter agreements is highly competitive and generally involves an intensive screening and competitive bidding process, which, in certain cases, extends for several months. Contracts in the time charter market are awarded based upon a variety of factors, including:

 

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the size, age, fuel efficiency, emissions levels, and condition of a vessel;

 

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the operator’s industry relationships, experience and reputation for customer service, quality operations and safety;

 

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the quality, experience and technical capability of the crew;

 

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the experience of the crew with the operator and type of vessel;

 

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the operator’s relationships with shipyards and the ability to get suitable berths;

 

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the operator’s construction management experience, including the ability to obtain on-time delivery of new vessels according to customer specifications; and

 

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the operator’s willingness to accept operational risks pursuant to the charter, such as allowing termination of the charter for force majeure events.

Contracts in the spot market are awarded based upon a variety of factors as well, and include:

 

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the location of the vessel; and

 

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competitiveness of the bid in terms of overall price.

Vessels operating in the Heidmar Pools operate in a highly competitive market and we expect substantial competition for providing transportation services from a number of companies (both tanker and dry bulk vessel owners and operators). Our existing and potential competitors may have significantly greater financial resources than us. In addition, competitors with greater resources may have larger fleets, or could operate larger fleets through consolidations, acquisitions, newbuildings or pooling of their vessels with other companies, and, therefore, may be able to offer a more competitive service than us or the Heidmar Pools, including better charter rates. We expect competition from a number of experienced companies providing contracts for oil and dry bulk transportation services to potential customers, including state-sponsored entities and major energy companies affiliated with the projects requiring shipping services. As a result, we (including the Heidmar Pools) may be unable to expand our relationships with existing customers or to obtain new customers on a profitable basis, if at all, which would have a material adverse effect on our business, financial condition and operating results.

We are subject to risks with respect to counterparties, and failure of those counterparties to meet their obligations could cause us to suffer losses or negatively impact our results of operations and cash flows.

We and the Heidmar Pools enter into various contracts, including charter agreements, pooling arrangements, commercial vessel management agreements and asset agreements, credit facilities and financing arrangements, that subject us and the Heidmar Pools to counterparty risks. The ability and willingness of these counterparties to perform their obligations under any contract will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the maritime and shipping industries, the overall financial condition of the counterparty, charter rates for specific types of vessels, and various expenses. For example, a reduction of cash flow resulting from declines in world trade or the lack of availability of debt or equity financing may result in a significant reduction in the ability of our charterers or the Heidmar Pools’ charterers to make required charter payments. In addition, in depressed market conditions, charterers and customers may no longer need a vessel that is then under charter or contract or may be able to obtain a comparable vessel at lower rates. As a result, charterers and customers may seek to renegotiate the terms of their existing charter agreements or avoid their obligations under those contracts. Should a charterer fail to honor its obligations under agreements with us or a Heidmar Pool, it may difficult for us or the Heidmar Pool to secure substitute employment for its vessels, and any new charter arrangements that we secure could be at lower rates or on less favorable terms. Should a counterparty fail to honor its obligations under agreements with us or a Heidmar Pool, we could sustain significant losses and a significant reduction in the charter hire we earn from the Heidmar Pool, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our financing arrangements contain certain restrictive covenants that may limit our liquidity and corporate activities, which could limit our operational flexibility and have an adverse effect on our financial condition and results of operations.

In order to facilitate growth, we have incurred debt at the subsidiary level. Any changes in interest rates may have an adverse effect on our business, financial condition, results of operations and/or cash flows.

 

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Our ability to obtain new financing for working capital, capital expenditures, acquisitions, general corporate and other purposes may be limited by our existing leverage and/or by market conditions, and no guarantee can be made that we will be able to arrange new borrowing or refinance existing facilitates on favorable terms, or at all. Uncertainty relating to global financial markets and economic conditions may affect our ability to obtain financing and related costs of any financing. These borrowings are denominated in U.S. dollars, and although we generate almost all of our revenues in U.S. dollars we incur a portion of our expenses in other currencies. Accordingly, any strengthening of those currencies against the U.S. dollar could make it more difficult for us to repay our indebtedness.

The terms and conditions of our existing financing arrangements require us or our subsidiaries to maintain specified financial ratios and to satisfy covenants, such as paid-in capital contributions and maintain retained distributions in each of our pools at no less than the amount specified in the relevant pool agreement and/or to maintain a certain number of vessels in a particular Heidmar Pool. Should tanker charter rates or spot market rates values materially decline in the future to an extent that would result in a breach under or more of the covenants, it could constitute an event of default, and/or cross default, under multiple facilities. Prior thereto, we would need to try and seek waivers or amendments from our lenders with respect to those covenant breaches, or may be required to take action to reduce our debt or to act in a manner contrary to our business objectives to comply with those covenants, failing which the lenders may accelerate the relevant loans. The occurrence of any of these events may materially adversely affect our business.

We are dependent on the spot market and any decrease in spot market rates in the future may adversely affect the earnings of Heidmar and ability to pay dividends.

We employ most of the vessels that we operate in the spot market and operate some vessels under time charter. These practices expose us to fluctuations in spot market charter rates.

Although the number of vessels in our managed fleet that participate in the spot market will vary from time to time, we anticipate that a significant portion of our managed fleet will participate in this market. As a result, our financial performance will be significantly affected by conditions in the tanker spot market, and only our pool vessels that operate under fixed-rate time charters may, during the period such vessels operate under such time charters, provide a fixed source of revenue to us.

Historically, the tanker market has been volatile because of the many conditions and factors that can affect the price, supply and demand for tanker capacity. The spot market may fluctuate significantly based upon supply of and demand for vessels and cargoes. The successful operation of our managed vessels in the competitive spot market depends upon, among other things, obtaining profitable charters and minimizing, to the extent possible, time spent waiting for charters and time spent in ballast. The spot market is very volatile, and, in the past, there have been periods when spot rates have declined below the operating cost of vessels. If future spot market rates decline or stay at current depressed levels, then we may be unable to operate our managed vessels trading in the spot market profitably, meet our obligations, including payments on indebtedness, or to pay dividends in the future. Furthermore, as charter rates in the spot market are fixed for a single voyage, which may last up to several weeks, during periods in which charter rates are rising, we will generally experience delays in realizing the benefits from such increases.

Our ability to renew the charters on our managed vessels on the expiration or termination of our current charters or on vessels that we may acquire in the future, the charter rates payable under any new charters, and vessel values will all depend upon, among other things, economic conditions in the sectors in which our managed vessels operate at that time, changes in the supply and demand for vessel capacity and changes in the supply and demand for the seaborne transportation of energy resources.

 

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Our fixed rate time charters may limit our ability to benefit from any improvement in charter rates, and at the same time, our revenues may be adversely affected if we do not successfully employ our vessels on the expiration of our charters.

While fixed rate time charters generally provide more reliable revenues, they also limit the portion of our fleet available for spot market voyages during an upswing in the tanker industry cycle, when spot market voyages might be more profitable. By the same token, we cannot assure you that we will be able to successfully employ our vessels in the future or renew existing charters at rates sufficient to allow us to operate our business profitably or meet our obligations. A decline in charter or spot rates or a failure to successfully charter our vessels could have a material adverse effect on our business, financial condition, results of operations and ability to pay dividends.

The tanker vessel industry is cyclical and volatile, which may lead to volatility in the charter rates we are able to obtain for our managed vessels.

The tanker industry is both cyclical and volatile in terms of charter rates and profitability. For example, during the ten year period from 2013 through 2022, time charter equivalent (“TCE”) spot rates for an Aframax tanker trading between the Caribbean and the U.S. Gulf fluctuated between $3,507 to $210,524 per day. Periodic adjustments to the supply of and demand for oil tankers cause the industry to be cyclical in nature. Fluctuations in charter rates and vessel values result from changes in the supply of and demand for tanker capacity and changes in the supply of and demand for oil and oil products. Because Heidmar and the Heidmar Subsidiaries earn a commission on each managed vessel’s daily gross freight rate, which is in part composed of TCE rates, substantial volatility in TCE spot rates for our managed tanker vessels could have a material adverse effect on our business and financial condition.

A drop in spot market rates may provide an incentive for some customers to default on their charters, and the failure of our counterparties to meet their obligations could cause us to suffer losses or otherwise adversely affect our business.

Often, when we enter into a time charter, the rates under that charter are fixed for the term of the charter. The time charters have a maximum remaining duration of approximately two years. If the spot market rates or short-term time charter rates in the tanker industry become significantly lower than the time charter equivalent rates that some of our customers are obligated to pay us under our existing charters, the customers may have incentive to default under that charter or attempt to renegotiate the charter. If our customers fail to pay their obligations, we would have to attempt to re-charter a vessel, which if re-chartered at lower rates, may affect our ability to operate vessels in our fleet profitably and may affect our ability to comply with current or future covenants contained in our loan agreements.

We depend upon a limited number of charter customers and ship owners for a large part of our revenues, and the loss of any of these could adversely affect our business, results of operations and financial condition.

We conduct a substantial portion of our charter activity through a limited number of charter customers and depend on a single ship owner for a large portion of the vessels that we manage. Accordingly, a deterioration in our relationships with any of these parties such that they reduced or eliminated the business they conduct with us, or the unwillingness or inability of if any of them to pay their bills to us, could adversely affect our business, results of operation and financial condition.

Our top three customers accounted for between 11% and 22% each and in the aggregate 50% of our total operating revenues during the year ended December 31, 2023, equivalent to $24.5 million of our total revenue. During the year ended December 31, 2022, our top three customers accounted for between 12% and 20% each, and in aggregate, 47% of our total operating revenues, equivalent to $14.0 million of our total revenues. If our charter business with any of these customers were to decline, our business, revenues and results of operations would suffer, and this decrease in business could also adversely affect the interest of ship owners to contribute vessels to our Heidmar Pools.

 

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Further, we rely on a limited number of vessel owners to enter vessels to the Heidmar Pools. In particular, Capital Ship Management Corp. (“Capital”) has placed most of its tanker vessels, trading in the spot market, into the Heidmar Pools. The Capital vessels comprise 29 of the 43 vessels currently managed by Heidmar and accounted for 20% of our total revenues from the Heidmar Pools during the year ended December 31, 2023. Capital is owned by the father of the indirect owner of Maistros Shipinvest Corp. (“Maistros”), one of our major shareholders. A decision by Capital, or any of our other major pool partners, to withdraw its vessels from the Heidmar Pools may have a material adverse effect on our business, results of operations and financial condition.

We may be subject to litigation that, if not resolved in our favor and not sufficiently insured against, could have a material adverse effect on our business, results of operations and financial condition.

We may be, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, environmental claims or proceedings, employment matters, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. The ultimate outcome of any litigation or the potential costs to resolve them may have a material adverse effect on us. Insurance may not be applicable or sufficient in all cases and/or insurers may not remain solvent which may have a material adverse effect on our business, results of operations and financial condition.

Exchange Rate fluctuations could have an adverse impact on our results of operations.

We generate all of our revenues in U.S. dollars, and the majority of our expenses are denominated in U.S. dollars. However, a portion of voyage and administrative expenses are denominated in currencies other than U.S. dollars. If our expenditures on such costs and fees were significant, and the U.S. dollar were weak against such currencies, our business, results of operations, cash flows, financial condition and ability to pay dividends could be adversely affected.

Our directors and officers may in the future hold direct or indirect interests in companies that compete with us.

Our directors and officers have a history of involvement in the shipping industry and some of them currently, and some of them may in the future, directly or indirectly, hold investments in companies that compete with us. In that case, they may face conflicts between their own interests and their obligations to us.

It is possible that our directors and officers will not be influenced by their interests in or affiliation with other shipping companies, or our competitors, and seek to cause us to take courses of action that might involve risks to our other shareholders or adversely affect us or our shareholders. However, we have written policies in our Code of Conduct to address such situations if they arise.

We may be unable to retain key management personnel, which may negatively impact the effectiveness of our management and our results of operations.

Heidmar is a people-based business and people are vital to its success. Our success will depend to a significant extent upon the abilities and efforts of the following personnel: Pankaj Khanna, Niki Fotiou, Andreas Konialidis, Justin Sims-Sterling, Gerry Ventouris, Navin Arjun Soni, Deepak Laishram and Nick Andriopoulos. They and members of the board of directors are crucial to the execution of its business strategies and to the growth and development of Heidmar’s business. If these individuals were no longer to be affiliated with Heidmar, or if Heidmar were to otherwise cease to receive advisory services from them, Heidmar may be unable to recruit other management personnel with equivalent talent and experience, and its business and financial condition may suffer as a result. Inadequate policies and reward structures could incentivize negative behaviors, create internal conflict, lead to reputational damage or contribute to failure in attracting and/or retaining personnel. Lack of appropriate consideration of environmental and social issues could also contribute to any inability to attract and retain skilled personnel.

 

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An over-supply of vessel capacity may lead to reductions in charter hire rates, vessel values and profitability.

The supply of vessels generally increases with deliveries of new vessels and decreases with the recycling of older vessels, conversion of vessels to other uses, such as floating production and storage facilities, and loss of tonnage as a result of casualties. An over-supply of vessel capacity, combined with a decline in the demand for such vessels, may result in a reduction of charter hire rates. Generally, increased competition in the form of increases in newbuild orders at shipyards and/or new shipowner entrants to the tanker shipping market may negatively affect the number of vessels available to us. Upon the expiration or termination of customers’ vessels’ current charters, if we are unable to re-charter these vessels at rates sufficient to allow us to operate these vessels profitably or at all such inability, would have a material adverse effect on our revenues and profitability.

Any decrease in shipments of crude oil may adversely affect our financial performance.

The demand for our managed tankers derives primarily from demand for Arabian Gulf, West African, North Sea, Caribbean, Russian and U.S. Shale crude oil, which, in turn, primarily depends on the economies of the world’s industrial countries and competition from alternative energy sources. Any decrease in shipments of crude oil or change in trade patterns from these geographical areas would have a material adverse effect on our financial performance. Among the factors which could lead to such a decrease are:

 

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increased crude oil production from other areas;

 

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increased refining capacity in the Arabian Gulf or West Africa;

 

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increased use of existing and future crude oil pipelines in the Arabian Gulf or West Africa;

 

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a decision by oil-producing nations to increase their crude oil prices or to further decrease or limit their crude oil production;

 

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armed conflict between Ukraine and Russia and related sanctions;

 

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expansion of other sanctions programs maintained by the United States or other jurisdictions;

 

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armed conflict in the Arabian Gulf and West Africa and political or other factors; and

 

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the development, availability and the costs of nuclear power, natural gas, coal and other alternative sources of energy.

With crude oil as a particularly sensitive commodity in international trade and of first-rate significance in sanctions measures, we as a tanker management company are particularly exposed to the effects of trade embargoes and sanctions-related measures. Such measures may also negatively affect demand for our commercial management and other services.

In addition, volatile economic conditions affecting world economies may result in reduced consumption of oil products and a decreased demand for our managed vessels and lower charter rates, which could have a material adverse effect on our earnings and our ability to pay dividends.

A shift in consumer demand from oil towards other energy sources or changes to trade patterns for crude oil or refined oil products may have a material adverse effect on our business.

A significant portion of our earnings are related to the oil industry. The demand for our services depend on the level of activity in the oil industry, including oil companies’ willingness and ability to continue making operating and capital expenditures to explore, develop and produce crude oil and refined petroleum products, which are directly affected by trends in oil prices. A shift in or disruption of consumer demand from oil towards other energy sources such as electricity, natural gas, liquified natural gas, hydrogen or ammonia will potentially affect the demand for our managed vessels. A shift from the use of internal combustion engine vehicles may also reduce the demand for oil. These factors could have a material adverse effect on our future performance, results of operations, cash flows and financial position

 

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“Peak oil” is the year when the maximum rate of extraction of oil is reached. Recent forecasts of “peak oil” range from the late 2020s to 2040, depending on economics and how governments respond to global warming. OPEC maintains that demand for oil will plateau around 2040, despite transition toward other energy sources. Irrespective of “peak oil”, the continuing shift in consumer demand from oil towards other energy resources such as wind energy, solar energy, hydrogen energy or nuclear energy, as well shifts in government commitments and support for energy transition programs, may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

Seaborne trading and distribution patterns are primarily influenced by the relative advantage of the various sources of production, locations of consumption, pricing differentials and seasonality. Changes to the trade patterns of crude oil or refined oil products may have a significant negative or positive impact on the ton-mile and therefore the demand for our tankers. This could have a material adverse effect on our future performance, results of operations, cash flows and financial position.

The operation of tankers involves certain unique operational risks.

The operation of tankers has unique operational risks associated with the transportation of oil. An oil spill may cause significant environmental damage, and a catastrophic spill could exceed the insurance coverage available. Compared to other types of vessels, tankers are exposed to a higher risk of damage and loss by fire, whether ignited by a terrorist attack, collision, or other cause, due to the high flammability and high volume of the oil transported in tankers.

Further, our managed vessels and their cargoes will be at risk of being damaged or lost because of events such as marine disasters and other bad weather, business interruptions caused by mechanical failures, grounding, fire, explosions and collisions, human error, war, terrorism, piracy and other circumstances or events. Changing economic, regulatory and political conditions in some countries, including political and military conflicts, have from time to time resulted in attacks on vessels, mining of waterways, piracy, terrorism, labor strikes and boycotts. These hazards may result in death or injury to persons, loss of revenues or property, the payment of ransoms, environmental damage, higher insurance rates, damage to our customer relationships and market disruptions, delay or rerouting.

If our managed vessels suffer damage, they may need to be repaired at a drydocking facility. While we are not financially responsible for the drydocking and repair of our managed vessels in the event of damages, the loss of earnings while these vessels are forced to wait for space or to travel to more distant drydocking facilities may adversely affect our business and financial condition. Further, the total loss of any of our managed vessels could harm our reputation as a safe and reliable vessel owner and operator. If we are unable to adequately maintain or safeguard our managed vessels, we may be unable to prevent any such damage, costs or loss which could negatively impact our business, financial condition, results of operations, cash flows and ability to pay dividends.

Our business has inherent operational risks, which may not be adequately covered by insurance.

The vessels that we manage and charter and their cargoes are at risk of being damaged or lost because of events such as marine disasters, adverse weather conditions, mechanical failures, human error, environmental accidents, war, terrorism, piracy and other circumstances or events. In addition, transporting cargoes across a wide variety of international jurisdictions creates a risk of business interruptions due to political circumstances in foreign countries, hostilities, labor strikes and boycotts, the potential changes in tax rates or policies, and the potential for government expropriation of our managed vessels. Any of these events may result in loss of revenues, increased costs and decreased cash flows to the Heidmar Pools and our counterparties, which could impair their ability to make payments to us under our charters.

Heidmar and/or the Heidmar Subsidiaries generally maintain charters liability insurance, freight demurrage and defense insurance, charterers freight insurance and kidnap and ransom insurance in connection with our commercial management and operation.

 

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Our counterparties may not be insured in amounts sufficient to address all risks and may not be able to obtain adequate insurance coverage for their vessels in the future or may not be able to obtain certain coverage at reasonable rates. For example, in the past more stringent environmental regulations have led to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. Such inadequacy of insurance could have a material adverse effect on our results of operations and financial condition.

Further, insurers may not pay particular claims. Our counterparties’ insurance policies contain deductibles for which they will be responsible and limitations and exclusions which may increase their costs or lower our revenues. Moreover, insurers may default on claims they are required to pay. Any of these factors could have a material adverse effect on our financial condition.

Inability to obtain or maintain adequate insurance coverage could adversely affect our results of operations.

As part of our overall risk management strategy we have obtained and maintain insurance coverage. Although we have been able to obtain reasonably priced insurance coverage to meet our requirements in the past, there is no assurance that we will be able to do so in the future. For example, catastrophic events can result in decreased coverage limits, more limited coverage, and increased premium costs or deductibles. If we are unable to obtain adequate insurance coverage, we may not be able to procure certain contracts or pursue certain business opportunities, which could materially adversely affect our financial position, results of operations, cash flows or liquidity.

Our operations outside the United States expose us to global risks, such as political instability, terrorist or other attacks, war and international hostilities, all of which may affect the tanker industry and adversely affect our business.

We are an international company and primarily conduct of our operations outside of the United States, and our business, results of operations, cash flows, financial condition and ability to pay dividends, if any, may be adversely affected by changing economic, political and government conditions in the countries and regions where our managed vessels are employed or registered. Moreover, we operate in a sector of the economy that is likely to be adversely impacted by the effects of political conflicts, including the current political instability in the Middle East and the South China Sea region and other geographic countries and areas, geopolitical events such as terrorist or other attacks, war (or threatened war) or international hostilities, such as those between Russia and Ukraine and most recently Israel and Hamas. Terrorist attacks, as well as the frequent incidents of terrorism in the Middle East, and the continuing response of the United States and others to these attacks, as well as the threat of future terrorist attacks around the world, continue to cause uncertainty in the world’s financial markets and may affect our business, operating results and financial condition. Continuing conflicts and recent developments in Ukraine and the Middle East may lead to additional acts of terrorism and armed conflict around the world, which may contribute to further economic instability in the global financial markets.

The military conflict in Ukraine has had a significant direct and indirect impact on the trade of refined petroleum and drybulk products. This conflict has resulted in the United States, United Kingdom, and members of the European Union, among other countries, implementing sanctions on certain persons, entities, and activities connected to Russia. Some of these sanctions target the Russian oil sector, including a prohibition on the import of oil and refined petroleum products from Russia to the United States, United Kingdom and the European Union. We cannot foresee what other sanctions may arise that affect the trade of petroleum products. Furthermore, the conflict and ensuing international response has disrupted the supply of Russian oil to the global market, and as a result, the price of oil and petroleum products has risen significantly.

Additionally, since December 2023, there have been multiple drone and missile attacks on commercial vessels transiting international waters in the southern Red Sea by groups believed to be affiliated with the Yemen-based Houthi rebel group purportedly in response to the ongoing military conflict between Israel and

 

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Hamas. Recent attacks on U.S. military installations in Jordan and other locations in the Middle East, the military actions by the U.S. government and certain of its allies against the Houthi rebel group, which the U.S. government believes to be supported by the government of Iran and the ongoing military conflict between Israel and Hamas continue to threaten the political stability of the region and may lead to further military conflicts, including continued hostile actions towards commercial shipping in the region. We cannot predict the severity or length of the current conditions impacting international shipping in this region and the continuing disruption of the trade routes in the region of the Red Sea. It is also possible that these conditions could have a material and adverse impact on our financial condition, results of operations, and future performance.

Governments may also turn to trade barriers to protect their domestic industries against foreign imports, thereby depressing shipping demand. In particular, leaders in the United States have indicated the United States may seek to implement more protective trade measures. There is significant uncertainty about the future relationship between the United States, China, and other exporting countries, including with respect to trade policies, treaties, government regulations, and tariffs. Protectionist developments, or the perception that they may occur, may have a material adverse effect on global economic conditions, and may significantly reduce global trade. Moreover, increasing trade protectionism may cause an increase in (a) the cost of goods exported from regions globally, (b) the length of time required to transport goods and (c) the risks associated with exporting goods. Such increases may significantly affect the quantity of goods to be shipped, shipping time schedules, voyage costs and other associated costs, which could have an adverse impact on our charterers’ business, operating results and financial condition and could thereby affect their ability to make timely charter hire payments to us and to renew and increase the number of their charters with us. This could have a material adverse effect on our business, results of operations or financial condition.

In the past, political instability has also resulted in attacks on vessels, mining of waterways and other efforts to disrupt international shipping, particularly in the Arabian Gulf region and most recently in the Red Sea in connection with the conflict between Israel and Hamas. Acts of terrorism and piracy have also affected vessels trading in regions such as the Black Sea, the South China Sea, the Gulf of Guinea off the coast of West Africa and the Gulf of Aden off the coast of Somalia.

In February of 2022, President Biden and several European leaders also announced various economic sanctions against Russia in connection with its invasion of Ukraine, which may adversely impact our business, given Russia’s role as a major global exporter of crude oil and natural gas. The Russian Foreign Harmful Activities Sanctions program includes prohibitions on the import of certain Russian energy products into the United States, including crude oil, petroleum, petroleum fuels, oils, liquefied natural gas and coal, as well as prohibitions on all new investments in Russia by U.S. persons, among other restrictions. Furthermore, the United States has also prohibited a variety of specified services related to the maritime transport of Russian Federation origin crude oil and petroleum products, including trading/commodities brokering, financing, shipping, insurance (including reinsurance and protection and indemnity), flagging, and customs brokering. These prohibitions took effect on December 5, 2022 with respect to the maritime transport of crude oil and on February 5, 2023 with respect to the maritime transport of other petroleum products. An exception exists to permit such services when the price of the seaborne Russian oil does not exceed the relevant price cap, but implementation of this price exception relies on a recordkeeping and attestation process that allows each party in the supply chain of seaborne Russian oil to demonstrate or confirm that oil has been purchased at or below the price cap. Violations of the price cap policy or the risk that information, documentation, or attestations provided by parties in the supply chain are later determined to be false may pose additional risks adversely affecting our business. Our business could also be adversely impacted by trade tariffs, trade embargoes or other economic sanctions that limit trading activities by the United States or other countries against countries in the Middle East, Asia or elsewhere as a result of terrorist attacks, hostilities or diplomatic or political pressures, which may, among other things, impair or prevent certain of our counterparties from performing their obligations under contracts with us or with the pools in which our managed vessels operate.

Any of these occurrences could have a material adverse impact on our future performance, results of operations, cash flows, financial position and our ability to pay any cash distributions to our stockholders.

 

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Our future results of operations will be subject to seasonal fluctuations, which may adversely affect our financial condition.

We have recently expanded our services to include dry bulk operating pools, and those dry bulk vessels may operate in markets that have historically exhibited seasonal variations in demand, particularly in the Capesize segment given its share of the iron ore trade, and, as a result, in charter hire rates. As China is the most significant market for dry bulk shipping, the public holidays in relation to the Chinese New Year during the first quarter usually results in a decrease in market activity during this period. In addition, unpredictable and adverse weather conditions and patterns in the Southern Hemisphere, which often occur during the first quarter, have had a negative impact on iron ore exports from Australia and from Brazil. Further, certain of the largest iron ore producers in Brazil usually schedule maintenance works on their plants in the first quarter, which also results in a decrease in iron ore export from Brazil. In addition, Australia had some wet and inclement weather for the three months ending March 31, 2023, which further exacerbated the seasonal low. Both Australia and Brazil are very important loading areas for Capsize and Panamax vessels. This seasonality may affect our business, results of operations, financial condition, and could affect our ability to pay dividends, if any, in the future.

As we expand our business, we may have difficulty managing our growth, which could increase expenses.

We plan to grow our business by continuing to develop our relationships with vessel owners and charterers and potentially by selective acquisitions, joint ventures or strategic expansion into complementary service offerings.

We may, from time to time, selectively pursue new business lines, strategic acquisitions or joint ventures we believe are complementary to our business. Existing as well as new projects entail opportunity and risk. Any strategic transaction that is a departure from our historical operations in the tanker shipping industry could present unforeseen challenges and result in a competitive disadvantage relative to our more established competitors. In March 2024, we acquired Landbridge Ship Management (HK) Limited, a technical manager of vessels, and have since expanded our services to technical management. We cannot assure you that our expansion into this business line will be successful, and our inability to realize the anticipated benefits of the acquisition may affect our results of operations and financial condition.

There is always a possibility that intended transactions may not conclude due to various execution risks related to, but not limited to, documentation, inspection of the vessels and/or class records and due diligence. Thus, there may be certain external and third-party costs, including for example, the costs of legal and/or financial advisers, carried by us that are not recoverable.

We will operate dry bulk vessels worldwide and the dry bulk business has inherent operational risks, which may reduce our revenue or increase our expenses.

Our expansion into the management and operation of dry bulk vessels exposes us to certain risks particular to these vessels. With a dry bulk carrier, the cargo itself and its interaction with the vessel can be an operational risk. By their nature, dry bulk cargoes are often heavy, dense, easily shifted, and react badly to water exposure. In addition, dry bulk carriers are often subjected to battering treatment during unloading operations with grabs, jackhammers (to pry encrusted cargoes out of the hold) and small bulldozers. This treatment may damage the vessel, which can be expensive and, if not repaired properly, could make the vessel more susceptible to breach at sea. Hull breaches in dry bulk carriers may lead to the flooding of the vessels’ holds. If a dry bulk carrier suffers flooding in its forward holds, the bulk cargo may become so dense and waterlogged that its pressure may buckle the vessel’s bulkheads, leading to the loss of the vessel. Any of these circumstances or events may have a material adverse effect on our business, results of operations and financial condition. In addition, the loss of any of our managed vessels could harm our reputation as a safe and reliable commercial management company.

 

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Charter hire rates for dry bulk vessels are volatile, have fluctuated significantly in recent years, and may decrease below our cash break-even rates in the future, which may adversely affect our business, results of operations and financial condition.

As we expand into the management and operation of dry bulk vessels, we will be increasingly affected by the cyclicality and volatility of the dry bulk shipping industry. Time charter and spot market rates for dry bulk vessels have in the recent past declined below the operating costs of vessels. When we charter our managed vessels pursuant to time charters, we will be exposed to changes in charter rates for dry bulk carriers and such changes may adversely affect our earnings.

Charter rate fluctuations result from changes in the supply and demand for vessel capacity for the major commodities carried on water internationally. Because the factors affecting the supply and demand for vessels are outside of our control and are unpredictable, the nature, timing, direction and degree of changes in charter rates are also unpredictable. Since we currently, and may continue to, charter our managed dry bulk carriers principally in the spot market, we are exposed to the cyclicality and volatility of the spot market. We may not be able to predict whether future spot rates will be sufficient to enable our managed vessels to be operated profitably.

Demand for dry bulk oceangoing vessels is dependent upon world economic growth, seasonal and regional changes in demand, changes to the capacity of the global dry bulk fleet and the sources and supply of dry bulk cargo transported by sea. Continued adverse economic, political or social conditions or other developments could further negatively impact charter rates and therefore have a material adverse effect in the future on our business and results of operations.

Factors that influence the supply of vessel capacity include:

 

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the number of newbuilding orders and deliveries, including delays in vessel deliveries;

 

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the number of shipyards and ability of shipyards to deliver vessels;

 

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port or canal congestion;

 

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potential disruption, including supply chain disruptions, of shipping routes due to accidents or political events;

 

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speed of vessel operation;

 

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vessel casualties;

 

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technological advances in vessel design and capacity;

 

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the extent of scrapping or recycling of older vessels, depending, among other things, on scrapping or recycling rates and international scrapping or recycling regulations;

 

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the price of steel and vessel equipment;

 

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product imbalances (affecting the level of trading activity) and developments in international trade;

 

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number of vessels that are out of service, namely those that are laid-up, drydocked, awaiting repairs or otherwise not available for hire;

 

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availability of financing for new vessels and shipping activity;

 

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changes in national or international regulations that may effectively cause reductions in the carrying capacity of vessels or early obsolescence of tonnage; and

 

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changes in environmental and other regulations that may limit the useful lives of vessels.

In addition to the prevailing and anticipated freight rates, factors that affect the rate of newbuilding, scrapping and laying-up include newbuilding prices, secondhand vessel values in relation to scrap prices, costs of

 

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bunkers and other operating costs, costs associated with classification society surveys, normal maintenance costs, insurance coverage costs, the efficiency and age profile of the existing dry bulk fleet in the market, and government and industry regulation of maritime transportation practices, particularly environmental protection laws and regulations. These factors influencing the supply of and demand for shipping capacity are outside of our control, and we may not be able to correctly assess the nature, timing and degree of changes in industry conditions.

Further, the market may fluctuate widely based on a variety of factors including changes in overall market movements, political and economic events, wars, including the ongoing conflict between Russia and Ukraine and Israel and Hamas, acts of terrorism, natural disasters (including disease, epidemics and pandemics) and changes in interest rates or inflation rates.

Shipbroking is a business largely transacted via personal relationships.

Shipbroking remains a business that is largely transacted via personal relationships, which are dependent upon quality service. The risk of technological change, disintermediation and increased consumer demands for enhanced technological offerings could render aspects of our current services obsolete, potentially resulting in a loss of customers. Relationships could be devalued and replaced by disruptive technology platforms which could result in increased competition, consequent price reductions and loss of revenue.

Outbreaks of epidemic and pandemic diseases and governmental responses thereto could adversely affect our business.

Our operations are particularly vulnerable to risks related to pandemics, epidemics or other infectious disease outbreaks and government responses thereto. COVID-19, which was initially declared a pandemic by the World Health Organization on March 11, 2020 and was declared no longer a global health emergency on May 5, 2023, negatively affected economic conditions, supply chains, labor markets, and demand for certain shipped goods both regionally and globally as a result of government efforts to combat the pandemic, including the enactment or imposition of travel bans, quarantines and other emergency public health measures.

The extent to which our business, the global economy and the petroleum product transportation industry may be negatively affected by future pandemics, epidemics or other outbreaks of infectious diseases is highly uncertain and will depend on numerous evolving factors that we cannot predict, including, but not limited to (i) the duration and severity of the infectious disease outbreak; (ii) the imposition of restrictive measures to combat the outbreak and slow disease transmission; (iii) the introduction of financial support measures to reduce the impact of the outbreak on the economy; (iv) volatility in the demand for and price of oil and gas; (v) shortages or reductions in the supply of essential goods, services or labor; and (vi) fluctuations in general economic or financial conditions tied to the outbreak, such as a sharp increase in interest rates or reduction in the availability of credit. We cannot predict the effect that an outbreak of any future infectious disease outbreak, pandemic or epidemic may have on our business, results of operations and financial condition, which could be material and adverse.

Safety, environmental, governmental and other requirements expose us to liability, and compliance with current and future regulations could require significant additional expenditures, which could have a material adverse effect on our business and financial results.

Our operations are affected by extensive and changing international, national, state and local laws, regulations, treaties, conventions and standards in force in international waters, the jurisdictions where we operate the vessels we manage, and the country or countries in which the vessels we manage are registered. These obligations address matters such as the management and disposal of hazardous substances and wastes, the cleanup of oil spills and other contamination, air emissions (including greenhouse gases), and water discharges and ballast and bilge water management. The regulations applicable to us and the vessels we manage include, but

 

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are not limited to, the U.S. Oil Pollution Act of 1990, or OPA, requirements of the U.S. Coast Guard, or the USCG, and the U.S. Environmental Protection Agency, or EPA, the U.S. Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA, the U.S. Clean Water Act, the U.S. Maritime Transportation Security Act of 2002, and regulations of the International Maritime Organization, or IMO, including the International Convention for the Safety of Life at Sea of 1974, or SOLAS, the International Convention for the Prevention of Pollution from Ships of 1973, or MARPOL, including the designation thereunder of Emission Control Areas, or ECAs, the International Convention on Civil Liability for Oil Pollution Damage of 1969, or CLC, and the International Convention on Load Lines of 1966. In particular, IMO’s Marine Environmental Protection Committee (“MEPC”) 73, amendments to Annex VI prohibiting the carriage of bunkers above 0.5% sulfur content in fuel on ships took effect March 1, 2020 and may cause us to incur substantial costs. Compliance with these regulations could have a material adverse effect on our business and financial results.

In addition, vessel classification societies and the requirements set forth in the IMO’s International Management Code for the Safe Operation of Ships and for Pollution Prevention, or the ISM Code, also impose significant safety and other requirements on our managed vessels. In complying with current and future environmental requirements, vessel owners and operators may also incur significant additional costs in meeting new maintenance and inspection requirements, in developing contingency arrangements for potential spills and in obtaining insurance coverage. Government regulation of vessels, particularly in the areas of safety and environmental requirements, can be expected to become stricter in the future and require vessel owners to incur significant capital expenditures on our managed vessels to keep them in compliance, or even to recycle or sell certain vessels altogether. While Heidmar does not bear the cost of ensuring our managed vessels comply with safety and environmental requirements, any additional costs or requirements could have a material adverse effect on our business.

Increasing scrutiny and changing expectations from investors, lenders and other market participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or expose us to additional risks.

Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage, costs related to litigation, and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.

In February 2021, the Acting Chair of the SEC issued a statement directing the Division of Corporation Finance to enhance its focus on climate-related disclosure in public company filings, and in March 2021, the SEC announced the creation of a Climate and ESG Task Force in the Division of Enforcement (the “Task Force”). The Task Force’s goal is to develop initiatives to proactively identify ESG-related misconduct consistent with increased investor reliance on climate and ESG-related disclosure and investment. To implement the Task Force’s purpose, the SEC has taken several enforcement actions, with the first enforcement action taking place in May 2022, and promulgated new rules. On March 21, 2022, the SEC proposed that all public companies are to include extensive climate-related information in their SEC filings. On May 25, 2022, the SEC proposed a second set of rules aiming to curb the practice of “greenwashing” (i.e., making unfounded claims about one’s ESG efforts) and would add proposed amendments to rules and reporting forms that apply to registered investment companies and advisers, advisers exempt from registration, and business development companies. In March 2024, the SEC adopted its final rule, which requires standardized qualitative and quantitative disclosure about

 

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climate-related risks, expenditures and greenhouse gas emissions, among a long list of other items, by public companies and in public offerings. The final rule became effective on May 28, 2024, and compliance will be phased in over time for all companies with the compliance date dependent upon the status of the registrant.

We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us, especially given the highly focused and specific trade of crude oil transportation in which we are engaged. Such ESG corporate transformation calls for an increased resource allocation to serve the necessary changes in that sector, increasing costs and capital expenditure. If we do not meet these standards, our business and/or our ability to access capital could be harmed.

Additionally, certain investors and lenders may exclude companies involved in the oil transportation industry, such as us, from their investing portfolios altogether due to ESG factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with wide ranging ESG requirements. The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition.

Climate change and greenhouse gas restrictions may adversely impact our operations and markets.

Due to concern over the risk of climate change, a number of countries, the European Commission and the IMO have adopted, or are considering the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These regulatory measures may include, among others, adoption of cap-and-trade regimes, carbon taxes, taxonomy of ‘green’ economic activities, increased efficiency standards and incentives or mandates for renewable energy. More specifically, on October 27, 2016, IMO’s MEPC announced its decision concerning the implementation of regulations mandating a reduction in sulfur content of fuel oil from 3.5% currently to 0.5% as of the beginning of January 1, 2020. Additionally, in April 2018, nations at the MEPC 72 adopted an initial strategy to reduce greenhouse gas emissions from ships. The initial strategy identified levels of ambition to reducing greenhouse gas emissions, including (1) decreasing the carbon intensity from ships through implementation of further phases of the Energy Efficiency Design Index (“EEDI”) for new ships; (2) reducing carbon dioxide emissions per transport work, as an average across international shipping compared to 2008 levels, by at least 40% by 2030, pursuing efforts towards 70% by 2050,; and (3) reducing the total annual greenhouse emissions by at least 50% by 2050 compared to 2008, while pursuing efforts towards phasing them out entirely. On July 7, 2023, at the MEPC’s 80th session, the MEPC adopted the 2023 IMO Strategy on Reduction of GHG Emissions from Ships, which, in part, includes (A) enhanced targets to reach net-zero greenhouse gas (“GHG”) emissions close to 2050; (B) a targeted uptake in use of zero or near-zero GHG emissions technologies and fuels to represent at least 5% (striving for 10%) of the energy used by international shipping by 2030; and (C) indicative check-points to reach net-zero GHG emissions from international shipping, with targets to reduce the total annual GHG emissions from international shipping by (i) at least 20% (striving for 30%) by 2030, as compared to 2008 and (ii) at least 70% (striving for 80%) by 2040, as compared to 2008. These regulations may cause us to incur additional substantial expenses in the future and therefore could impact the cost of our operations and adversely affect our business.

The European Commission has proposed adding shipping to the EU Emission Trading Scheme (“EU ETS”) as of 2023 with a phase-in period. It is expected that shipowners will need to purchase and surrender a number of emission allowances that represent their recorded carbon emission exposure for a specific reporting period. The person or organization responsible for the compliance with the EU ETS should be the shipping company, defined

 

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as the shipowner or any other organization or person, such as the manager or the bareboat charterer, that has assumed the responsibility for the operation of the ship from the shipowner. On December 18, 2022, the Environmental Council and European Parliament agreed to include maritime shipping emissions within the scope of the EU ETS on a gradual introduction of obligations for shipping companies to surrender allowances: 40% for verified emissions from 2024, 70% for 2025 and 100% for 2026. Most large vessels will be included in the scope of the EU ETS from the outset. Big offshore vessels of 5,000 gross tonnage and above will be included in the Monitoring, Reporting and Verification (“MRV”) of CO2 emissions from maritime transport regulation from 2025 and in the EU ETS from 2027. General cargo vessels and off-shore vessels between 400-5,000 gross tonnage will be included in the MRV regulation from 2025 and their inclusion in EU ETS will be reviewed in 2026. Compliance with the Maritime EU ETS could result in additional compliance and administration costs to properly incorporate the provisions of the Directive into our business routines. Additional EU regulations which are part of the EU’s Fit-for-55, could also affect our financial position in terms of compliance and administration costs when they take effect.

Territorial taxonomy regulations in geographies where we are operating and are regulatory liable, such as EU Taxonomy, might jeopardize the level of access to capital. For example, the EU has already introduced a set of criteria for economic activities which should be framed as ‘green’, called EU Taxonomy. The EU taxonomy is a classification regulatory system which attempts to identify environmentally sustainable economic activities. The requirement to deliver sustainability indicators under Article 8 of the Taxonomy Regulation is applicable as of January 1, 2022, to companies subject to the obligation to publish non-financial statements in accordance with Article 19a or Article 29a of the Accounting Directive 2013/34/EU. The Non-financial Reporting Directive (Directive 2014/95/EU, NFRD) is an amendment to the Accounting Directive (Directive 2013/34/EU). Under the NFRD, large listed companies, banks and insurance companies with more than 500 employees are required to publish reports on the policies they implement in relation to social responsibility and other sustainability related information (Act 14, Art. 1 and Art. 29a). Article 8 of the Taxonomy Regulation requires companies falling within the scope of the existing NFRD, and additional companies brought under the scope of the proposed Corporate Sustainability Reporting Directive, to report certain indicators on the extent to which their activities are sustainable as defined by the EU Taxonomy.

Since January 1, 2020, ships must either remove sulfur from emissions or buy fuel with low sulfur content, which may lead to increased costs and supplementary investments for ship owners. The interpretation of “fuel oil used on board” includes use in main engine, auxiliary engines and boilers. Shipowners may comply with this regulation by (i) using 0.5% sulfur fuels on board, which are available around the world but at a higher cost; (ii) installing scrubbers for cleaning of the exhaust gas; or (iii) by retrofitting vessels to be powered by liquefied natural gas or other alternative energy sources, which may not be a viable option due to the lack of supply network and high costs involved in this process. Costs of compliance with these regulatory changes may be significant and may have a material adverse effect on our future performance, results of operations, cash flows and financial position.

MEPC 75 introduced draft amendments to Annex VI which impose new regulations to reduce greenhouse gas emissions from ships. These amendments introduce requirements to assess and measure the energy efficiency of all ships and set the required attainment values, with the goal of reducing the carbon intensity of international shipping. To achieve a 40% reduction in carbon emissions by 2023 compared to 2008, shipping companies are required to include: (i) a technical requirement to reduce carbon intensity based on a new Energy Efficiency Existing Ship Index (“EEXI”), and (ii) operational carbon intensity reduction requirements, based on a new operational Carbon Intensity Indicator (“CII”). The EEXI is required to be calculated for ships of 400 gross tonnage and above. The IMO and MEPC will calculated “required” EEXI levels based on the vessel’s technical design, such as vessel type, date of creation, size and baseline. Additionally, an “attained” EEXI will be calculated to determine the actual energy efficiency of the vessel. A vessel’s attained EEXI must be less than the vessel’s required EEXI. Non-compliant vessels will have to upgrade their engine to continue to travel. With respect to the CII, the draft amendments would require ships of 5,000 gross tonnage to document and verify their actual annual operational CII achieved against a determined required annual operational CII. The vessel’s

 

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attained CII must be lower than its required CII. Vessels that continually receive subpar CII ratings will be required to submit corrective action plans to ensure compliance. MEPC 79 also adopted amendments to MARPOL Annex VI, Appendix IX to include the attained and required CII values, the CII rating and attained EEXI for existing ships in the required information to be submitted to the IMO Ship Fuel Oil Consumption Database. The amendments will enter into force on May 1, 2024.

Additionally, MEPC 75 proposed draft amendments requiring that, on or before January 1, 2023, all ships above 400 gross tonnage must have an approved Ship Energy Efficiency Management Plan, or SEEMP, on board. For ships above 5,000 gross tonnage, the SEEMP would need to include certain mandatory content. MEPC 75 also approved draft amendments to MARPOL Annex I to prohibit the use and carriage for use as fuel of heavy fuel oil by ships in Arctic waters on and after July 1, 2024. The draft amendments introduced at MEPC 75 were adopted at the MEPC 76 session held on June 2021, entered into force on November 1, 2022 and became effective on January 1, 2023.

MPEC 76 adopted amendments to the International Convention on the Control of Harmful Anti-Fouling Systems on Ships, 2001, or the AFS Convention, which have been entered into force on January 1, 2023. From this date, all ships shall not apply or re-apply anti-fouling systems containing cybutryne on or after January 1, 2023; all ships bearing an anti-fouling system that contains cybutryne in the external coating layer of their hulls or external parts or surfaced on January 1, 2023 shall either: remove the anti-fouling system or apply a coating that forms a barrier to this substance leaching from the underlying non-compliance anti-fouling system.

Adverse effects upon the oil and gas industry relating to climate change, including growing public concern about the environmental impact of climate change, may also adversely affect demand for our services. For example, increased regulation of greenhouse gases or other concerns relating to climate change may reduce the demand for oil and gas in the future or create greater incentives for use of alternative energy sources. In addition to the peak oil risk from a demand perspective, the physical effects of climate change, including changes in weather patterns, extreme weather events, rising sea levels, scarcity of water resources, may negatively impact our operations. Any long-term material adverse effect on the oil and gas industry could have a significant financial and operational adverse impact on our business that we cannot predict with certainty at this time.

Increased inspection procedures, tighter import and export controls and security standards could increase costs and disrupt our business.

International shipping is subject to various security and customs inspection and related procedures in countries of origin and destination and trans-shipment points. In addition, pursuant to the SOLAS Convention, dry bulk vessels and the ports in which we plan to operate are subject to the International Ship and Port Facility Security Code (“ISPS Code”), which is designed to enhance the security of ports and ships against terrorism. Inspection procedures may result in the seizure of contents of our managed vessels, delays in the loading, offloading, trans-shipment or delivery and the levying of customs duties, fines or other penalties against us.

International shipping is subject to security and customs inspection and related procedures in countries of origin, destination and trans-shipment points. Under the U.S. Maritime Transportation Security Act of 2002 (the “MTSA”), the USCG issued regulations requiring the implementation of certain security requirements aboard vessels operating in waters subject to the jurisdiction of the United States and at certain ports and facilities. These security procedures can result in the seizure of the contents of our managed vessels, delays in the loading, offloading or trans- shipment, and the levying of customs duties, fines or other penalties against exporters or importers and, in some cases, carriers.

It is possible that changes to inspection procedures and security standards could impose additional financial and legal obligations on us. Changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo uneconomical or impractical. Any such changes or developments may have a material adverse effect on our business results, results of operations and financial condition.

 

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We rely on our information systems to conduct our business, and failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

The safety and security of our managed vessels and efficient operation of our business, including processing, transmitting and storing electronic and financial information, depend on computer hardware and software systems, which are increasingly vulnerable to security breaches and other disruptions.

We may experience threats to our data and systems, including malware and computer virus attacks, internet network scams, systems failures and disruptions. A cyberattack that bypasses our IT security systems, causing an IT security breach, could lead to a material disruption of our IT systems and adversely impact our daily operations and cause the loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and result in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liability. While we devote substantial resources to maintaining adequate levels of cybersecurity, our resources and technical sophistication may not be adequate to prevent all types of cyberattacks. We will continue to depend upon our ability to protect our information systems against damage or system interruptions from natural disasters, technical failures and other events beyond our control.

We rely on industry accepted security and control frameworks and technology to securely maintain confidential and proprietary information and personal data maintained on our information systems. However, these measures and technology may not adequately prevent security breaches. A breach could be caused by an insider, an external party, inadequate physical security, insecure software development or inadequate supply chain management. In addition, the unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could result in decreased performance and increased operating costs, causing our business and results of operations to suffer. In order to compete effectively and meet our clients’ needs, we will need to maintain our systems as well as invest in improved technology. Any significant interruption or failure of our information systems or any significant breach in the confidentiality, integrity or availability of our IT systems and data could adversely affect our business, results of operations and financial condition, cash flows and our reputation.

Cyberattacks against the Ukrainian government and other countries in the region have been reported in connection with the ongoing conflict between Russia and Ukraine. To the extent such attacks have collateral effects on global critical infrastructure or financial institutions, such developments could adversely affect our business, operating results and financial condition. It is difficult to assess the likelihood of such a threat and any potential impact at this time. Further, as a result of generally increased remote working, the business has seen an increased volume of spam, targeted phishing type email and ransomware attacks. The recent identification of the Log4j vulnerability, the increased frequency of zero-day attacks and more sophisticated methods of attack are further examples of the risks we face.

Cybersecurity threats are of immediate concern, and constitute a potential risk to us, with contingent exposure to us and our subsidiaries.

Sanctions and embargoes imposed by the U.S. government, the European Union, the United Nations or other governmental authorities could prevent us from calling on certain ports or serving certain clients and could lead us to suffer monetary fines or penalties.

The shipping sector is high risk with respect to sanctions compliance. None of our managed vessels called on ports located in countries or territories that are the subject of country-wide or territory-wide sanctions or embargoes imposed by the U.S. government or other applicable governmental authorities (“Sanctioned Jurisdictions”) in 2022 in violation of applicable sanctions. Although we intend to maintain compliance with all applicable sanctions, and we endeavor to take precautions reasonably designed to mitigate such risks, it is

 

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possible that in the future our managed vessels may call on ports located in Sanctioned Jurisdictions on charterers’ instructions and/or without our consent. If such activities result in a violation of sanctions, we could be subject to monetary fines, penalties, or other sanctions, and our reputation and the market for our common shares could be adversely affected. We currently have written policies in place to avoid and/or minimize the possibility of such situations, and we also seek “sanctions clauses” when negotiating contracts with counterparties.

The laws and regulations of these different jurisdictions vary in their application and do not all apply to the same covered persons or proscribe the same activities. Some sanctions regimes with which we are required to comply provide that entities owned or controlled by the persons or entities designated in such lists are also subject to sanctions. In addition, the evolving nature of sanctions laws and regulations require us to be diligent in maintaining compliance. The sanctions of each jurisdiction may be amended to increase or reduce the restrictions imposed over time, and the lists of persons and entities designated under these sanctions are amended frequently. Additional countries or territories, as well as additional persons or entities located, organized, or resident in those countries or territories, may in the future become the target of sanctions if such additional countries or territories become Sanctioned Jurisdictions. Changes to such laws or regulations, including the imposition of sanctions on new persons or entities could mean the loss of significant customers, restrictions on our ability to provide bunker procurement services to certain customers or in specific jurisdictions, or delays in processing and releasing payments through our banks during the resolution of any legal and regulatory compliance queries, any of which could have an adverse effect on our business, financial condition, results of operations and/or cash flows.

Our current or future counterparties may become, or may be owned, controlled, or affiliated with persons or entities that are or may be in the future become the subject of sanctions imposed by the U.S., E.U. or other governmental authorities to which we are subject. If we determine that such sanctions require us to terminate existing or future contracts to which we, or the Heidmar Pools, are party or if we are found to be in violation of such applicable sanctions, our results of operations may be adversely affected, and/or we may suffer reputational harm. In addition, ports that we call on may have their country or other jurisdiction become subject to sanctions, which could prevent us from continuing to call on those ports.

As a result of Russia’s actions in Ukraine, the U.S., EU and United Kingdom, together with numerous other countries, have imposed significant sanctions on persons and entities associated with Russia and Belarus, as well as comprehensive sanctions on the Crimea, Donetsk, and Luhansk regions of Ukraine, effectively making such regions Sanctioned Jurisdictions. Such sanctions also apply to entities owned or controlled by such designated persons or entities and to any persons or entities located, organized, or resident in any of the Sanctioned Jurisdictions. These sanctions adversely affect our ability to operate in the region and also restrict parties whose cargo we may carry.

During 2023, 17 of our currently managed vessels called at Russian ports under their time charters, to the extent permitted by sanctions. As of June 30, 2024, seven of our currently managed vessels continued to call, based on the previous three months of voyages, at Russian ports to the extent permitted by sanctions. In respect of the vessels that previously called at Russia ports, the respective charterers of such vessels changed the trade routes that such vessels were employed on so that such vessels now call on other ports outside of Russia. All of these vessels remain fully employed under their respective time charter agreements and no charterer has requested the early redelivery of any of these vessels.

Although we believe that we are and have been in compliance with all applicable sanctions laws and regulations in 2023, and intend to maintain such compliance, there can be no assurance that we will be in compliance in the future, particularly as the scope of certain laws may be unclear and the scope of such sanctions may change quickly and without notice. Any such violation could result in reputational damages, fines, penalties or other sanctions that could severely impact our ability to access U.S. capital markets and conduct our business and could result in some investors deciding, or being required, to divest their interest, or not to invest, in us.

 

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Our business is affected by macroeconomic conditions, including rising inflation, interest rates, market volatility, economic uncertainty and supply chain constraints.

Various macroeconomic factors could adversely affect our business and the results of our operations and financial condition, including changes in inflation, interest rates and overall economic conditions and uncertainties such as those resulting from the current and future conditions in the global financial markets. For instance, inflation has negatively impacted us by increasing our labor costs, through higher wages and higher interest rates, and operating costs. Supply chain constraints have led to higher inflation, which if sustained could have a negative impact on our product development and operations. If inflation or other factors were to significantly increase, our business operations may be negatively affected.

We are exposed to significant changes in interest rates. Any changes in interest rates will directly affect the cost of our financings, which are not on fixed interest rates, as well as our returns on investments. Interest rates, the liquidity of the credit markets and the volatility of the capital markets could also affect the operation of our business and our ability to raise capital on favorable terms, or at all, in order to fund our operations or growth.

Inflation, including rising prices for items such as fuel, parts and components, freight, packaging, supplies, labor and energy, increases our operating costs. We do not currently use financial derivatives to hedge against volatility in commodity prices. We use market prices for materials, fuel, parts and components, and we may be unable to pass these rising costs onto our customers. To mitigate this exposure, we attempt to include cost escalation clauses in our longer-term marine transportation contracts, whereby we can largely pass certain costs, including fuel, through to our customers. Our results of operations and margin performance can be negatively affected if we are unable to mitigate the impact of these cost increases through contractual means or increase prices to sufficiently offset the effect of these cost increases.

Any failure to comply with the U.S. Foreign Corrupt Practices Act could result in fines, criminal penalties, contract terminations and an adverse effect on our business, results of operations and financial condition.

We expect our managed vessels to operate in a number of countries, such as China, Brazil, Singapore and in some developing economies, including countries known to have a reputation for corruption, which can involve inherent risks associated with fraud, bribery and corruption and where strict compliance with anti-corruption laws may conflict with local customs and practices. As a result, we may be subject to risks under the U.S. Foreign Corrupt Practices Act, as amended, or the FCPA, the U.K. Bribery Act 2010, the Bermuda Bribery Act 2016 and similar laws in other jurisdictions that generally prohibit companies and their intermediaries from making, offering or authorizing improper payments to government officials for the purpose of obtaining or retaining business.

We are committed to doing business in accordance with applicable anti-corruption laws and have policies and procedures, including a code of business conduct and ethics, which are designed to promote legal and regulatory compliance with such laws and regulations. We are subject, however, to the risk that we, our affiliated entities or our or their respective officers, directors, employees and agents may take actions determined to be in violation of anti-corruption laws, including the FCPA. Any such violation could result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions, and might adversely affect our business, results of operations or financial condition. Our customers in relevant jurisdictions could seek to impose penalties or take other actions adverse to our interests. In addition, actual or alleged violations could damage our reputation and ability to do business. Furthermore, detecting, investigating, and resolving actual or alleged violations is expensive and can consume significant time and attention of our contracted senior management.

Natural or man-made disasters and other similar events may significantly disrupt our business and could have an adverse effect on our business, results of operations and financial condition.

Natural or man-made disasters, including earthquakes, power outages, fires, floods, nuclear disasters, terrorist attacks or other criminal activities or acts of crew malfeasance, may render it difficult or impossible for

 

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us to operate our business for some period of time. Any disruptions in our operations related to the repair or replacement of our managed vessels or disruption of or reduced demand for shipping could have a material adverse impact on our business, results of operations and financial condition. In addition, we may not carry business insurance sufficient to compensate for losses that may occur.

Acts of piracy on ocean-going vessels may have an adverse effect on our business, results of operations and financial condition.

Acts of piracy have historically affected ocean-going vessels trading in regions of the world such as the South China Sea, Strait of Malacca, Arabian Sea, Red Sea, the Indian Ocean, the Gulf of Aden off the coast of Somalia, Sulu Sea, Celebes Sea and in the Gulf of Guinea. Although the frequency of sea piracy worldwide has generally decreased since 2013, sea piracy incidents continue to occur, particularly in the South China Sea, the Indian Ocean, in the Gulf of Guinea and the Strait of Malacca and with dry bulk vessels particularly vulnerable to these attacks. Acts of piracy could result in harm or danger to the crews that man our managed vessels. If these piracy attacks result in regions in which our managed vessels are deployed being characterized as “war risk” zones by insurers or Joint War Committee “war and strikes” listed areas, premiums payable for insurance coverage could increase significantly and that coverage may become more difficult to obtain. In addition, crew costs, including due to employing on-board security guards, could increase in such circumstances. Furthermore, while we believe the charterer remains liable for charter payments when a vessel is seized by pirates, the charterer may dispute this and withhold charter hire until the vessel is released. A charterer may also claim that a vessel seized by pirates was not “on-hire” for a certain number of days and is therefore entitled to cancel the charter party, a claim that we would dispute. Although we plan to obtain insurance to cover risks associated with piracy acts, we may not be adequately insured to cover losses from these incidents, which could have a material adverse effect on us. In addition, any detention or hijacking as a result of an act of piracy against our managed vessels, or an increase in cost, or unavailability, of insurance for our managed vessels, could have a material adverse effect on our business, results of operations and financial condition.

The smuggling of drugs or other contraband onto our managed vessels may lead to governmental claims against us.

We expect that our managed vessels will call on ports where smugglers may attempt to hide drugs and other contraband on vessels, with or without the knowledge of crew members. To the extent our managed vessels are found with drugs or contraband, whether inside or attached to the hull of our vessel and whether with or without the knowledge of any of our crew, we may face governmental or other regulatory claims which could have an adverse effect on our business, results of operations, reputation and financial condition.

Maritime claimants could arrest or attach one or more of our managed vessels, which could interrupt our cash flows.

Crew members, suppliers of goods and services to a vessel, shippers of cargo, lenders, and other parties may be entitled to a maritime lien against a vessel for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by “arresting” or “attaching” a vessel through judicial or foreclosure proceedings.

This could require the payment of a large sum of money to have the arrest or attachment lifted and prevent the operation of the vessel until that payment is made. Accordingly, the arrest or attachment of one or more of our managed vessels could interrupt the cash flows of the charterer and/or our cash flow and have an adverse effect on our business, results of operations and financial condition. In addition, in some jurisdictions, such as South Africa, under the “sister ship” theory of liability, a claimant may arrest both the vessel that is subject to the claimant’s maritime lien and any “associated” vessel, which is any vessel owned or controlled by the same owner. Claimants could attempt to assert “sister ship” liability against one vessel in our pool for claims relating to another vessels with the same owner.

 

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Governments could requisition our managed vessels during a period of war or emergency, which could negatively impact our business, results of operations and financial condition.

A government could requisition one or more of our managed vessels for title or for hire, and any such requisition could interrupt our cash flow and operations. Requisition for title occurs when a government takes control of a vessel and becomes its owner, while requisition for hire occurs when a government takes control of a vessel and effectively becomes its charterer at dictated charter rates. Generally, requisitions occur during periods of war or emergency, although governments may elect to requisition vessels in other circumstances. Government requisition of one or more of our managed vessels may negatively impact our business, results of operations and financial condition, and reduce the amount of cash we may have available for distribution as dividends to our shareholders, if any such dividends are declared.

The announcement and pendency of the Business Combination could adversely affect our business, cash flows, financial condition or results of operations.

The announcement and pendency of the Business Combination could cause disruptions in and create uncertainty surrounding our business, including our relationships with existing and future customers, suppliers and employees. This could have an adverse effect on our business, cash flows, financial condition or results of operations, irrespective of whether the Business Combination is completed. Our business relationships may be subject to disruption as customers, suppliers and other persons with whom we have a business relationship may delay or defer certain business decisions or might decide to seek to terminate, change or renegotiate their relationships or consider entering into business relationships with other parties. The risk, and adverse effect, of any such disruptions could be exacerbated by a delay in the consummation of the Business Combination.

Risks involved with operating ocean-going vessels could result in the loss of life or harm to our seafarers, environmental accidents or affect our business and reputation, which could have a material adverse effect on our results of operations and financial condition.

The operation of an ocean-going vessel carries inherent risks. These risks include the possibility of:

 

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loss of life or harm to seafarers;

 

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a marine accident or disaster;

 

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environmental accidents and pollution;

 

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cargo and property losses or damage; and

 

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business interruptions caused by mechanical failure, human error, war, terrorism, piracy, political action in various countries, labor strikes, or adverse weather conditions.

Any of these circumstances or events could increase our costs or lower our revenues. The involvement of our vessels in an accident or oil spill or other environmental disaster may harm our reputation as a safe and reliable pool manager.

Risks Related to Holdings Becoming a Public Company

There can be no assurance that the Holdings Shares will be approved for listing on Nasdaq or any other national securities exchange, or that Holdings will be able to comply with the continued listing standards of Nasdaq or any other national securities exchange.

In connection with the Closing, Holdings intends to list the Holdings Shares on Nasdaq or another national securities exchange under the symbol “HMR”. If, after the Business Combination, Nasdaq delists Holdings’ shares from trading on its exchange for failure to meet the listing standards and Holdings is not able to list its shares on another national securities exchange, Holdings expects its shares could be quoted on an

 

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over-the-counter market. If this were to occur, Holdings and its shareholders could face significant material adverse consequences including:

 

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a limited availability of market quotations for Holdings Shares;

 

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reduced liquidity for Holdings Shares;

 

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a determination that the Holdings Shares are “penny stock,” which would require brokers trading the Holdings Shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for Holdings Shares;

 

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a limited amount of news and analyst coverage for Holdings; and

 

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

Holdings is an emerging growth company and will therefore be subject to reduced reporting requirements that may make the Holdings Shares less attractive to investors.

Following the consummation of the Business Combination, Holdings will be an emerging growth company, as defined in the JOBS Act. For as long as Holdings continues to be an emerging growth company, it may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including exemption from compliance with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Further, an emerging growth company’s auditor is exempt from the requirement to communicate critical audit matters in the auditor’s report. Holdings will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (x) during which the fifth anniversary of the Closing occurs (the Closing being the date of the first sale of securities under the Registration Statement of which this proxy statement/prospectus is a part), (y) in which Holdings has total annual gross revenue of at least $1.235 billion or (z) in which Holdings is deemed to be a large accelerated filer (which means the market value of Holdings Shares held by non-affiliates exceeds $700.0 million as of the last Business Day of the second fiscal quarter of that fiscal year), and (ii) the date on which Holdings has issued more than $1.0 billion in non-convertible debt during the prior three-year period.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. Holdings may elect to avail itself of this exemption from new or revised accounting standards in the future and, therefore, Holdings would not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Holdings cannot predict if investors will find Holdings Shares less attractive because Holdings may rely on these exemptions. If some investors find the Holdings Shares less attractive as a result, there may be a less active trading market for the Holdings Shares and its market price may be more volatile.

Holdings will be a “controlled company” within the meaning of the Nasdaq rules, which will exempt it from certain corporate governance requirements.

Immediately following the completion of the Business Combination, the Heidmar Shareholders will control a majority of the voting power of the outstanding Holdings Shares.

As a result, Holdings will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

 

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the requirement that a majority of the board of directors of Holdings (the “Holdings Board”) consist of “independent directors” as defined under the rules of Nasdaq;

 

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the requirement that the Holdings Board form a compensation committee composed of at least two independent directors with a written charter addressing the committee’s responsibilities; and

 

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the requirement that nominees of the Holdings Board be selected by either (a) independent directors constituting a majority of the Holdings Board’s independent directors or (b) a nominations committee comprised solely of independent directors.

Following the Business Combination, Holdings intends to utilize some or all of these exemptions. As a result, you may not have the same protections afforded to shareholders of companies that are subject to all of the corporate governance requirements of Nasdaq.

Holdings will be a “foreign private issuer” under U.S. securities laws, which exempts it from certain reporting and other obligations and could make the Holdings Shares less attractive to some investors.

Following the Business Combination, Holdings will be a “foreign private issuer,” as defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”). This means that the information Holdings will be required to publicly disclose will be different from those required of domestic public companies, including the following.

 

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Holdings will not have to provide certain information as often or as quickly as domestic filers, including quarterly reports on Form 10-Q or current reports on Form 8-K.

 

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Holdings’ directors, officers and Affiliates (its “insiders”) will not be subject to the provisions of Section 16 of the Exchange Act requiring disclosure of stock purchases and sales, which means investors will have less information in this regard than they do about MGO or other domestic public companies.

 

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Holdings’ insiders also won’t be subject to the “short swing” profit liability in Section 16 of the Exchange Act.

 

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Holdings will not be subject to the provisions of the Exchange Act regulating the solicitation of proxies, and its proxy statements are not subject to review by the SEC, which means there may be less public information regarding Holdings and its governance than for MGO or other domestic companies.

 

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Holdings will not be subject to the selective disclosure rules relating to material nonpublic information under Regulation FD.

Holdings will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, Holdings intends to publish its results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information Holdings is required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer. Further, these factors could make the Holdings Shares less attractive to some investors or otherwise harm its share price.

Holdings is permitted to follow certain “home country” governance practices in the Marshall Islands rather than the corporate governance requirements of the Nasdaq.

As a foreign private issuer, Holdings will have the option to follow certain home country corporate governance practices rather than those of the Nasdaq, provided that Holdings discloses the requirements it is not following and describe the home country practices it is following. Holdings intends to rely on this “foreign private issuer exemption” with respect to Nasdaq rules requiring shareholder approval. Holdings may in the future elect to follow home country practices with regard to other matters. As a result, Holdings’ shareholders may not have the same protections afforded to shareholders of companies that are subject to all Nasdaq corporate governance requirements.

 

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Holdings may lose its foreign private issuer status in the future, which could result in significant additional costs and expenses.

At the Closing of the Business Combination, Holdings will be a foreign private issuer, which means it will not be required to comply with all of the periodic disclosure and current reporting requirements of the Exchange Act that are applicable to domestic companies. A company’s foreign private issuer status is determined annually on the last Business Day of its most second fiscal quarter, and, accordingly, the next determination will be made with respect to Holdings on June 30, 2025. In the future, Holdings would lose its foreign private issuer status if (a) more than 50% of its outstanding voting securities are owned by U.S. residents and (b) one of the following three things are true: (1) a majority of its directors or executive officers are U.S. citizens or residents, (2) it administers its business principally from the United States or (3) a majority of its assets are located in the United States. If Holdings loses its foreign private issuer status, it would be required to file with the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms available to a foreign private issuer. Holdings would also have to mandatorily comply with U.S. federal proxy requirements, and Holdings’ officers, directors and principal shareholders would become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. In addition, Holdings would lose its ability to rely upon exemptions from certain corporate governance requirements under the listing rules of the Nasdaq. As a U.S. listed public company that is not a foreign private issuer, Holdings would incur significant additional legal, accounting and other expenses that it would not incur as a foreign private issuer.

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

Holdings will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, Nasdaq listing requirements and other applicable securities rules and regulations. As such, Holdings will incur additional legal, accounting and other expenses following the completion of the Business Combination. These expenses may increase even more once Holdings no longer qualifies as an “emerging growth company.” The Exchange Act requires, among other things, that Holdings file annual and current reports with respect to its business and operating results. The Sarbanes-Oxley Act requires, among other things, that Holdings maintains effective disclosure controls and procedures and internal control over financial reporting. Holdings may need to hire more employees post-Business Combination or engage outside consultants to comply with these requirements, which will increase its post-Business Combination costs and expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. Holdings expects these laws and regulations to increase its legal and financial compliance costs after the Business Combination and to render some activities more time-consuming and costly, although Holdings is currently unable to estimate these costs with any degree of certainty.

Many members of Holdings’ management team will have limited experience managing a publicly traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Holdings’ management team may not successfully or efficiently manage the transition to being a public company subject to significant regulatory oversight and reporting obligations under the federal securities laws and regulations and the continuous scrutiny of securities analysts and investors. The need to establish the corporate infrastructure demanded of a public company may divert the management’s attention from implementing its growth strategy, which could prevent Holdings from improving its business, financial condition and results of operations. Furthermore, Holdings expects these rules and regulations to make it more difficult and more expensive for Holdings to obtain director and officer liability insurance, and

 

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consequently Holdings may be required to incur substantial costs to maintain the same or similar coverage. These additional obligations could have a material adverse effect on its business, financial condition, results of operations and prospects. These factors could also make it more difficult for Holdings to attract and retain qualified members of its board of directors, particularly to serve on Holdings’ finance and audit committee and nomination and compensation committee, and to attract and retain qualified executive officers.

As a result of disclosure of information in filings required of a public company, Holdings’ business and financial condition will become more visible, which Holdings believes may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, Holdings’ business and operating results could be adversely affected, and, even if the claims do not result in litigation or are resolved in Holdings’ favor, these claims, and the time and resources necessary to resolve them, could cause an adverse effect on its business, financial condition, results of operations, prospects and reputation.

Holdings’ failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act that will be applicable to it after the Closing could have a material adverse effect on its business.

Heidmar is currently not subject to Section 404 of the Sarbanes-Oxley Act. However, following the Closing, Holdings will be required to provide management’s attestation on internal controls. The standards required for a public company under Section 404(a) of the Sarbanes-Oxley Act are significantly more stringent than those required of Heidmar as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that will be applicable after the Business Combination. If Holdings is not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of its securities.

Risks Related to the Holdings Shares

Upon completion of the Business Combination, MGO Stockholders will become shareholders of Holdings, and the market price for the Holdings Shares may be affected by factors different from those that historically have affected MGO.

Upon completion of the Business Combination, MGO Stockholders will become shareholders of Holdings. Holdings’ business differs from that of MGO, and, accordingly, the results of operations of Holdings will be affected by some factors that are different from those currently affecting the results of operations of MGO. Holdings is a holding company incorporated in the Marshall Islands, and, after the consummation of the Business Combination, will have as its direct subsidiaries MGO and Heidmar. Heidmar is engaged in tanker pooling, commercial and asset management, and time charters, businesses quite distinct from those that MGO currently operates. Holdings’ business and results of operations will, therefore, be affected by operating, industry and regional risks to which MGO is not currently exposed. For a discussion of the future business of Holdings currently conducted and proposed to be conducted by Heidmar, see “Information About Heidmar.”

The Heidmar Shareholders will have substantial control over Holdings pursuant to the terms of Holdings’ Organizational Documents and a shareholders’ agreement between Holdings, Rhea and Maistros, and their interests may conflict with those of other shareholders.

After the Closing, it is anticipated that Rhea and Maistros, the Heidmar Shareholders, will hold 91.85% of the Holdings Shares. In addition, at the Closing, Holdings, Rhea and Maistros will become parties to a shareholders’ agreement (the “Shareholders Agreement”) and a registration rights agreement (the “Registration Rights Agreement”). In addition, Holdings’ Organizational Documents will provide the Heidmar Shareholders with certain rights and powers.

 

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For example, pursuant to the Shareholders Agreement, the Heidmar Shareholders will have the power to determine, among other things Holdings’ policies and the persons who will be nominated to its board of directors at any annual meeting, so long as either Heidmar Shareholder beneficially owns at least 15% of the outstanding Holdings Shares. The Shareholders Agreement provides that Holdings’ board of directors will initially consist of three nominees of Rhea and four nominees of Maistros. Further, the Heidmar Shareholders will also have control over actions requiring shareholder approval.

In addition, pursuant to Holdings’ Amended and Restated Articles of Incorporation, during the term set forth in the Shareholders Agreement with respect to each of the Heidmar Shareholders, certain corporate actions will require the prior approval of the Heidmar Shareholders. The Shareholders Agreement and Registration Rights Agreement also dictate the conditions under which the parties’ shares may be registered by Holdings, or sold or transferred by the Heidmar Shareholders, including certain tagalong and piggyback rights.

The Shareholders Agreement will remain in effect until terminated (i) by the mutual written agreement of Holdings and the Heidmar Shareholders, and (ii) with respect to a particular Heidmar Shareholder when it, together with its affiliates, no longer beneficially owns any voting stock of Holdings.

The rights of the Heidmar Shareholders under the Shareholders Agreement, the Registration Rights Agreement and Holdings’ Organizational Documents will therefore allow the Heidmar Shareholders to pursue their preferred course of action in managing Holdings’ business, even if Holdings’ other investors disagree with these decisions. Further, the Heidmar Shareholders may have interests that are in conflict with or adverse to your own. For more information regarding the Shareholders Agreement and our Amended and Restated Articles of Incorporation, see the section entitled “Description of Holdings Securities.”

Future sales of Holdings Shares, including resales by the Heidmar Shareholders and other significant shareholders, may cause the market price of the Holdings Shares to drop significantly, even if Holdings’ business is doing well.

After the Closing, it is anticipated that existing Heidmar Shareholders will hold 91.85% of the Holdings Shares, the MGO Principals will hold 0.2% of the Holdings Shares, and Maxim will hold 2.49% of the Holdings Shares, without taking into account the issuance of any Earnout Shares, based on the MGO Shares outstanding as of January 10, 2025 and assuming the warrants issued by MGO as part of the Units are exercised as described elsewhere in this proxy statement/prospectus. All of these Holdings Shares will be issued to these holders pursuant to the Registration Statement that Holdings will file in connection with the Business Combination, and therefore will be freely tradable by their holders, subject in certain cases to the restrictions applicable to “control securities” under U.S. securities laws. The Holdings Shares held by the Heidmar Shareholders and the MGO Principals will also be subject to lock-up/leak-out agreements between these holders and Holdings, pursuant to which the Heidmar Shareholders, and the MGO Principals will be restricted from transferring their shares for four months after the Closing and have limits on the number of shares they may sell during the fifth and sixth month after the Closing, subject to certain customary exceptions.

The sale by these holders of substantial quantities of Holdings Shares, or the market’s perception that such a sale is pending, could cause a significant decrease in the price of the Holdings Shares. This could occur as the expiration of the lock-up or leak-out periods approach, upon an announcement of the waiver of the lock-up/leak-out restrictions applicable to some or all of the shares or for other reasons. Any of these could have the effect of increasing the volatility in, or putting significant downward pressure on, the price of Holdings Shares. See “Shares Eligible for Future Sale.”

In addition, Holdings could seek to issue new Holdings Shares for sale or as consideration for an acquisition, which could also cause the market price of Holdings Shares to decline or impair Holdings’ ability to raise capital through a future sale of, or pay for acquisitions using, Holdings’ equity securities.

 

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The future exercise of registration rights may adversely affect the market price of Holdings’ securities.

In connection with the Transactions Holdings will enter into a Registration Rights Agreement with the Heidmar Shareholders (each, a “Holder”). Pursuant to the Registration Rights Agreement, each of the Holders has the right to cause Holdings to file a Registration Statement with the SEC for the resale by the Holders of their Holdings Shares beginning upon the expiration of the lock-up period in the Lock-Up/Leak Out Agreements. Once Holdings becomes eligible to file a registration statement on Form F-3, each of the Holders will have the right to cause Holdings to file a “shelf” registration statement for the resale of their Holdings Shares on a delayed or continuous basis. The Holders will also be entitled to demand that Holdings engage in an underwritten offering or shelf takedown of their Holdings Shares and will also have certain “piggy-back” registration rights with respect to registration statements filed for other offerings by Holdings. The presence of these additional Holdings Shares trading in the public market or the expectation that the Holders plan to sell some or all of their shares may have an adverse effect on the market price of Holdings’ securities.

The market price of Holdings Shares may be volatile, and you may lose all or part of your investment.

Immediately following completion of the Business Combination and the other Transactions, based on the MGO Shares outstanding as of January 10, 2025 and assuming the Common Warrants are exercised as described elsewhere in this proxy statement/prospectus and the that Issuance Ratio is thirty-to-one, Holdings will have 24,676,317 Holdings Shares outstanding. This includes 1,972,597 Holdings Shares that will be freely tradable without restriction at the Closing, with the remainder becoming freely tradable upon expiration of the Lock-Up/Leak Out Agreement. Sales by Holdings or Holdings’ shareholders of a substantial number of Holdings Shares, the issuance of Holdings Shares as consideration for acquisitions, or the perception that these sales might occur, could cause the market price of the Holdings Shares to decline or could impair Holdings’ ability to raise capital through a future sale of, or pay for acquisitions using, Holdings’ equity securities.

The market price of the Holdings Shares may be volatile, because of actual and perceived changes specific events regarding Holdings’ business, financial performance and prospects, general economic events and conditions, and general volatility in the stock market. The factors that could cause fluctuations in Holdings’ share price may include, among other factors (including those discussed in this “Risk Factors” section) the following:

 

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actual or anticipated fluctuations in Holdings’ results of operations;

 

•

variance in Holdings’ financial performance from the expectations of market analysts or others;

 

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announcements by Holdings or Holdings’ competitors of significant business developments, changes in significant customers, acquisitions or expansion plans;

 

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Holdings’ involvement in litigation;

 

•

Holdings’ sale of Holdings Shares or other securities in the future;

 

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market conditions in Holdings’ industry;

 

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changes in key personnel;

 

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the trading volume of Holdings’ Common Shares;

 

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the sale of a substantial number of Holdings Shares by Holdings or its shareholders, or the perception that such a sale may occur;

 

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changes in the estimation of the future size and growth rate of Holdings’ markets; and

 

•

general economic and market conditions.

In addition, the stock markets have experienced extreme price and volume fluctuations. Broad market and industry factors may materially harm the market price of the Holdings Shares, regardless of Holdings’ operating

 

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performance. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against that company. If Holdings was involved in any similar litigation, Holdings could incur substantial costs and Holdings’ management’s attention and resources could be diverted.

Volatility in Holdings’ share price could subject Holdings to securities class action litigation.

The market price of the Holdings Shares may be volatile and, in the past, companies that have experienced volatility in the market price of their shares have been subject to securities class action litigation. Holdings may be the target of this type of litigation and investigations. Securities litigation against Holdings could result in substantial costs and divert management’s attention from other business concerns, which could seriously harm Holdings’ business.

An active trading market for the Holdings Shares may not be sustained to provide adequate liquidity.

An active trading market may not be sustained for Holdings Shares. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. An inactive market may also impair Holdings’ ability to raise capital by selling Holdings Shares and may impair Holdings’ ability to acquire other companies by using Holdings’ shares as consideration.

Holdings is a holding company that depends on the ability of its subsidiaries to distribute funds to it in order to satisfy its financial and other obligations.

Holdings is a holding company that has no significant assets other than cash and the equity of its subsidiaries. Holdings’ ability to pay dividends and fulfill respective financial obligations depends on the performance of its subsidiaries and their ability to distribute funds to Holdings. The ability of Holdings’ subsidiaries to make these distributions may become subject to restrictions contained in those subsidiaries’ financing agreements and could be affected by a claim or other action by a third party, including a creditor, or by Marshall Islands law which regulates the payment of dividends by companies. If Holdings is unable to obtain sufficient funds from its subsidiaries to satisfy future liquidity requirements and/or to finance future operations or if for other reasons its subsidiaries are unable to upstream funds to it, Holdings may not be able to pay dividends.

Holdings’ ability to pay dividends is subject to limitations and risks that could cause those dividends to be lower than expected or to not be paid at all.

Holdings has never declared or paid any dividends on the Holdings Shares. Heidmar, which will be a wholly owned subsidiary of Holdings immediately following the Closing, paid an aggregate of $25 million in dividends in 2023 and did not pay any dividends in 2022. Heidmar has not yet paid any dividends in 2024 or 2025, however the Business Combination Agreement requires Heidmar to have at least $10 million of cash and accounts receivable at Closing, and Heidmar expects to pay a cash dividend to the Heidmar Shareholders prior to Closing equal to the amount by which its combined cash and accounts receivable exceeds $10.0 million.

Any payment of any dividends by Holdings will be subject to certain limitations and qualifications including that:

 

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Holdings intends to pay any dividends from its operating surplus, less amounts it retains to fund its expansion, for debt repayment and for other corporate purposes, as determined by Holdings’ management and board of directors;

 

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the declaration and payment of dividends will be subject at all times to the discretion of the Holdings Board;

 

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the timing and amount of dividends will depend on Holdings’ earnings, financial condition, cash requirements and availability, fleet renewal and expansion, restrictions in its loan agreements, the provisions of Marshall Islands law affecting the payment of dividends and other factors; and

 

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•

the requirements of Marshall Islands law, which generally prohibits the payment of dividends other than from surplus, while a company is insolvent, or if it would be rendered insolvent upon the payment of such dividends, or if there is no surplus, dividends may be declared or paid out of net income for the fiscal year in which the dividend is declared, and for the preceding fiscal year.

In addition, Holdings’ ability to pay any dividends is subject to and can be diminished by the risks set forth in this “Risk Factors” section, any of which could result in Holdings being unable to pay its expected dividends or any dividends at all. If Holdings fails to pay dividends at the expected rate, the value of Holdings Shares will decrease, and you could lose some or all of your investment.

Please see the section entitled “Price Range of Securities and Dividends—Holdings” for a description of Holdings’ dividend policy.

Investors may suffer adverse tax consequences in connection with the acquisition, ownership and disposal of the Holdings Shares.

The tax consequences in connection with the acquisition, ownership and disposal of the Holdings Shares may differ from the tax consequences in connection with the acquisition, ownership and disposal of securities in another entity and may also differ depending on such an investor’s respective circumstances including, without limitation, where such an investor is a tax resident. Any such tax consequences could be materially adverse to such an investor and therefore, such an investor should seek its own tax advice in respect of the tax consequences in connection with the acquisition, ownership and disposal of the Holdings Shares.

The number of issued Holdings Shares may fluctuate substantially, which could lead to adverse tax consequences for the holders thereof.

It may be that the number of issued and outstanding Holdings Shares fluctuates substantially. This may have an impact on interests and certain thresholds that are relevant for investors’ tax purposes and positions, also dependent on their respective circumstances. The potential tax consequences in this regard could potentially be material, and therefore, investors should seek their own tax advice with respect to the tax consequences in connection with the acquisition, ownership and disposal of the Holdings Shares.

If securities or industry analysts do not publish research or reports about Holdings’ business, or if they issue an adverse or misleading opinion regarding Holdings Shares, the market price and trading volume of Holdings Shares could decline.

The trading market for Holdings Shares will be influenced by the research and reports that industry or securities analysts publish about Holdings or Holdings’ business. Holdings does not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of Holdings, the trading price for Holdings Shares would be negatively impacted. In the event Holdings obtains securities or industry analyst coverage, if any of the analysts who cover Holdings issue an adverse or misleading opinion regarding Holdings, Holdings’ business model, Holdings’ intellectual property or Holdings’ stock performance, or if Holdings’ results of operations fail to meet the expectations of analysts, Holdings’ stock price would likely decline. If one or more of these analysts cease coverage of Holdings or fail to publish reports on Holdings regularly, Holdings could lose visibility in the financial markets, which in turn could cause Holdings’ stock price or trading volume to decline.

Investor confidence and the market price of Holdings’ shares may be adversely impacted if Holdings’ management is unable to establish and maintain an effective system of internal control over financial reporting.

Holdings will become a U.S. public company subject to the reporting requirements of the U.S. Securities and Exchange Commission (the “SEC”), following the completion of the Business Combination. SEC rules

 

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require a public company, to include a report from management of its internal control structure and procedures for financial reporting in that company’s annual report on Form 10-K or Form 20-F that contains an assessment by management of the effectiveness of its internal controls over financial reporting. This requirement will first apply to Holdings’ annual report on Form 20-F for the fiscal year ending on December 31, 2024. In addition, independent registered public accountants of a public company must report on the effectiveness of that company’s internal controls over financial reporting after that company loses emerging growth company status and has met accelerated filer status. Holdings’ management may not conclude that its internal controls over financial reporting are effective. Moreover, even if Holdings’ management does conclude that its internal controls over financial reporting are effective, if its independent registered public accountants are not satisfied with its internal control structure and procedures, the level at which its internal controls are documented, designed, operated or reviewed, or if the independent registered public accountants interpret the requirements, rules or regulations differently from Holdings’ management, they may not concur with its management’s assessment or may not issue a report that is unqualified. Any of these outcomes could result in an adverse reaction in the financial markets due to a loss of investor confidence in the reliability of Holdings’ financial statements, which could lead to a decline in the market price of its shares. Further, the total cost of Holdings’ initial compliance and the future ongoing costs of complying with U.S. public company requirements will be substantial.

Currently, there is no public market for the Holdings Shares. MGO Stockholders cannot be sure that an active trading market will develop for the Holdings Shares, the market price they will receive or that Holdings will successfully obtain authorization for listing on the Nasdaq.

As part of the Business Combination, each issued and outstanding MGO Share will be converted into the right to receive one Holdings Common Share. Holdings is a newly formed entity, and prior to this transaction it has not issued any securities in the U.S. markets or elsewhere. Further, extensive information about Holdings, its businesses or its operations has not previously been publicly available. MGO and Holdings have agreed to cause the Holdings Shares to be issued in the Business Combination to be approved for listing on the Nasdaq prior to the effective time of the Business Combination. However, the listing of shares on the Nasdaq does not ensure that a market for the Holdings Shares will develop or the price at which the shares will trade. No assurance can be provided as to the demand for or trading price of the Holdings Shares following the Closing and the Holdings Shares may trade at a price less than the current market price of the MGO Shares.

Even if Holdings is successful in developing a public market, there may not be enough liquidity to enable shareholders to sell their common shares. If a public market for the Holdings Shares does not develop, investors may not be able to re-sell their common shares, rendering their shares illiquid and possibly resulting in a complete loss of their investment. Holdings cannot predict the extent to which investor interest in Holdings will lead to the development of an active, liquid trading market. The trading price of and demand for the Holdings Shares following completion of the Business Combination and the development and continued existence of a market and favorable price for the Holdings Shares will depend on a number of conditions, including the development of a market following, including by analysts and other investment professionals, the businesses, operations, results and prospects of Holdings, general market and economic conditions, governmental actions, regulatory considerations, legal proceedings and developments or other factors. These and other factors may impair the development of a liquid market and the ability of investors to sell shares at an attractive price. These factors also could cause the market price and demand for the Holdings Shares to fluctuate substantially, which may limit or prevent investors from readily selling their shares and may otherwise affect negatively the price and liquidity of the Holdings Shares. Many of these factors and conditions are beyond the control of Holdings or Holdings shareholders.

Recent market volatility could impact the share price and trading volume of Holdings’ securities.

The trading market for Holdings’ securities could be impacted by recent market volatility. Recent stock run-ups, divergences in valuation ratios relative to those seen during traditional markets, high short interest or

 

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short squeezes, and strong and atypical retail investor interest in the markets may impact the demand for Holdings Shares.

A possible “short squeeze” due to a sudden increase in demand of Holdings Shares that largely exceeds supply may lead to price volatility in Holdings Shares. Investors may purchase Holdings Shares to hedge existing exposure or to speculate on the price of the Holdings Shares, which may involve both long and short exposures. To the extent aggregate short exposure exceeds the number of Holdings Shares available for purchase, investors with short exposure may have to pay a premium to repurchase Holdings Shares for delivery to lenders. Those repurchases may in turn, dramatically increase the price of the Holdings Shares. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in the Holdings Shares that are not directly correlated to the operating performance of Holdings.

If the Holdings Shares are not eligible for deposit and clearing within the facilities of the Depository Trust Company, then Transactions in the Holdings Shares may be disrupted.

The facilities of the Depository Trust Company (“DTC”) are a widely used mechanism that allow for rapid electronic transfers of securities between the participants in the DTC system, which include many large banks and brokerage firms. Holdings expects that Holdings Shares will be eligible for deposit and clearing within the DTC system. Holdings expects to enter into arrangements with DTC whereby it will agree to indemnify DTC for stamp duty that may be assessed upon it as a result of its service as a depository and clearing agency for the Holdings Shares. Holdings expects these actions, among others, will result in DTC agreeing to accept the Holdings Shares for deposit and clearing within its facilities.

DTC is not obligated to accept Holdings Shares for deposit and clearing within its facilities in connection with the listing and, even if DTC does initially accept Holdings Shares, it will generally have discretion to cease to act as a depository and clearing agency for Holdings Shares.

If DTC determines at any time after the completion of the Transactions and the listing that the Holdings Shares were not eligible for continued deposit and clearance within its facilities, then Holdings believes the Holdings Shares would not be eligible for continued listing on a U.S. securities exchange and trading in the shares would be disrupted. While Holdings would pursue alternative arrangements to preserve its listing and maintain trading, any such disruption could have a material adverse effect on the market price of the Holdings Shares.

Risks Related to Holdings’ incorporation in the Marshall Islands

Holdings is incorporated in the Republic of the Marshall Islands, which does not have a well-developed body of corporate law and, as a result, shareholders may have a more limited ability to protect their interests.

Holdings’ corporate affairs are governed by its amended and restated Articles of Incorporation and amended and restated Bylaws and by the Marshall Islands Business Corporations Act (the “Business Corporations Act”). The provisions of the Business Corporations Act resemble provisions of the corporation laws of a number of states in the United States. However, there have been few judicial cases in the Republic of the Marshall Islands interpreting the Business Corporations Act. The rights and fiduciary responsibilities of directors under the law of the Republic of the Marshall Islands are not as clearly established as the rights and fiduciary responsibilities of directors under statutes or judicial precedent in existence in certain U.S. jurisdictions. Shareholder rights may differ as well. While the Business Corporations Act does specifically incorporate the non-statutory law, or judicial case law, of the State of Delaware and other states with substantially similar legislative provisions, Holdings’ public shareholders may have more difficulty in protecting their interests in the face of actions by management, directors or controlling shareholders than would shareholders of a corporation incorporated in a United States jurisdiction.

There is uncertainty as to whether the courts of the Marshall Islands would (a) recognize or enforce judgements of courts of the United States based on civil liability provisions of applicable United States securities

 

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laws or (b) impose liabilities in original actions brought in the Republic of the Marshall Islands, based on these laws. Furthermore, the level of legal protection in the United States may be lower than comparable jurisdictions and there may be fewer judicial cases in the Republic of the Marshall Islands interpreting the rights of creditors.

Holdings and Heidmar, as Marshall Islands corporations with principal executive offices in Greece, their operations may be subject to economic substance requirements.

In March 2019, the Council of the European Union, or the Council, published a list of non-cooperative jurisdictions for tax purposes, the 2019 Conclusions. In the 2019 Conclusions, the Republic of the Marshall Islands, among others, was placed by the E.U. on the list of non-cooperative jurisdictions for failing to implement certain commitments previously made to the E.U. by the agreed deadline. However, it was announced by the Council in October 2019 that the Marshall Islands had been removed from the list of non-cooperative jurisdictions. Bermuda and the British Virgin Islands were similarly added and subsequently removed from the list within 2019. In February 2023, the Marshall Islands was added again to the list of non-cooperative jurisdictions, along with the British Virgin Islands, among others. In October 2023, the Marshall Islands and the British Virgin Islands were again removed from the list of non-cooperative jurisdictions. E.U. member states have agreed upon a set of measures, which they can choose to apply against the listed countries, including, inter alia, increased monitoring and audits, withholding taxes and non-deductibility of costs. The European Commission has stated it will continue to support member states’ efforts to develop a more coordinated approach to sanctions for the listed countries. E.U. legislation prohibits E.U. funds from being channeled or transited through entities in non-cooperative jurisdictions.

Holdings and Heidmar are a Marshall Islands corporations with principal executive offices in Greece. The Marshall Islands have enacted economic substance regulations with which Holdings and Heidmar are obligated to comply. The Marshall Islands economic substance regulations require certain entities that carry out particular activities to comply with a three-part economic substance test whereby the entity must show that it (i) is directed and managed in the Marshall Islands in relation to that relevant activity, (ii) carries out core income-generating activity in relation to that relevant activity in the Marshall Islands (although it is being understood and acknowledged by the regulators that income-generated activities for shipping companies will generally occur in international waters) and (iii) having regard to the level of relevant activity carried out in the Marshall Islands has (a) an adequate amount of expenditures in the Marshall Islands, (b) adequate physical presence in the Marshall Islands and (c) an adequate number of qualified employees in the Marshall Islands.

If Holdings and Heidmar fail to comply with their obligations under such regulations or any similar law applicable to them in any other jurisdictions, they could be subject to financial penalties and spontaneous disclosure of information to foreign tax officials, or could be struck from the register of companies, in related jurisdictions. Any of the foregoing could be disruptive to Holdings’ business and could have a material adverse effect on Holdings’ business, operating results, cash flows and financial condition.

The parties do not know (i) if the E.U. will act to add the Republic of the Marshall Islands to the list of non-cooperative jurisdictions, (ii) how quickly the E.U. would react to any changes in legislation or regulations of the relevant jurisdictions, or (iii) how E.U. banks or other counterparties will react while Holdings, Heidmar or any of their subsidiaries remain as entities organized and existing under the laws of listed countries. The effect of the E.U. list of non-cooperative jurisdictions, and any noncompliance by Holdings, Heidmar or any of their subsidiaries with any legislation adopted by applicable countries to achieve removal from the list, including economic substance regulations, could have a material adverse effect on Holdings’ business, operating results, cash flows and financial condition.

 

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