As filed with the U.S. Securities and Exchange Commission on July 25, 2014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
_______________
FORM 10/A
Amendment No. 1
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
VALUESETTERS INC.
(Exact name of registrant as specified in its charter)
Utah | 87-0409951 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
430 North Street, White Plains, New York | 10605 | |
(Address of principal executive offices) | Zip Code |
(203) 525-0450 | ||
(Registrant’s telephone number, including area code) |
Copies to:
Mr. Manuel Teixeira
Chairman of the Board and Chief Executive Officer
ValueSetters Inc.
430 North Street
White Plains, New York 10605
Tel.: (203) 525-0450
-and-
Olshan Frome Wolosky LLP
Park Avenue Tower
65 East 55 th Street
New York, New York 10022
Attn.: Spencer G. Feldman, Esq.
Tel.: (212) 801-9200
Fax: (212) 801-6400
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 per share
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
VALUESETTERS, INC.
TABLE OF CONTENTS
Page | |||||
Item 1. | Business | 4 | |||
Item 1a. | Risk Factors | 8 | |||
Item 2. | Financial Information | 16 | |||
Item 3. | Description of Properties | 20 | |||
Item 4. | Security Ownership of Certain Beneficial Owners and Management | 20 | |||
Item 5. | Directors and Executive Officers | 21 | |||
Item 6. | Executive Compensation | 23 | |||
Item 7. | Certain Relationships and Related Transactions, and Director Independence | 24 | |||
Item 8. | Legal Proceedings | 24 | |||
Item 9. | Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters | 24 | |||
Item 10. | Recent Sales of Unregistered Securities | 25 | |||
Item 11. | Description of Registrant’s Securities to be Registered | 25 | |||
Item 12. | Indemnification of Directors and Officers | 26 | |||
Item 13. | Financial Statements and Supplementary Data | 26 | |||
Item 14. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 26 | |||
Item 15. | Financial Statements and Exhibits | 26 |
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EXPLANATORY NOTE
We are voluntarily filing this General Form for Registration of Securities on Form 10 to register our common stock, par value $0.001 per share (the “Common Stock”), pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Once this registration statement is deemed effective, we will be subject to the requirements of Regulation 13A under the Exchange Act, which will require us to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and we will be required to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(g) of the Exchange Act.
Throughout this registration statement, unless otherwise indicated by the context, references herein to the “Company,” “ValueSetters,” “we,” “us,” “our” or the “Registrant” means ValueSetters, Inc., a Utah corporation, and its corporate subsidiaries and predecessors.
FORWARD-LOOKING STATEMENTS
We caution readers that this registration statement contains forward-looking statements as that term is defined in the Exchange Act. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. We hereby qualify all our forward-looking statements by the following cautionary statements. Forward-looking statements are predictions and not guarantees of future performance or events. Forward-looking statements are based on current expectations rather than historical facts and relate to future events or future financial performance. Such statements are based on currently available financial and competitive information and are subject to various risks and uncertainties that could cause actual results to differ materially from historical experience and present expectations. Our actual results could differ materially from those stated or implied by such forward-looking statements due to risks and uncertainties associated with our business. Undue reliance should not be placed on forward-looking statements as such statements speak only as of the date on which they are made. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Some of the factors that could affect our financial performance, cause actual results to differ from our estimates, or underlie such forward-looking statements, are set forth below and in various places in this registration statement, including under the headings Item 1. “Business” and Item 1A. “Risk Factors” in this registration statement. These factors include:
· | general economic conditions; |
· | our future capital needs and our ability to obtain financing; |
· | anticipated and unanticipated trends and conditions in our industry, including the impact of recent or future regulatory environment; |
· | recent and future economic conditions, including turmoil in the financial and credit markets; |
· | the effectiveness of our marketing to maintain existing and attract new customers; |
· | our ability to contain costs; |
· | our ability to predict consumer preferences and changes in trends, technology and consumer acceptance of both new designs and newly introduced products; |
· | changes in the costs of labor and advertising; |
· | our ability to carry out our business strategies; |
· | the level of consumer spending for gaming and entertainment; |
· | our ability to compete; and |
· | other factors set forth in this registration statement. |
You are cautioned that all forward-looking statements involve risks and uncertainties. We undertake no obligation to amend this registration statement or revise publicly these forward-looking statements (other than pursuant to reporting obligations imposed on registrants pursuant to applicable federal securities laws) to reflect subsequent events or circumstances.
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ITEM 1. | BUSINESS. |
Business and Operations
We are an Internet-based game company that seeks free subscribers and revenue-generating subscribers. We allow subscribers to play games of chess for free and not receive rankings. We charge a fee to play the game against advanced players and to receive a ranking. We operate on an automated basis. We believe that Internet operations, customer sign-ups and game playing should occur without human intervention so that they can scale rapidly in the event the number of subscribers of the game begins to rapidly grow on a viral basis. We rely significantly on the programs we purchased, including the assets of NetGames.com, and we intend to acquire other Internet-based games and programs that can generate revenue with a minimum of personnel.
The games on our website use software technology that provides easy-to-use graphics, and allows real time interactivity with a competitor. Our one operational website is www.chess.net, which allows a person to play chess online, without typing any words, unless the person wants to use the website’s chat feature. People have the option of loading and playing games through their web browser with no downloading, or a person may download our chess software in order to play rated games and enter tournaments. Once the necessary software has been downloaded, a customer is required to provide certain personal and financial information, including a user name, password and bank or credit card information, in order to open an account.
Most of our players have a chess rating calculated based on their results achieved while playing on our site. An average player or an advanced player can be quantified by his rating on our site.. A subscriber has the opportunity to play an advanced player, based on these ratings, or to play an “advanced player” that is represented by our automated artificial intelligence system, which is designed to play at a level that is higher than the ranking of the subscriber. The subscriber is capable of winning a chess game against the artificial intelligence program, unless the artificial intelligence is set at its highest level, when beating the computer program is unlikely. Many of our subscribers choose to play our computer players and they are aware of when they are playing against artificial intelligence because those players are marked with a ©. We adjust the skill level of the computer player to challenge our subscribers and help them play at a higher level.
A person need not open an account to browse the website or play pick-up games. In order to enter chess tournaments and develop a track record that allows a person to be ranked against other players, a person must purchase a monthly, quarterly or annual membership. We sell memberships for $4.00 per month, $8.00 per quarter and $30.00 per year. Returning players on annual subscriptions may be offered a non-refundable price of $20.00 per year. Returning players on quarterly subscriptions may be offered a non-refundable price of $5.00 per quarter.
In addition to paid subscribers, we seek free subscribers for a variety of reasons. We believe our online chess platform is enjoyable and functional and that more people are willing to use our revenue-generating services if they can try our chess platform free of charge. Once we have a free subscriber, we can encourage the subscriber to sign up for the paid service and receive rankings against other paid members. Additionally, many cloud-based companies have found that free subscribers are a source of value because they attract advertising revenue. Furthermore, we have the email address of all our subscribers, and we plan to market newly developed applications for games, music and movies to the people who have registered on our chess platform.
We currently have 429,019 free subscribers and 268 paid subscribers, consisting of 12 monthly players, 11 quarterly players and 245 annual players. At the end of fiscal 2012 we had 245 paid subscribers, consisting of 14 monthly players, 29 quarterly players and 202 annual players. At the end of fiscal 2013 we had 277 paid subscribers, consisting of 6 monthly players, 24 quarterly players and 247 annual players.
We plan to develop other interactive Internet-based games, including ones that are designed for smart phone users. We design our websites to be an entertaining, interactive, real time playing experience that provides maximum privacy and security to the customer. With respect to customer privacy and security, we do not disclose any personal information relating to any customer, but certain customers who use our on-line chat feature may decide to reveal their identities to other customers, or exchange email addresses or telephone numbers.
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We are seeking to acquire digital products that we can sell and deliver instantly to a customer, over an Internet connection. We are considering a variety of games, apps, music and movies. Given that we do not have any full-time employees, we rely on our Chief Executive Officer, our board of directors and our board of advisors to identify and introduce us to products that we can potentially develop ourselves, buy, or resell on a white-label basis from the developer.
We have entered into agreements with StationDigital and VoX Communications for us to resell their music library and mobile VoIP app, respectively, to end-users over an Internet connection. Our plan is to use the automated delivery and billing platforms of StationDigital and VoX Communications to help us expand our customer base without requiring us, initially, to add fixed overhead expenses to our operations. We plan to use a variable-cost model for adding digital products, until we can generate enough revenue to justify cash expenditures for fixed expenses.
We began marketing the mobile VoIP app, under our brand name of V-Star, in the first quarter of fiscal 2015, and we anticipate that StationDigital will have built our music-delivery platform, which will allow us to sell songs, by the end of our second quarter of fiscal 2015.
Our existing game platform was purchased, and as noted above, we plan to use other people’s technology to provide us with digital products that we can sell under our brand name to consumers. We have, however, added to our advisory board, three people who have significant experience with the development of Internet-based and smart-phone-based games and applications. Joe Abrams, Nolan Bushnell and John Fanning are three advisory board members (the “Advisors”) who have extensive personal experience with creating value in companies such as Atari, Myspace and Napster.
We have compensated the Advisors with 5-year stock options that fully vest over a three year period. On May 7, 2014, each Advisor was granted an option to purchase up to 6 million shares of our common stock at a price of $0.03 per share. They are required to attend 4 advisory board meetings each year and we engage them individually when needed for specific projects. We do not have the cash resources needed to pay for their services, but we believe that by providing the Advisors with an equity ownership in the Company via a stock option grant, we strengthen their commitment to the success of the Company, and stimulates their efforts on behalf of the Company.
As of our most recent audit period, the year ended April 30, 2013, we had revenues of $8,127, assets of $3,075, current liabilities of $685,601and a net loss of $26,370. Despite our significant amount of debt, we have nominal debt service requirements. Most of our debt is owed to related parties. Included in our currently liabilities of $685,601 is $69,254 of debt that we owe to our secured lender (who is our majority shareholder), which has not required any principal or interest payments. Similarly, we have an interest-bearing note payable to our former Chairman of the Board, to whom we owe $348,066, and we have not been required to make any interest or principal payments. We also have a demand note payable of $15,000 to an individual, who has not demanded payment, and a loan from Chase Bank of $50,229. For the years ended April 30, 2013 and 2012, the bank has required only interest payments.
Our cash requirements to fund our operations are approximately $1,500 a month, or $18,000 a year. Our secured lender provided us with additional cash loans of $18,021 and $18,087 for the years ended April 30, 2013 and 2012, respectively. Our secured lender has also provided us with the cash financing we needed in fiscal 2014 to meet our monthly cash burn. We typically operate with cash balances of $1,000 or less, and ask our secured lender to forward us additional cash to meet the current month’s bills. We anticipate that our secured lender will continue to fund our cash burn until we are able to raise cash through an equity offering. We are not able to raise funds until we increase our authorized stock. We have filed a preliminary information statement on Schedule 14C to increase our authorized shares of common stock from 500,000,000 to 900,000,000.
We know of no funds that are available to us, except for the monthly loans that we have been receiving from our secured lender, and we have no written commitment from our secured lender that such monthly advances will continue in the future, although we anticipate they will. We anticipate that we will be dependent, for the near future, on additional capital to fund our operating expenses and anticipated growth. We estimate that we will need $250,000 in funds to accomplish our goals of becoming cash-flow positive with our current initiatives to sell games, apps and music. The report of our independent registered public accounting firm expresses substantial doubt about our ability to continue as a going concern.
In addition to the revenues we generate on our chess site, we sell advertising services and we provide an application on the Google Play app store that subscribers can download. A nominal portion of our revenues is derived from advertising services.
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Corporate History
We were incorporated in the State of Utah in April 1984 under our previous name, DBS Investments, Inc. A change of control of our company occurred in December 2003 and we changed our name to ValueSetters Inc., when we, in conjunction with a plan of reorganization, merged with ValueSetters L.L.C., an Arizona limited liability corporation. Another change of control of our company occurred on November 23, 2010 when a contract of sale was signed that required us to issue or cause to be issued from existing shareholders an aggregate of 417,048,000 shares of Common Stock to acquire the assets of NetGames.com.
After the merger in December 2003, the founders of ValueSetters L.L.C. held 75% of the shares of the merged business, the shareholders of DBS Investments held 6% of the shares and new investors acquired 19% of the shares. ValueSetters launched its business with a unique consumer goods distribution model that was designed to:
· | provide manufacturers and importers with access to profitable incremental sales to small-store and non-store resellers, |
· | provide small-store and non-store resellers with cost-effective access to products from large manufacturers and importers, and |
· | utilize its proprietary computer-Internet based system to allow the Company to efficiently receive small orders from individual resellers, consolidate them and process them to large manufacturers and importers who would not otherwise find it economically feasible to deal with small retailers and vice versa, |
When the operations of ValueSetters failed to generate enough revenue to sustain its business, we terminated operations and looked to invest in another business. In order to take advantage of the increasing game activities on the Internet, on November 23, 2010, we signed a contract to purchase all the assets of NetGames.com, a company that owned several websites and operated a small Internet-based chess game known as Chess.net. Our operations now consist of the revenue provided by the website at www.chess.net . In conjunction with the purchase of this website, VaxStar LLC became the majority owner of our company.
Since our acquisition of Chess.net, we have upgraded the website, improved the graphical layout and changed the payment system. New programming techniques and features were applied to the former chess.net website, to create a modern, reliable and functionally effective and attractive design. The upgrade in the payment system follows the new trends of international payment gateways. We intend to continue to increase our marketing and administrative activities, and to increase other operating expenses as required to build our business.
Competition
We compete with a number of public and private companies, which provide electronic commerce and/or Internet games. Most of our competitors have significant financial resources, and occupy entrenched position in the market and name-brand recognition. We also face challenges from new Internet sites that aim to attract subscribers who seek to play interactive games and obtain ratings and status for superior playing skills. Such companies may be able to attract significantly more subscribers than us because of new marketing ideas and new game concepts.
The barriers to entry into most Internet markets are relatively low, making them accessible to a large number of entities and individuals. We believe the principal competitive factors in our industry that create certain barriers to entry include but are not limited to reputation, technology, financial stability and resources, proven track record of successful operations, critical mass, independent oversight and transparency of business practices. While these barriers will limit those able to enter or compete effectively in the market, it is likely that new competitors as well as laws and regulations of governmental authority will be established in the future, in addition to our known current competitors.
Increased competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial condition.
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Industry Regulation
We are subject, both directly and indirectly, to various laws and regulations relating to our business. If any of the laws are amended, compliance could become more expensive and directly affect our income. We intend to comply with such laws, but new restrictions may arise that could materially adversely affect our Company.
Research and Development
We do not currently have a budget specifically allocated for research and development purposes.
Employees
As of June 30, 2014, we had no full-time employees and one part-time employee (Manuel Teixeira, our Chairman and Chief Executive Officer). Mr. Teixeira is engaged in outside business activities and we anticipate he will continue to devote 8 hours per week to our business until we develop or acquire additional games.
We consider our corporate secretary, Mr. Avi Liss, to be an independent board member. Mr. Liss is an attorney with his own legal practice, and advises us on a non-compensated basis. We do not pay him a salary and we do not consider him an employee. He devotes approximately 1 hour a week to our business.
Corporate Information
Our principal executive office is located at 430 North Street, White Plains, New York 10605. This location is adequate for our current needs. Our telephone number is (203) 525-0450 and our facsimile is (914) 517-1632. We maintain a website at http://www.chess.net and http://www.valuesetters.com.
Reports to Security Holders
We are currently not required to deliver an annual report to security holders, and at this time do not anticipate the distribution of such a report.
We will voluntarily file reports with the SEC, be a reporting company and comply with the requirements of the Exchange Act. Upon effectiveness of the Form 10, the Company will be subject to the reporting requirements under Section 13(a) of the Exchange Act and Rules 13a-l and 13a-13 thereunder.
The public may read and copy any materials we file with the SEC in the SEC's Public Reference Section, Room 1580, 100 F Street N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Section by calling the SEC at 1-800-SEC-0330. Additionally, the SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, which can be found at http://www.sec.gov.
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Item 1A. | RISK FACTORS. |
An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information in this registration statement before investing in our common stock. If any of the following risks occur, our business, operating results and financial condition could be seriously harmed.
We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company.
We were incorporated in the State of Utah in April 1984. We have no significant financial resources and limited revenues to date. The likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays frequently encountered by a small developing company starting a new business enterprise and the highly competitive environment in which we will operate. Since we have a limited operating history, we cannot assure you that our business will be profitable or that we will ever generate sufficient revenues to meet our expenses and support our anticipated activities.
We will require financing to achieve our current business strategy and our inability to obtain such financing could prohibit us from executing our business plan and cause us to slow down our expansion of operations.
We will need to raise additional funds through public or private debt or sale of equity to achieve our current business strategy.
Such financing may not be available when needed. Even if such financing is available, it may be on terms that are materially adverse
to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. We estimate
our capital requirements to implement our business strategy will be approximately $250,000. Moreover, in addition to monies needed
to continue operations over the next twelve months, we anticipate requiring additional funds in order to implement our plan of
operations. No assurance can be given that such funds will be available or, if available, will be on commercially reasonable terms
satisfactory to us. There can be no assurance that we will be able to obtain financing if and when it is needed on terms we deem
acceptable. If we are unable to obtain financing on reasonable terms, we could be forced to delay or scale back our plans for expansion.
In addition, such inability to obtain financing on reasonable terms could have a material adverse effect on our business, operating
results, or financial condition.
Our auditor has expressed substantial doubt as to our ability to continue as a going concern .
Based on our financial history since inception, our auditor has expressed substantial doubt as to our ability to continue as a
going concern. At April 30, 2013, we had not yet achieved profitable operations, and had accumulated losses of $1,603,494. We expect
to incur further losses in the development of our business, all of which casts substantial doubt about our ability to continue
as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate future profitable operations
and/or to obtain the necessary financing to meet our obligations and repay our liabilities arising from normal business operations
when they come due. Management anticipates that additional funding will be in the form of equity financing from the sale of common
stock. Management may also seek to obtain short-term loans from the directors of our company or from our majority shareholder.
There are no current arrangements in place for equity funding and our majority shareholder may not be able to provide us with enough
working capital via short-term loans. If we cannot generate sufficient revenues from our services or seek additional funding we
may have to delay the implementation of our business plan.
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The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, and other applicable securities rules and regulations. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, and such attention could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants who will increase our costs and expenses.
In addition, 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. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
However, for as long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these reporting exemptions until we are no longer an “emerging growth company.”
We would cease to be an “emerging growth company” upon the earliest of: (i) the first fiscal year following the fifth anniversary of our becoming a reporting company, (ii) the first fiscal year after our annual gross revenues are $1.0 billion or more, (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities or (iv) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $75 million as of the end of the second quarter of that fiscal year.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
In fiscal 2014, our costs of being public include fees to our independent registered public accounting firm of $10,300 and legal fees that we estimate to be $6,000. Our legal fees may be higher if our outside securities firm requires time in excess of what it estimated to complete its review of our public filings. We have no insurance coverage for directors and officers. We anticipate the costs of being a public company will increase for us in fiscal 2015 and we believe our independent board members will ask us to consider incurring the additional expense of directors and officers’ liability insurance coverage. We do not know what the annual cost of a policy would be and do not know if we can obtain coverage at a reasonable price. Our secured lender has funded the costs related to being a public company, but it has no obligation to continue funding such costs.
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We may need to raise additional funds through public or private debt or sale of equity to pay for the costs we incur as a public company. Such financing may not be available when needed. Even if such financing is available, it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. No assurance can be given that such funds will be available or, if available, will be on commercially reasonable terms satisfactory to us. There can be no assurance that we will be able to obtain financing if and when it is needed on terms we deem acceptable. If we are unable to obtain financing on reasonable terms, we could be forced to discontinue our public reporting.
As a result of disclosure of information in this report and in future filings required of a public company, our business and financial condition will become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business and operating results could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business and operating results.
We are dependent on a small number of individuals and they only work on a part-time basis.
Our two corporate officers only devote a small percentage of their time to Company business. Our Chief Executive Officer provides consulting and tax services to a variety of companies and devotes only 20% of his time to the Company. Our Secretary provides legal and consulting services to a variety of companies and devotes only 5% of his time to the Company. This lack of a full-time effort in certain cases will probably cause management to be distracted by other business and miss opportunities that full-time managers would recognize and take advantage of. Management’s decisions and choices may not be well thought out and operations and earnings and ultimate financial success may suffer irreparable harm. Additionally, these individuals have not previously worked together.
To help compensate for the lack of full-time employees, the Company also uses outside consultants. We have accounting consultants, acquisition consultants, and sales and marketing consultants for project purposes on a part time basis; three advisors assist us with project evaluations and business development, information and research, technical writing and presentation. The Company will consider full time employees upon sufficient capitalization and cash flow, which may include the acquisition of another chess web site or an Internet-related business that sells digital products. Future performance will be substantially dependent on the continued services of management and the ability to retain and motivate them. The loss of the services of our Chief Executive Officer could affect activities of our business and its operations until additional personnel can be retained and trained to perform some of the management tasks. At the present time the Company does not have long-term employment agreements with any personnel and does not maintain any life insurance policies.
We are dependent on a small number of individuals who occupy all corporate positions. Given our lack of employees and executive officers, it may not be possible for us to have adequate internal controls, and we believe that we have material weaknesses in internal controls.
Many of the key responsibilities of our business have been assigned to two individuals. Our ability to implement adequate internal controls depends, in part, on our ability to attract trained professional staff that allows us to segregate duties among several individuals.
The Company’s management has evaluated the effectiveness of its internal control over financial reporting as of April 30, 2014 based on the criteria established in a report entitled “Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission in Release No. 34-55929. Based on this evaluation, the Company’s management has evaluated and concluded that the Company’s internal control over financial reporting was ineffective as of April 30, 2014 and continues to be ineffective as of today, and identified the following material weaknesses:
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● | There is a lack of accounting personnel with the requisite knowledge of Generally Accepted Accounting Principles in the US (“GAAP”), and the financial reporting requirements of the SEC; |
● | There are insufficient written policies and procedures to insure the correct application of accounting and financial reporting with respect to the current requirements of GAAP and SEC disclosure requirements; and |
● | There is a lack of segregation of duties, in that we only had one person performing all accounting-related duties. |
The lack of sufficient internal controls and the time and cost of implementing such controls could delay the development and introduction of, and negatively impact our ability to sell our services, which could adversely affect our financial results and impair our growth.
The adoption of new laws or changes to or the application of existing laws relating to Internet commerce may affect the growth of our business.
We may become subject to any number of laws and regulations that may be adopted with respect to the Internet and electronic commerce. New laws and regulations that address issues such as user privacy, pricing, online content regulation, taxation, advertising, intellectual property, information security, and the characteristics and quality of online products and services may be enacted. As well, current laws, which predate or are incompatible with the Internet and electronic commerce, may be applied and enforced in a manner that restricts the electronic commerce market. The application of such pre-existing laws regulating communications or commerce in the context of the Internet and electronic commerce is uncertain. Moreover, it may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership and infringement, libel and personal privacy are applicable to the Internet.
The adoption of new laws or regulations relating to the Internet, or particular applications or interpretations of existing laws, could decrease the growth in the use of the Internet, decrease the demand for our products and services, increase our cost of doing business or could otherwise have a material adverse affect on our business, revenues, operating results and financial condition.
Many major economies are in a recession and unless these economies improve it will adversely impact our business.
We sell a form of entertainment for individual consumers throughout the world, and consequently the ability to successfully deploy our business model is heavily dependent upon the general state of the economy. If consumers have limited discretionary income, we may not be able to attract enough paying subscribers to make our chess business profitable or to generate new Internet games that consumers are willing to purchase and play. We cannot assure you that favorable conditions will exist in the future. A continued long-term economic recession in several countries could have a serious adverse economic impact on us and our ability to obtain funding and generate projected revenues.
Our business depends on the reliability of the infrastructure that supports the Internet and the viability of the Internet.
The growth of Internet usage has caused frequent interruptions and delays in processing and transmitting data over the Internet. There can be no assurance that the Internet infrastructure or the Company’s own network systems will continue to be able to support the demands placed on it by the continued growth of the Internet, the overall online gaming industry or that of our customers.
The Internet’s viability could be affected if the necessary infrastructure is not sufficient, or if other technologies and technological devices eclipse the Internet as a viable channel.
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End-users of our software depend on Internet Service Providers (“ISPs”), online service providers and our system infrastructure for access to the Internet sites that we operate. Many of these services have experienced service outages in the past and could experience service outages, delays and other difficulties due to system failures, stability or interruption. As a result, we may not be able to meet a level of service that we have promised to our subscribers, and we may be in breach of our contractual commitments, which could materially adversely affect our business, revenues, operating results and financial condition.
Game playing on the Internet is a developing industry and, therefore, we do not know if the market will continue to develop and our products and services will continue to be in demand.
The Internet continues to evolve rapidly and is characterized by an increasing number of market entrants. The demand and acceptance for new products and services are subject to a level of uncertainty and growing competition, and if our games do not receive market acceptance, our business, revenues, operating results and financial condition could be materially adversely affected.
Our game software, the Internet and electronic commerce services are subject to security risks, which may inhibit the growth of the industry and the acceptance of our products and services.
Our game software, the Internet and electronic commerce services are reliant on technologies and network systems to securely handle transactions and user information over the Internet, which may be vulnerable to system intrusions, unauthorized access or manipulation. As users become increasingly sophisticated and devise new ways to commit fraud, our security and network systems may be tested and subject to attack.
We implement and plan to continue to implement measures to protect against these intrusions. However, there is no assurance that all such intrusions or attacks will or can be prevented in the future, and any system intrusion/attack may cause a delay, interruption or financial loss, which could have a material adverse effect on our business, revenue, operating results and financial condition.
Intense competition could prevent us from increasing our market share and growing our revenues.
We compete with a number of public and private companies, which provide electronic commerce and/or Internet games. Most of our competitors have significant financial resources, and occupy entrenched position in the market and name-brand recognition. We also face challenges from new Internet sites that aim to attract subscribers who seek to play interactive games and obtain ratings and status for superior playing skills. Such companies may be able to attract significantly more subscribers than us because of new marketing ideas and new game concepts.
The barriers to entry into most Internet markets are relatively low, making them accessible to a large number of entities and individuals. We believe the principal competitive factors in our industry that create certain barriers to entry include but are not limited to reputation, technology, financial stability and resources, proven track record of successful operations, critical mass independent oversight and transparency of business practices. While these barriers will limit those able to enter or compete effectively in the market, it is likely that new competitors as well as laws and regulations of governmental authority will be established in the future, in addition to our known current competitors.
Increased competition from current and future competitors may in the future materially adversely affect our business, revenues, operating results and financial condition.
Our debt level could negatively impact our financial condition, results of operations and business prospects.
As of April 30, 2013, our total debt payable amounted to $482,549, all of which is currently due and payable. Our lenders have been cooperative, and all of the debt, except for $65,229, is from related parties, whom be believe will not demand immediate repayment. Our level of debt could have significant consequences to our shareholders, including the following:
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- | requiring the dedication of a substantial portion of cash flow from operations to make payments on debt, thereby reducing the availability of cash flow for working capital, capital expenditures and other general business activities; |
- | requiring a substantial portion of our corporate cash reserves to be held as a reserve for debt service, limiting our ability to invest in new growth opportunities; |
- | limiting the ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions and general corporate and other activities; |
- | limiting the flexibility in planning for, or reacting to, changes in the business and industry in which we operate; |
- | increasing our vulnerability to both general and industry-specific adverse economic conditions; |
- | being at a competitive disadvantage against less leveraged competitors; |
- | being vulnerable to increases in prevailing interest rates; |
Our ability to make payments of principal and interest, or to refinance our indebtedness, depends on our future performance, which is subject to economic, financial, competitive and other factors. Our business is not currently generating positive cash flow and may not generate cash flow in the future sufficient to service our debt because of factors beyond our control, including but not limited to our ability to market our products and expand our operations. If we are unable to generate sufficient cash flows, we may be required to adopt one or more alternatives, such as restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
We will require our related-party lenders to cooperate with us and, among other things, not demand repayments of principal and interest until the business is capable of making such payments.
We do not expect that we will be able to obtain the funds to pay principal and interest on our related-party debt by utilizing cash flow from operations. We are operating as a development stage company and our ability to meet these payment obligations will depend on expansion of our revenues and our future financial performance, which will be affected by financial, business, economic and other factors. We will not be able to control many of these factors, such as economic conditions in the markets in which we operate or the ability to raise additional capital in a timely manner. We cannot be certain that our future cash flow from operations will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If cash flow from operations is insufficient, we may be required to refinance all or part of our existing debt, sell assets, and borrow more money or issue additional equity.
We owe a related party, the founder of Valuesetters Inc., and a family member, $348,066 at June 30, 2014. The founder holds a demand note, at a variable interest rate that approximates 2.5% per annum. We have not paid interest on the note and it accrues each month. We owe our secured lender, Vaxstar LLC (the “Lender”), who is also our majority shareholder, $91,407 at June 30, 2014. Our Lender holds a demand note bearing interest at an annual rate of 8%. We have not paid interest on the note and it accrues each month. We have a revolving loan and security agreement (the “Loan”) with the Lender for a maximum amount of $250,000. The Lender has provided us with cash advances to pay our operating expenses, but there is no assurance the Lender will continue to provide cash advances.
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To secure the payment of all obligations to the lender, the Company granted to the lender a continuing security interest and first lien on all of the assets of the Company.
In connection with the Loan, the Company has agreed to certain restrictive covenants, including, among others, that the Company may not convey, sell lease, transfer or otherwise dispose of any part of its business or property, except as permitted in the agreement, dissolve, liquidate or merge with any other party unless, in the case of a merger, the Company is the surviving entity, incur any indebtedness except as defined in the agreement, create or allow an lien on any of its assets or collateral that has been pledge to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business, or make any material capital expenditures.
We may need to renegotiate our related-party debt if our related-party lenders demand that we begin making principal or interest payments. Any renegotiation may be on less favorable terms or may require that we refinance the related-party debt. We may need to raise additional funds through public or private debt or sale of equity to pay the related-party debt. Such financing may not be available when needed. Even if such financing is available, it may be on terms that are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, or other terms. No assurance can be given that such funds will be available or, if available, will be on commercially reasonable terms satisfactory to us. There can be no assurance that we will be able to obtain financing if and when it is needed on terms we deem acceptable. If we are unable to obtain financing on reasonable terms, or, if our related-party lender do no continue to cooperate with us, we could be forced to discontinue our operations.
We plan to increase our authorized shares of common stock from 500,000,000 to 900,000,000 during fiscal 2015. Future sales of shares of our common stock could adversely affect the trading price of our common stock and our ability to raise funds in new equity offerings.
We have 500,000,000 shares of common stock authorized and issued and our board of directors and majority shareholder have approved resolutions to increase our authorized shares of common stock to 900,000,000. In the future, we anticipate we will issue additional shares of common stock to help us raise money to implement our business strategy. Future sales of substantial amounts of our common stock or equity-related securities in the public market or privately, or the perception that such sales could occur, will more than likely have an adverse effect on prevailing trading prices of our common stock and could impair our ability to raise capital through future offerings of equity or equity-related securities. No prediction can be made as to the effect, if any, that future sales of shares of common stock or the availability of shares of common stock for future sale will have on the trading price of our common stock.
We may make acquisitions or form joint ventures that are unsuccessful.
Our ability to grow is dependent on our ability to successfully acquire other companies, which creates substantial risk. In order to pursue a growth by acquisition strategy successfully, we must identify suitable candidates for these transactions; however, because of our limited funds, we may not be able to purchase those companies that we have identified as potential acquisition candidates. Additionally, we may have difficulty managing post-closing issues such as the integration into our corporate structure. Integration issues are complex, time consuming and expensive and, without proper planning and implementation, could significantly disrupt our business, including, but not limited to, the diversion of management's attention, the loss of key business and/or personnel from the acquired company, unanticipated events, and legal liabilities.
We do not expect to pay dividends and investors should not buy our common stock expecting to receive dividends.
We have not paid any dividends on our common stock in the past, and do not anticipate that we will declare or pay any dividends in the foreseeable future. Consequently, you will only realize an economic gain on your investment in our common stock if the price appreciates. You should not purchase our common stock expecting to receive cash dividends. Since we do not pay dividends, and if we are not successful in having our shares listed or quoted on an exchange, then you may have a limited ability to liquidate or receive any payment on your investment. Therefore our failure to pay dividends may cause you to not see any return on your investment even if we are successful in our business operations. In addition, because we do not pay dividends we may have trouble raising additional funds, which could affect our ability to expand our business operations.
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Our common stock is considered a penny stock, which is subject to restrictions on marketability, so you may not be able to sell your shares.
The trading of our stock is subject to the penny stock rules adopted by the Securities and Exchange Commission that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.
Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit their market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.
We must be able to develop and implement an expansion strategy and manage our growth.
Our success depends in part on our ability to grow and take advantage of efficiencies of scale. We believe our software will expand and allow tens of thousands of additional users to play chess games and chess tournaments on our chess website. However, we may need additional servers, bandwidth and other fixed expenses to support an increased customer base and we cannot be certain that our projections of our hardware and software needs are accurate if the user base rapidly increases. To accomplish our growth strategy, we may be required to raise and invest additional capital and resources and expand our marketing efforts in several geographic markets. We cannot be assured that we will be successful in raising the required capital.
Our future growth depends on our ability to develop and retain customers.
Our future growth depends to a large extent on our ability to effectively anticipate and adapt to customer requirements and offer services that meet customer demands. If we are unable to attract new customers and/or retain new customers, our business, results of operations and financial condition may be materially adversely affected.
We will need to attract, train and retain additional highly qualified senior executives and technical and managerial personnel in the future.
We continue to seek technical and managerial staff members, although we cannot compensate them until we have raised additional capital or purchased a business that generates cash flow from operations. We believe it is important to negotiate with potential candidates and, if appropriate, engage them on a part-time basis or on a project basis and compensate them at least partially, with a stock option grant. There is a high demand for highly trained and managerial staff members. If we are not able to fill these positions, it may have an adverse affect on our business.
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We may conduct future offerings of our common stock and pay debt obligations with our common and preferred stock which may diminish our investors’ pro rata ownership and depress our stock price.
We reserve the right to make future offers and sales, either public or private, of our securities, including shares of our common stock or securities convertible into common stock at prices differing from the price of the common stock previously issued. In the event that any such future sales of securities are affected or we use our common stock to pay principal or interest on our debt obligations, an investor’s pro rata ownership interest may be reduced to the extent of any such future sales.
ITEM 2. | FINANCIAL INFORMATION. |
This registration statement contains forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. Future filings with the SEC future press releases and future oral or written statements made by us or with our approval, which are not statements of historical fact, may also contain forward-looking statements. Because such statements include risks and uncertainties, many of which are beyond our control, actual results may differ materially from those expressed or implied by such forward-looking statements. Some of the factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements are set forth in the section entitled “Financial Information” and elsewhere throughout this registration statement.
Readers are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made and, except as required by applicable federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
The following financial data is referenced to, and should be read in conjunction with, the Company’s Financial Statements and related Notes thereto for the respective periods, contained elsewhere in this report.
Overview
We are an Internet-based company that seeks free subscribers and revenue-generating subscribers for digital product that we offer to game players and app users. We operate on an automated basis with the belief that Internet operations, customer sign-ups, sales and game playing should occur without requiring a Company employee to participate in the transaction, so that it is possible for the Company to quickly expand in the event the number of subscribers begins to rapidly grow on a viral basis. Our back-office software operates 24 hours a day and can quickly collect money from and deliver games to subscribers. Similarly, we sell a mobile calling application that can be downloaded to an Android phone or tablet on an automated basis, 24 hours a day, from anywhere in the world. Our focus is on the digital delivery of games, apps, movies and music.
We intend to employ personnel in such areas as sales, technical support and finance once we have increased our revenues or received an injection of capital that is sufficient to support such personnel. In addition to our online chess subscriptions, we recently began selling a mobile VoIP app on the Google Play app store. The sales are automated, and we have not hired any new employees to support this activity. We anticipate our chief executive officer and members of our advisory board will be able to find third parties who are capable of marketing the product in exchange for a sales commission. Once we achieve a sufficient revenue level to hire employees, we plan to do so, which will result in an increase in our selling, general and administrative expenses.
Our limited operating history and the uncertain nature of our future operations and the markets we address or intend to address make prediction of our future results of operations difficult. Our operations may never generate significant revenues, and we may never achieve profitable operations.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes to the financial statements included elsewhere in this registration statement. This discussion contains forward-looking statements that relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Results of Operations
Fiscal Year 2013 Compared to Fiscal Year 2012
Our revenues for fiscal 2013 increased by $1,373, or approximately 20%, to $8,167 as compared to $6,813 reported for fiscal 2012. The increase in revenues was from referrals, as we did no advertising or spending to attract new users.
Selling, general and administrative expenses (“SG&A”) decreased by $2,798, or approximately 8%, to $33,690 for fiscal 2013 from $36,488 reported in the prior year fiscal period. The decrease is primarily attributable to a decrease in professional fees.
Interest expense increased by $2,348 to $18,874 for the year ended April 30, 2013, as compared to $16,526 for the prior fiscal year. Increased borrowings in fiscal 2013 accounted for the increase in interest expense.
Liquidity and Capital Resources
At April 30, 2013, we had cash and cash equivalents of $3,075 and negative working capital of $682,526 as compared to cash and cash equivalents of $1,944 and negative working capital of $656,156 at April 30, 2012.
Net cash used in operating activities aggregated approximately $16,890 and $17,388 in fiscal 2013 and 2012, respectively. The principal use of cash from operating activities in 2013 was the loss for the year of $26,370. The use of cash was offset in part by an increase in current liabilities of $9,480. The principal use of cash from operating activities in fiscal 2012 was the loss for the year of $30,630. The use of cash was offset in part by an increase in current liabilities of 13,242.
There was no investing activity in fiscal 2012 or in fiscal 2011.
Net cash provided by financing activities aggregated $18,021 and $18,087 in fiscal 2013 and 2012, respectively. The principal sources of cash from financing activities were net proceeds from the working capital line provided by our majority stockholder.
In fiscal 2013 and 2012, there were no expenditures for capital assets. We do not anticipate any capital expenditures in fiscal 2014 to enhance or expand our existing business that is provided on the chess.net website.
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of our company as a going concern. However, we have sustained net losses from operations during the last several years, and we have very limited liquidity. Management anticipates that we will be dependent, for the near future, on additional capital to fund our operating expenses and anticipated growth, which we intend to achieve through the utilization of digital delivery platforms of companies that will allow us to sell a white-label version of their songs, movies, games and apps. Although we are choosing methods of growth that potentially minimize the use of cash, we cannot be assured that we will be able to obtain the cash to market the digital products we sell or that we will be successful in increasing our sales. Furthermore, the report of our independent registered public accounting firm expresses doubt about our ability to continue as a going concern. Our operating losses have been funded through borrowings under a line of credit from our majority shareholder.
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Our only required debt payments are for a bank loan, which has a balance of $47,587 at June 30, 2014. We pay $220 a month of principal and approximately the same amount in interest every month, at an interest rate that is approximately 5.5% per annum. We owe a related party, the founder of Valuesetters Inc., $348,066 at June 30, 2014. He holds a demand note, at a variable interest rate that approximates 2.5% per annum. We have not paid interest on the note and it accrues each month. We owe our Lender, who is also our majority shareholder, $91,407 at June 30, 2014. Our Lender holds a demand note bearing interest at an annual rate of 8%. We also have balance due to directors, in both accounts payable and notes payable. Our total liabilities to related parties is approximately $543,000 at June 30, 2014. We have not paid interest on any related party debt; the interest accrues each month. We believe our related party creditors will not demand payment in the near future, although each lender may have a change in circumstances and demand payment. Any demand for payment from a related party will have an adverse impact on our ability to achieve our longer-term business objectives, and will adversely affect our ability to continue operating as a going concern.
Although we are not yet profitable and we are not generating cash from operations, we believe we have short-term financing available from our majority shareholder to fund our monthly cash-flow deficit. While we continually look for other financing sources, in the current economic environment, the procurement of outside funding is extremely difficult and there can be no assurance that such financing will be available, or, if available, that such financing will be at a price that will be acceptable to us. Failure to generate sufficient revenues or raise additional capital will have an adverse impact on our ability to achieve our longer-term business objectives, and will adversely affect our ability to continue operating as a going concern.
New Accounting Standards
The new accounting pronouncements in Note 1 to our consolidated financial statements, which are included in this Report, are incorporated herein by reference thereto.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. The most significant estimates include:
We continually evaluate our accounting policies and the estimates we use to prepare our consolidated financial statements. In general, the estimates are based on historical experience, on information from third party professionals and on various other sources and assumptions that are believed to be reasonable under the facts and circumstances at the time such estimates are made. Management considers an accounting estimate to be critical if:
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Actual results could differ from those estimates. Significant accounting policies are described in Note 1 to our consolidated financial statements, which are included in this Report. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.
Certain of our accounting policies are deemed “critical”, as they require management's highest degree of judgment, estimates and assumptions. The following critical accounting policies are not intended to be a comprehensive list of all of our accounting policies or estimates:
Revenue Recognition
Revenues from services are recognized in the period in which they are earned, in accordance with the terms and conditions noted on our websites. In instances where a subscriber prepays for a service, any prepayment is recognized as a current liability until it is earned.
Allowance for Doubtful Accounts
In fiscal 2013 and 2012, we do not maintain allowances for doubtful accounts for estimated losses that result from the inability or unwillingness of our customers to make required payments. We have not carried any accounts receivable in either fiscal year, as we have required our customers to make a non-refundable prepayment for our services.
Impairment of Long-Lived Assets
Financial Accounting Standards Board (“FASB”) authoritative guidance requires that certain assets be reviewed for impairment and, if impaired, remeasured at fair value whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Impairment loss estimates are primarily based upon management’s analysis and review of the carrying value of long-lived assets at each balance sheet date, utilizing an undiscounted future cash flow calculation. During fiscal 2010, we recognized an impairment loss as we concluded the carrying amount of the assets purchased when we acquired Chess.net was not recoverable. No impairment losses were recognized in fiscal 2013 and 2012, as we no longer have a carrying amount for long-lived assets recorded on our books.
Income Taxes
We estimate the degree to which tax assets and loss carryforwards will result in a benefit based on expected profitability by tax jurisdiction. A valuation allowance for such tax assets and loss carryforwards is provided when it is determined that such assets will more likely than not go unused. If it becomes more likely than not that a tax asset or loss carry-forward will be used, the related valuation allowance on such assets is reversed. If actual future taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary. At April 30, 2013 and 2012, we have recorded a full valuation on our deferred tax assets.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Information About Market Risk
We are not subject to fluctuations in interest rates, currency exchange rates or other financial market risks. We have not made any sales, purchases or commitments with foreign entities which would expose us to currency risks.
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ITEM 3. | PROPERTIES. |
We have maintained minimal office space in White Plains, New York that we shared with an unaffiliated company, TelcoSoftware.com Corp. (“Telco”) on a rent-free basis. Beginning in February 2014, we became a customer of Telco, and Telco has built a mobile app for low-cost mobile phone calls for us to sell to people who use Android phone or tablets. Furthermore, beginning in May 2014, an executive with Telco became the chief executive officer of Vaxstar LLC, our majority shareholder. Telco has a lease agreement with its landlord that renews annually on May 31 st .
Management believes that this arrangement will meet our needs for the foreseeable future. We currently have no rental agreement and have not paid rent during the past three fiscal years. There is no guarantee that the office space will continue to be made available without cost in the future.
ITEM 4. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. |
Security Ownership of Certain Beneficial Owners
The following table sets forth, as of July 25, 2013, the number of shares of common stock owned of record and beneficially by our executive officers, directors, our executive officers and directors as a group, and persons who beneficially own 5% or more of the outstanding shares of our common stock.
Name and Address | Amount of Shares and Nature | ||
of Beneficial Owner (1) | of Beneficial Ownership | Percent of Class* | |
Vaxstar LLC (4) | 271,673,207 | 54.3% | |
Sean F. Lee(3) | 50,600,000 | 10.1% | |
Manuel Teixeira (2,3) | 25,000,000 | 5.0% | |
Steven Geary (3) | 20,600,000 | 4.1% | |
Tom Carmody (3) | 5,000,000 | 1.0% | |
Avi Liss (2,3) | 2,000,000 | **% | |
Officers and Directors as a group (5 persons) | 103,200,000 | 20.6% |
_________________
* Based on 500,000,000 shares of common stock outstanding as of July 25, 2014. ** Less than 1% |
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(1) |
Unless otherwise noted, the business address of each member of our Board of Directors is c/o Valuesetters Inc. 430 North Street White Plains, NY 10605.
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(2) |
Mr. Teixeira is our Chairman of the Board and Chief Executive Officer, and Mr. Liss is our Secretary.
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(3) | Such individual is a current member of the Board of Directors, except for Mr. Lee who retired from the board in April 2014 |
(4) | Mark Richards is the Chief Executive Officer of Vaxstar LLC and casts the vote for the shares held by Vaxstar LLC. |
Changes in Control
We are not aware of any arrangements that may result in a change in control of the Company.
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ITEM 5. | DIRECTORS AND EXECUTIVE OFFICERS. |
The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at June 30, 2014.
Our executive officers and directors are as follows:
Officer or | |||
Name | Age | Position | Director Since |
Manuel Teixeira | 48 |
Chairman of the Board and Chief
Executive Officer |
August 2010 |
Thomas H Carmody | 68 | Director | August 2010 |
Avi Liss | 35 | Secretary and Director | August 2010 |
Sean S. Lee | 39 | Director | May 2014 |
Steven Geary | 47 | Director | June 2006 |
Our directors serve in such capacity until the first annual meeting of our shareholders and until their successors have been elected and qualified. Our officers serve at the discretion of our board of directors, until their death, or until they resign or have been removed from office.
Executive Officers and Directors
Manuel Teixeira, Chairman of the Board and Chief Executive Officer
Manuel Teixeira has served as the Chairman of the Board and Chief Executive Officer of the Company since August 2010. From 2007 to the present, he has served as a principal in Leaf Web Solutions, an Internet based consulting and marketing company, and in Teixeira Accounting, Consulting & Tax LLC, a company that provides tax planning, tax preparation, accounting and consulting services, primarily to small businesses. From 2007 to 2010 he was the founder and Chief Executive Officer of Financira Services Inc., a consumer debt settlement company.
Mr. Teixeira’s clients have included technology growth companies, Internet-based entities, investment firms, mergers and acquisitions, wholesalers and various retail establishments. He devotes approximately 8 hours a week to our Company and the remainder of his time to his other business interests.
Thomas Carmody, Director
Thomas Carmody has served as a Director of the Company since August 2010. He has over 40 years experience as a marketing executive. For the past five years he has worked as a self-employed marketing consultant for Summit International LLC. He currently serves on the Board of Directors of Continental Materials Corporation, Chicago, Illinois, and serves on that company’s audit committee. Mr. Carmody also served as the Vice President of U.S. Operations and Vice President of the sports division at Reebok International Inc. from 1988 to 1996.
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Avi Liss, Director and Secretary
Avi Liss has served as a Director and Secretary of the Company since August 2010. From August 2009 to present, he has served as the President of Liss Law, LLC, a law firm specializing in real estate conveyances. Prior to founding Liss Law, he worked as a judicial law clerk for the Honorable Stephen S. Mitchell a bankruptcy court judge for the Eastern District of Virginia.
Mr. Liss is well qualified to serve as a director of the company due to his knowledge and working experience with legal governance matters. He devotes approximately 1 hour a week to our Company and the remainder of his time to his other business interests.
Sean S. Lee, Director
Sean S. Lee has served as a Director of the Company since May 2014. His father, Sean F. Lee, a 10% owner of our common stock, was the founder of Valuesetters in 2003 and was our Chief Executive Officer until 2010 and a member of our board of directors until April 2014. Mr. Sean S. Lee is a product manager for Heartland School Solutions, a K-12 food nutrition software development firm, since January 2012 to present. Prior to joining Heartland, he worked as a consultant for SL-Tech, a K-12 food nutrition software and hardware development firm, from August 2011 to January 2012, and as the chief technology officer for ImproveSmart Inc., an electronic commerce company, from December 2009 to August 2011. From June 2007 to December 2010 he served as the technology manager for our Company.
Steven Geary, Director
Steven Geary has served as a Director of the Company since December 2003. Since 2009 he as served in several management positions at Statera and is currently the Vice Present of Strategy and Business Development. From 2008 to 2009 he was the Chief Executive Officer of ImproveSmart, Inc. From April 2006 to June 2008 he served as our President and Chief Operating Officer.
Director Independence
The Board has determined that the following directors are "independent" as defined under Marketplace Rule 5605(a)(2) of the listing rules of the NASDAQ Stock Market ("NASDAQ"): Thomas Carmody and Steven Geary. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with us that would impair his or her independence. The Board has established guidelines to assist it in determining director independence, which conform to the independence requirements in the NASDAQ listing rules. The Board has concluded that there are no business relationships that are material or that would interfere with the exercise of independent judgment by any of the independent directors in their service on the Board or its committees.
Involvement in Certain Legal Proceedings
Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
· | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
· | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
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· | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and |
· | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
ITEM 6. | EXECUTIVE COMPENSATION. |
Summary Executive Compensation Table
Change in | |||||||||
pension value | |||||||||
and | |||||||||
Non-equity | nonqualified | ||||||||
Name | incentive | deferred | |||||||
and | Stock | Option | plan | compensation | All other | ||||
principal | Salary | Bonus | awards | awards | compensation | earnings | compensation | Total | |
position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($)(1) | ($) |
Manuel | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | 1,000 | 1,000 |
Teixeira, | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
CEO | 2011 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Avi, | 2013 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Liss, Secretary | 2012 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
2011 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
(1) Although Mr. Teixeira is not paid a salary, we paid him $1,000 during fiscal 2103 as a non-accountable reimbursement of his out-of-pocket expenses incurred on behalf of our Company. Because the expenses were non-accountable, we have classified such payment as other compensation and reported them as taxable income to Mr. Teixeira.
Our executive officers have agreed to work without compensation until our annual revenues exceed $1,000,000. We believe the equity positions held by such officers provides them with significant incentive to remain with us as we build the company.
We have no retirement, pension, profit sharing, stock option or insurance programs or other similar programs for the benefit of our officers and directors, and we have no regular salaried employees.
Compensation of Directors
We currently do not compensate our directors for their services as directors.
Employment Agreements
We currently have no employment agreements in place. At a later date we may enter into employment agreements with our executive officers.
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ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Our majority shareholder, Vaxstar LLC, is also our working capital lender. As of June 30, 2014, we owe our majority shareholder $91,407, under a demand note agreement that bears interest at an annual rate of 8%. We have not made any principal or interest payments to our working capital lender. Unpaid interest has been accrued and added to the note.
In connection with the financing, the Company has agreed to certain restrictive covenants, including, among others, that the Company may not convey, sell lease, transfer or otherwise dispose of any part of its business or property, except as permitted in the agreement, dissolve, liquidate or merge with any other party unless, in the case of a merger, the Company is the surviving entity, incur any indebtedness except as defined in the agreement, create or allow an lien on any of its assets or collateral that has been pledge to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business, or make any material capital expenditures.
We owe a related party, Sean F. Lee, the founder of Valuesetters Inc. and former board member, $333,066 at June 30, 2014, in conjunction with a demand note, at a variable interest rate that approximates 2.5% per annum. The note is unsecured. Unpaid interest has been accrued and added to the note. In addition, we owe to Mr. Lee $79,761 at June 30, 2014, that we have recorded as related party accounts payable. There is no signed agreement for the related party accounts payable and it is not an interest-bearing obligation.
We owe Steven Geary, a director, $31,680 as of June 30, 2014. This obligation is not interest bearing. $16,680 is recorded as a related party trade accounts payable and $15,000 as a related party note payable. We have no signed agreements for the indebtedness to Mr. Geary.
We owe Sean S. Lee, a director, $15,000 as of June 30, 2014. This obligation is not interest bearing and is recorded as a related party trade accounts payable. We have no signed agreements for the indebtedness to Sean S. Lee.
ITEM 8. | LEGAL PROCEEDINGS. |
There are no legal proceedings pending or threatened by or against us. From time to time, we may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise that may harm our business.
ITEM 9. | MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. |
Market Price
Our common stock is currently quoted on the OTC marketplace under the symbol VSTR. The high and low closing price for each quarterly period of our last two fiscal years are listed below.
The following table sets forth the high and low trade information for our common stock for each quarter during the past two fiscal years. The prices reflect inter-dealer quotations, do not include retail mark-ups, markdowns or commissions and do not necessarily reflect actual transactions.
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Fiscal Quarter ended | High Price | Low Price | ||||
1 st Quarter - May – July 2011 | $ | 0.005 | $ | 0.0001 | ||
2 nd Quarter – August - October 2011 | $ | 0.005 | $ | 0.002 | ||
3 rd Quarter – November 2011 - January 2012 | $ | 0.0026 | $ | 0.001 | ||
4 th Quarter – February – April 2012 | $ | 0.007 | $ | 0.0015 | ||
1 st Quarter – May – July 2012 | $ | 0.02 | $ | 0.0028 | ||
2 nd Quarter – August – October 2012 | $ | 0.05 | $ | 0.014 | ||
3 rd Quarter – November 2012 – January 2013 | $ | 0.025 | $ | 0.006 | ||
4 th Quarter – February – April 2013 | $ | 0.0063 | $ | 0.005 |
The quotations set forth in the table above reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions.
Holders
There are 234 shareholders of record of our Common Stock.
Dividends
We have never paid dividends on our Common Stock and do not expect to do so in the foreseeable future.
Equity Compensation Plan Information
We currently have no equity compensation plan either approved or not approved by security holders, and there are no securities currently authorized for issuance under any equity compensation plan. However, our Board of Directors has previously approved share-based compensation in lieu of cash compensation to various consultants and employees. Such share-based compensation is recognized at the time of grant equal to the fair value of the stock award at the time of the grant as the awards generally do not require a service or vesting period.
ITEM 10. | RECENT SALES OF UNREGISTERED SECURITIES. |
We have not sold any unregistered securities within the past 14 fiscal quarters.
ITEM 11. | DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED. |
Capital Stock
We are authorized by our Articles of Incorporation to issue an aggregate of 500,000,000 shares of capital stock, all of which shares are designated as common stock, par value $0.001 per share (the “Common Stock”). We currently have no authorized preferred stock.
As of June 30, 2014, all 500,000,000 shares of Common Stock were issued and outstanding.
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Common Stock
All outstanding shares of Common Stock are of the same class and have equal rights and attributes. Holders of Common Stock are entitled to one vote per share on all matters submitted to a vote of shareholders of our company. All shareholders are entitled to share equally in dividends, if any, as may be declared from time to time by our Board of Directors out of funds legally available. In the event of liquidation, the holders of our Common Stock are entitled to share ratably in all assets remaining after payment of all liabilities and liquidation preferences of preferred stockholders. Our shareholders do not have cumulative or preemptive rights.
Warrants and Stock Options
As of June 30, 2014, we had no warrants, stock options or other convertible securities authorized or outstanding.
ITEM 12. | INDEMNIFICATION OF DIRECTORS AND OFFICERS. |
Our directors and officers are indemnified as provided by the Utah corporate law and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Act”). Insofar as indemnification for liabilities arising under the Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
ITEM 13. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Our audited financial statements appear at the end of this registration statement. See Index to Financial Statements on page F-1.
ITEM 14. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
There have been no changes in or disagreements with accountants on accounting or financial disclosure matters.
ITEM 15. | FINANCIAL STATEMENTS AND EXHIBITS. | |
Exhibit | ||
Number | Description | |
2.1 | Asset Purchase Agreement, dated November 23, 2010, between ValueSetters, Inc. and NetGames.com.* | |
3.1 | Articles of Incorporation of ValueSetters, Inc. filed on April 25, 1984, incorporated by reference to Exhibit 3.1 to our Form 10 dated September 3, 2013. | |
3.2 | Amendment to Articles of Incorporation of ValueSetters, Inc. filed on September 7, 1999, incorporated by reference to Exhibit 3.2 to our Form 10 dated September 3, 2013. | |
3.3 | Amendment to Articles of Incorporation of ValueSetters, Inc. filed on December 4, 2003, incorporated by reference to Exhibit 3.3 to our Form 10 dated September 3, 2013. | |
3.4 | By-Laws of ValueSetters, Inc, incorporated by reference to Exhibit 3.4 to our Form 10 dated September 3, 2013. | |
10.1 | Amended Secured Lending Agreement between ValueSetters, Inc. and Vaxstar LLC.* | |
10.2 | 3% Unsecured Term Note Due June 30, 2017* | |
23.1 | Consent of Silberstein Ungar, PLLC, independent registered public accountants.* | |
* | Filed herewith | |
26
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: July 25, 2014 | VALUESETTERS, INC. |
By: /s/ Manuel Teixeira | |
Manuel Teixeira | |
Chairman of the Board and Chief Executive Officer |
27
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors
Valuesetters Inc.
Hingham, MA
We have audited the accompanying balance sheets of Valuesetters, Inc. as of April 30, 2013 and 2012, and the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Valuesetters, Inc. as of April 30, 2013 and 2012 and the results of its operations and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that Valuesetters Inc. will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred losses from operations, has limited working capital, and is in need of additional capital to grow its operations so that it can become profitable. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans with regard to these matters are described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC
Bingham Farms, Michigan
August 30, 2013
F-1
VALUESETTERS, INC. |
(A Development Stage Company) |
Balance Sheets |
April 30, | April 30, | |||||||
2013 | 2012 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 3,075 | $ | 1,944 | ||||
Total current assets | 3,075 | 1,944 | ||||||
Total assets | $ | 3,075 | $ | 1,944 | ||||
LIABILTIES AND STOCKHOLDERS’ EQUITY DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts payable | ||||||||
Trade | $ | 79,943 | $ | 83,504 | ||||
Related parties | 103,509 | 96,068 | ||||||
Accrued expenses | 19,600 | 29,000 | ||||||
Secured note payable to related party | 69,254 | 51,233 | ||||||
Notes payable – related parties | 348,066 | 348,066 | ||||||
Loan payable - bank | 50,229 | 50,229 | ||||||
Demand note payable | 15,000 | — | ||||||
Total Current Liabilities | 685,601 | 658,100 | ||||||
Stockholders’ equity deficit | ||||||||
Common stock, $.001 par value, 500,000,0000 shares authorized; | ||||||||
500,000,0000 issued and outstanding in 2013 and 2012 | 500,000 | 500,000 | ||||||
Capital in excess of par value | 420,968 | 420,968 | ||||||
Accumulated deficit through November 23, 2010* | (1,514,037 | ) | (1,514,037 | ) | ||||
Accumulated deficit during the development stage | (89,457 | ) | (63,087 | ) | ||||
Total stockholders' equity deficit | (682,526 | ) | (656,156 | ) | ||||
Total liabilities and stockholders' equity deficit | $ | 3,075 | $ | 1,944 |
See Accompanying Notes to the Financial Statements
* Commencement of development stage
F-2
VALUESETTERS, INC. |
(A Development Stage Company) |
Statements of Operations |
Years Ended April 30, |
Period From Nov. 23, 2010 (inception) to |
|||||||||||
2013 | 2012 | April 30, 2013 | ||||||||||
Revenues | $ | 8,127 | $ | 6,511 | $ | 15,118 | ||||||
Cost and expenses: | ||||||||||||
Costs of services | 806 | 652 | 1,458 | |||||||||
Selling, general and administrative | 33,690 | 36,489 | 103,117 | |||||||||
Total costs and expenses | 34,496 | 37,141 | 104,575 | |||||||||
Net loss before income taxes | (26,370 | ) | (30,630 | ) | (89,457 | ) | ||||||
Income taxes | — | — | — | |||||||||
Net loss | $ | (26,370 | ) | $ | (30,630 | ) | $ | (89,457 | ) | |||
Basic and diluted loss per share | $ | 0.00 | $ | 0.00 | ||||||||
Weighted average number of shares outstanding | 500,000,000 | 500,000,000 | ||||||||||
See Accompanying Notes to the Financial Statements
F-3
VALUESETTERS, INC. |
(A Development Stage Company) |
Statements of Comprehensive Loss |
Years Ended April 30, |
Period From Nov. 23, 2010 (inception) to |
|||||||||||
2013 | 2012 | April 30, 2013 | ||||||||||
Net loss | $ | (26,370 | ) | $ | (30,630 | ) | $ | (89,457 | ) | |||
Other comprehensive income | — | — | — | |||||||||
Comprehensive loss | $ | (26,370 | ) | $ | (30,630 | ) | $ | (89,457 | ) | |||
See Accompanying Notes to the Financial Statements
F-4
VALUESETTERS, INC. |
(A Development Stage Company) |
Statements of Stockholders' Equity Deficit |
Period From November 23, 2010 to April 30, 2013 |
Capital in | Accumulated Deficit | Accumulated Deficit During | ||||||||||||||||||||||||||
Common Stock | Excess of | Through | Development | |||||||||||||||||||||||||
Shares | Amount | Par Value | Nov. 23, 2010* | Stage | Total | |||||||||||||||||||||||
Balance November 23, 2010 | 500,000,000 | $ | 500,000 | $ | 420,968 | $ | (1,514,037 | ) | $ | — | $ | (593,069 | ) | |||||||||||||||
Net loss and comprehensive loss, April 30, 2011 | — | — | — | — | — | (32,457 | ) | (32,457 | ) | |||||||||||||||||||
Balance April 30, 2011 | 500,000,000 | 500,000 | 420,968 | (1,514,037 | ) | (32,457 | ) | (625,526 | ) | |||||||||||||||||||
Net loss and comprehensive loss, April 30, 2012 | — | — | — | — | (30,630 | ) | (30,630 | ) | ||||||||||||||||||||
Balance, April 30, 2012 | 500,000,000 | 500,000 | 420,968 | (1,514,037 | ) | (63,087 | ) | (656,156 | ) | |||||||||||||||||||
Net loss and comprehensive loss, April 30, 2013 | — | — | — | — | (26,370 | ) | (26,370 | ) | ||||||||||||||||||||
Balance, April 30, 2013 | 500,000,000 | $ | 500,000 | $ | 420,968 | $ | (1,514,037 | ) | (89,457 | ) | (682,526 | ) | ||||||||||||||||
See Accompanying Notes to the Financial Statements
* Commencement of development stage
VALUESETTERS, INC. |
(A Development Stage Company) |
Statements of Cash Flows |
Period From | ||||||||||||
November 23, | ||||||||||||
Year | Year | 2010 | ||||||||||
Ended | Ended | (inception) to | ||||||||||
April 30, | April 30, | April 30, | ||||||||||
2013 | 2012 | 2013 | ||||||||||
Operating activities | ||||||||||||
Net loss | $ | (26,370 | ) | $ | (30,630 | ) | $ | (89,457 | ) | |||
Changes in non-cash working capital balances | ||||||||||||
Accounts payable | 3,880 | 2,241 | 8,933 | |||||||||
Accrued liabilities | 5,600 | 11,000 | 30,600 | |||||||||
Cash provided by (used in) operating activities | (16,890 | ) | (17,389 | ) | (49,923 | ) | ||||||
Financing activities | ||||||||||||
Notes payable – related party | 18,021 | 18,087 | 41,848 | |||||||||
Cash provided by financing activities | 18,021 | 18,087 | 41,848 | |||||||||
Increase (decrease) in cash and cash equivalents during the period | 1,131 | 698 | (8,075 | ) | ||||||||
Cash and cash equivalents, beginning of the period | 1,944 | 1,246 | 11,150 | |||||||||
Cash and cash equivalents, end of the period | $ | 3,075 | $ | 1,944 | $ | 3,075 | ||||||
Cash paid for: | ||||||||||||
Interest | $ | 6,812 | $ | 5,468 | ||||||||
Income taxes | $ | — | $ | — |
See Accompanying Notes to the Financial Statements
F-6
VALUESETTERS, INC
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
1. Description of Business and Summary of Accounting Principles
Description of Business and Concentrations
Valuesetters, Inc. (“Valuesetters”, or the “Company”) is a provider of subscription services, advertising and digital goods using technology distribution platforms like the Internet and mobile devices in the media and entertainment markets. Most of the Company’s revenues are derived from customers worldwide who subscribe to a chess website that allows them to play ranked chess games against international competitors.
The financial statements are presented in United States dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America related to development stage companies. A development stage company is one in which planned principal operations have not commenced or if its operations have commenced, there has been no significant revenues there from. The Company’s fiscal year end is April 30.
Income Taxes
The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible. A valuation allowance has been established to eliminate the Company’s deferred tax assets as it is more likely than not that none of the deferred tax assets will be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the tax authorities. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in income tax expense. The Company has determined that it had no significant uncertain tax positions requiring recognition or disclosure.
F-7
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
1. Description of Business and Summary of Accounting Principles (Continued)
Revenue Recognition
Revenues from services are recognized in the period in which subscribers pay for the related services. The Company does not offer any partial refunds and all revenues are earned when the subscriber approves an online payment to the Company. Most subscribers pay on a monthly basis. In order to receive a discount for annual services a subscriber agrees that services are earned upon payment and are non-refundable.
Costs of Services
Costs of services consist of direct costs that we pay to third parties in order to maintain our online sites that generate revenue.
Loss Per Share
Basic loss per share is computed by dividing net loss by the weighted-average number of shares outstanding. To the extent that stock options and warrants are anti-dilutive, they are excluded from the calculation of diluted loss per share. For 2013 and 2012, the Company had no potentially dilutive securities.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company did not have any cash equivalents during 2013 and 2012.
Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates relates to the accruals for unbilled legal services and income tax valuation allowance. On a continual basis, management reviews its estimates, utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such reviews, and if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates.
F-8
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
1. | Description of Business and Summary of Accounting Principles (Continued) |
Determination of Fair Value
Cash and cash equivalents, accounts receivable, and accounts payable
In general, carrying amounts approximate fair value because of the short maturity of these instruments.
Debt
At November 30, 2012 and 2011, long-term debt was carried at its face value plus accrued interest due to the fact that the debt is fully callable by the lender. Based on the financial condition of the Company, it is impracticable for the Company to estimate the fair value of the short and long-term debt.
The Company has no instruments with significant off balance sheet risk.
Recent Accounting Pronouncements
The Company does not expect any recent accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.
2. | Going Concern Matters and Realization of Assets |
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the ordinary course of business. However, the Company has sustained recurring losses from its continuing operations and as of April 30, 2013, had negative working capital and a stockholders’ equity deficit of $682,526. In addition, the Company is unable to meet its obligations as they become due and sustain its operations. The Company believes that its existing cash resources are not sufficient to fund its continuing operating losses, capital expenditures, lease and debt payments and working capital requirements.
The Company may not be able to raise sufficient additional debt, equity or other cash on acceptable terms, if at all. Failure to generate sufficient revenues, achieve certain other business plan objectives or raise additional funds could have a material adverse effect on the Company’s results of operations, cash flows and financial position, including its ability to continue as a going concern, and may require it to significantly reduce, reorganize, discontinue or shut down its operations.
F-9
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
2. | Going Concern Matters and Realization of Assets (Continued) |
In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company which, in turn, is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue in its existence. Management’s plans include:
1. | Seek to raise debt or equity for working capital purposes and to pay off existing debt balances. With sufficient additional cash available to the Company, it can begin to make marketing expenditures and hire people to generate more revenues, and consequently cut monthly operating losses. |
2. | Continue to look for software niches and other digital products that can be sold via an Internet-based store. Various acquisition opportunities may help us generate the revenues we are seeking and be a quicker path to profitability than organic growth. |
There can be no assurance that the Company will be able to achieve or maintain cash-flow-positive operating results. If the Company is unable to generate adequate funds from operations or raise sufficient additional funds, the Company may not be able to repay its existing debt, continue to operate its business network, respond to competitive pressures or fund its operations. As a result, the Company may be required to significantly reduce, reorganize, discontinue or shut down its operations. The financial statements do not include any adjustments that might result from this uncertainty.
3. Debt
The following table summarizes components debt as of April 30, 2013 and 2012:
2013 | 2012 | Interest Rate | ||||||||||
Secured lender (majority shareholder) | $ | 69,254 | $ | 51,233 | 8.00 | % | ||||||
Demand note payable – related parties | 348,066 | 348,066 | 2.5 | % | ||||||||
Demand note payable | 15,000 | — | 0 | % | ||||||||
Due to bank | 50,229 | 50,229 | 5.5 | % | ||||||||
Total Debt | $ | 482,549 | $ | 449,528 |
F-10
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
3. | Debt (Continued) |
As of April 30, 2013 and 2012, the Company owed its principal lender (“Lender”) $69,2540 and $51,233, respectively, under a revolving loan and security agreement (“Loan”) dated April 28, 2011. The maximum amount of the Loan is $250,000, and the Loan is payable on demand by its Lender. The Lender is also the majority shareholder of the Company, owning 328,219,103 shares of common stock, or 56% of the 500,000,000 shares issued and outstanding.
In connection with the financing, the Company has agreed to certain restrictive covenants, including, among others, that the Company may not convey, sell lease, transfer or otherwise dispose of any part of its business or property, except as permitted in the agreement, dissolve, liquidate or merge with any other party unless, in the case of a merger, the Company is the surviving entity, incur any indebtedness except as defined in the agreement, create or allow an lien on any of its assets or collateral that has been pledge to the Lender, make any loans to any person, except for prepaid items or deposits incurred in the ordinary course of business, or make any material capital expenditures
To secure the payment of all obligations to the lender, the Company granted to the lender a continuing security interest and first lien on all of the assets of the Company.
As of April 30, 2013 and 2012, the Company owed a board member $314,000 in a demand note payable dated April 30, 2011. The note represents monies lent to the Company by the board member under a home equity line of credit and the Company accrues interest payable to the board member for the actual interest charged under the home equity line of credit. The same board member has personally guaranteed a bank line of credit under which the Company has borrowed $50,000, and owes $50,229 as of April 30, 2013 and 2012. The Company pays the monthly interest expense on the bank line of credit.
4. Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures of financial instruments on a recurring basis.
F-11
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
4. Fair Value Measurements (Continued)
Fair Value Hierarchy
The Fair Value Measurements Topic of the FASB Accounting Standards Codification establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for the asset or liability.
Determination of Fair Value
Under the Fair Value Measurements Topic of the FASB Accounting Standards Codification, the Company bases its fair value on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and, therefore, are based primarily upon management’s own estimates, are often calculated based on current pricing policy, the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including discount rates and estimates of future cash flows, that could significantly affect the results of current or future value.
See Note 1 for a description of valuation methodologies used for assets and liabilities recorded at fair value and for estimating fair value where it is practicable to do so for financial instruments not recorded at fair value (disclosures required by the Fair Value Measurements Topic of the FASB Accounting Standards Codification).
F-12
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
5. Income Taxes
At April 30, 2013, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $1,032,000 expiring in the years of 2014 through 2029. Utilization of the net operating losses may be subject to annual limitations provided by Section 382 of the Internal Revenue Code and similar State provisions.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of April 30, 2013 and 2012 were as follows:
2013 | 2012 | |||||||
Deferred tax assets, net: | ||||||||
Net operating loss carryforwards | $ | 1,032,000 | $ | 1,006,000 | ||||
Valuation allowance | 1,032,000 | 1,006,000 | ||||||
Net deferred assets | $ | — | $ | — |
The valuation allowance increased to $1,032,000 at April 30, 2013 from $1,006,000 at April 30, 2012.
The following is a reconciliation of the tax provisions for the years ended April 30, 2013 and 2012 with the statutory Federal income tax rates:
Percentage of Pre-Tax Income |
||||||||
2013 | 2012 | |||||||
Statutory Federal income tax rate | (34.0 | )% | (34.0 | )% | ||||
Loss generating no tax benefit | 34.0 | 34.0 | ||||||
Effective tax rate | — | — | ||||||
The Company did not have any material unrecognized tax benefits as of April 30, 2013 and 2012. The Company does not expect the unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company recorded no interest and penalties relating to unrecognized tax benefits as of and during the years ended April 30, 2013 and 2012. The Company is subject to U.S. federal income tax, as well as taxes by various state jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending April 30, 2010 through 2013.
F-13
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
6. Commitments and Contingencies
Litigation
The Company is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability, if any, is not likely to have a material effect on the financial condition, results of operations or liquidity of the Company. However, as the outcome of litigation or legal claims is difficult to predict, significant changes in the estimated exposures could occur.
7. Stockholders’ Equity (Deficit)
The Company is authorized to issue 500,000,000 shares of its common stock, par value $0.001. 500,000,000 shares were outstanding as of April 30, 2013 and 2012, and no shares were issued during the fiscal years ended April 30, 2013 or 2012. No warrant, options or other convertible securities are outstanding at April 30, 2013 and 2012.
8. Loss Per Common Share
Loss per common share data was computed as follows:
2013 | 2012 | |||||||
Net loss | $ | (26,370 | ) | $ | (30,630 | ) | ||
Weighted average common
shares outstanding |
500,000,000 | 500,000,000 | ||||||
Effect of dilutive securities | — | — | ||||||
Weighted average dilutive
common shares outstanding |
500,000,000 | 500,000,000 | ||||||
Loss per common share – basic | $ | (.00 | ) | $ | (.00 | ) | ||
Loss per common share – diluted | $ | (.00 | ) | $ | (.00 | ) |
F-14
VALUESETTERS, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AS OF AND FOR THE YEARS ENDED APRIL 30, 2013 AND 2012
9. Related Party Transactions
The Company’s majority shareholder is also its principal lender. As of April 30, 2013 and 2012, the Company owed its majority shareholder, under a secured lending agreement, $69,2540 and $51,233, respectively. The maximum amount of the loan is $250,000, and the loan is payable on demand. The majority shareholder of the Company owns 328,219,103 shares of common stock, or 56% of the 500,000,000 shares issued and outstanding. |
A director of the Company and founder of Valuesetters, Inc., which merged with the Company in December 2003, has personally guaranteed bank debt of $50,229, as of April 30, 2013 and 2012 and credit card debt of $28,298 and $31,859, as of April 30, 2013 and 2012, respectively. In addition to the personal guarantees, the Company owes him $419,895 and $412,454 as of April 30, 2013 and 2012, respectively, for loans, interest payable and unpaid expenses. |
The Company owes a second director $31,680 as of April 30, 2013 and 2012. |
10. | Subsequent Events |
T he Company has analyzed its operations subsequent to April 30, 2013 through the date these financial statements were issued, and has determined that it does not have any material subsequent events to disclose |
F-15
Exhibit 2.1
CONTRACT OF SALE
The parties to this Contract of Sale (the "Agreement") are Netcapital.com LLC
P. O. Box 277, Hingham Ma 02043, hereinafter referred to as "Seller", Valuesetters Inc. (Pink Sheets: VSTR) , hereinafter referred to as "Buyer" and Sean Lee and Steve Geary, hereinafter referred to as the "Individuals".
WHEREAS, Seller owns certain assets operated on the Internet under the trade name Netgames.com. These assets hereinafter sometimes referred to as the "Business".
WHEREAS FURTHER, Buyer desires to buy the assets of the Seller under the terms and conditions as hereinafter expressed.
NOW, THEREFORE, for and in consideration of the mutual covenants as herein contained and based on the foregoing, the parties hereto agree as follows:
1. | The Total Consideration and Allocation. In consideration of the transfer of (a) netgames.com, chess.net, cards.net, backgammon.net, (b) all the software needed to operate the sites, (c) all patents, trademarks, trades names, licensed names, corporate names, intellectual property, software, customer lists, and any and all goodwill associated therewith (collectively the "Intellectual Property") and (d) 100% interest in and to all of the hard assets of seller not listed above, including but not limited to any computer equipment, repair equipment, spare parts printed material and other items, it being understood that at such time such hard assets shall be substantially the same in quality as they are on the date hereof (collectively the "Equipment"), a-d above being hereinafter referred to as the "Assets", Buyer shall purchase the Assets for an aggregate consideration of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS ($1,800,000.00). The total purchase price shall be remitted by the Buyer’s issuance of 250,000,000 shares of its common stock, par value $0.001 (“Common Stock”), to Seller or to entities designated in writing by the Seller. Buyer will additionally cause shareholders affiliated with Godzich, Darrow, Geary and Lee (“Shareholders”) to transfer to Seller 167,048,000 of Common Stock to Seller as further consideration for this transaction. Shareholders shall transfer their shares of Common Stock as directed in writing by Seller. |
CONTRACT OF SALE PAGE - 1
Buyer does not assume and Seller warrants that Buyer will not be responsible for any liabilities of Seller except as specifically provided in this Agreement. Further, the parties agree that they will use the above allocation of total consideration when filing the Internal Revenue Service form 8594 with their tax return for this year.
II. Bill of Sale . Attached hereto as Exhibit “A” is a Bill of Sale which fully and finally transfers all of the Assets described in such Bill of Sale from Seller to Buyer.
III. Agreements as to Closing Date. The parties intend that the "Closing Date" as that term is used in this Agreement and the effective date of the transfer and transactions contemplated by this Agreement shall be the date of this Agreement.
IV. Representations and Warranties of Seller. Seller hereby represents and warrants, jointly and severally, to Buyer as follows:
A. The Seller is an incorporated business in the state of Delaware.
B. This Agreement and all transactions contemplated hereby will not result in any violation of any of the terms and provisions of any indenture or other agreement to which Seller and/or the Individuals is/are a party or by which Seller or the Individuals may otherwise be bound, or of any law, rule, license, regulation, judgment, order or decree governing or affecting the operation of the Business of Seller.
C. All authorizations, approvals and consents necessary for execution and delivery by Seller of this Agreement and for the consummation by Seller of the transactions contemplated hereby have been given, which if not given would have a materially adverse affect on Seller and/or the Business.
D. Some developers associated with the Seller have agreed to supply their services to the Buyer and will be available to Buyer telephonically on a consulting basis, as needed for a period of fifteen (15) days immediately following the Closing Date during normal business hours, for the price as is set forth in Article I of this Agreement, for the purpose of training Buyer in the detailed operations of the Business and assisting in a smooth and orderly transition of the Business from Seller to Buyer.
E. Seller has, and there shall vest in Buyer, good, indefeasible and marketable title to the Assets free and clear of all debts, claims, liens, encumbrances, charges, equities, restrictions, or any other imperfections of title whatsoever (including without limitation any federal, state, or municipal tax liens for taxes).
CONTRACT OF SALE PAGE - 2
F. This Agreement and the other agreements contemplated hereby are legal, valid and binding obligations of the Seller enforceable against it in accordance with their respective terms.
G. As of the Closing Date, all tangible Assets listed on Exhibit “A,” the Bill of Sale, are in reasonable working condition given their age, appearance and prior use. Buyer understands that the Seller is not a merchant of any of the Assets and that the Assets are used goods and many of the Assets are intangible.
H. There are no actions, suits, audits, proceedings, judgments or investigations pending or to the knowledge of Seller, threatened against or affecting Seller or the Seller's Assets to be transferred.
I. No representation or warranty made by Seller in this Agreement, and no statement contained in any exhibit hereto furnished by the Seller or in any certificate or other instrument to be furnished by Seller in connection with this Agreement, or the transactions contemplated hereby, on or before the Closing Date, contains or will contain any untrue statement of a material fact, or omits or will omit to state all material facts which are necessary in order to make the statements contained therein not misleading.
J. Seller’s Assets are in substantial compliance, provided that no lack of compliance has or will have any materially adverse effect, in respect of Seller's operations, equipment, other property, practices and all other aspects of its Business, with all laws, ordinances, regulations, orders, judgments, rules and decrees of all governmental authorities, including but not limited to those relating to zoning, solid waste management, protection of the environment, and occupational safety and health, which have any application to the operations of Seller, and Seller has obtained and possesses all permits and licenses necessary for it to conduct its Business as heretofore conducted.
K. From the date on which the Buyer first contacted the Seller about the sale of the Assets, as of the date of this Agreement and through the Closing Date, pending consummation of the sale and purchase described in this Agreement, the Seller and has, and if the effective date of this Agreement is any date after the date of this Agreement, the Seller will continue to operate the Business in the same manner as it has been operated by Seller in the past and no materially adverse change has occurred, or will be known to the Seller that will be about to occur as of the Closing Date, which in the knowledge of the Seller might adversely affect the Business or its Assets. Without limiting the foregoing, the Seller agrees, warrants, and covenants that from the date on which the Buyer first contacted the Seller about the sale of the Assets and pending the signing of this Agreement, the Seller not made any substantial changes in the operation of the Business.
V. Representations and Warranties of Buyer and the Individuals. Each of Buyer and the Individuals hereby represents and warrants to Seller as follows:
CONTRACT OF SALE PAGE - 3
A. The Buyer is a corporation, duly organized and validly existing under the laws of the State of Utah.
B. This Agreement and all transactions contemplated hereby will not result in any violation of any of the terms and provisions of any indenture, or other agreement to which Buyer is a party or to which Buyer may otherwise be bound, or of any law, rule, license, regulation, judgment, order or decree governing or affecting Buyer.
C. All authorizations, approvals and consents necessary for the execution and delivery by Buyer of this Agreement and for the consummation by Buyer of the transactions contemplated hereby have been given, which if not given would have a materially adverse affect on Seller and/or Buyer.
D. Buyer has inspected the physical and intangible assets of Seller and is satisfied with such inspections considering all relevant information including the age, prior use and appearance of the physical assets of Seller to be transferred to Buyer. Notwithstanding anything in this paragraph to the contrary, Buyer does not release Seller from any of Seller's representations and warranties by reason of Buyer's inspections.
E. Buyer understands and agrees that Seller has made no representations or warranties regarding future profitability of the Business, general business prospects for the Business, retention of customers, supply sources, business prospects in general or general economic conditions relative to the Business.
F. There are no actions, suits, audits, proceedings, judgments or investigations (whether or not purportedly on behalf of Buyer or the Individuals) pending or to the knowledge of Buyer or the Individuals, threatened against or affecting Buyer or the Buyer's common stock to be transferred.
G. No representation or warranty made by Buyer or the Individuals in this Agreement, and no statement contained in any exhibit hereto furnished by the Buyer or the Individuals in any certificate or other instrument to be furnished by Buyer in connection with this Agreement, or the transactions contemplated hereby, on or before the Closing Date, contains or will contain any untrue statement of a material fact, or omits or will omit to state all material facts which are necessary in order to make the statements contained therein not misleading.
H. Buyer guarantees that its equity is no less than negative $588,590 at the time of closing. Buyer and Individuals represent that the financial statements attached in Exhibit B are free from material error and that the financial statements include all assets liabilities of the Buyer, recorded in accordance with generally accepted accounting principles.
CONTRACT OF SALE PAGE - 4
VI. Prorations. In the event that the parties hereto have not prorated all costs, expenses, and other items necessary at or before the Closing Date, the parties hereto agree that all costs, expenses and other liability items shall be prorated to the Closing Date with Seller being responsible for any and all costs, expenses or other liability items up including the Closing Date and Buyer being responsible for all costs, expenses and other items from and after the Closing Date into the future, except as otherwise specifically provided for in this Agreement to the contrary. The parties have agreed to prorate all items not handled at or before the Closing Date in accordance with the foregoing statements outside of closing.
VII. Taxes. Each party also agrees that Seller will remain responsible for any type of taxes or special governmental assessments accruing regarding the Business up to the Closing Date and that the Buyer will be responsible for such taxes after the Closing Date.
VIII. Nature and Survival of Representations, Etc. All statements contained in any certificates or other instrument delivered on behalf of any party hereto in connection with this Agreement, or in connection with the transactions contemplated herein shall be deemed representations and warranties by such party. All representations, warranties, agreements and covenants in this Agreement shall be deemed restated as of, and shall survive the Closing Date.
IX. Brokerage Commission . Seller and Buyer acknowledges that there is no broker or other third party to which a commission is due for help in negotiating and procuring the Buyer as is set forth in this Agreement.
X. Notices. All notices, consents, requests, demands or other communications hereunder shall be in writing and shall be deemed to have been duly given or delivered, if delivered personally or mailed by registered, overnight or certified mail, return receipt requested, with the first class postage prepaid as follows:
TO BUYER :
Steve Geary
17423 N. 25 th Ave Suite 1
Phoenix AZ 85023
TO SELLER :
Netcapital.com Inc
Box 277 Hingham Ma 02043
Any change in the above addresses shall be deemed effective if made in accordance with this article.
CONTRACT OF SALE PAGE - 5
XI. Modification. This Agreement shall not be modified or amended except by instrument in writing signed by or on behalf of the parties hereto.
XII. Law to Govern. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Massachusetts. The choice of law provision of this Agreement shall be applied with no effect given to the principles of conflicts of law, and without regard to the Choice of Law rules of the State of Massachusetts.
XIII. Assignment. This Agreement may not be assigned by any party without the written consent of the other parties. Nothing in this Agreement is intended to confer upon any person, other than the parties hereto and their successors, any rights or remedies under or by reason of this Agreement. All assignments or attempted assignments shall be deemed valid only if in writing.
XIV. Exhibits . All Exhibits to this Agreement shall be deemed to be part of this Agreement and are hereby intended to be incorporated herein by reference as if set out verbatim.
XV. Entire Agreement . This instrument, including all exhibits attached hereto, contains the entire agreement of the parties. Any and all prior agreements, written or oral are hereby superseded by this Agreement.
XVI. Attorney's Fees. Should any party deem it necessary to obtain the services of legal counsel to assist with respect to any dispute arising between the parties concerning this Agreement, or with respect to the resolution of any dispute pursuant to this Agreement, then the prevailing party shall be entitled to reimbursement for any such reasonable attorney's fees, costs and expenses.
XVII. Headings. The article paragraph headings of this Agreement are for administrative convenience only and shall not be construed in interpreting this Agreement.
XVIII. Further Assurances. The parties to this Agreement mutually, both individually and collectively covenant and agree that they will do any and all things reasonably necessary after the date of this Agreement in order to effectuate all the terms and conditions of this Agreement. Each party agrees to cooperate with the other including but not limited to signing any and all documents necessary in order to pass title to the Assets and effectuate the other terms and conditions of this Agreement. However, Seller shall in no way be required to expend any other sums of money in order to effectuate the provisions of this paragraph.
XIX. Assumed Name. The parties to this Agreement acknowledge and agree that the trade name “Netgames” to be transferred as one of the Assets to be sold/purchased pursuant to the terms of this Agreement.
CONTRACT OF SALE PAGE - 6
XXI. Remedies Not Exclusive. The remedies provided for in this Agreement are not exclusive of any other remedy available to any party, that is, they are not in lieu of, but are in addition to any other remedy available to any party at law or in equity.
XXII. Binding Nature. This Agreement shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the parties hereto, that nothing contained in this paragraph shall be construed as a consent to any assignment of this Agreement or the duties and obligations under this Agreement by either Buyer or Seller.
XXIII. Invalidity or Unenforceable Nature. In the event that any provision or part thereof is deemed to be invalid, illegal or unenforceable for any reason, then the parties to this Agreement hereby mutually acknowledge and agree that it is their intention to have any such invalid, illegal or unenforceable provision or part thereof be deleted from this Agreement as if it had never been included in this Agreement, so that the remainder of this Agreement is valid, binding and enforceable in accordance with its terms.
XXIV. Indemnities of the Parties . Each of Seller and the Individuals agrees to and does indemnify and hold harmless Buyer and Buyer's employees, agents and assigns from and against any and all liabilities, claims, damages, taxes, actions, demands, losses, costs, penalties, violations of law and expenses, including reasonable attorneys' fees, ("Losses") arising out of Seller's conduct of Seller's Business on or prior to the Closing Date, including to mean an indemnification for the negligent acts of the Seller, or resulting from any misrepresentation or breach of warranties contained herein or in the Exhibits attached hereto or any material default by Seller or the Individuals in the performance of the covenants and agreements made by Seller or the Individuals herein or in the Exhibits attached hereto.
XXV. Settlement of Disputes. The following agreements are made with respect to the settlement of disputes arising under the terms and conditions of this Agreement:
A. If a dispute arises out of or relates to this Agreement, including to mean any of its Exhibits, or the breach or default of this Agreement, the parties shall first, in good faith, attempt to negotiate a settlement of that dispute, breach or default.
B. If the dispute, breach or default cannot be settled through negotiation, the parties agree and shall proceed to binding arbitration through the American Arbitration Association in accordance with its Commercial Arbitration Rules under the Federal Arbitration Act, and judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
CONTRACT OF SALE PAGE - 7
C. Any provisional remedy (including injunctive relief) which a party to this Agreement may want to elect, shall be available notwithstanding the provisions relating to arbitration of disputes. Any party may seek such provisional remedy from the appropriate court of law pending arbitration, and such proceeding in which the provisional remedy was sought will then be stayed pending the final award of the arbitration.
D. The expenses of arbitration conducted pursuant to this paragraph shall be born by the parties in such proportions as the arbitrator(s) shall decide.
IN WITNESS WHEREOF, the parties have signed this Agreement to be effective on November 23, 2010.
SELLER:
Netcapital.com Inc.
By: /s/ John Fanning
John Fanning, Chairman
BUYER:
Valuesetters, Inc .
By: /s/ Steve Geary
Steve Geary, CEO
By: /s/ Sean F. Lee
Sean Lee, Chairman
EXHIBIT LIST
Exhibit “A” – Bill of Sale
Exhibit “B” – Financial Statements of Buyer
The Company agrees to supplementally submit a copy of all omitted exhibits to the Securities and Exchange Commission upon request.
CONTRACT OF SALE PAGE - 8
Exhibit 10.1
AMENDED LOAN AND SECURITY AGREEMENT
THIS AMENDED LOAN AND SECURITY AGREEMENT (this “ Agreement ”), dated as of July 25, 2014 (the “ Effective Date ”) is entered into by and between Valusetters Inc., a Utah corporation the “ Borrower ”), and Vaxstar LLC, a Delaware limited liability company (“ Lender ”).
RECITALS
WHEREAS, Lender is a shareholder of Valuesetters Inc. and has purchased the debt previously owed to a secured lender under a revolving loan and security agreement dated April 28, 2011;
WHEREAS , Borrower has requested that Lender make advances to Borrower from time to time on a revolving basis in an aggregate principal amount at any time thereof not to exceed two hundred fifty thousand dollars ($250,000) (the “ Maximum Principal Amount ”); and
WHEREAS , Lender is willing to make such advances to Borrower on the terms and subject to the conditions set forth herein.
AGREEMENT
NOW , THEREFORE , in consideration of the premises and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower and Lender, intending to be legally bound, hereby agree as follows:
1. Loans and Promissory Note .
(a) Commitment to Lend . Subject to the terms and conditions set forth in this Agreement, Lender hereby agrees to make advances to Borrower (each a “ Loan Advance ” and collectively, the “ Loan Advances ”) from time to time, during the period beginning on the date hereof and ending on the Maturity Date (the “ Draw Period ”), in an amount up to, but not to exceed, the Maximum Principal Amount in the aggregate outstanding at any time, for the purposes stated herein only. During the Draw Period, subject to the terms and condition of this Agreement, Borrower may borrow, repay, and re-borrow amounts up to the Maximum Principal Amount at any time and from time to time.
(b) Promissory Note . The Loan Advances made by Lender hereunder shall be evidenced by the duly executed Promissory Note of Borrower to Lender, dated as of the date hereof in an original principal amount equal to the Maximum Principal Amount and in the form attached hereto as Exhibit A (as amended, modified, extended, renewed or replaced from time to time, the “ Note ”).
(c) Repayments . Borrower shall pay in full any remaining outstanding principal amount, all accrued but unpaid interest, and all other Obligations on the Maturity Date.
(d) Payment of Interest .
(i) Subject to Section 7(b)(ii), the principal amount outstanding under the Loan Advances shall accrue interest from the date of issuance until the Maturity Date at the rate of eight percent (8%) per annum, compounding daily. The payment of accrued interest shall be made on the first calendar day of each month. Should Borrower not make a monthly interest payment, the payment amount will be added to the principal balance due under this Agreement.
(ii) Interest will be computed on the basis of a year deemed to consist of 360 days and shall be paid for the actual number of days elapsed.
2. Creation of a Security Interest .
(a) Grant of Security Interest .
(i) Borrower hereby grants to Lender, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Lender, all of Borrower’s right, title and interest in, to and under all the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all proceeds and products thereof. Borrower represents, warrants, and covenants that the security interest granted herein is and shall at all times be a first priority perfected security interest in the Collateral other than with respect to Permitted Liens. If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify Lender in writing of the general details thereof and grant to Lender a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to be in form and substance reasonably satisfactory to Lender.
(ii) If this Agreement is terminated, Lender’s security interest in the Collateral shall continue until the Obligations are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as Lender’s obligation to make Loan Advances has terminated, Lender shall, at Borrower’s sole cost and expense, release its security interest in the Collateral and all rights therein shall revert to Borrower.
(b) Authorization to File Financing Statements . Borrower hereby authorizes Lender to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Lender’s interest or rights hereunder. Such financing statements may indicate the Collateral as “all assets of the Debtor” or words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Lender’s discretion. Lender shall promptly provide Borrower with a copy of any such financing statements following filing.
3. Conditions of Loans .
(a) Conditions Precedent to Loan Advances . Lender’s obligation to make each Loan Advance is subject to satisfaction of the following conditions:
(i) Receipt of an executed Notice of Borrowing (as defined below);
(ii) The representations and warranties in Section 4 shall be true in all material respects on the date of the Notice of Borrowing and the Loan Date (as defined below);
(iii) No Event of Default shall have occurred and be continuing or result from such Loan Advance;
(iv) There shall not have occurred, in Lender’s sole discretion, any Material Adverse Change.
(b) Procedure for Borrowing . Subject to the prior or simultaneous satisfaction of the conditions set forth in Section 3(a), to obtain a Loan Advance, Borrower shall give written notice to Lender in the form attached as Exhibit B (a “ Notice of Borrowing ”) not later than the tenth (10 th ) Business Day prior to the date of the proposed Loan Advance (the “ Loan Date ”). Each Notice of Borrowing shall be in writing and shall specify (a) the Loan Date; (b) the account of Borrower to be funded and the wire instructions applicable thereto; (c) the purpose for which such Loan Advance shall be used; and (d) the amount of such proposed Loan Advance. Each Loan Advance shall be made to Borrower following Lender’s receipt of a Notice of Borrowing and satisfaction of the other conditions set forth in Section 3(a), Lender shall deliver the applicable Loan Advance to Borrower on the Loan Date by ACH transfer of immediately available funds to the account specified by Borrower.
4. Representations and Warranties of Borrower .
Borrower hereby represents and warrants to Lender as of the date hereof as follows:
(a) Binding Agreement . The Loan Documents constitute or will constitute, when issued and delivered, valid and binding obligations of Borrower, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights in general, and general principles of equity.
(b) Organization; Power; Authorization . Borrower is a Registered Organization duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation, as the case may be. Borrower has all requisite power and authority (corporate and otherwise) to execute, deliver and perform the Loan Documents and to consummate the transactions contemplated thereby. The execution, delivery and performance by Borrower of the Loan Documents and the consummation of the transactions contemplated thereby have been duly authorized by all necessary action on the part of Borrower.
(c) Non-Contravention . Neither the execution and the delivery of the Loan Documents, nor the consummation of the transactions contemplated hereby, will (a) violate any injunction, judgment, order, decree, ruling, charge or any provision of Borrower’s charter documents, or, to Borrower’s knowledge, any restriction of any government, governmental agency, or court to which Borrower is subject, or (b) conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, any material agreement, contract, lease, license, instrument, or other arrangement to which Borrower is a party or by which it is bound or to which any of its assets are subject.
(d) Collateral .
(i) Borrower has good title to, has rights in, and the power to transfer each item of the Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. The security interests and Liens granted to Lender under this Agreement and the other Loan Documents to which Borrower is a party constitute valid and perfected first priority liens and security interests in and upon the Collateral to which Borrower now has or hereafter acquires rights other than with respect to Permitted Liens. The Accounts are bona fide, existing obligations of the Account Debtors.
(ii) All Inventory is in all material respects of good and marketable quality, free from material defects.
(iii) Borrower is the owner of its intellectual property, except for non-exclusive licenses granted to its customers in the ordinary course of business. Each patent is valid and enforceable and no part of the intellectual property of the Borrower has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower’s knowledge, no claim has been made that any part of the intellectual property violates the rights of any third party.
(iv) Borrower is not a party to, nor is bound by, any material license or other agreement with respect to which Borrower is the licensee (A) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (B) for which a default under or termination of could interfere with Lender’s right to sell any Collateral. Borrower shall provide written notice to Lender within ten (10) days of entering or becoming bound by any such license or agreement which is reasonably likely to have a material impact on Borrower’s business or financial condition (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Lender requests to obtain the consent of, or waiver by, any Person whose consent or waiver is necessary for (Y) all such licenses or agreements to be deemed “Collateral” and for Lender to have a security interest in it that might otherwise be restricted or prohibited by law or by the terms of any such license or agreement, whether now existing or entered into in the future, and (Z) Lender to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance with Lender’s rights and remedies under this Agreement and the other Loan Documents.
(e) Tax Returns and Payments . Borrower has filed, or caused to be filed, in a timely manner all material tax returns, reports and declarations which are required to be filed by it (without requests for extension except as previously disclosed in writing to Lender). All information in such tax returns, reports and declarations is complete and accurate in all material respects. Borrower has paid or caused to be paid prior to delinquency all taxes due and payable or claimed due and payable in any assessment received by it, except taxes the validity of which are being contested in good faith by appropriate proceedings diligently pursued and available to Borrower and with respect to which adequate reserves have been set aside on its books. Adequate provision has been made by Borrower for the payment of all accrued and unpaid federal, state, county, local, foreign and other taxes whether or not yet due and payable and whether or not disputed.
5. Covenants .
(a) Affirmative Covenants .
(i) Maintenance of Properties . Borrower shall maintain all tangible property included in the Collateral in good order and repair, subject to normal wear and tear, and make all needed and proper repairs to its properties so that Borrower’s business may be properly and advantageously conducted at all times in accordance with prudent business management and in compliance with all governmental requirements and regulations;
(ii) Use of Proceeds . Borrower shall use the proceeds of the Loan Advances solely as working capital and to fund its general business requirements and not for personal, family, household or agricultural purposes;
(iii) Insurance . Borrower shall, at all times, maintain with financially sound and reputable insurers insurance with respect to the Collateral against loss or damage and all other insurance of the kinds and in the amounts customarily insured against or carried by corporations of established reputation engaged in the same or similar businesses and similarly situated.
(iv) Further Assurances . Borrower shall execute any further instruments and take further action as Lender reasonably requests to perfect or continue Lender’s security interest in the Collateral or to otherwise effect the purposes of this Agreement.
(b) Negative Covenants . Borrower shall not, without Lender’s prior written consent:
(i) Dispositions . Convey, sell, lease, transfer or otherwise dispose of (collectively, “ Transfer ”), or permit any of its subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment; (c) in connection with Permitted Liens; and (d) of non-exclusive licenses for the use of the property of Borrower or its subsidiaries in the ordinary course of business;
(ii) Mergers or Acquisitions . Merge or consolidate, or permit any of its subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A subsidiary may merge or consolidate into another subsidiary or into Borrower; provided that, in the case of a merger of a subsidiary into Borrower, Borrower shall remain the surviving entity.
(iii) Indebtedness . Borrow money or engage in any other financing transaction for borrowed money except under this Agreement and except for trade payables incurred in the ordinary course of Borrower’s business;
(iv) Encumbrances . Create, incur, allow, or suffer any Lien on any Collateral, or assign or convey any right to receive income or permit any of Borrower’s subsidiaries to do so, or permit any Collateral not to be subject to the first priority security interest granted herein, in each case, other than with respect to Permitted Liens;
(v) Loans . Make any loan to any Person except receivable, prepaid items or deposits incurred in the ordinary course of business; or
(vi) Capital Expenditures . Make nor agree to make any material capital expenditures.
6. Representations and Warranties of Lender .
(a) Binding Agreement . This Agreement constitutes or will constitute, when issued and delivered, a valid and binding obligation of Lender, enforceable in accordance with its terms, subject to bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights in general, and general principles of equity.
(b) Organization; Power; Authorization . Lender is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Lender has full limited liability company power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance by Lender of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary limited liability company action.
(c) Non-Contravention . Neither the execution and the delivery of the Loan Documents, nor the consummation of the transactions contemplated hereby, will (a) violate any injunction, judgment, order, decree, ruling, charge or any provision of Lender’s charter documents, or, to Lender’s knowledge, any restriction of any government, governmental agency, or court to which Lender is subject, or (b) conflict with, result in a material breach of, constitute a default under, result in the acceleration of, create in any party the right to accelerate, terminate, modify, or cancel, any material agreement, contract, lease, license, instrument, or other arrangement to which Lender is a party or by which it is bound or to which any of its assets are subject
7. Events of Default; Remedies Upon Default .
(a) Events of Default . The occurrence of any of the following events shall constitute an event of default (each, an “ Event of Default ”) hereunder:
(i) Borrower fails to pay timely any of the principal and any accrued interest or other amounts due under the Loan Documents when the same becomes due and payable;
(ii) Borrower (A) files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law, or any other law for the relief of, or relating to, debtors, now or hereafter in effect; (B) applies for or consents to the appointment of a custodian, receiver, trustee, sequestrator, conservator or similar official for Borrower or for a substantial part of Borrower’s assets; (C) makes a general assignment for the benefit of creditors; (D) becomes unable to, or admits in writing its inability to, pay its debts generally as they come due; or (E) takes any corporate action in furtherance of any of the foregoing;
(iii) An involuntary petition is filed against Borrower (unless such petition is dismissed or discharged within sixty (60) days) under any bankruptcy statute now or hereafter in effect, or a custodian, receiver, trustee, sequestrator, conservator, assignee for the benefit of creditors (or other similar official) is appointed to take possession, custody or control of any property of Borrower;
(iv) One or more final and non-appealable judgments for the payment of money in an amount, individually or in the aggregate, of at least $100,000 (not covered by independent third-party insurance as to which liability has been accepted by such insurance carrier) are entered by a court of competent jurisdiction against Borrower which judgment remains undischarged, unsatisfied, unvacated or unstayed for a period of ten (10) days after such judgment becomes final and non-appealable (and Lender shall not be required to make any Loan Advances prior to the satisfaction, vacation or stay of such judgment, order or decree);
(v) A default or breach occurs under any agreement between Borrower and any creditor of Borrower that signed a subordination, intercreditor, or other similar agreement with Lender, or any creditor that has signed such an agreement with Lender breaches any terms of such agreement;
(vi) Any representation, warranty or other statement made by Borrower in the Loan Documents, or any other agreement or other document delivered in connection with any of the Loan Documents, shall prove to have been false or misleading in any material respect when made;
(vii) Borrower violates any covenant set forth in Section 5 hereof; or
(viii) After the date hereof, Borrower grants any Person, other than Lender, any Lien or other encumbrance on all or any substantial part of its assets, other than (A) with respect to Permitted Liens or (B) with respect to any Lien or other encumbrance that is junior in priority to the Lien created by Section 2 hereof.
(b) Remedies Upon Default .
(i) Upon the occurrence of an Event of Default hereunder:
(A) all unpaid principal, accrued interest and other amounts owing hereunder shall, at the option of Lender, be immediately due and payable by Borrower;
(B) Lender may terminate its commitment to make additional Loan Advances; and
(C) Lender may proceed to protect and enforce its right by suit in the specific performance of any covenant or agreement contained in the Loan Documents or in aid of the exercise of any power granted in the Loan Documents or may proceed to enforce the payment of the Loan Documents or to enforce any other legal or equitable rights as Lender may have, including exercising any right or remedies available to Lender under the Loan Documents and under the Code (including disposal of the Collateral pursuant to the terms thereof).
(ii) Any and all amounts (including principal, unpaid interest and all reasonable costs and expenses of collection, including reasonable attorneys’ fees) outstanding hereunder after an Event of Default shall bear interest from the date due until paid at the rate of fifteen percent (15%) per annum.
(c) Power of Attorney . Borrower hereby irrevocably appoints Lender as its lawful attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Lender determines reasonable; (d) make, settle, and adjust all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; and (f) transfer the Collateral into the name of Lender or a third party as the Code permits.
(d) Application of Payments and Proceeds . If an Event of Default has occurred and is continuing, Borrower shall have no right to specify the order or the accounts to which Lender shall allocate or apply any payments required to be made by Borrower to Lender or otherwise received by Lender under this Agreement when any such allocation or application is not specified elsewhere in this Agreement. If an Event of Default has occurred and is continuing, Lender may apply any funds in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Lender shall determine in its sole discretion. If Lender, in its good faith business judgment, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lender shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the Obligations until the actual receipt by Lender of cash therefor.
(e) Lender’s Liability for the Collateral . So long as Lender complies with reasonable practices regarding the safekeeping of the Collateral in the possession or under the control of Lender, Lender shall not be liable or responsible for: (i) any loss or damage to the Collateral; (ii) any diminution in the value of the Collateral; or (iii) any act or default of any carrier, warehouseman, bailee, or other Person. So long as Lender complies with reasonable practices regarding the safekeeping of the Collateral in the possession or under the control of Lender, Borrower bears all risk of loss, damage or destruction of the Collateral.
8. Other Provisions .
(a) Demand Waiver; Representations and Expenses . Borrower waives presentment, notice of dishonor, protest and notice of protest of this Agreement and the Note and all other notices or demands in connection with the delivery, acceptance, performance, default or endorsement of the Loan Documents, and shall pay reasonable out-of-pocket costs and expenses of collection when incurred by Lender, including, without limitation, reasonable attorneys’ fees and expenses
(b) Waivers by Lender; Remedies Cumulative . Lender’s failure, at any time or times, to require strict performance by Borrower of any provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Lender thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by Lender and then is only effective for the specific instance and purpose for which it is given. Lender’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Lender has all rights and remedies provided under the Code, by law, or in equity. Lender’s exercise of one right or remedy is not an election, and Lender’s waiver of any Event of Default is not a continuing waiver. Any delay in exercising any remedy by Lender is not a waiver, election, or acquiescence.
(c) Binding Agreement; Governing Law . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement shall be governed by and construed in accordance with the internal and substantive laws of the State of Delaware and without regard to any conflicts of laws concepts which would apply the substantive law of some other jurisdiction.
(d) Further Assurances . The parties hereto agree to execute and deliver all such other papers and documents and to take such other further actions that may be reasonably necessary or appropriate to carry out the terms of this Agreement.
(e) Entire Agreement; Amendment . The Loan Documents contain the entire agreement among the parties with respect to the subject matter hereof and there are no agreements, understandings, representations, or warranties regarding the subject matter hereof that are not set forth herein. This Agreement may not be amended or revised except by a writing signed by Borrower and Lender.
(f) Notices . Any notices required or permitted to be sent to Borrower or Lender shall be delivered to the address of Borrower or Lender, as applicable, as set forth below. All notices required or permitted hereunder, to be effective, shall be in writing and shall be deemed effectively given: (i) when sent by confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next Business Day, (ii) three (3) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (iii) one (1) Business Day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.
If to Borrower, to:
Manuel Teixeira
Valuesetters Inc.
430 North Street
White Plains, NY 10605
If to Lender, to:
Vaxstar LLC
P. O. Box 277, Hingham MA 02043
(g) Counterparts . This Agreement may be executed in one or more counterparts, all of which when taken together shall constitute but one instrument, and in the event any signature is delivered by facsimile or “.pdf” transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” were an original thereof.
(h) Severability . The provisions of this Agreement are severable, and the invalidity of any provision shall not affect the validity or enforceability of any other provision hereof.
(i) Captions . The captions herein have been inserted solely for convenience of reference and in no way define, limit, or describe the scope or substance of any provision of this Agreement.
(j) Interpretation . All pronouns used herein shall include the masculine, feminine, and neuter gender as the context requires. All defined terms shall include both the plural and singular case as the context requires.
(k) Restriction on Assignment . Notwithstanding anything herein to the contrary, Borrower shall not assign this Agreement without obtaining the prior written approval of Lender. Lender may assign or transfer any of its rights or obligations under the Loan Documents without the consent of Borrower, and the provisions of the Loan Documents shall be binding upon and inure to the benefit of such assignee or transferee. Any attempted assignment in violation of this Section 8(k) shall be void and the other party hereto shall not recognize any such purported assignment.
(l) Borrower Matters . Borrower may request a Loan Advance hereunder. Borrower acknowledges that Loan Advances totaling $91,407 have already been made to it and such advances shall be governed by this agreement. Borrower hereunder shall be obligated to repay all Loan Advances made hereunder. Borrower waives any suretyship defenses available to it under the Code or any other applicable law. Borrower waives any right to require Lender to: (i) proceed against any Borrower or any other Person; (ii) proceed against or exhaust any security; or (iii) pursue any other remedy. Lender may exercise or not exercise any right or remedy it has against Borrower or any security it holds (including the right to foreclose by judicial or non-judicial sale) without affecting any Borrower’s liability hereunder. Notwithstanding any other provision of this Agreement or any other Loan Document, Borrower irrevocably waives all rights that it may have at law or in equity (including, without limitation, any law subrogating Borrower to the rights of Lender under this Agreement) to seek contribution, indemnification or any other form of reimbursement from any other Borrower, or any other Person now or hereafter primarily or secondarily liable for any of the Obligations, for any payment made by Borrower with respect to the Obligations in connection with this Agreement, any other Loan Document or otherwise and all rights that it might have to benefit from, or to participate in, any security for the Obligations as a result of any payment made by Borrower with respect to the Obligations in connection with this Agreement or otherwise. Any agreement providing for indemnification, reimbursement or any other arrangement prohibited under this Section 8(l) shall be null and void. If any payment is made to a Borrower in contravention of this Section 8(l), such Borrower shall hold such payment in trust for Lender and such payment shall be promptly delivered to Lender for application to the Obligations, whether matured or unmatured.
9. Definitions . As used in this Agreement:
(a) “ Account ” means all present and future rights of Borrower to payment for goods sold or leased or for services rendered, which are not evidenced by instruments or chattel paper, and whether or not earned by performance.
(b) “ Account Debtor ” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
(c) “ Business Day ” means any day except Saturday, Sunday and any day which shall be a federal legal holiday or a day on which banking institutions in the State of Delaware are authorized or required by law or governmental action to close.
(d) “ Code ” means the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of Delaware; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Lender’s security interest in any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of Delaware, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other jurisdiction solely for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
(e) “ Collateral ” is any and all properties, rights and assets of Borrower described on Exhibit C .
(f) “ Equipment ” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
(g) “ Inventory ” means all “inventory” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
(h) “ Lien ” means any claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind, whether voluntarily incurred or arising by operation of law or otherwise against any property.
(i) “ Loan Documents ” means this Agreement and the Note, each as amended, restated, or otherwise modified.
(j) “ Material Adverse Change ” means (i) any impairment in the perfection or priority of Lender’s security interest in the Collateral, other than with respect to any Permitted Lien, or in the value of such Collateral; (ii) a material adverse change in the business, operations or condition (financial or otherwise) of Borrower; or (iii) a material impairment in the prospect of repayment of any portion of the Obligations.
(k) “ Maturity Date ” means June 30, 2017.
(l) “ Obligations ” means Borrower’s obligation to pay when due any debts, principal, interest, and other amounts Borrower owes Lender now or later under the Loan Documents.
(m) “ Permitted Liens ” means (i) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good faith and for which Borrower maintains adequate reserves on its books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the treasury regulations adopted thereunder; (ii) purchase money Liens (A) on Equipment acquired or held by Borrower incurred for financing the acquisition of Equipment securing no more than One Hundred Thousand Dollars ($100,000) in the aggregate amount outstanding, or (B) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the Equipment; (iii) statutory Liens securing claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other Persons imposed without action of such parties; provided that, the aggregate amount of such Liens does not at any time exceed One Hundred Thousand Dollars ($100,000.00); and (iv) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (i) through (ii), but any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase.
(n) “ Person ” means an individual, corporation association, partnership, limited liability company, joint venture, trust, government, agency department or any other entity.
(o) “ Records ” means all of Borrower’s present and future books of account of every kind or nature, purchase and sale agreements, invoices, ledger cards, bills of lading and other shipping evidence, statements, correspondence, memoranda, credit files and other data relating to the Collateral or any account debtor, together with the tapes, disks, diskettes and other data and software storage media and devices, file cabinets or containers in or on which the foregoing are stored (including any rights of Borrower with respect to the foregoing maintained with or by any other person).
(p) “ Registered Organization ” means any “registered organization” as defined in the Code with such additions to such term as may hereafter be made.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Loan and Security Agreement as of the date first above written.
BORROWER:
VALUESETTERS INC.
By: /s/ Manuel Teixeira Name: Manuel Teixeira Title: CEO
|
LENDER:
VAXSTAR LLC
By: /s/ Mark Richards Name: Mark Richards Title: CEO |
Exhibit A
Form of Promissory Note
PROMISSORY NOTE
Up to $250,000 | July 25, 2014 |
FOR VALUE RECEIVED, VALUESETTERS INC. , a Delaware corporation, (the “ Borrower ”), hereby absolutely, irrevocably, unconditionally to pay to the order of VAXSTAR LLC , a Delaware limited liability company (“ Lender ”), in United States dollars and in immediately available funds, the principal sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) , or such lesser amount as may be advanced by Lender to the Borrower from time to time in accordance with that certain Amended Loan and Security Agreement dated as of July 25, 2014, between the Borrower and Lender (as it may be amended, modified, extended or restated from time to time, the “ Loan Agreement ”), together with interest thereon, as provided in the Loan Agreement. Notwithstanding the foregoing, the aggregate principal amount outstanding under this Promissory Note (this “ Note ”) shall not exceed two hundred fifty thousand dollars ($250,000). This Note is subject to all of the terms and conditions set forth in, and such terms and conditions are hereby incorporated herein by reference to, the Loan Agreement. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement. In the event of any conflict between the provisions of this Note and the Loan Agreement, the provisions of the Loan Agreement shall prevail.
The obligations of the Borrower evidenced by this Note are secured as set forth in the Loan Agreement.
Except as otherwise provided in the Loan Documents, all outstanding principal and interest with respect to Loan Advances shall be due and payable in full in cash on the Maturity Date. The daily unpaid principal balance outstanding under this Note shall bear interest at the rate(s) set forth in the Loan Agreement. The Loan Advances may be prepaid in whole or in part at any time without premium or penalty and amounts repaid may be re-borrowed in accordance with the provisions of the Loan Agreement.
Upon the occurrence of an Event of Default, Lender shall have, and shall be entitled to exercise, all of the rights and remedies set forth in the Loan Documents.
All payments in respect of amounts outstanding under this Note shall be paid in immediately available funds to the account(s) specified by Lender from time to time. Any payment due in respect of this Note which falls due on a day other than a Business Day shall be made on the next Business Day.
The Borrower hereby waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note. No release of any security for the payment of this Note or extension of time for payment of this Note, and no alteration, amendment or waiver of any provision of this Note made by agreement between Lender and any other Person shall release, discharge, modify, change or affect the liability of the Borrower under this Note.
Each right, power and remedy of Lender under this Note, the Loan Agreement, any other Loan Document, or under applicable laws shall be cumulative and concurrent, and the exercise of any one or more of them shall not preclude the simultaneous or later exercise by Lender of any or all such other rights, powers or remedies. No failure or delay by Lender to insist upon the strict performance of any one or more provisions of this Note, the Loan Agreement, any other Loan Document, or to exercise any right, power or remedy consequent upon an Event of Default shall constitute a waiver thereof, or preclude Lender from exercising any such right, power or remedy. No modification, change, waiver or amendment of this Note shall be deemed to be made unless in writing signed by the Borrower and Lender. This Note shall inure to the benefit of and be binding upon the Borrower and Lender and their respective successors and assigns; provided that except as set forth in the Loan Agreement, the Borrower shall have no right to assign any of its rights or delegate any of its obligations under this Note and provided further there shall be no restrictions of any nature on Lender’s right to assign this Note or its rights hereunder. The invalidity, illegality or unenforceability of any provision of this Note shall not affect or impair the validity, legality or enforceability of any other provision. This Note shall be deemed to be made in, and shall be governed by the laws of, the State of Delaware (without regard to its conflicts of laws principles).
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Promissory Note has been duly executed by the undersigned as of the day and year first above written.
BORROWER:
VALUESETTERS INC.
By: /s/ Manuel Teixeira Name: Manuel Teixeira Title: CEO
|
Exhibit B
Form of Notice of Borrowing/Loan Advance Request
NOTICE OF BORROWING/LOAN ADVANCE REQUEST
Date:
VaxStar LLC
P. O. Box 277
Hingham Ma 02043
Attention:
Advance Request: Loan and Security Agreement
Dear Gentlemen:
Reference is made to that certain Loan and Security Agreement (as from time to time amended, varied, supplemented or otherwise modified, the “ Loan Agreement ”), dated as of April 28, 2011, by and between Valuesetters Inc (the “ Borrower ”), and (ii) Vaxstar LLC, a Delaware limited liability company (“ Lender ”).
This is a Notice of Borrowing. All capitalized terms used herein and not otherwise defined shall have the meanings given to them in the Loan Agreement.
1. | LOAN ADVANCE REQUEST |
In accordance with the Loan Agreement, the undersigned hereby requests that Lender make a Loan Advance as follows:
a. | Loan Date: July 31, 2013 |
b. | Amount of Loan Advance: US $_________________ to be disbursed as follows: |
Valuesetters Inc
Account Information
ABA # Account #
c. | Purpose for which Loan Advance will be used: |
2. CERTIFICATION.
The Borrower hereby certifies that (a) the representations and warranties in Section 4 of the Loan Agreement are true in all material respects as of the date hereof, (b) no Event of Default (i) has occurred that is continuing as of the date hereof and (ii) will result from the Loan Advance requested hereunder and (c) no Material Adverse Change has occurred.
Sincerely,
Valuesetters Inc.
Exhibit C
Description of Collateral
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
1. | All Accounts and other indebtedness owed to Borrower; |
2. | All present and future contract rights, general intangibles (including, but not limited to, tax and duty refunds, intellectual property, registered and unregistered patents, trademarks, service marks, copyrights, trade names, applications for the foregoing, technology, software, know-how, designs, trade secrets, goodwill, processes, drawings, blueprints, customer lists, mailing lists, licenses, whether as licensor or licensee, choses in action and other claims and existing and future leasehold interests in equipment, real estate and fixtures), chattel paper, documents, instruments, securities, investment property, letters of credit, proceeds of letters of credit, bankers’ acceptances and guaranties; |
3. | All present and future monies, securities, credit balances, deposits, deposit accounts and other property of Borrower now or hereafter held or received by or in transit to Lender, any Lender or any of their respective affiliates or at any other depository or other institution from or for the account of Borrower, whether for safekeeping, pledge, custody, transmission, collection or otherwise, and all present and future Liens, security interests, rights, remedies, title and interest in, to and in respect of Accounts and other Collateral, including, without limitation, (a) rights and remedies under or relating to guaranties, contracts of suretyship, letters of credit and credit and other insurance related to the Collateral, (b) rights of stoppage in transit, replevin, repossession, reclamation and other rights and remedies of an unpaid vendor, lienor or secured party, (c) goods described in invoices, documents, contracts or instruments with respect to, or otherwise representing or evidencing, Accounts or other Collateral, including, without limitation, returned, repossessed and reclaimed goods, and (d) deposits by and property of Account Debtors or other Persons securing the obligations of Account Debtors; |
4. | All Inventory; |
5. | All Equipment; |
6. | All Records; and |
7. | All products and proceeds of the foregoing, in any form, including, without limitation, insurance proceeds and any claims against third parties for loss or damage to or destruction of any or all of the foregoing. |
Exhibit 10.2
THIS 3% NOTE IS ISSUED IN EXCHANGE FOR ALL OF THAT CERTAIN DEMAND NOTE ISSUED TO SEAN LEE ON APRIL 30, 2011 BY THE COMPANY.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A PARTIAL REDEMPTION. AS A RESULT, FOLLOWING ANY REDEMPTION OF ANY PORTION OF THIS NOTE, THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE PRINCIPAL AMOUNT AND ACCRUED INTEREST SET FORTH BELOW.
3% UNSECURED TERM NOTE DUE JUNE 30, 2017
OF
VALUESETTERS INC.
Issuance Date: July 24, 2014
Issuance Date of Original Note: April 30, 2011
Exchange Date: July 24, 2014
Original Principal Amount of this Exchange Note: $314,000.00
This Note (“ Note ” or “ Exchange Note ”) is a duly authorized promissory note of Valuesetters Inc. a corporation duly organized and existing under the laws of the State of Utah ( the “ Company ”), designated as the Company's 3% Term Note Due June 30, 2017 ( “Maturity Date” ) in the original principal amount of Three hundred fourteen Thousand U.S. Dollars (U.S. $314,000.00) (the “ Note” ).
FOR VALUE RECEIVED, the undersigned, VALUESETTERS INC., a corporation having an address at 430 North Street White Plains, New York 10605 (“ Maker ”), promises to pay, on the dates set forth below, in lawful money of the United States, to Sean Lee, an individual (“ Holder ”), or assigns, the principal amount of THREE HUNDRED FOURTEEN THOUSAND and 00/100 (U.S. $314,000.00) UNITED STATES DOLLARS, at the Maturity Date, together with 3% per annum interest thereon. Any payment which becomes due on a Saturday, Sunday or legal holiday shall be payable on the next business day.
All cash payments due and payable on this Note shall be made directly by check or wire transfer of immediately available funds to an account designated by Holder to Maker in writing, or at such other bank or agency, or in such other manner, as Holder shall have designated by written notice to Maker. There are no penalties for prepayments.
If this Note is past due and is placed in the hands of an attorney for collection or enforcement or it is collected or enforced through any legal proceedings, then Maker shall pay to Holder all attorneys’ fees, costs and expenses incurred in connection therewith in addition to all other amounts due hereunder.
Maker (i) waives presentment and demand for payment, notices of nonpayment and dishonor, protest of dishonor and notice of protest; (ii) waives all notices in connection with the delivery and acceptance hereof and all other notices in connection with the performance, default or enforcement of the payment hereof or hereunder; (iii) waives any and all lack of diligence and delays in enforcement of the payment hereof; and (iv) consents to any and all extensions of time, renewals, waivers or modifications which may be granted by the Holder with respect to the payment or other provisions hereof.
Maker may prepay this Note in whole or in part without the prior consent of Holder and without penalty or premium.
The obligations of Maker hereunder are absolute and unconditional and are not subject to any advances, offsets or counterclaims which Maker, its successors or assigns, or any subsidiary or affiliate of any of them, may now or hereafter have against the Holder.
Maker agrees that in any litigation arising out of or relating to this Note, it will waive trial by jury and not impose any setoff or counterclaim of any nature or description, and Maker shall be absolutely and unconditionally liable hereunder.
This Note shall be binding upon any successor to Maker.
Maker agrees that this Note and the rights and obligations of the parties hereunder shall be governed by and construed in accordance with the laws and decisions of the State of New York, without reference to the principles of conflicts of laws.
IN WITNESS WHEREOF, the Maker has signed this Note as of the day and year first above written.
VALUESETTERS, INC. | |
By: /s/ Manuel Teixeira | |
Manuel Teixeira | |
CEO |
Silberstein Ungar, PLLC CPAs and Business Advisors
Phone (248) 203-0080
Fax (248) 281-0940
30600 Telegraph Road, Suite 2175
Bingham Farms, MI 48025-4586
www.sucpas.com
July 24, 2014
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Valuesetters Inc.
White Plains, New York
To Whom It May Concern:
Silberstein Ungar, PLLC hereby consents to the use in the Form 10/A Amendment No.1, General Form for Registration of Securities pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, filed by Valuesetters, Inc. of our report dated August 30, 2013, relating to the financial statements of Valuesetters, Inc. as of and for the years ended April 30, 2013 and 2012.
Sincerely,
/s/ Silberstein Ungar, PLLC
Silberstein Ungar, PLLC