What Breaks First After a DESPAC: The Deal or the Company?

Chaz C: This is Chaz with the D SPAC podcast, your host. I'm here today with Morris Zarif and he is with Zarif Law Group. I'm gonna tell you what, if you are a target looking for somebody. To help you navigate through the D SPAC process and you're looking for a phenomenal attorney at a phenomenal value.

I don't believe there is a better person that's really bridging those two right now, better than Morris. He's phenomenal in that way. So with that in frame. Morris, I want to bring you on. What's the 32nd elevator pitch for your law firm? 

Morris Z: Oh, gosh. Well, first of all, Chaz, always a pleasure, uh, speaking to, I think we probably have, uh, these conversations on a daily basis, so it's great to have it actually recorded for, for the record, which is great.

It's dangerous. And, uh, thank you for the KBoards. I really appreciate. It's, uh, it's very, um, so I guess the, the 32nd elevator pitch for Zarif Law Group is, you know, getting a big law expertise and experience, um, over the last 12 years of my, my, or 11 years of my practice, um, you know, I've been lucky enough to be trained by the best in, in the capital markets business.

And realized that on the small and micro cap, uh, space and the SPAC space, there is a ton of, um, untapped value for, uh, companies, issuers, uh, investment banks alike. Uh, where, you know, getting that big law expertise at a, a more strategic, uh, economic value makes, you know, makes the world of a difference in a transaction.

Um, so that's, that's really where we come in. We have, you know, the experience, expertise, uh, and personnel on, on hand to, to handle all types and manners of transactions in our capital market space, um, from, uh, you know, IPOs and formations to, uh, SPACs and D SPACs, um, to, you know, follow on offerings. Locs, we represent, uh, the issuers.

We represent the investment banks. Uh, and we try to always do so with an eye towards the company's, uh, long-term and short-term visions and goals, right? So it's, it's about their business and making sure that they can continue operating in the matter and achieving the goals that they have been looking to achieve over, over the course of their existence.

Chaz C: So, um, real quick, I, I want to know actually. Chris, I, I wanted to know can we, can we redo that? Because I want him to, to absolutely nail his intro with, there's the long version of that, but I want to make sure that we get a concise version of that in there, because I also wanted for to be able to like. To follow on with that with one other thing and fit 'em both into a short and Sure.

So like, let's, uh, let's hit that part again just with me asking you the question and, and then you kind of just diving straight in to 32nd elevator version of who like. Whose ZLG is and, um, at an ultra high view and your value proposition as if I was the CEO kind of thing. So, or as you're talking to CEOs, uh, specifically of private targets.

So, alright, so recording on that. Okay, Morris, so tell the audience this. Who is your firm? Like maybe they haven't heard of you, maybe they haven't. I want to hear from you in a bite-sized version. What's the elevator pitch? Who are you guys? 

Morris Z: Sure. Uh, as a reflow group, we were formed, uh, a little under two years ago.

Uh, we do everything in the capital markets in m and a space from IPO through follow on offerings, these spac, SPACs, uh, and we do so with the i towards adding value to the company in a, in their long-term goals. 

Chaz C: So, okay, let me ask you this. You're on the D SPAC podcast. Your firm is just under two years old.

Am I crazy for bringing you on here, or do you really have the experience? So 

Morris Z: I have been practicing for 11 plus years now. Uh, and I got super lucky in my career. I've been trained under the best. Uh, firms and, you know, I mean, we, I could name them, but you know, we're promoting the This is about you. Yeah, exactly.

And our audience, uh, super grateful for all of those experiences and all the mentors I've had over the years in the capital market space. Um, but you know, I, I realized, uh, a few years ago, more than a few years ago, that. With the big law experience and, and or mid-size law experience comes, uh, at a cost for companies that might not otherwise be able to, uh, afford that, or comes with a big sticker shop with, with that.

So, uh, you know, because of my experience and expertise that I've kind of accumulated over the last. Uh, decade plus, uh, you know, I'm able to offer that same level, uh, of expertise and experience, uh, while offering that that white glove service that people should expect from their, uh, law firms at, uh, pretty good economic value.

And, and, uh, you know, 

Chaz C: I love that. So, yeah, I mean, 'cause it is about value, right? It's you're trying to make sure that you've got a fiduciary duty to your shareholders. You've got, uh, to your investors. And for these private companies that are actually looking at who do we secure for legal counsel? Um, your firm can be a really solid option to them.

So let's dive in and start talking about things. 'cause I brought you on here not just to, to pitch your firm, even though I do think you guys are phenomenal, but I wanna talk to you about some of the stuff that you're seeing as somebody who has had their pulse or had the pulse of the Spac d SPAC market for.

Many years. Um, I'd love to know what litigation patterns you're seeing that have emerged out of the Spac d spac ecosystem. 

Morris Z: Yeah, it's, it's super interesting, right? Because the SPAC and d SPAC world has gone through four or five phases over the last decade or, or, uh, decade a half since I've, I've been practicing, I think.

Uh, most recently, you know, typically it's the, the retail investor. When, you know you have heavy, uh, redemption rates and the stock price of the DPAC company, kind of, yeah. It's no secret that these, that these stocks will sometimes take a dive immediately after, in the first year. 

Chaz C: Yeah. 

Morris Z: There are several new strategies, uh, out there in the works that are pretty innovative from a legal standpoint, a security standpoint, that have been, uh, limiting those, um.

Uh, those redemptions and stock price declines, you know, longer. Uh, lock lockup provisions, leak out provisions, um, uh, the ability, uh, to raise cash without diluting ownership in the long run. These all kind of contribute to, um, limitate limiting the downside risk post, uh, d spac, uh, business combination. 

Chaz C: So I, I actually, I'm glad you mentioned that 'cause that was really a thing that I kind of wanted to segue into next.

How do you, these companies, like, how do you see that these private companies, they're moving through the steps, they do a business combination, then all of a sudden they find themselves. Public, what are you seeing that, 'cause obviously the SPAC is gonna take their steps, they're incentivized to keep the stock price up to the best of their ability, but what do you believe is there on the target side that allows for them to make sure that their best foot is forward on uh, on supporting a higher price on the stock?

Morris Z: So there's a ton of things that target companies can do before. The SPAC conversation even happens. Right. And I think from a at least legal standpoint, the biggest thing, or a couple things are the corporate governance cleanup. Before you get to that point, if you are, if your balance sheet, if your capital structure, if you are.

Uh, IP even. Right? That's a, that's a huge issue when it comes to the D SPAC process, right? Who owns the ip? Is it under the inventor's name? Is it under the company's name? Right. And investors in the D SPAC process will want to know that that IP exists within the company in the company's name. Getting all that cleaned up takes time.

Right. And yeah, you are just starting to do that. Uh, after you sign a term sheet or after, uh, the ne the deal is announced, you're already a month or two behind because it takes 

Chaz C: Yeah, 

Morris Z: time to get all that in place. Um, so that's, that's one thing. The other, um, aspect of it that I think, uh, targets can really have a leg up in, uh, post.

Uh, business combination world when they are a public company is having, just having somebody, either a consultant or even a board member, an executive on, on, on Deck that knows how to run a public company because it's a completely different animal. Um, true story. And it takes a huge amount of resources to just do the public capital markets, uh, side of things from a a public company standpoint.

And it's a shame because the, the CEOs of these companies are super successful. They know their business and operations, uh, like nobody else does, and you don't wanna take away from those c those operators ability and experience and resources to put towards the actual business. So having somebody else kind of have that experience and being able to streamline that for the company as a whole.

Uh, is extremely helpful. 

Chaz C: So let's talk about that real quick. The, what you're talking about is really public readiness, right? It's that idea of are these private companies ready to step in, be public operators, jumping through the SEC hoops, NASDAQ nyse, whatever, and being able to. Manage all of that while also do the balancing act of satiating investors to stay in and go down the journey with them.

And basically you've gotta, uh, you've gotta do this balancing act all while. Avoiding landmines that are there and not saying the wrong thing, doing the wrong thing, not doing something you were supposed to do from a governance standpoint, all of that. So let me ask you, what would you say I, if you had to give a top two, and this is like not even a question.

I planned on asking if you had to give a top two ideas. What would you say are the top two things that they could invest just a very small amount of capital in as a private company that would, that would, uh, add immense value on public readiness for these private companies? 

Morris Z: Uh, well, first of all, their legal counsel is gonna make a huge difference.

Um, having, having, having legal counsel that is not just a tool that you point at and say, fix. Yeah. That has to be, they have to be proactive. Number one, they have to be strategic advisors with you, partnering with you on different ideas that come down the pipeline. Um, and on that same note, making sure that you, the, you know, the future public company operators and management understand that.

The operations feed the capital markets and the capital markets feed the operations, right? So you still have to, and primarily focus on the company's business, invest continuously invest in the company's business and not just, and I, I've seen this mistakes with these mistakes with a lot of different public companies in the past where they just focus on the capital markets aspect and the not realizing that really the operations is, and the business and the progress of that really drives.

Um, their success in the capital market space, uh, or not. Um, so aside from legal, uh. Having, making sure that they're protected. Uh, obviously from the risk side, uh, as you, I mean, your expertise is in there going in church for all day. I think making sure you know that you understand the risks and you're protected from the risks, right?

Because every company has their own risk profile and as you know, different managers have their own risk. Um, uh, their, you know, tolerance. Yeah, their risk tolerance. Thank you. Yeah. Uh, they have their own risk tolerance and from the legal side, it's our job to, you know, build that profile for them, make them understand like.

These risks for Tesla may not be applicable, but for you, let's talk about how it impacts your operations from the ground up and how it impacts your ability to, uh, comply with Nasdaq nice, ESEC rules, fin rules, uh, et cetera. Um, so once they understand those, they have to be able to get protection, uh, on the d and o side that protects themselves, protects future.

Directors and officers because you know, they want to attract the best. And no public, uh, or, or management team with public company experience is going to come on board to a newly public company if they think there's a possibility that they're, they're liable for whatever the company does. So. I dunno. Do you wanna give us a, a little bit of, of your take on the public company readiness and DNO?

Chaz C: Yeah, so I, I have a, I, I know that a lot of times when I talk to companies, it's an eyeopening moment for them, for these private operators when they realize that. Once they take on investors that those ve, those investors, the ones that they have a fiduciary responsibility to, if they aren't perceived as doing their job with excellence, they can be sued.

And if their company is either unwilling or unable to indemnify them, then their personal assets become exposed. And that's something that for a lot of people, it's just mind blowing. Um, especially whenever we go. And we, we see a deal happen with a foreign company because a lot of people don't realize it, but 97.3% of all securities litigation globally, mm-hmm.

Happens here in the United States, two percent's in Australia, and the remaining 0.7%. Is the rest of the world. Mm-hmm. So it's, you have foreign operators coming here and their minds are just blown around the concept of d and o insurance and uh, and, and the risk exposure that is there for them. So, but, um, so let me ask you this kind of circling back to you and your first thing that they can do to, to help ensure that they're public ready and you said that they need to be doing it before they even talk to a SPAC team.

So in my mind I'm thinking to myself, okay, so. So how many hours, like if they said, you know what, we wanna do a consult with a securities attorney, like on average, how many hours do you think that if they came to you and said, Morris, hey, we want to talk to you about where we are and have you give us some advice on what we should be doing to prep before we even talk to a SPAC team.

So that number one, the process is more smooth. And number two, we can expect what we are going into and not have just a whole lot of surprises that irritate us, shock us, dismay us. You know, like leave us dismayed, whatever. But then also number three, and I think even most valuable is positioning ourselves in the best light so that we look more attractive and more valuable to SPAC teams.

So like, if you were gonna do a consulting thing, um, and they came to you early, like. How many hours is that? Like 10 hours, 50 ballpark? Like any idea? Uh, it, 

Morris Z: it's obvi, you know, you know from your experience as well. It depends on the company itself, right? I mean, if they have super complicated cab tables with convertibles and, uh, uh, preferred with that are that are.

You know, tagged to a variable rate for conversion. You know, all of these things have to be handled before, and some of them may require shareholder approval to amend or, you know, the approval of the warrant holders or note holders or debt holders, whatever, whatever the case may be. Um, so it really, the ballpark really extends from anywhere from 10 hours for a really simple company to.

You know, upwards of 150. Like it really, okay. It really, really depends on the company, how big they are, how, how complicated their tr their corporate structure is. But I can tell you the leaner and the, the more uncomplicated it is, the better they are as a target. Um, you know, there are amazing consultants pre IPO consultants that, that go in there and clean things up even.

Um. From the inside out, which, you know, always happy to recommend. Those. The people that I've worked with, they're, they're really excellent. Um, and they actually, from an economic standpoint and value standpoint, actually, you know, create. A lot more value reduced the legal costs on both sides. Yeah, right. So from, from both the SPAC side and the PAC side, reduced costs.

Um, a lot people hate the word consultant, but these guys really, they get in there, they know more about the company than almost anybody else ends up knowing. And from a legal standpoint, like it really. It makes my job a thousand times easier. Right? You're putting together an S four or S one when you're doing an IPO or the dpac and those guys are gonna be the, the go-to person for all the information that you need.

They know all the ins and outs already for the last 'cause they've been involved for the last two, three months. Um, which, 

Chaz C: so I mean, and, and the reality is, right, like the money that they spend on the consultant, they, in a way they kind of get all of that back. Oh yeah. Because. They're spending less on billables for you because things are streamlined and well, to be fair, 

Morris Z: my, my, my fee structures are, are, uh, are structured in a way that makes it economical just for, for the record for them.

Fair enough, 

Chaz C: fair enough, fair enough. 

Morris Z: But I do think that the consultant side ends up being, uh, higher economic value at the end of the day than, than not having one For sure. 

Chaz C: Especially because of the fact that you're, those consultants have been there, they've done that. They've, they've learned a hard fought lesson more than once.

And you're, and it goes back 

Morris Z: directly to what we were talking about before about how hard it is to be a public company, CEO or management team. If you have that consultant there, that is the liaison between the company and legal, you never really have to worry about that. They're, they're the ones taking care of that.

They're the ones that are going to be at the forefront of, okay, listen, we wanna do this. Eloc post, uh, post IPO or post D SPAC transaction, all consultant go confer everything, get everything in line, uh, and that's that. And then just makes it easier for them to focus on the business. 

Chaz C: So let's shift gears a little bit for a second because I, I know that people love doing business with people that they like, right?

Like, um, and I, I think that it's important to know where, where a man or a woman stands whenever it comes to doing business with them from a perspective of ethics, morality, everything like that. Man, I, I just, uh, I'd love to hear from you on what's your, why. It's a simple question of what is your why? Like, why is it you are passionate about doing securities litiga, or not litigation, sorry, uh, doing securities law, helping a private company become public.

Like, why do you care about doing that? Um, why would it be a passion for you? Mm-hmm. And, and maybe it's personal. Maybe it's just. Maybe it's just dollars, maybe it's pride. I don't know, but I I'd love to hear what's your why. 

Morris Z: Oh, man. Uh, my original why is, is. More of a funny happenstance than anything else.

When I was in high school, I was doing book reports for, for money for other kids in my, my class. Shut up. Yeah. Uh, so one of them was about, uh, a stock trade and, and Wall Street and economics. And that's really, I, I think it was like Jim Cramer's book or something and I just happened to have gotten into it at that point.

Started day trading. I took a huge, like a three week course in the city on day trading. And, uh, I started day trading in late high school. College got me through college, so that was, that was good. But I knew I never wanted to do that as a, as a profession. Um, and that I always wanted to be an attorney. So the two just kind of fit with each other at that point.

Um. Again, I have been lucky enough to, to be trained by some of the greatest mentors I could, I could ask for. They're, they're fantastic over the course of my career. Um, and I absolutely love the space. Right. You are working with extremely, especially I think for, I might be biased, but in the mid-market, small in, in the mid cap, small cap and macro cap, you're working with some of the most passionate.

CEOs, CFOs, COOs, uh, in the industry, right? They, these guys are going tooth and nail. They're scraping going and, and, and, and moving forward. Yeah. Uh, trying to realize the dream that they, that they've been. Uh, on this journey for right, they're, they, they've tried to execute on these different scalable businesses, uh, and helping them get there and being, being a trusted advisor to me is the most humbling experience that I could, uh, ever express.

Like they come to me and they actually seek my advice and, and, and listen to it. And, um, that not being the reason, but the, but the kind of drive that makes me want to be better. And make sure that I'm giving them the best advice possible. Like, what's, what's going on in the market? Let me tell you about all these different people in my network that I can introduce you to that can make your life easier.

And hey, don't take your eye off the ball of, you know, yes, the capital markets and capital raising is extremely important in order to get your goals and achieve your goals. Um, but the operations of your business is. Where your primary focus needs to stay. Let me worry about the, the legal side and getting these deals done for you.

Uh, and let me discuss with you the different strategies that you're thinking about. Let me help you execute and get the people the right team in place to execute. So, uh, seeing them grow and seeing them. Uh, really especially on like, you know, the life sciences side, right? Getting these, uh, really cool medical devices or, uh, different pharmaceutical drugs out there, you know, between the cannabis and, and, um.

Uh, the different psychedelics that are, uh, are happening now in the pharmaceutical industry. It's really, it's exciting stuff right now. SpaceX is going public, uh, in 2026 apparently, which is huge, right? Yeah. It's all, it's all really exciting. It moves the world, right? The stuff is what moves markets. It's, uh, to me, 

Chaz C: so lemme ask you this as a kind of a follow on specifically for the DPAC side.

If a target was going to engage you, like. What does that relationship look like at, and what does that path look like for them? Like what do they expect kind of in two, two minute, high view? What is it that they're expecting in the relationship with you and on the course of that journey? 

Morris Z: Yeah. Um, I think what every client needs to expect from their attorney, which is constant communication and.

Uh, availability, right? I mean, we are in the service business. That's, that's my, that's my job. I serve my clients and my legal practice. Um, yeah, so I think there, there's a, a few steps that we take, uh, on, on, at least on the initial onboarding. Number one is we make it clear that I am available to them at their, at their leisure, right?

I have a WhatsApp group or message, uh, a message. With my clients, uh, constantly on WhatsApp, um, email, uh, they call me at all hours of the day, which I love, love it. Not, not, not disparaging. You call me, me at 2:00 AM you know, who you're, um, and, uh, so that, that's one aspect of it. Making sure that they understand.

You know, I, I, I hate the billable hour because I, I really dislike when clients are hesitant to call me. Even though my rates are obviously a lot lower than some of the other firms out there, not disparaging or saying that that's a bad thing or a good thing, but you know, hopefully that doesn't disincentivize uh, clients from calling up your attorney and giving, asking 'em a question because.

You never know when that question's gonna be extremely important. Usually the questions that the client, when clients tell me, oh, this might be a stupid question. Like, it's never a stupid question at that point. Yeah, it's, it's usually the simple stuff that get people stuck and and in trouble. Um, so there's that onboarding aspect, then it's going in there and understanding the company, making sure you understand the operations, the business, what their goals are in the short and long term.

Uh, cleaning all of that up and making sure that there's a strategy in place. To achieve those short and long term goals from a legal point of view, right? Cleaning up their capital structure, um, talking through, uh, their balance sheet and seeing how best to, uh, clean that up over the long term, uh, and short term.

Uh, and then, you know, going out into market and going and tapping in. Your own network, even though you are their legal representative, you still have a vast network of, of third party providers and investment banks and all these guys that you know will add value and making those connections and a proper and and value added way is really important.

Chaz C: So, okay. You, you talk about doing things in a proper value added way, like. There's a lot of times to where things don't happen in the proper way. There's times to where private companies might be stubborn and it ends up costing 'em money. You know, because of the fact that they just, they didn't want to, they didn't wanna listen, even though there's experience there.

Um, what are some of the common early mistakes that people can listen to you right now as a private company? What are some of the common mistakes you see private companies make as they're on their journey to be public, to where they're just. Whether they're being stubborn, they're banging their head against the wall.

They just ignored the problem until it was the 11th hour. Like, what, what did you see that happens that ends up, um, being an issue that maybe these private companies can listen and learn now and take your advice. 

Morris Z: Yeah, I, I really think this all ties back to corporate governance and corporate governance best practices, right?

Making, again, making sure your internal, uh, organs are, are clean and you get, and you do, uh, and you do have, um, you know, a, a purge of of, of, you know what you've done from the be your inception through. You know that date, right? Because when the SPAC looks at your documents and they do their diligence, they're going to want to see the story.

And, you know, every, every attorney start there on the corporate side, starts out doing diligence, and the thing you learn is that if they're, the diligence is supposed to tell the story of the company, right? You wanna see from beginning to, to the date of, you know, to the present date. What has the, where did the company come from?

Where is it now? Where is it going? If you can't piece together that story, uh, you're not passing diligence. And if you have gaps in your story, there is an issue there, uh, that we have to address. So the earlier you fix that, and I've had private comp, 'cause I, you know, my part of my practice is also m and a, uh, it's also startup advisory.

Um, so a lot of the times, you know, my startup clients will ask me like, is this really necessary for my size of a company? And I always tell 'em like, you could spend $250 extra now to do this con all inclusive consent that includes everything and properly, um. Forms the company now, or you could spend $50,000, uh, in five years from now when you're trying to sell the company and you to do corporate governance cleanup, like you Can you decide which one, because that's really where the, like, it's exponentially grows as you do and the problems exponentially grown.

Complexity exponentially. 

Chaz C: Yeah. And but, and even to the point, like, let's assume that it's a company that's, they're in d SPAC mode, right? Like they're looking to do a deal with a spac. They need to get their governance dialed in. Yeah. Like it's not, let's kick the can down the road. It's. It's time. Like, let's get it done, guys.

Yeah. And when they're in that situation, what is the difference in a governance structure that is strong versus a governance structure that's just gonna spiral downward and like, yeah. What, like what are some of the key components. 

Morris Z: Uh, so I think it depends. I think there's two buckets there. So if it's a, if it's a controlled company, when there, where there's one primary person that basically controls everything, um, you wanna make sure that there's a check and balance, right?

You wanna make sure that number one, they, he surrounds himself with people that, or she surrounds himself with people that doesn't, um, is, aren't just yes men or women to, to that person, right? You wanna make sure that they have a certain amount of. Credibility when they say this is good for shareholders and this is good for the company, not just myself.

Uh, and you wanna also make sure that every related party transaction, anything that this person does between that person and the company is papered over and, uh, has proper best practices, corporate governance. Because when, you know from the SPAC side, when I'm looking at diligence of the target and I see that the.

CEO rented out his house in the Hamptons to the company for board meetings every, every month, even though the company only had four board meetings for the course of its tenure, uh, history. You know, it becomes an issue, you know? Well, man, but it's the 

Chaz C: Augusta rule. A 

Morris Z: private company can do that, right? Yeah, for sure.

Absolutely. Just paper it over and make sure that it was approved. Uh, I'm not saying whether it's it's a proper or not, um, but. Uh, it definitely raises a lot of flags, right? And you have to be in a position to be able to talk about it and dispel any notion that there was, um. Self-dealing them. Um, on the other hand, on the other side, where it's not just one person, just having, you know, the, the general corporate.

If you, if you can show that you understand the corporate governance structure of your, of your company, that you have a board of directors that, you know, some of them are considered independent not from a NASDAQ rule or an IC rule or SAC perspective, but that they have the best interest of the company at heart versus.

Um, any other conflicts that they might have, 

Chaz C: and that's actually a thing that d and o insurance underwriters look at from a pricing perspective. Absolutely. That's, yeah. But sorry, continue. But 

Morris Z: yeah, no. Did I, I think it's a, it's an amazing point, and I think from a d and o perspective, uh, from the DO insurance perspective, um, I think it all ties into each other, right?

Like the, like Utah, I mean, you know, the underwriting process better than I do, of course. Um, but that legal aspect of it. Is the same, and the diligence side is the same as the underwriting side where the underwriters and I, I hope you give a little bit better insight than I can. They do look at, to make sure that that story is correct and they're going to carve out any of the gaps in that story.

Chaz C: I, I think it comes down to, and you could correct me, I think it comes down to basic oversight and accountability. Like people want to know that you don't just have a rogue CEO that's out there saying. I'm gonna roll how I'm gonna roll. 'cause it's how I've always done it, even when I've been private and it's them saying, Hey, we don't get to do things the way we used to.

We acknowledge that and we are submitting to the plurality of the board. Right. Which absolutely, and, and actually in truth be told, some CEOs, that's a tough pill to swallow. I mean, I, I know me as a company guy, like I own Churchwell Insurance like. For 11 years, I have owned my company, grown my company, and like, and I do things my way and I don't have to answer to anyone.

And all of a sudden you start putting all these guardrails on me when I've used to have freedom of how I did stuff. Yeah, it could be frustrating, but the truth of the matter is, and you can correct me if you have a different opinion, somebody who has the mindset that I have right now about how my insurance agency is ran.

Like they have no business being public unless they can shift that mindset. Absolutely. Absolutely. I think it's, 

that's 

Morris Z: that. I was thinking, uh, while you're talking of, uh, of two different CEOs that I was talking to over the last few weeks, one with that correct mindset, like, like you framed of, you know, I own.

X percent of this company, a very large controlling share, and I have these convertibles that are, that are obviously not okay for this specific company, uh, as it moves into the public sphere. Uh, obviously I'm willing to give up that for, for the benefit of having liquidity and having active to the capital markets versus one another.

CEO, who also a controlling shareholder that absolutely did not wanna give up. Anything, not like zero, control. Zero. And you know what? And, and, and sometimes you'll find the investment banker that is willing to go out in the market to to, to market that into the As and spin it off into a public company.

But it's, it's, they're hard pressed to do it. You're gonna find, you're not gonna find, uh, a lot of investment banking partners that are willing to, um, tolerate that, that. Rigidity. Right. Well, 

Chaz C: and you've got super voting rights. Right, right. Like yeah. Super voting rights. I will tell you, and if you're listening right now and you're a private company and you're thinking, well, that's how I want to do it, I will let you know that the propensity for litigation, securities, litigation against a company was super voting rights is going to be exponentially higher.

Right. You're gonna find that it will be harder to, to your point, Morris, to raise capital. Um, not as many people are gonna be excited about the deal, knowing that there's not accountability there. So that's huge. Speaking of like, speaking of getting capital, um, let's talk about the other side of that, spending capital.

What are some of the hidden costs other than legal fees? Oh, man. Yeah. What are the costs that a public company needs to be mindful of? As they prep to go public through a D spac and once they're public, what are some of those key ongoing costs that they're just like, holy crap, wait, what? I didn't know that that was there.

Morris Z: Yeah, yeah. No, there's a lot to unpack on the, on the legal cost or the cost side. Sorry, not the legal cost side, but on the cost side. Um, and I know you said other than the legal, but a legal takes takes. A big chunk out of, it's 

Chaz C: a huge chunk.

Morris Z: Yeah. 

Chaz C: Um, so making sure, that's why you 

Morris Z: guys also have great 

Chaz C: suits and time pieces.

You're like, you're crushing 

Morris Z: it. Uh, no time pieces for me. I, I keep it, I keep it very simple. I'm like my dad, the only, the only jewelry I wear is my Apple watch and my my ring, which there you go. My wife absolutely forces me to wear, dude, hey, what mama 

Chaz C: wants you do it. Yeah, exactly. So what are some of these costs?

What are some of these costs that these private companies doing a dpac need to. Be prepared for at through the d SPAC process and when they go public. 

Morris Z: Yeah, I'll kind of go through each one and, and give maybe my, my 2 cents forever for whatever it's, it's worth probably calls 1 cent. But um, on the legal side, you wanna make sure that you understand the scope.

Right. The, you know, from RIF law group's perspective, from Z G's perspective, we try to structure our legal fees that encompasses, that, that'll encompass everything, uh, under the sun except for extreme circumstances. And my clients will always tell you that I'm extremely, um, generous with my time, even if it's not within the scope of the engagement, uh, which.

I like because again, I hate when my clients don't wanna pick up the phone because they're afraid that I'm gonna build in. None of my clients have that fear. Um, but you wanna make sure if on the DPAC side, especially that when you engage your, uh, firm that. You understand that there's gonna be legal costs associated with the diligence with the m and a transaction, with the public company transaction, and then post, uh, business combination that they are either, they are also still on board to be your firm and you know what those costs will be and they're predictable for your cash flow.

Uh, or, um, or, you know, the, the securities attorney from the spac that, that stays on to be, continue your, as your securities counsel, um, and you wanna understand those costs. Uh, otherwise the audit process seems to be always one that catches, uh, targets off guard. Yeah. Um, you know, typically they'll get a quote and then the.

Actual bill tends to be somewhat higher to say the least than, than what expected. Uh, so always, always, uh, prepare for a larger or I think, larger audit co cost. Uh, on that side, unless you have a really great relationship and have experience with your auditor and not saying anything bad about auditing, I think they, they do their best to.

Um, come up with a fee structure that works for the information that they have at the time, and then as they audit things come up that require extra time. So that is another, uh, a really big one actually, is DNO insurance. I mean DNO insurance, even on the private side, uh, during the DPAC process. Is, is a cost that, um, private companies don't really realize that they should get for that, you know, I don't know, four or five month period.

Chaz C: Dude, I'm so happy you said that. Thank you. Yeah. Like, 'cause here's what a lot of private companies don't realize. Sometimes their attorneys don't think about it. Yeah. Um, the, but, but when you're private. While you're trending on that public, uh, that process to going public, all those filings you make through the d SPAC process, there is a, there is a legal exposure that's there.

So a lot of times they think as long as we have our DNO, whenever we consummate the D spac, then we're good. No, because what happens is, is the effective date of your D spac for that public DNO insurance, that is the date to where anything happening down the road, they're willing to come back to that date.

But if you end up in court because of something that was on the original S four filing, right? Then you could end up with a coverage gap because they're gonna say No, actually your, your p and p date pending a prior date. Like basically when you first had some coverage for d and o insurance, it didn't go back far enough.

To encompass that S four. So I always tell companies before you have your first filing, go out on Edgar announcing you to the world as a company that's going public through a D spac. Make sure you have private DNO insurance in place. They will typically, for you do it pro rata and then you take that amount of money.

And then you go forward, and a lot of times you'll see some value in taking that company, making it the primary layer on your public. That's a strategy move to talk about with your d and o guy. Happy to help. But, uh, but what you'll find is that there is absolutely a risk exposure when you're private and you're being listed in those filings saying that you're an entity that's about to be public coming down the road.

So, I'm, I'm so glad you said that. 

Morris Z: Yeah. I, I think, you know, we've, we've worked together in the past, and I think that you, you know, one of your greatest strengths is, number one, your passion for the risk aspect of d and o insurance. But also being able, able to explain it to, to clients right, is. It's fantastic because I know not, not everybody in the space has that ability of saying like, this is your risk profile.

Like, people are gonna tell you X, but really what you need to be thinking about is, you know, A, B, A, C, and D that you're not covered by. Yeah. Um, and even though it might cost more, here's your risk exposure if you don't get it. Um, and people tend to look at those numbers and, and get a little, uh. You know, nightmare, 

Chaz C: uh, that, well, when you start to look at the public DNO numbers, yeah.

They, they can be like, they can be, uh, stifling to, to see if you're not, if you're not prepared for them because it's six figures, you know, like it, so it's an unexpected thing. People are like, I've never paid six figures for any DNO or for any insurance. What the heck? But, but it's imperative. It's the one if you want to have solid directors on your team.

Um, it, it's the coverage you've gotta have and you should want it for yourself because your personal assets are exposed, right? I mean, it's, it's crazy 

Morris Z: and I think that sometimes the private companies are under the impression that they are covered by the d and o insurance of the spac, which is absolutely not 

Chaz C: true 

Morris Z: at all.

Uh, talking about the effectiveness of the S four. Um, so that's something also to, to that you've, that you've rightly dispelled from my, from my knowledge, which is great, 

Chaz C: dude. Okay. I want you to help me on something 'cause we're gonna, like, we're gonna close up here and in just a moment, but I want to find out from you.

Um, y you, you stepped out, you, you've been taking risks all your life, like from the time that you were writing book reports for other, other people and monetizing on that, which is risky business. Yeah. High school. Come on, man. All the way through like. Like stepping out, going to law school, doing the things that you've done, stepping out from a prestigious SPAC law firm and starting your own practice.

You're somebody who is like, who has taken risks embedded on yourself along the way. And obviously I applaud that other founder CEOs of private companies. I know they know how much that means and they respect it. Um, my question to you is this, what is something risky that you've always wanted to do, but you've been, but you've been scared to do it?

Morris Z: Oh 

Chaz C: man,

Morris Z: I don't, I don't know. That's, uh. I don't know. I mean, you know, I mean, you and I have talked about it, but you know, I've had a, I had a motorcycle, um, yeah. I used to go around the country like camping and, and stuff, so there's really not a lot I wouldn't do. I, I'm scared not. Listen, it did, it took me a while to, to get up the courage and go on my own.

Right. I, I left without a single client at the time. Right. It's not like some, some partners at firms can leave and take. X amount of business, book business with them and, and start their own thing. I, I literally had zero, uh, and grew it from zero to to seven people now, plus trying to scale up even more.

Um, I don't know any fears or things that I wouldn't, that I haven't had the opportunity to try or, or too risky to try. I don't know. I, I really don't, I'd have to think about that a little more. I, 

Chaz C: there's not much. I'm not even saying that like that it's too risky to try. Like there's things to where you can do that scare you.

Like you still might do it, but it scares you. Right. That was kind of what my thought was. Anything. 

Morris Z: Yeah. No, I really, I'm sure there is. I, I just, I don't know. There's not. 

Chaz C: Like, I'll tell you that I think I'm gonna have to get back to you. Now. I wanna go camping in Antarctica. Let's go. Like, I wanna do that.

And I don't know why, but like, let's do, that's something, uh, that's like the thing to where it's kinda like I, that's gonna be frigid, frigid cold. And if you get caught in a bad storm or something, it's wild. But yeah, you, that's kinda like, uh, that's something that's, that I'm, that I really wanna do and I hate the idea.

Like I'd be away from my family for a while. I love my family. I don't wanna be away from them. I know that is the hardest 

Morris Z: thing to do, to take your own vacation, like vacations, but things for your yourself that you need to, to do and, and leave your family is, is the hardest. Yeah, the hardest thing that you can actually, you know, do for yourself.

Um. That's thing, I dunno, you feel 

Chaz C: selfish. I feel selfish if I ever take off by myself for anything, like, 

Morris Z: I don't know. And so, so I encourage my wife to do it a lot. My wife, my, I, I try to get myself to do like weekends with her friends or, or go do a spa weekend or whatever it is. I haven't had that luxury yet over the last two years.

You know, I, I closed two deals while I was away in ca, in the Cayman Islands and, you know, met with different, you know, people might look down on, on that lack of work-life balance, but I don't know, trying to build something, there's no such thing, right? You're, yeah. Life is your work as long as it's feeding your.

Your family and you're doing, like you always tell me, do right by your family and nothing else matters. I think that's, uh, that's really, that's really the end goal, right? 

Chaz C: I love it, man. Well, hey everybody. I'm here with Morris Zarif from Zarif Law Group. My name is Chas Churchwell. This is the D SPAC podcast.

And make sure you smash the subscribe button, like the video. Give us a little love, give Morris a little love. And of course, if you love what you heard from him today, make sure that you reach out to us or stalk him on LinkedIn. Find him. I'm sure that he'd be happy to hear from you. Absolutely. Have an amazing day.

And Morris, thank you so much. 

Morris Z: Thank you so much. Jazz. Pleasure to be here.