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Mars Acquisition Corp. *

Mars Acquisition Corp. *

May 26, 2022 by Anthony Sozzi

PROPOSED BUSINESS COMBINATION: ScanTech Identification Beam Systems, LLC

ENTERPRISE VALUE: $323 million
ANTICIPATED SYMBOL: STAI

Mars Acquisition Corp. entered into a definitive business combination agreement with ScanTech Identification Beam Systems, LLC

  • ScanTech Identification Beam Systems, LLC, is a leading global innovator, developing the most advanced non-intrusive ‘fixed-gantry’ CT baggage and cargo logistics screening technology in the world.
  • ScanTech utilizes proprietary artificial intelligence (AI) and machine learning capabilities to develop state-of-the-art CT (computed tomography) scanners that accurately and quickly detect hazardous and contraband materials.
  • While initially focused on the airline industry, the unmatched speed and accuracy of the company’s fixed gantry solutions seek to revolutionize security operations capabilities worldwide, providing critical security measures to governments, businesses, and individuals across a diverse group of industries.

SUBSEQUENT EVENT – 10/4/24 – LINK

  • BCA Amendment:
    • The merger consideration shall be adjusted to $140,000,000 minus (or plus, if negative) the amount of the closing net debt that exceeds $20,000,000
  • In addition, every Mars ordinary share not redeemed or sold within 90 days post-Closing, including those held by Insiders and Maxim who’ve waived redemption rights, will receive two additional shares of Pubco common stock.
    • Additionally, shares will be issued to Seaport Group SIBS, LLC and Aegus Corp., with obligations and terms similar to those in the definitive subscription agreements dated April 2, 2024, and May 29, 2024, between Polar Multi-Strategy Master Fund, Mars, and ScanTech.

SUBSEQUENT EVENT – 4/5/24 – LINK

  • BCA Amendment:
    • The merger consideration shall be adjusted to $110,000,000 minus (or plus, if negative) the amount of the closing net debt that exceeds $20,000,000
  • Subscription Agreement:
    • The SPAC entered into a definitive subscription agreement with Polar Multi-Strategy Master Fund (the “Investor”), Mars Capital Holdings Corporation, and ScanTech for Investor to provide ScanTech up to $1,000,000 in funding for working capital expenses in connection with the Business Combination in exchange for the Subscription Shares.
    • The SPAC shall issue to Investor one share of Pubco Common Stock for each dollar the Investor provided as of the Closing without transfer restrictions.

EXTENSION – 2/1/24 – LINK

  • The SPAC approved the extension from February 16, 2024 to May 16, 2025.
    • 4,818,568 shares were redeemed at the meeting for $10.68 per share.
    • No contribution will be made into the trust account.

SUBSEQUENT EVENT – 1/24/24 – LINK

  • The SPAC entered into a non-redemption agreement with several unaffiliated third parties in exchange for them agreeing not to redeem an aggregate of 200,000 shares.
    • The Sponsor will transfer 40,000 shares of common stock to the non-redeeming shareholders.

SUBSEQUENT EVENT – 12/26/23 – LINK

  • The outside date was extended from January 31, 2024 to May 15, 2024

TRANSACTION

  • The combined company is expected to have an estimated post-transaction enterprise value of $149.5 million, consisting of an estimated equity value of $197.5 million and $48 million in net cash, assuming no redemptions by Mars’ public shareholders – ESTIMATES have been AMENDED
  • ScanTech and Mars will merge with newly-formed subsidiaries of ScanTech AI Systems Inc., a newly-formed Delaware holding company (“Pubco”), and Pubco will be the parent company of each of ScanTech and Mars following the consummation of the transaction.
  • Upon the closing of the transaction, Pubco is expected to be listed on Nasdaq under the ticker symbol “STAI“.
  • Karl Brenza, CEO of Mars, will be appointed as the Chairman of the Board of Pubco immediately after the closing.
  • The Business Combination has been unanimously approved by the boards of directors of both ScanTech and Mars and is expected to close in the first quarter of 2024.
  • It is anticipated that (i) Mars’ public shareholders will retain an ownership interest of approximately 42% of the combined company, (ii) the sponsors, officers, directors and other holders of Mars founder shares will retain an ownership interest of approximately 12% of the combined company, and (iii) the ScanTech security holders will own approximately 46% of the combined company.

Updated Transaction Overview

Original Transaction Overview

SPAC FUNDING

  • Mars entered into a Prepaid Forward Purchase Agreement with ScanTech, Pubco and RiverNorth SPAC Arbitrage Fund, L.P., pursuant to which RiverNorth agreed, among other things, to purchase Mars ordinary shares in the open market for no greater than the Redemption Price indicated by Mars’ most recent periodic report.
  • The shares to be purchased by RiverNorth (the “Purchased Shares”) will not be redeemed in connection with the extraordinary general meeting at which Mars’ shareholders will be asked to vote on the proposed Business Combination and will convert into shares of Pubco upon consummation of the Business Combination.
  • Upon the Business Combination closing, the Purchased Shares will be allocated on a 14 to 1 basis (“Share Ratio”) between “Prepaid Forward Purchase Shares” and “Commitment Shares.”
  • No later than the date any assets from Mars’ trust account are disbursed in connection with the Business Combination, Mars, ScanTech and Pubco will cause RiverNorth to be paid directly, out of the funds so disbursed, a cash amount (the “Prepayment Amount”) equal to the number of Purchase Shares multiplied by the Redemption Price.
  • The parties agreed to use commercially reasonable effort to set up an escrow account to hold the Forward Purchase Shares.

EARNOUT

  • Company:
    • The Company Holder Participants shall have the contingent right to receive as additional consideration up to a number of shares equal to 10% of the fully diluted shares of Pubco Common Stock outstanding immediately following the Closing based on Pubco’s achievement of the milestones set forth below during the 5-year period after the Closing, provided that the Earnout Period shall not end earlier than December 31, 2028.
    • The Company Holder Participants’ right to receive the Earnout Shares shall vest and become due and issuable as follows:
      • (i) In the event that Pubco or its Subsidiaries shall receive the TSA APSS 6.2.0 Explosive Standard Certification at any time during the Earnout Period (the “TSA APSS Milestone”), then the Company Holder Participants shall be entitled to receive an aggregate of one-third (1/3) of the Earnout Shares;
      • (ii) In the event that Pubco or its Subsidiaries receives Qualifying Orders for an aggregate of not less than 100 Sentinel Scanners over a six-month period at any time during the Earnout Period (the “Order Milestone” and, together with the TSA APSS Milestone, the “Commercial Milestones”), then the Company Holder Participants shall be entitled to receive an aggregate of one-third (1/3) of the Earnout Shares;
      • (iii)?In the event that the revenue of Pubco as reported in the audited consolidated financial statements set forth in the annual report of Pubco for fiscal year 2024 as filed with the SEC is equal to or exceeds Twenty-Five Million Dollars ($25,000,000) (the “First Revenue Milestone”), then the Company Holder Participants shall be entitled to receive an aggregate of one-twelfth of the Earnout Shares;
      • (iv) In the event that the EBITDA of Pubco for fiscal year 2024 is a positive number (the “First EDITDA Milestone”), then the Company Holder Participants shall be entitled to receive an aggregate of one-twelfth of the Earnout Shares;
      • (v) In the event that the revenue of Pubco as reported in the audited consolidated financial statements set forth in the annual report of Pubco for fiscal year 2025 filed with the SEC is equal to or exceeds Seventy-Five Million Dollars ($75,000,000) (the “Second Revenue Milestone” and, together with the First Revenue Milestone, the “Revenue Milestones”), then the Company Holder Participants shall be entitled to receive an aggregate of one-twelfth of the Earnout Shares; and
      • (vi) ?In the event that the EBITDA of Pubco for fiscal year 2025 is equal to or exceeds Twenty Million Dollars ($20,000,000) (the “Second EDITDA Milestone” and, together with the First EBITDA Milestone, the “EBITDA Milestones”), then the Company Holder Participants shall be entitled to receive an aggregate of one-twelfth of the Earnout Shares.
    • Notwithstanding the foregoing or anything contained herein to the contrary, in the event that any or all of Earnout Shares are not earned and issued pursuant to the above provisions, any unearned Earnout Shares (up to the maximum number of Earnout Shares) shall be earned in their entirety and issued to the Company Holder Participants if one of the following milestones is achieved:
      • (i) The revenue of Pubco as reported in the audited consolidated financial statements set forth in the annual report of Pubco for fiscal year 2026 filed with the SEC is equal to or exceeds One Hundred and Fifty Million Dollars ($150,000,000) and Pubco’s EBITDA for fiscal year 2026 equals or exceeds Sixty Million Dollars ($60,000,000); or
      • (ii) The revenue of Pubco as reported in the audited consolidated financial statements set forth in the annual report of Pubco for fiscal year 2027 filed with the SEC is equal to or exceeds Three Hundred Million Dollars ($300,000,000) and Pubco’s EBITDA for fiscal year 2027 equals or exceeds One Hundred Twenty Million Dollars ($120,000,000); or
      • (iii) The revenue of Pubco as reported in the audited consolidated financial statements set forth in the annual report of Pubco for fiscal year 2028 filed with the SEC is equal to or exceeds Five Hundred Million Dollars ($500,000,000) and Pubco’s EBITDA for fiscal year 2028 equals or exceeds Two Hundred Million Dollars ($200,000,000).

LOCK-UP

  • Company and Sponsor:
    • The Company and Sponsor agreed not to transfer any Lock-Up Shares for a period, ending on the earlier of:
      • (i) 6 months after the Closing, or
      • (ii) if the closing price of the Pubco Common Stock following the Closing equals or exceeds $12.00 per share for any 20 out of 30 consecutive trading days commencing at least 60 days after the Closing.

NOTABLE CONDITIONS TO CLOSING

  • Mars shareholder approval

NOTABLE CONDITIONS TO TERMINATION

  • The Business Combination Agreement may be terminated by either ScanTech or Mars if any of closing conditions have not been satisfied or waived by January 31, 2024.
    • The outside date was extended from January 31, 2024 to May 15, 2024 – LINK
    • The outside date was extended from May 15, 2024 to September 30, 2024 – LINK
    • The outside date was extended from September 30, 2024 to November 15, 2024- LINK
    • The outside date was extended from November 15, 2024 t December 23, 2024- LINK

ADVISORS

  • ScanTech Advisors:
    • Ellenoff Grossman & Schole LLP is acting as legal counsel
  • Mars Advisors:
    • VCL Law LLP is acting as legal counsel

MANAGEMENT & BOARD

Executive Officers

Karl Brenza, 57 [Appointed Chairman on 2/6/24]
Director, Chief Executive Officer, Chief Financial Officer, and Chairman

He is based in New York, New York. Mr. Brenza has over 25 years of investment banking and financial advisory experience as well as significant operational and technology experience as a corporate executive. He has extensive blank-check/SPAC experience and completed some of the earliest blank-check/SPAC transactions. During his career, Mr. Brenza has completed over 200 transactions in the areas of strategic advisory assignments, mergers, acquisitions, reverse merger transactions, IPOs, follow-on offerings, SPACs, PIPEs, fairness opinions and private financings. Mr. Brenza is currently serving as CFO of First Breach, Inc, a manufacturer of ammunition components and has held this position since November 2021. In addition, Mr. Brenza is CFO of Omni eCom Acquisition Corp. From August 2018 to November 2021, he was Senior Managing Director, Investment Banking for Paulson Investment Company. From August 2018 to December 2019, he also served as the Head of US Operations for Jerash Holdings US, a NASDAQ-listed manufacturer of outdoor and action garments and sportswear. From 2008 to 2018, Mr. Brenza was Senior Managing Director and Head of the Capital Growth Advisory Group at Maxim Group, LLC. Mr. Brenza received an MBA with honors from Columbia Business School, a BS in Electrical Engineering from the University of Pennsylvania and has been a guest lecturer at the NYU Stern Graduate School of Business.

Xiaochen (Iris) Zhao, 37
Chief Operating Officer & Director

Ms. Iris Zhao has 10 years of experience in building and advising corporations through M&A and capital market transactions globally. Ms. Zhao is responsible for managing and coordinating company’s investment, liquidity and asset liability management in order to optimize investment performance within the risk management guidelines. At the same time, to monitor company’s portfolio of assets, devise strategies for growth, act as the liaison with investors, and recognize and avoid serious risks. Ms. Zhao is proficient in road-shows presentation, structuring and negotiating transactions and terms with international investment communities and corporate finance. Ms. Zhao was appointed as the Chief Investment Officer of Future Fintech Group Inc. (NASDAQ stock ticker: FTFT) in February 2020. Prior to that she served as the Managing Partner of Wealth Index (Beijing) Fund Management Co., Ltd., which is a top financial advisory service corporation that focuses on financial advisory, private equities investment and investment banking businesses. From January 2011 to February 2019, Ms. Zhao was in charge of international business planning and developing, investor relationship support and relationships with global investors. Ms. Zhao has completed dozens of transactions in a wide range of transactions including IPOs, M&A transactions, RTOs, follow-on offerings, public and private fund raising, and PIPEs. In her early career, Ms. Zhao worked at SUNTV Video Ltd. As a Specialist in NYC. She brings experience in media, business negotiation, and is familiar with international business activities. Ms. Zhao studied Finance at New York City University and Montana State University. She received Bachelor of Science with highest honor in Finance from Montana State University and was appointed to Beta Gamma Sigma, international association of elite business schools. She received MBA from UP Diliman. Ms. Zhao is the Dame of Grace of the Order of Saint Lazarus of Jerusalem, and the first Commander of the Grand Priory of China. Ms. Zhao is Shanchun Huang’s wife.

Shanchun Huang, 55 [Resigned]
Chairman

Mr. Huang has over 16 years of experience in the financial service and investment industry. He has provided financing solutions and advice for high-growth companies in China and successfully assisted 37 enterprises to complete fundraising or public offerings in China. Mr. Huang has served as the CEO and director of Future Fintech Group, Inc. a Nasdaq-listed company and a blockchain based e-commerce platform since March 2020. Most recently, Mr. Huang served as the president of Wealth Index (Beijing) Fund Management Co., Ltd., which provides private equity fund management service, from March 2011 to March 2020 and president of Wealth Index (Beijing) International Investment Consulting Co., Ltd., which provides investment management and consulting services for non-securities related business, from August 2004 to March 2020. From May 2001 to June 2004, Mr. Huang was the vice president of Zhejiang Geely Holding Group Corporation, a global automobile company headquartered in Hangzhou, China. Mr. Huang graduated from Hefei Staff University of Science and Technology in July 1986 majoring in news collection and editing. Mr. Huang is also a prolific writer and has published four books in the finance and investment area in China. These books include How to Raise Money to Start a Business, the Road to Red Chips, Comparison and Research Among Global Capital Markets, and The Practice of Small and Medium Enterprises Listed Overseas and Hong Kong. Mr. Huang is the Knight Commander of Grace of the Order of Saint Lazarus of Jerusalem, and the first Grand Prior of the Grand Priory of China. Mr. Huang is our COO Xiaochen Zhao’s husband.

Board of Directors

Yenyou (Jeff) Zheng, 65
Independent Director

Dr. Zheng has over 20 years of experience in investment banking and financing industry. Dr. Zheng currently serves as the Director of Business Development of, and as a broker with, Craft Capital Management LLC and has served in such positions since September 2019. He is also currently an independent director of NovaBay Pharmaceuticals, Inc. (NYSE American: NBY) since September 2019. Prior to that, Dr. Zheng served as the Director of Business Development of Spartan Securities Group, Ltd. From 2014 to August 2019. Dr. Zheng’s experience includes providing innovative financial solutions and consulting services for initial public offering underwriting and investment banking as well as corporate financing solutions with a particular focus on Chinese companies listed overseas. Dr. Zheng received a Ph.D. in physics from Flinders University of South Australia.

James Jenkins, 57
Independent Director

He is based in Rochester, New York. Mr. Jenkins currently serves as chair of Lakeland Industries, Inc. (NASDAQ: Lake) Nominating Committee and serves on its Audit and Compensation Committees. He previously served on the board of Lakeland Industries, Inc. from 2012 to 2015 and was a member of the Audit and Corporate Governance Committees. He also serves on the Board, Audit and Compensation Committees of OmniLit Acquisition Corp. (NASDAQ: OLITU), a SPAC that recently raised $143.75 million.  Mr. Jenkins is a General Counsel and Vice President of Corporate Development at Transcat, Inc. (NASDAQ: TRNS) and has served in that position since September 2020. At Transcat he drives its acquisition strategy. Prior to that he served as a partner at Harter Secrest & Emery LLP, a regional law firm located in New York State. His practice focused in the areas of corporate governance and general corporate law matters, including initial and secondary public offerings, private placements, mergers and acquisitions, and securities law compliance. Mr. Jenkins joined Harter Secrest and Emery in 1989 as an associate and was elected a partner effective January 1, 1997. He is a Chambers rated attorney and served as a member of the firm’s Management Committee from January 2007 to January 2013. Mr. Jenkins holds a BA from Virginia Military Institute and a J.D. from West Virginia University College of Law.

Yang (Sean) Liu, 42
Independent Director

Mr. Liu is a seasoned executive with 16 years of experience in an array of industries including technologies, finance, investment banking and corporation. He has a proven record of driving growth within global organizations and management of public companies. Mr. Liu is currently the Chief Operating Officer of Future Fintech Group Inc. (NASDAQ stock ticker: FTFT), a Nasdaq company expanding globally aggressively in financial technologies and financial services. Mr. Liu served as the Chairman of the board and the Chief Executive Officer at Color Star Technology Co. Ltd (NASDAQ stock ticker: CSCW), a Nasdaq company, from March 2019 to July 2020. Through a series of acquisitions and dispositions, he successfully transformed the company from a traditional Chinese manufacturer into a global technology company in education and entertainment. He also served as the CEO and Chairman at Wave Sync Corporation, an OTC technology company from July 2017 to August 2018. From 2015 to 2017, Mr. Liu worked as an IT Manager at UBS, overseeing regional production support and implementation coordination of its core capital market software platform. Mr. Liu received two M.S. degrees in financial mathematics and electrical engineering from New Mexico State University in the United States. He also received a B.S. Degree in Electric Engineering from Tsinghua University in China.

Xin (Adam) He, 48
Independent Director

Mr. He has been a CFO for a Fortune Global 500 conglomerate, Wanda USA since May 2012. Amongst many of the responsibilities inherent to this leadership position, Mr. He played a key role in two of the most world-renowned projects – the development of a 101-story landmark “Vista Tower” in downtown Chicago and the acquisition of AMC Entertainment Inc, that he later led its IPO to NYSE in 2013. In addition, during the period of August 2012 to December 2014, Mr. He merged the qualities of Wanda with AMC that resulted in a historic highest profit for the American theatrical exhibition business that owns and operates 660 theatres. His diverse background across various industries came from his previous jobs as Financial Controller for NYSE listed Xinyuan Real Estate Co., auditor at Financial Service Office in Ernst & Young LLP in New York, and various leadership roles at Chinatex Corporation. Due to his exceptional public company management expertise, Mr. He was invited to serve as an independent board director at Energy Focus (NASDAQ: EFOI) from July 2014 to April 2015, iFresh Inc. (NASDAQ: IFMK) from December 2017 to April 2018, Professional Diversity Network (NASDAQ: IPDN) from January 2018 to March 2019, and Beijing Baosheng Media (NASDAQ: BAOS) from February 2021 to present. He is also deeply involved in a non-profit organization, as Vice Chair of the China General Chamber of Commerce Chicago, to bridge culture and business between US and China. His education and license strongly support this endeavor as he had obtained a Bachelor and Master of Science in Taxation from Central University of Finance and Economics in Beijing, and a Master of Science in Accounting from Seton Hall University in New Jersey. He is also a Certified Public Accountant both in China and in New York state.

 

ByAnthony Sozzi