UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 2016
ACTIVE WITH ME, INC.
(Exact Name of Registrant as Specified in Charter)
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Nevada |
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333- 191083 |
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39-2080103 |
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(State or other jurisdiction
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(Commission File Number) |
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(IRS Employer Identification No.) |
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420 Lexington Avenue, New York, NY |
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10170 |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: 201-994-9936
2005 Lakeshore Road
Sarnia, Ontario Canada N7X IG4
(Former name or former address, if changed since last report)
Copies to:
Jeffrey Fessler, Esq.
61 Broadway, 32nd Floor
New York, New York 10006
Telephone: (212) 930-9700
Facsimile: (212) 202-7735
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
CURRENT REPORT ON FORM 8-K
ACTIVE WITH ME, INC.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Security Ownership of Certain Beneficial Owners and Management |
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This Current Report on Form 8-K and other written and oral statements made from time to time by us may contain so-called “forward-looking statements,” all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward looking statement can be guaranteed and actual future results may vary materially.
Information regarding market and industry statistics contained in this Report is included based on information available to us that we believe is accurate. It is generally based on industry and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources, and cannot assure investors of the accuracy or completeness of the data included in this Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not assume any obligation to update any forward-looking statement. As a result, investors should not place undue reliance on these forward-looking statements.
Item 2.01 Completion of Acquisition or Disposition of Assets
On August 15, 2016, Active With Me Inc., a Nevada corporation (the “Company” or “Parent”), entered into an Agreement of Merger and Plan of Reorganization (the “Merger Agreement”) with Rasna Therapeutics, Inc., a Delaware corporation (“Rasna”) and Rasna Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”), providing for the merger of Merger Sub with and into Rasna (the “Merger”), with Rasna surviving the Merger as a wholly-owned subsidiary of Parent. The Merger Agreement was approved by the Board of Directors of each of Parent, Merger Sub and Rasna, as well as the requisite stockholders. The Merger closed on August 15, 2016
At the Effective Time of the Merger (as defined in the Merger Agreement):
· Each share of common stock, par value $0.0001 per share, of Merger Sub that was outstanding immediately prior to the effective time was, by virtue of the Merger and without any action on the part of the holder thereof, converted into the right to receive one (1) share of common stock, $0.0001 par value, of Rasna (the “Rasna Common Stock”), so that at the Effective Time, Parent was the holder of all of the issued and outstanding shares of Rasna.
· Each share of Rasna Common Stock beneficially owned by the stockholders of Rasna (other than shares of Rasna Common Stock as to which appraisal rights are perfected pursuant to the applicable provisions of the Delaware General Corporate Law (“DGCL”) and not withdrawn or otherwise forfeited), was, by virtue of the Merger and without any action on the part of the holders thereof, converted into the right to receive .33 shares of common stock, par value $0.001, of Parent (the “Parent Common Stock”), with fractional shares of Parent Common Stock rounded up or down to the nearest whole share (the “Merger Consideration”).
· Each share of Rasna Common Stock held in the treasury of Rasna immediately prior to the effective time was cancelled in the Merger and ceases to exist.
· The Merger Agreement provider that each holder of Rasna Common Stock entitled to receive Merger Consideration pursuant to the Merger Agreement will be subject to a lock-up restricting them from selling or otherwise disposing of any Merger Consideration for a period of twenty-four (24) months from the closing of the Merger.
· Immediately following the closing of the Merger, under the terms of an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, the Company transferred all of its pre-Merger assets and liabilities to its wholly owned subsidiary, Active With Me Holdings, Inc., a Delaware corporation (“SplitCo”). Thereafter, pursuant to a Stock Purchase Agreement, the Company transferred all of the outstanding capital stock of SplitCo to a former officer and director of the Company in exchange for cancellation of an aggregate of 1,500,000 shares of the Company’s common stock held by such person (the “Split-Off”), which left 1,805,000
shares of the Company’s common stock held by persons who were stockholders of the Company prior to the Merger and which constitute the Company’s “public float” prior to the Merger that will continue to represent the shares of the Company’s common stock eligible for resale without further registration by the holders thereof, until such time as the applicability of Rule 144 or other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), or the effectiveness of a further registration statement under the Securities Act, permits additional sales of issued shares.
The foregoing description of the Merger Agreement and related transactions does not purport to be complete and is qualified in its entirety by reference to the complete text of (i) the Merger Agreement, which is filed as Exhibit 2.1 hereto; (ii) the Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations, which is filed as Exhibit 10.1 hereto and (iii) the Stock Purchase Agreement, which is filed as Exhibit 10.2 hereto, each of which is incorporated herein by reference.
Following the closing of the Merger and the Company’s cancellation of 1,500,000 shares in the Split-Off, there were 19,901,471 shares of Parent Common Stock issued and outstanding.
The shares of Parent Common Stock issued to former holders of Rasna Common Stock in connection with the Merger were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act and Regulation D promulgated under that section, which exempts transactions by an issuer not involving any public offering. These securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements. Certificates representing these shares of common stock contain a legend stating the restrictions applicable to such securities.
Changes Resulting from the Merger . Parent shall have the absolute and unqualified right to deal with the assets and business of Rasna as its own property without limitation on the disposition or use of such assets or the conduct of such business. At the closing of the Merger, James Tripp, Kunwar Shailubhai, Riccardo Dalla-Favera, Jim Mervis, John Alex Martin, John Brancaccio and Alessandro Padova were elected to the Parent’s Board of Directors and Sheri Strangway resigned from the Parent’s Board of Directors. At the closing of the Merger, James Tripp was elected as the acting Chief Executive Officer and Chairman of the Parent. Sheri Strangway resigned as President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of Parent.
Stockholder Approval. The Merger and its related transactions were approved by the holders of a requisite number of shares of Parent’s and Rasna’s capital stock pursuant to written consents dated as of August 12, 2016 and August 15, 2016.
Accounting Treatment. The Merger is being accounted for as a reverse-merger and recapitalization. Rasna is the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations that will be reflected in the historical financial statements prior to the Merger will be those of Rasnt and will be recorded at the historical cost basis of Rasna.
Tax Treatment; Small Business Issuer. The Merger is intended to constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), or such other tax free reorganization exemptions that may be available under the Code.
Following the Merger, the Company will continue to be a “smaller reporting company,” as defined in Item 10(f)(1) of Regulation S-K, as promulgated by the Securities and Exchange Commission.
Rasna was incorporated as a Delaware corporation on May 28, 2013 for the purpose of developing novel therapeutics to treat leukemia and other cancers.
The Company was incorporated in Nevada on December 6, 2012 as a development stage company to create online resources that offer travelers unique, highly relevant and user-friendly information on activity-based travel.
Effective on the Closing Date, pursuant to the Merger Agreement, Rasna became a wholly-owned subsidiary of Parent. The acquisition of Rasna is treated as a reverse acquisition, and the business of Rasna became the business of Parent.
As used in this Current Report on Form 8-K, all references to “the Company,” “Rasna,” “we,” “our” and “us” for periods prior to the closing of the Merger refer to Rasna, as a privately owned company, Rasna UK and Arna and for periods subsequent to the closing of the Merger refer to the Company and its subsidiaries (including Rasna).
Introduction
Rasna was formed in 2013 by Gabriele Cerrone, an experienced biotechnology investor, Dr. Roberto Pellicciari, a medicinal chemist, and Dr. Brunangelo Falini, a physician and microbiologist. The founders believed that the synergy caused by the collaboration between the two scientists would create an effective treatment for leukemia and other cancers. Rasna is currently engaged in modulating the molecular targets NPM1 and LSD1, which are implicated in the disease progression of leukemia and lymphoma.
Rasna began its work in earnest in when Dr. Pellicciari and his research team at TES Pharma (“TES”) in Perugia, Italy invented a method to modulate the molecular target NPM1, which was first shown to be implicated in the disease progression of leukemia by Dr. Falini. More recently, through Dr. Pier Guiseppe Pelicci and his research team at the European Institute of Oncology in Milan, Italy (“IOM”), Rasna discovered a method of modulating LSD1, a protein which is specific to multiple forms of leukemia and lymphoma. The addition of the IOM team to Rasna’s resources is anticipated to aid in the development of NPM1 by allowing Rasna access to IOM’s proprietary animal models for cancer studies.
Rasna’s executive offices are located at 420 Lexington Avenue, New York, NY 10170, and its telephone number is 201-994-9936. The Company’s executive offices prior to the Merger were located at 2005 Lakeshore Road, Sarnia, Ontario, Canada N7X 1G4, and its telephone number is (519) 337-9048.
Leukemia
Overview
Leukemia is a cancer of the blood or bone marrow involving abnormal proliferation of white blood cells, called WBCs or leukocytes. Leukemia is caused by a mutation of the DNA in bone marrow stem cells resulting in the abnormal multiplication of leukocytes. If untreated, surplus leukocytes will overwhelm the bone marrow, enter the bloodstream and eventually invade other parts of the body, such as the lymph nodes, spleen, liver, and central nervous system. In this way, the behavior of leukemia is different from that of other cancers, which usually begin in major organs and ultimately spread to the bone marrow. Leukemia is an umbrella term covering a large group of cancers.
Table 1 - Leukemia Subtypes
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Type |
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Subtype |
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Features |
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Most common among children |
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Acute |
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Acute Lymphocytic Leukemia (ALL) |
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85% survival rate among children; 50% among adults |
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Leukemia |
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More common in adults, especially men |
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Acute Myelogenous Leukemia (AML) (AML) |
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Five year survival rate of 40% |
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Most common in adults above 55 years old, especially men |
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Chronic |
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Chronic Lymphocytic Leukemia (CLL) (CLL) |
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Five year survival rate of 75% |
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Leukemia |
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Mainly in adults and rare in children |
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Chronic Myelogenous Leukemia (CML) (CML) |
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Five year survival rate of 90% |
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All leukemia arises from mutations or damage to the DNA within the blood cells. These mutations may occur spontaneously or as a result of exposure to radiation or carcinogenic substances. Ionizing radiation, as well as exposure to chemicals such as benzene, increases the risk of acute myelogenous leukemia (“AML”), while agricultural chemicals have been linked to an increased incidence of chronic lymphoctic Leukemia (“CLL”). A weak immune system, some virus forms such as human T-cell Leukemia virus I (“HTLV-1”), genetic predisposition, cigarette smoking, and reactions to some therapeutic drugs are also implicated in the etiology of leukemia.
Diagnosis, Treatment, and Management
The first symptoms of leukemia are often vague and are correlated with other disorders. Common symptoms include fatigue and malaise, excessive bruising, and abnormal bleeding due to low platelet count. Further symptoms can include weight loss, bone and joint pain, infection and fever, and an enlarged spleen, lymph nodes and liver. After a blood test, several blood abnormalities such as anemia, or leucopenia may be observed, and in most cases a bone marrow test is required to confirm the diagnosis.
The preliminary diagnostic test for leukemia is a blood cell count, which is followed by immune-phenotyping to assess whether the abnormal lymphocyte levels are caused by inflammation or cancer. The physician may also require additional confirmatory tests such as cytogenetic analysis or bone marrow sampling.
The specific variety and combination of anticancer drugs prescribed depends on the form and stage of the disease. For example, treatment for AML, the most common form of leukemia, usually involves chemotherapy with cytotoxic cytarabine in conjunction with an anthracycline such as daunorubicin or idarubicin. Because of the severity of the cytotoxic treatment, bone marrow transplants (“BMTs”) are sometimes necessary. By transplanting healthy bone marrow into the body, BMTs help rebuild tissue damaged by the treatment. Interferon (“INF”) therapy, particularly with INF-alpha, is an alternative or additional treatment offered to almost all newly diagnosed patients in these markets. However, it is very difficult to cure, even though early treatment indicates it will help people to live longer.
The standard first-line treatment strategy for CLL: Patients who might not be able to tolerate the side effects of strong chemotherapy (chemo) are often treated with chlorambucil alone or with a monoclonal antibody like rituximab (Rituxan) or obinutuzumab (Gazyva). Other options include ibrutinib (Imbruvica), rituximab alone, or a corticosteroid like prednisone.
In stronger and healthier patients, there are many options for treatment. Commonly used treatments include:
· FCR: fludarabine (Fludara), cyclophosphamide (Cytoxan), and rituximab
· Bendamustine (sometimes with rituximab)
· FR: fludarabine and rituximab
· CVP: cyclophosphamide, vincristine, and prednisone (sometimes with rituximab)
· CHOP: cyclophosphamide, doxorubicin, vincristine (Oncovin), and prednisone
· Chlorambucil combined with prednisone, rituximab, obinutuzumab, or ofatumumab
· PCR: pentostatin (Nipent), cyclophosphamide, and rituximab
· Alemtuzumab (Campath)
· Fludarabine (alone)
· Ibrutinib (alone)
Other drugs or combinations of drugs may also be also used. If the only problem is an enlarged spleen or swollen lymph nodes in one region of the body, localized treatment with low-dose radiation therapy may be used. Splenectomy (surgery to remove the spleen) is another option if the enlarged spleen is causing symptoms.
Also, very high numbers of leukemia cells in the blood causes problems with normal circulation. This is called leukostasis. Leukapheresis is also sometimes used before chemo if there are very high numbers of leukemia cells (even when they aren’t causing problems) to prevent tumor lysis syndrome.
On the failure of first line therapy, the standard therapy is usually to administer many of the drugs and combinations listed above as potential second-line treatments. For many people who have already had fludarabine, alemtuzumab seems to be helpful as second-line treatment, but it carries an increased risk of infections. Other purine analog drugs, such as pentostatin or cladribine (2-CdA), may also be tried. Newer drugs such as ofatumumab, ibrutinib, idelalisib (Zydelig), and venetoclax (Venclexta) may be other options. If these types of chemotherapy fail, the next option is usually a bone marrow transplant. A stem cell transplant is a third treatment option depending on leukemia response.
NPM1
As noted above, leukemia arises due to damage or mutations to DNA. Chromosomal aberrations involving NPM1 were found in patients with non-Hodgkin lymphoma, acute promyelocytic leukemia, myelodysplastic syndrome, and AML. NPM1 has been found in the cytoplasm in patients with primary AML.
NPM1 Roles in Tumorigenesis
NPM1 gene is up-regulated, mutated and chromosomally translocated in many tumor types. NPM1 is transferred from nucleolus to nucleoplasm and cytoplasm by anticancer drugs. When expressed at high level, NPM1 could promote tumor growth by
inactivation of tumor suppressor p53/ARF pathway; when expressed at low level, NPM1 could suppress tumor growth by inhibition of centrosome duplication. NPM1 is haploinsufficient in hemizygous mice that are vulnerable to tumor development. NPM1c+ (cytoplasm form) translocation into cytoplasm could serve as an AML remission signal. NPM1 forms a pentamer that could serve as a potential anticancer target.
Rasna’s technology promises to inhibit the NPM1 gene, reducing levels of NPM1 and consequently reducing a tumor cell’s ability to duplicate. It anticipated that Rasna’s NPM1 inhibitor will have therapeutic activity in patients with the NPM1 mutation and possibly in the broader NPM1 population.
Our Programs
NPM1 Program
Despite existing available treatments, the 5-year survival rate for AML patients is only 24%. We do not believe that any existing drug therapies address this problem. Our NPM1 program targets the sub-set of AML patients with the NPM1 mutuation and may also benefit the general AML population. The project team is targeting to have a lead candidate identified by 2017.
LSD1 Program
In 2012, a paper published in Nature Medicine established that inhibitors of an enzyme involved in the epigenetic regulation of gene expression known as LSD1 or KDM1A can make drug-insensitive forms of AML responsive to treatment with all-trans-retinoic acid (ATRA). ATRA is used to treat a subtype of AML called acute promyelocytic leukemia (APL), but it is normally not effective in non-APL AML because the drug does not cause proper transcriptional activation of retinoic acid receptor target genes. This is a result of reduced methylation (specifically histone 3lysine 4 (H3K4) demethylation) on the promoter regions of these target genes. Therefore, the authors of the article hypothesized that inhibiting LSD1 might facilitate ATRA-induced differentiation of AML cells, which is known to halt the division of these cells. The research highlights a crosstalk between the ATRA-induced myeloid differentiation pathway and H3K4 methylation, and suggests that ATRA combined with LSD1 inhibitors might be therapeutically beneficial in AML.
Working from this premise, Dr. Pelicci’s group has developed novel irreversible and reversible LSD1 regulators which have shown appropriate effect on the LSD1 gene in-vitro and are currently undergoing in-vivo animal studies in order for Rasna to nominate a lead and then a drug candidate for clinical trials. We believe that this breakthrough program may have significant benefits across all forms of leukemia.
Market Potential of NPM1
There are estimated to be approximately 19,000 new AML cases in the United States each year and the projected cost of treatment attributable to drug administrations for each patient over the course of the disease can be estimated at US $100,000 per patient or US $1,900,000,000 in the aggregate from the different treatment cycles. Of this it is estimated that 50% of the costs will continue to be attributable to standard of care chemotherapy. Thus, it is estimated that the US market potential for AML is $1 billion annually. The rest of the world is estimated to constitute 50% of the AML market; thus, the total annual world market is estimated to be $2 billion. If Rasna’s NPM1 targeted therapy proves beneficial to only that 20% of AML patients with mutated NPM1 genes, the addressable market will be diminished. However, in that event, Rasna’s NPM1 targeted therapy would then be the only therapy which address that sub-population and may command higher pricing and reimbursement.
Table 2
Total Estimated Number of New Leukemia Cases in
the United States for 2014
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Type |
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Total |
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Male |
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Female |
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Acute Lymphoblasti Leukemia |
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6,020 |
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3,140 |
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2,880 |
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Chronic Lymphocytic Leukemia |
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15,720 |
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9,100 |
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6,620 |
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Acute Myeloid Leukemia |
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18,860 |
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11,530 |
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7,330 |
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Chronic Myeloid Leukemia |
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5,980 |
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3,130 |
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2,850 |
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Other Leukemia |
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5,800 |
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3,200 |
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2,600 |
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Total Estimated New Cases |
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52,380 |
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30,100 |
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22,280 |
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Table 3
Cost Per AML Patient For Different Treatment Cycles
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PROGRAM |
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United States |
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Induction of remission (1 cycle) |
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$ 56,802 |
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Consolidation (2 cycles) |
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$ 113,176 |
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BSC |
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Chemotherapy |
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Transplantation |
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CR [outpatient clinic] |
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$14,861 (6 cycles) |
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$14,861 (6 cycles) |
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$2,477 (1 cycle) |
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Transplantation |
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$ 154,739 |
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Relapse |
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$ 2,477 (BSC) |
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$56,588 (Chemo 1 cycle) |
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Total |
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$ 187,315 |
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$ 241,427 |
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$ 327,194 |
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Regulation
We operate in a highly regulated industry that is subject to significant federal, state, local and foreign regulation. Our present and future business has been, and will continue to be, subject to a variety of laws including, the Federal Food, Drug, and Cosmetic Act, or FDC Act, the Food and Drug Administration (FDA)/European Medicines Agency (EMA) and the Public Health Service Act, among others.
The FDC Act and other federal and state statutes and regulations govern the testing, manufacture, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion of our products. As a result of these laws and regulations, product development and product approval processes are very expensive and time-consuming.
FDA Approval Process
In the United States, pharmaceutical products, including biologics, are subject to extensive regulation by the FDA. The FDC Act and other federal and state statutes and regulations, govern, among other things, the research, development, testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and reporting, sampling, and import and export of pharmaceutical products. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as FDA refusal to approve pending new drug applications, or NDAs, or biologic license applications, or BLAs, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution.
Pharmaceutical product development in the United States typically involves preclinical laboratory and animal tests, the submission to the FDA/EMA of an Investigational New Drug (IND) application, which must become effective before clinical testing may commence, and adequate and well-controlled clinical trials to establish the safety and effectiveness of the drug or biologic for each indication for which FDA/EMA approval is sought. Satisfaction of FDA/EMA pre-market approval requirements typically takes many years (typically between 5-7 years post an IND submission) and the actual time required may vary substantially based upon the type, complexity and novelty of the product or disease.
Preclinical tests include laboratory evaluation as well as animal trials to assess the characteristics and potential pharmacology and toxicity of the product. The conduct of the preclinical tests must comply with federal regulations and requirements including good laboratory practices. The results of preclinical testing are submitted to the FDA as part of an IND along with other information, including information about product chemistry, manufacturing and controls, and a proposed clinical trial protocol. Long term preclinical tests, such as animal tests of reproductive toxicity and carcinogenicity, may continue after the IND is submitted.
A 30-day waiting period after the submission of each IND is required prior to the commencement of clinical testing in humans. If the FDA has not objected to the IND within this 30-day period, the clinical trial proposed in the IND may begin.
Clinical trials involve the administration of the investigational drug to healthy volunteers or patients under the supervision of a qualified investigator. Clinical trials must be conducted in compliance with federal regulations and good clinical practices, or GCP, as well as under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. Each protocol involving testing on U.S. patients and subsequent protocol amendments must be submitted to the FDA as part of the IND.
The FDA may order the temporary or permanent discontinuation of a clinical trial at any time or impose other sanctions if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients. The clinical trial protocol and informed consent information for patients in clinical trials must also be submitted
to an institutional review board, or IRB, for approval. An IRB may also require the clinical trial at the site to be halted, either temporarily or permanently, for failure to comply with the IRB’s requirements, or may impose other conditions.
Clinical trials to support NDAs or BLAs, which are applications for marketing approval, are typically conducted in three sequential Phases, but the Phases may overlap. In Phase 1, the initial introduction of the investigational drug candidate into healthy human subjects or patients, the investigational drug is tested to assess metabolism, pharmacokinetics, pharmacological actions, side effects associated with increasing doses and, if possible, early evidence on effectiveness. Phase 2 usually involves trials in a limited patient population, to determine the effectiveness of the investigational drug for a particular indication or indications, dosage tolerance and optimum dosage, and identify common adverse effects and safety risks. In the case of product candidates for severe or life-threatening diseases such as pneumonia, the initial human testing is often conducted in patients rather than in healthy volunteers.
If an investigational drug demonstrates evidence of effectiveness and an acceptable safety profile in Phase 2 evaluations, Phase 3 clinical trials are undertaken to obtain additional information about clinical efficacy and safety in a larger number of patients, typically at geographically dispersed clinical trial sites, to permit the FDA to evaluate the overall benefit-risk relationship of the investigational drug and to provide adequate information for its labeling.
After completion of the required clinical testing, an NDA or, in the case of a biologic, a BLA, is prepared and submitted to the FDA. FDA approval of the marketing application is required before marketing of the product may begin in the United States. The marketing application must include the results of all preclinical, clinical and other testing and a compilation of data relating to the product’s pharmacology, chemistry, manufacture, and controls.
The FDA has 60 days from its receipt of an NDA or BLA to determine whether the application will be accepted for filing based on the agency’s threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. The FDA has agreed to certain performance goals in the review of marketing applications. Most such applications for non-priority drug products are reviewed within ten months. The review process may be extended by the FDA for three additional months to consider new information submitted during the review or clarification regarding information already provided in the submission. The FDA may also refer applications for novel drug products or drug products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. Before approving a marketing application, the FDA will typically inspect one or more clinical sites to assure compliance with GCP.
Additionally, the FDA will inspect the facility or the facilities at which the drug product is manufactured. The FDA will not approve the NDA or, in the case of a biologic, the BLA unless compliance with cGMPs is satisfactory and the marketing application contains data that provide substantial evidence that the product is safe and effective in the indication studied. Manufacturers of biologics also must comply with FDA’s general biological product standards.
After the FDA evaluates the NDA or BLA and the manufacturing facilities, it issues an approval letter or a complete response letter. A complete response letter outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed in a resubmission of the marketing application, the FDA will re-initiate review. If the FDA is satisfied that the deficiencies have been addressed, the agency will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. It is not unusual for the FDA to issue a complete response letter because it believes that the drug product is not safe enough or effective enough or because it does not believe that the data submitted are reliable or conclusive.
An approval letter authorizes commercial marketing of the drug product with specific prescribing information for specific indications. As a condition of approval of the marketing application, the FDA may require substantial post-approval testing and surveillance to monitor the drug product’s safety or efficacy and may impose other conditions, including labeling restrictions, which can materially affect the product’s potential market and profitability. Once granted, product approvals may be withdrawn if compliance with regulatory standards is not maintained or problems are identified following initial marketing.
Once a NDA or BLA is approved, a product will be subject to certain post-approval requirements. For instance, the FDA closely regulates the post-approval marketing and promotion of therapeutic products, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities and promotional activities involving the internet.
Biologics may be marketed only for the approved indications and in accordance with the provisions of the approved labeling. Changes to some of the conditions established in an approved application, including changes in indications, labeling, or manufacturing processes or facilities, require submission and FDA approval of a new BLA or BLA supplement, before the change can be implemented. A BLA supplement for a new indication typically requires clinical data similar to that in the original application, and the
FDA uses the same procedures and actions in reviewing BLA supplements as it does in reviewing BLAs. We cannot be certain that the FDA or any other regulatory agency will grant approval for our product candidates for any other indications or any other product candidate for any indication on a timely basis, if at all.
Adverse event reporting and submission of periodic reports is required following FDA approval of a BLA. The FDA also may require post-marketing testing, known as Phase 4 testing, risk evaluation and mitigation strategies, and surveillance to monitor the effects of an approved product or place conditions on an approval that could restrict the distribution or use of the product. In addition, quality control as well as product manufacturing, packaging, and labeling procedures must continue to conform to cGMPs after approval. Manufacturers and certain of their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA during which the agency inspects manufacturing facilities to assess compliance with cGMPs. Accordingly, manufacturers must continue to expend time, money and effort in the areas of production and quality control to maintain compliance with cGMPs. Regulatory authorities may withdraw product approvals or request product recalls if a company fails to comply with regulatory standards, if it encounters problems following initial marketing, or if previously unrecognized problems are subsequently discovered.
Federal and State Fraud and Abuse Laws
In addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the biopharmaceutical and medical device industries in recent years. These laws include anti-kickback statutes and false claims statutes.
The federal health care program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any health care item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers, and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases, or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Recently, several pharmaceutical and other health care companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of the Company’s marketing of the product for unapproved, and thus non-reimbursable, uses. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines, and imprisonment.
Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Such a challenge could have a material adverse effect on our business, financial condition and results of operations.
Regulation in the European Union
Biologics are also subject to extensive regulation outside of the United States. In the European Union, for example, there is a centralized approval procedure that authorizes marketing of a product in all countries of the European Union, which includes most major countries in Europe. If this procedure is not used, approval in one country of the European Union can be used to obtain approval in another country of the European Union under two simplified application processes, the mutual recognition procedure or the decentralized procedure, both of which rely on the principle of mutual recognition. After receiving regulatory approval through any of the European registration procedures, pricing and reimbursement approvals are also required in most countries.
Environmental Laws
We expect to be subject to regulation under federal, state and local laws and regulations governing environmental protection and the use, storage, handling and disposal of hazardous substances. The cost of complying with these laws and regulations may be significant. Our activities as currently planned will require the controlled use of potentially harmful biological materials, hazardous materials and chemicals. We will not be able to eliminate the risk of accidental contamination or injury to employees or third parties
from the use, storage, handling or disposal of these materials. In the event of contamination or injury, we could be held liable for any resulting damages, and any liability could exceed our resources or any applicable insurance coverage we may have.
Other Regulations
We are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances and biological materials. We may incur significant costs to comply with such laws and regulations now or in the future.
Intellectual Property
In order to remain competitive, we must develop and maintain protection on the proprietary aspects of our technologies. We rely on a combination of patents, copyrights, trademarks, trade secret laws and confidentiality, material data transfer agreements, licenses and invention assignment agreements to protect our intellectual property rights. We also rely upon unpatented trade secrets and improvements, unpatented know-how and continuing technological innovation to develop and maintain our competitive position. We generally protect this information with reasonable security measures.
We currently have one pending US patent application relating to the composition of matter of the NPM1 inhibitors. We also have an exclusive license to three pending US patent applications and one issued US patent relating to our LSD1 program .
Our patents and patent applications are set forth below:
|
Application
|
|
Title |
|
Filing
|
|
Earliest
|
|
Applicant |
|
Inventors |
|
IP Status |
|
Next IP
|
|
PCT/EP2011/
|
|
Tranylcypromine derivatives as inhibitors of histone demethylase LSD1 and/or LSD2 |
|
15-Apr
|
|
20-Apr
|
|
Universita’ delgi studi di Roma “La Sapienza” / Universita’ delgi studi di Pavia/ Universita’ delgi studi di Milano/ Fondazione IEO (Instituto Europeo di Oncologia as licensee) |
|
Minucci/ Mai/ Mattevi |
|
National Phase
Granted
in Australia, China, Eurasia (Russia), Europe (Switzerland, Germany, Spain, France, UK, Italy, Netherlands, Poland, Sweden), Japan, South Africa, USA
|
|
Examination
|
|
PCT/EP2013/
|
|
Cyclopropylamine derivatives useful as inhibitors of histone demethylases KDM1A |
|
3-Dec-
|
|
5-Dec
|
|
Istituto Europea di Oncologia |
|
Varasi/ Vianello/ Thaler/ Trifiro’/ Mercurio/ Meroni |
|
National Phase Pending in Australia, Canada, China, Europe, Japan, USA |
|
Examination
|
|
PCT/EP2015/
|
|
Cyclopropylamine derivatives as histone demethylase inhibitors |
|
29-May
|
|
30-May 2014 |
|
Istituto Europeo di Oncologia |
|
Vianello/ Varasi / Mercurio/ Cappa/ Meroni/ Villa/ Mai/ Valente |
|
International Phase |
|
National
|
|
PCT/IB2015/
|
|
Thienopyrroles as Histone Demethylase Inhibitors |
|
4-Sept
|
|
5-Sept 2014 |
|
Istituto Europea di Oncologia |
|
Vianello / Sartori/ Mercurio / Cappa / Villa / Meroni / Zagarri |
|
International Phase |
|
National Phase Entry
|
|
EP
|
|
Imidazoles as Histone Demethylase Inhibitors |
|
18-May
|
|
n/a |
|
Istituto Europea di Oncologia |
|
Vianello / Romussi/ Cappa/ Trifiro’/ Sartori/ Mercurio |
|
EP National Phase |
|
International Phase Entry
|
|
US
|
|
Combination of Caloric Restrction (CR) or IGF1/Insulin Receptor Inhibitor with LSD1 Inhibitor |
|
4-Dec
|
|
n/a |
|
Unknown |
|
Unknown |
|
US Provisional Phase |
|
International Phase Entry
|
We intend to file additional patent applications in the US and abroad to strengthen our intellectual property rights. Our patent applications may not result in issued patents, and we cannot assure you that any patents that might issue will protect our technology.
Any patents issued to us in the future may be challenged by third parties as being invalid or unenforceable, or third parties may independently develop similar or competing technology that are not covered by our patents. We cannot be certain that the steps we have taken will prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States.
From time to time we may receive notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights. Some of these claims may lead to litigation. We cannot assure you that we will prevail in these actions, or that other actions alleging misappropriation or misuse by us of third-party trade secrets, infringement by us of third-party patents and trademarks or the validity of patents issued to us in the future, will not be asserted or prosecuted against us, or that any assertions of misappropriation, infringement or misuse or prosecutions seeking to establish the validity of our patents will not materially or adversely affect our business, financial condition and results of operations.
An adverse determination in litigation or interference proceedings to which we may become a party relating to any patents issued to us in the future or any patents owned by third parties could subject us to significant liabilities to third parties or require us to seek licenses from third parties. Furthermore, if we are found to willfully infringe these patents, we could, in addition to other penalties, be required to pay treble damages. Although patent and intellectual property disputes in this area have often been settled through licensing or similar arrangements, costs associated with such arrangements may be substantial and could include ongoing royalties. We may be unable to obtain necessary licenses on satisfactory or commercially feasible terms, if at all. If we do not obtain necessary licenses, we may not be able to complete our research and development, or such research and development may take considerable time, and force us to reassess our business plans. Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from developing our targets, which would have a significant adverse impact on our business.
Competition
The biotechnology and pharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages, we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies, academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may become available in the future.
Several types of existing treatments may be used for people with AML. The main treatments include chemotherapy, bone marrow transplants, stem cell transplants and/or interferon therapy. In most cases AML can progress rapidly, so it is important to start treatment as soon as possible after the diagnosis is made. In addition to currently marketed therapies, there are also a number of products in late stage clinical development to treat AML. These products in development may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result, they may provide significant competition for any of our product candidates for which we obtain market approval.
There are other companies and research institutions working to develop therapies that target AML. Many of our competitors may have significantly greater financial resources and expertise in research and development, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Mergers and acquisitions in the pharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
The key competitive factors affecting the success of all of our targets, if approved, are likely to be their efficacy, safety, convenience, price, the level of generic competition and the availability of reimbursement from government and other third-party payors.
Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any products that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors seeking to encourage the use
of generic products. There are many generic products currently on the market for the indications that we are pursuing, and additional products are expected to become available on a generic basis over the coming years. If our therapeutic product candidates are approved, we expect that they will be priced at a significant premium over competitive generic products.
Employees
As of August 15, 2016, Rasna had 1 full-time employee. Rasna has no collective bargaining agreements with its employees and believes its relations with its employees are good.
Properties
Rasna’s executive offices are located at 420 Lexington Avenue, New York, NY 10170.
The Company’s executive offices prior to the merger were located at 2005 Lakeshore Road, Sarnia, Ontario, Canada N7X 1G4, and its telephone number is (519) 337-9048.
Research and Development Expenses
Research and development expenses for the past two fiscal years were $1,056,644 and $0 for the fiscal year ended March 31, 2016 for Rasna UK and Arna, respectively, as compared to $584,261 for Rasna UK and $1,125,000 for Arna for the fiscal year ended March 31, 2015, respectively.
Legal Proceedings
Rasna is not involved in any pending legal proceeding or litigations and, to the best of its knowledge, no governmental authority is contemplating any proceeding to which it is a party or to which any of its properties is subject, which would reasonably be likely to have a material adverse effect on Rasna.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussion should be read in conjunction with the other sections of this Current Report on Form 8-K, including “Risk Factors,” “Description of Our Business” and the Financial Statements attached hereto as Item 9.01 and the related exhibits. The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Report as well as other matters over which we have no control. See “Forward-Looking Statements.” Our actual results may differ materially.
Company Overview
The financial information presented in this Form 8-K consists of the audited financial statements of Arna Therapeutics Limited, a British Virgin Islands company (“Arna”) and Rasna Therapeutics Limited, a United Kingdom company (“Rasna UK”). Since incorporation in September 2013, Arna’s business has been focused on developing drugs to treat diseases in oncology and immunology, primarily focusing on the treatment of leukemia. Rasna UK was incorporated in February 2014 and its principal activities since inception has been developing drugs to treat diseases in oncology and immunology, mainly focused on the treatment of leukemia.
Rasna was incorporated as a Delaware corporation on May 28, 2013 for the purpose of developing novel therapeutics to treat leukemia and other cancers. From inception until May 17, 2016, Rasna has not had any business activities.
In April 2016, Rasna sold in a private placement 19,187,500 shares of common stock to accredited investors at $0.40 per share. On April 27, 2016, Rasna UK entered into a sale agreement with Rasna pursuant to which Rasna UK sold all of the shares of Falconridge Holdings Limited (“Falconridge”) to Rasna. Falconridge held certain key patents necessary for Rasna’s drug development activities. On May 5, 2016, Rasna UK entered into a sale agreement with Falconridge pursuant to which Rasna UK sold its intellectual property to Falconridge for £163,000. On May 17, 2016, Rasna, Falconridge and Arna entered into an agreement of merger and plan of reorganization (‘Rasna Merger Agreement”) pursuant to which Arna was merged into Falconridge and the shareholders of Arna were issued shares of Rasna in exchange for shares of Arna.
Upon consummation of the Rasna Merger Agreement, Rasna had 54,837,790 shares of common stock issued and outstanding.
Results of Operations
Rasna Therapeutics Limited
The following table presents the results of operations of Rasna Therapeutics Limited for the year ended March 31, 2016 and 2015.
|
|
|
Years Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Revenue |
|
$ |
— |
|
$ |
— |
|
|
Gross profit |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Legal and professional |
|
$ |
(135,176 |
) |
$ |
(27,400 |
) |
|
Foreign currency exchange gain |
|
3,701 |
|
1,984 |
|
||
|
Research and development expenses |
|
(1,056,644 |
) |
(584,261 |
) |
||
|
General and administrative expenses |
|
(312,014 |
) |
(338,641 |
) |
||
|
|
|
|
|
|
|
||
|
Loss from operations |
|
$ |
(1,500,133 |
) |
$ |
(948,318 |
) |
The Year Ended March 31, 2016 Compared to the Year Ended March 31, 2015
Revenue
There were no revenues for the years ended March 31, 2016 and 2015 because Rasna UK does not have any commercial biopharmaceutical products.
Operating Expenses
Operating expenses consisting of legal and professional expenses, research and development expenses, consultancy and administrative expenses for the year ended March 31, 2016 increased to $1,500,133 from $948,318 for the year ended March 31, 2015, an increase of $551,815. The increase is primarily attributable to increased research and development activity.
Net Loss
Net loss for the year ended March 31, 2016 increased to $1,500,133 from $948,318 for the year ended March 31, 2015.
Arna Therapeutics Limited
The following table presents the results of operations of Arna Therapeutics Limited for the year ended March 31, 2016 and 2015.
|
|
|
Years Ended |
|
||||
|
|
|
March 31, |
|
||||
|
|
|
2016 |
|
2015 |
|
||
|
Revenue |
|
$ |
— |
|
$ |
— |
|
|
Gross profit |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Research and development costs undertaken by a related party |
|
— |
|
$ |
(1,125,000 |
) |
|
|
Consultancy fees third parties |
|
(67,500 |
) |
(67,500 |
) |
||
|
Consultancy fees related parties |
|
(350,000 |
) |
(350,000 |
) |
||
|
Legal and professional fees |
|
(99,930 |
) |
(103,230 |
) |
||
|
Equity-based payments to non-employees |
|
(60,676 |
) |
(117,304 |
) |
||
|
General and administrative expenses |
|
— |
|
(5,364 |
) |
||
|
|
|
|
|
|
|
||
|
Loss from operations |
|
$ |
(578,106 |
) |
$ |
(1,768,398 |
) |
The Year Ended March 31, 2016 Compared to the Year Ended March 31, 2015
Revenue
There were no revenues for the years ended March 31, 2016 and 2015 because Arna does not have any commercial biopharmaceutical products.
Operating Expenses
Operating expenses consisting of, research and development costs, consultancy fee, legal and professional fees, equity-based payments to non-employees and general and administrative expenses for the year ended March 31, 2016 decreased to $578,106 from $1,768,398 for the the year ended March 31, 2015, a decrease of $1,190,292. The decrease is primarily attributable to decreased research and development activity.
Net Loss
Net loss for the year ended March 31, 2016 was $578,106 as compared to $1,768,398 for the year ended March 31, 2015.
Liquidity and Capital Resources
We will be required to raise additional capital within the next year to continue the development and commercialization of current product candidates and to fund operations. We cannot be certain that additional funding will be available on acceptable terms, or at all. Recently worldwide economic conditions and the international equity and credit markets have significantly deteriorated and may remain difficult for the foreseeable future. These developments will make it more difficult to obtain additional equity or credit financing, when needed. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct delay, scale back or discontinue the development and/or commercialization of one or more product candidates; (ii) seek collaborators for product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available; or (iii) relinquish or otherwise dispose of rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize its self on unfavorable terms.
Off Balance Sheet Arrangements
We do not engage in any activities involving variable interest entities or off-balance sheet arrangements.
Critical Accounting Policies
Financial Reporting Release No. 60 requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Our accounting policies are described in Note 2 in each of the Rasna UK and Arna audited financial statements, included as Exhibit 99.1 to this Current Report on Form 8-K.
Recent Accounting Pronouncements
See Note 2 in each of the audited financial statements for Rasna UK and Arna, included as Exhibit 99.1to this Current Report on Form 8-K.
There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.
Risks Relating to Our Business
As a result of the Merger, Rasna became a subsidiary of ours and since we are subject to the reporting requirements of federal securities laws, this can be expensive and may divert resources from other projects, thus impairing our ability to grow.
As a result of the Merger, Rasna became a subsidiary of ours and, accordingly, is subject to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The costs of preparing and filing annual and quarterly reports, proxy statements and other information with the Securities and Exchange Commission (including reporting of the Merger) and furnishing audited reports to stockholders will cause our expenses to be higher than they would have been if Rasna had remained privately held and did not consummate the Merger.
The Sarbanes-Oxley Act and new rules subsequently implemented by the Securities and Exchange Commission have required changes in corporate governance practices of public companies. As a public company, we expect these new rules and regulations to increase our compliance costs in 2016 and beyond and to make certain activities more time consuming and costly. As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers.
Because we became a public company by means of a reverse acquisition, we may not be able to attract the attention of brokerage firms.
Because Rasna became public through a “reverse acquisition,” securities analysts of brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of Rasna in the future.
Rasna is a development stage company with minimal operating history.
Rasna is a development stage company with minimal operating history and no revenue. It currently has no product candidates ready for commercialization, has not generated any revenue from operations and expects to incur substantial net losses for the foreseeable future to further develop and commercialize its molecular targets. We are unable to predict the extent of these future net losses, or when we may attain profitability, if at all. We may never be able to generate any revenues or royalties from the sales of our therapeutics or become profitable even if we do generate revenues or royalties.
If we are unable to manage our expected growth, we may not be able to develop our business.
Our ability to develop our business requires an effective planning and management process. We need to hire a significant number of employees in the near term. If we fail to identify, attract, retain and motivate highly skilled personnel, we may be unable to continue our development and commercialization activities.
If we lose key employees and consultants or are unable to attract or retain qualified personnel, our business could suffer.
Our success is highly dependent on our ability to attract and retain qualified scientific and management personnel. Our planned activities require expertise in areas such as research, development, clinical study management, regulatory affairs and commercialization, including reimbursement. Such activities require the addition of new personnel and the development of additional expertise by existing management personnel. We face intense competition for such personnel from other companies, academic institutions, government entities and other organizations, and there can be no assurance that we will be successful in hiring or retaining qualified personnel. Our inability to develop additional expertise or to hire and retain such qualified personnel could have a material adverse effect on our operations.
If we fail to select product candidates, fail to successfully complete clinical trials and commercialize product candidates or fail to obtain regulatory approval, our business would be harmed and the value of our securities would decline.
We must be evaluated in light of the uncertainties and complexities affecting a pre-commercial biopharmaceutical company. We have not completed preclinical or clinical research and have not yet selected product candidates or completed the development of such product candidates. Our failure to select product candidates and subsequently to develop and commercialize such product candidates successfully may cause us to cease operations. We are performing preclinical research on NPM1 and LSD1. This research will require significant additional development efforts by us prior to selection of product candidates and significant additional development efforts by us and regulatory approvals prior to commercialization. We cannot be certain that our efforts in this regard will lead to commercially viable therapeutics. We do not know what the final cost to select and commercialize product candidates will be.
We do not know whether any of our molecular targets under development ultimately will be selected as product candidates or whether our product candidates, if any, will be shown to be effective. Moreover, governmental authorities may enact new legislation or regulations that could limit or restrict our development efforts. We may receive unfavorable results from pre-clinical studies or clinical studies on the molecular targets, which may cause us to abandon the product selection process and further development efforts. If we are unable to select product candidates and then to successfully develop such product candidates, we will not have a source of revenue and will not achieve profitability.
Regulatory agencies, including the U.S. Food and Drug Administration, or FDA, must approve our product candidates, if any, before they can be marketed or sold. The approval process is lengthy, requires significant capital expenditures, and uncertain as to outcome. Our ability to obtain regulatory approval of any product candidate depends on, among other things, completion of additional clinical trials, whether our clinical trials demonstrate statistically significant efficacy with safety issues that do not potentially outweigh the therapeutic benefit of the product candidates, and whether the regulatory agencies agree that the data from our future clinical trials are sufficient to support approval for any of our product candidates. The final results of our current and future preclinical or clinical trials may not meet FDA or other regulatory agencies’ requirements to approve a product candidate for marketing, and the regulatory agencies may otherwise determine that our manufacturing processes or facilities are insufficient to support approval. We or our collaborators may need to conduct more preclinical or clinical trials than we currently anticipate. Even if we do receive FDA or other regulatory agency approval, we or our collaborators may not be successful in commercializing approved product candidates. If any of these events occur, our business could be materially harmed and the value of our securities would decline.
We, or our collaborators, may face delays in completing our pre-clinical or clinical trials, and may not be able to complete them at all.
We have not completed the pre-clinical and clinical trials necessary to support an application for approval to market of product candidates, if any. Our or our collaborators’ current and future clinical trials may be delayed, unsuccessful, or terminated as a result of many factors, including:
· delays in designing an appropriate clinical trial protocol and reaching agreement on trial design with investigators and regulatory authorities;
· governmental or regulatory delays, failure to obtain regulatory approval or changes in regulatory requirements, policy or guidelines;
· adding new clinical trial sites;
· reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;
· the actual performance of CROs and clinical trial sites in ensuring the proper and timely conduct of our clinical trials;
· adverse effects experienced by subjects in clinical trials;
· manufacturing sufficient quantities of product candidates for use in clinical trials; and
· delays in achieving study endpoints and completing data analysis for a trial.
In addition to these factors, our trials may be delayed, unsuccessful or terminated because:
· regulators or institutional review boards, or IRBs, may not authorize us to commence a clinical trial;
· regulators or IRBs may suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or concerns about patient safety;
· we may suspend or terminate our clinical trials if we believe that they expose the participating patients to unacceptable health risks;
· patients may not complete clinical trials due to safety issues, side effects, such as injection site discomfort, a belief that they are receiving placebo instead of our product candidates, or other reasons;
· patients with serious diseases included in our clinical trials may die or suffer other adverse medical events for reasons that may not be related to our product candidates;
· in those trials where our product candidate is being tested in combination with one or more other therapies, deaths may occur that may be attributable to the other therapies;
· we may have difficulty in maintaining contact with patients after treatment, preventing us from collecting the data required by our study protocol;
· product candidates may demonstrate a lack of efficacy during clinical trials;
· personnel conducting clinical trials may fail to properly administer our product candidates; and
· our collaborators may decide not to pursue further clinical trials.
We could encounter delays if our clinical trials are suspended or terminated by us, by IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Boards for such trials or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including potential for unacceptable safety risks to patients, inspection of the clinical trial operation or trial site, changes in government regulations or administrative actions.
In addition, we rely on academic institutions, physician practices and CROs to conduct, supervise or monitor some or all aspects of clinical trials involving our product candidates. We have less control over the timing and other aspects of these clinical trials than if we conducted the monitoring and supervision entirely on our own. Third parties may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial protocol or applicable regulations. We also may rely on CROs to perform our data management and analysis. They may not provide these services as required or in a timely or compliant manner, and we may be held legally responsible for any or all of their performance failures or inadequacies.
Moreover, our development costs will increase because we will be required to complete additional or larger clinical trials for our product candidates prior to FDA or other regulatory approval. If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects of our product candidates will be harmed, and our ability to generate product revenues from any of these product candidates will be delayed or eliminated. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process, and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harm our business, financial condition and prospects. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also lead to the denial of regulatory approval of our product candidates.
If we encounter difficulties enrolling patients in our clinical trials, our clinical trials could be delayed or otherwise adversely affected.
Clinical trials for our product candidates, if any, will require us to identify and enroll a large number of patients with the disease under investigation. We may not be able to enroll a sufficient number of patients, or those with required or desired characteristics, in a timely manner. Patient enrollment is affected by factors including:
· severity of the disease under investigation;
· design of the trial protocol;
· the size and nature of the patient population;
· eligibility criteria for the study in question;
· lack of a sufficient number of patients who meet the enrollment criteria for our clinical trials;
· delays required to characterize the infection to allow us to select a product candidate, which may lead patients to seek to enroll in other clinical trials or seek alternative treatments;
· perceived risks and benefits of the product candidate under study;
· availability of competing therapies and clinical trials;
· efforts to facilitate timely enrollment in clinical trials;
· scheduling conflicts with participating clinicians;
· patient referral practices of physicians;
· the ability to monitor patients adequately during and after treatment; and
· proximity and availability of clinical trial sites for prospective patients.
If we have difficulty enrolling a sufficient number or diversity of patients to conduct our clinical trials as planned, we may need to delay or terminate ongoing or planned clinical trials, either of which would have an adverse effect on our business.
Results of earlier studies and clinical trials may not be predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates, if any, may not be predictive of the design or results of later-stage clinical trials. Any positive results generated to date do not ensure that later trials will demonstrate similar results. While we have observed statistically significant improvements in the outcomes of some of our clinical trials, many of the improvements we have seen have not reached statistical significance. Statistical significance is a statistical term that means that an effect is unlikely to have occurred by chance. In order to be approved, product candidates must demonstrate that their effect on patients’ diseases in the trial is statistically significant. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and initial clinical trials. Early clinical trials frequently enroll patient populations that are different from the patient populations in later trials, resulting in different outcomes in later clinical trials from those in earlier stage clinical trials. In addition, adverse events may not occur in early clinical trials and only emerge in larger, late-stage clinical trials or after commercialization. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier clinical trials. If later stage clinical trials do not demonstrate efficacy and safety of our product candidates we will not be able to market them and our business will be materially harmed.
Regulatory authorities may not approve our product candidates, if any, even if they meet safety and efficacy endpoints in clinical trials.
Under certain circumstances, regulatory authorities may revise or retract previous guidance during the course of our clinical activities or after the completion of our clinical trials. A regulatory authority may also disqualify a clinical trial in whole or in part from consideration in support of approval of a potential product for commercial sale or otherwise deny approval of that product. Prior to regulatory approval, a regulatory authority may elect to obtain advice from outside experts regarding scientific issues and/or marketing applications under a regulatory authority review. In the United States, these outside experts are convened through the FDA’s Advisory Committee process, which would report to the FDA and make recommendations that may differ from the views of the FDA. Should an Advisory Committee be convened, it would be expected to lengthen the time for obtaining regulatory approval, if such approval is obtained at all.
The FDA and foreign regulatory agencies may delay, limit or deny marketing approval for many reasons, including:
· a product candidate may not be considered safe or effective;
· our manufacturing processes or facilities may not meet the applicable requirements;
· changes in the agencies’ approval policies or adoption of new regulations may require additional work on our part, for example, the FDA may require us to change or expand the endpoints in our clinical trials;
· different divisions of the FDA are reviewing different product candidates and those divisions may have different requirements for approval; and
· changes in regulatory law, FDA or foreign regulatory agency organization, or personnel may result in different requirements for approval than anticipated.
Our product candidates may not be approved even if they achieve their endpoints in clinical trials. Regulatory agencies, including the FDA, or their advisors may disagree with our trial design and our interpretations of data from preclinical studies and clinical trials. Regulatory agencies also may approve a product candidate for fewer or more limited indications than requested or may grant approval subject to the performance of post-marketing studies. In addition, regulatory agencies may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates.
Any delay in or failure to receive or maintain approval for any of our product candidates could prevent us from ever generating revenues or achieving profitability.
We may be required to suspend, repeat or terminate our clinical trials if they are not conducted in accordance with regulatory requirements, the results are negative or inconclusive, or the trials are not well designed.
Clinical trials must be conducted in accordance with FDA regulations governing clinical studies, or other applicable foreign government guidelines, and are subject to oversight by the FDA, other foreign governmental agencies and IRBs at the medical institutions where the clinical trials are conducted. In addition, clinical trials must be conducted with product candidates produced under current Good Manufacturing Practices, or cGMP, and may require large numbers of test subjects. Clinical trials may be suspended by the FDA, other foreign governmental agencies or us for various reasons, including:
· deficiencies in the conduct of the clinical trials, including failure to conduct the clinical trial in accordance with regulatory requirements or clinical protocols;
· deficiencies in the clinical trial operations or trial sites;
· the product candidate may have unforeseen adverse side effects;
· the time required to determine whether the product candidate is effective may be longer than expected;
· deaths or other adverse events arising during a clinical trial due to medical problems that may not be related to clinical trial treatments;
· the product candidate may not appear to be more effective than current therapies;
· the quality or stability of the product candidate may fall below acceptable standards; and
· insufficient quantities of the product candidate might be available to complete the trials.
In addition, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. Due to these and other factors, our product candidates could take longer to gain regulatory approval than we expect or we may never gain approval for any product candidates, which could reduce or eliminate our revenue by delaying or terminating the commercialization of our product candidates.
Any product candidate for which we, or our collaborators, obtain marketing approval could be subject to restrictions or withdrawal from the market, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products, when and if any of them are approved.
Any product candidate that we or our collaborators obtain marketing approval for, along with the manufacturing processes, post-approval clinical data, labeling, advertising and promotional activities for such product, will be subject to continual requirements of the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information, reports, registration and listing requirements, cGMP requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed or to conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure drugs are marketed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use. If we market our products outside of their approved indications, we will be subject to enforcement action for off-label marketing.
In addition, later discovery of previously unknown problems with these products, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
· restrictions on such products, manufacturers or manufacturing processes;
· restrictions on the labeling or marketing of a product;
· restrictions on product distribution or use;
· requirements to conduct post-marketing clinical trials;
· warning or untitled letters;
· withdrawal of the products from the market;
· refusal to approve pending applications or supplements to approved applications that we submit;
· recall of products, fines, restitution or disgorgement of profits or revenue;
· suspension or withdrawal of marketing approvals;
· refusal to permit the import or export of our products;
· product seizure; and
· injunctions or the imposition of civil or criminal penalties.
The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. If we, or our collaborators, are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we, or our collaborators, are not able to maintain regulatory compliance, any marketing approval that was obtained could be lost, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
If we, or our collaborators, are unable to comply with foreign regulatory requirements or obtain foreign regulatory approvals, our ability to develop foreign markets for our products could be impaired.
Sales of our product candidates, if any, outside the United States will be subject to foreign regulatory requirements governing clinical trials, marketing approval, manufacturing, product licensing, pricing and reimbursement. These regulatory requirements vary greatly from country to country. As a result, the time required to obtain approvals outside the United States may differ from that required to obtain FDA approval and we may not be able to obtain foreign regulatory approvals on a timely basis or at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other countries or by the FDA and foreign regulatory authorities could require additional testing. Failure to comply with these regulatory requirements or obtain required approvals could impair our ability to develop foreign markets for our products.
Competitive products for treatment of AML may reduce or eliminate the commercial opportunity for our product candidates, if any.
The clinical and commercial landscape for AML is rapidly changing. New data from commercial and clinical-stage products continue to emerge. It is possible that these data may alter current standards of care, completely precluding us from further developing our product candidates, if any, or getting them approved by regulatory agencies. Further, it is possible that we may initiate a clinical trial or trials for these product candidates, only to find that data from competing products make it impossible for us to complete enrollment in these trials, resulting in our inability to file for marketing approval with regulatory agencies. Even if these products are approved for marketing in a particular indication or indications, they may have limited sales due to particularly intense competition in these markets.
We will need to develop or acquire additional manufacturing and distribution capabilities in order to commercialize our product candidates, if any, that obtain marketing approval, and we may encounter unexpected costs or difficulties in doing so .
If we independently develop and commercialize one or more of our product candidates, if any, we will need to invest in acquiring or building additional capabilities and effectively manage our operations and facilities to successfully pursue and complete future research, development and commercialization efforts. We will require additional investment and validation process development in order to qualify our commercial-scale manufacturing process to manufacture clinical trial materials and commercial material if any of our products are approved for marketing. This investment and validation process development may be expensive and time-consuming. We will require additional personnel with experience in commercial-scale manufacturing, managing of large-scale information technology systems and managing a large-scale distribution system. We will need to add personnel and expand our capabilities, which may strain our existing managerial, operational, regulatory compliance, financial and other resources. To do this effectively, we must:
· recruit, hire, train, manage and motivate a growing employee base;
· accurately forecast demand for our products;
· assemble and manage the supply chain to ensure our ability to meet demand; and
· expand existing operational, manufacturing, financial and management information systems.
We may seek FDA approval for our production process and facilities simultaneously with seeking approval for sale of our product candidates. Should we not complete the development of adequate capabilities, including manufacturing capacity, or fail to receive timely approval of our manufacturing process and facilities, our ability to supply clinical trial materials for planned clinical trials or supply products following regulatory approval for sale could be delayed, which would further delay our clinical trials or the period of time when we would be able to generate revenues from the sale of such products, if we are even able to obtain approval or generate revenues at all.
Additionally, we may decide to outsource some or all of our manufacturing activities to a third party commercial manufacturing organization, or CMO. Under any agreement with a CMO, we would have less control over the timing and quality of manufacturing than if we were to perform such manufacturing ourselves. A CMO would be manufacturing other pharmaceutical products in the same facilities as our product candidates, increasing the risk of cross product contamination. Further, there is no guarantee that any CMO will continue ongoing operations, causing potential delays in product supply, reduced revenues and other liabilities for us.
Any such events would increase our costs and could delay or prevent our ability to commercialize our product candidates, which could adversely impact our business, financial condition and results of operations.
Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.
Undesirable side effects caused by our product candidates, if any, could cause us, our collaborators, or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory authorities. As a result of any side effects, our clinical trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development, or deny approval, of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly.
Additionally if one or more of our product candidates receives marketing approval, and we, our collaborators, or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:
· regulatory authorities may withdraw approvals of such product;
· regulatory authorities may require additional warnings on the label;
· we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;
· we may be sued and held liable for harm caused to patients; and
· our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly harm our business, results of operations and prospects.
If we cannot demonstrate an acceptable toxicity profile for our product candidates, if any, in non-clinical studies, we will not be able to initiate or continue clinical trials or obtain approval for our product candidates.
In order to move a product candidate into human clinical trials, we must first demonstrate an acceptable toxicity profile in preclinical testing. Furthermore, in order to obtain approval, we must also demonstrate safety in various non-clinical tests. We may not have conducted or may not conduct the types of non-clinical testing required by regulatory authorities, or future non-clinical tests may indicate that our product candidates are not safe for use. Preclinical and non-clinical testing is expensive, time-consuming and has an uncertain outcome. In addition, success in initial non-clinical testing does not ensure that later non-clinical testing will be successful. We may experience numerous unforeseen events during, or as a result of, the non-clinical testing process, which could delay or prevent our ability to develop or commercialize our product candidates, including:
· our preclinical and non-clinical testing may produce inconclusive or negative safety results, which may require us to conduct additional non-clinical testing or to abandon product candidates;
· our product candidates may have unfavorable pharmacology or toxicity characteristics;
· our product candidates may cause undesirable side effects such as negative immune responses that lead to complications;
· our enrolled patients may have allergies that lead to complications after treatment; and
· the FDA or other regulatory authorities may determine that additional safety testing is required.
Any such events would increase our costs and could delay or prevent our ability to commercialize our product candidates, which could adversely impact our business, financial condition and results of operations.
If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to sell and market our product candidates, we may not be successful in commercializing our product candidates if and when they are approved.
We do not have a sales and marketing infrastructure or any experience in the sales, marketing or distribution of pharmaceutical products. We may seek additional third-party collaborators for the commercialization of our other product candidates. In the future, we may choose to build a focused sales and marketing infrastructure to market or co-promote some of our product candidates if and when they are approved, which would be expensive and time-consuming. Alternatively, we may elect to outsource these functions to third parties. Either approach carries significant risks. For example, recruiting and training a sales force is expensive and time-consuming and, if done improperly, could delay a product launch and result in limited sales. If the commercial launch of a product candidate for which we recruit a sales force and establish marketing capabilities is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses. This may be costly, and our investment would be lost if we cannot retain or reposition our sales and marketing personnel.
Factors that may inhibit our efforts to commercialize our products on our own include:
· our inability to recruit, manage and retain adequate numbers of effective sales and marketing personnel;
· the inability of marketing personnel to develop effective marketing materials;
· the inability of sales personnel to obtain access to or persuade adequate numbers of physicians to prescribe any future products;
· the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and
· unforeseen costs and expenses associated with creating an independent sales and marketing organization.
The availability and amount of reimbursement, if approved, for our product candidates, if any, and the manner in which government and private payors may reimburse for any potential products, are uncertain.
In both U.S. and foreign markets, sales of any products will depend in part on the availability of reimbursement from third-party payors such as government health administration authorities, private health insurers and other organizations. The future magnitude of our revenues and profitability may be affected by the continuing efforts of governmental and third-party payors to contain or reduce the costs of health care. We cannot predict the effect that private sector or governmental health care reforms may have on our business, and there can be no assurance that any such reforms will not have a material adverse effect on our business, financial condition and results of operations.
In addition, in both the United States and elsewhere, sales of prescription drugs are dependent in part on the availability of reimbursement to the consumer from third-party payors, such as government and private insurance plans. The ability to obtain reimbursement of our products from these parties is a critical factor in the commercial success for any of our products. Failure to obtain appropriate reimbursement could result in reduced or no sales of our products.
Third-party payors are increasingly challenging the price and cost-effectiveness of medical products and services. Significant uncertainty exists as to the reimbursement status of newly-approved health care products. There can be no assurance that our products will be considered cost-effective or that adequate third-party reimbursement will be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development. Legislation and regulations affecting the pricing of pharmaceuticals may change before any of our products are approved for marketing. Adoption of such legislation could further limit reimbursement for medical products and services. We, or our collaborators, may elect not to market future products in certain markets.
We may expend our limited resources to pursue a particular research program, product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and eventually product candidates for the indications that we believe are the most scientifically and commercially promising. Our resource allocation decisions may cause us to fail to capitalize on viable scientific or commercial products or profitable market opportunities. In addition, we may spend valuable time and managerial and financial resources on research programs and product candidates for specific indications that ultimately do not yield any scientifically or commercially viable products. If we do not accurately evaluate the scientific and commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in situations where it would have been more advantageous for us to retain sole rights to development and commercialization.
Risks Relating to Our Stock
Our common stock is deemed a “penny stock,” which would make it more difficult for our investors to sell their shares.
Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on the NASDAQ Stock Market or other national securities exchange and trades at less than $4.00 per share, other than companies that have had average revenue of at least $6,000,000 for the last three years or that have tangible net worth of at least $5,000,000 ($2,000,000 if the company has been operating for three or more years). These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. If our securities are subject to the penny stock rules, investors will find it more difficult to dispose of our securities.
We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.
We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.
Our stock price may be volatile.
The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
· changes in our industry;
· competitive pricing pressures;
· our ability to obtain working capital financing;
· additions or departures of key personnel;
· sales of our common stock;
· our ability to execute our business plan;
· operating results that fall below expectations;
· loss of any strategic relationship;
· regulatory developments; and
· economic and other external factors.
In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock.
We identified material weaknesses in connection with our internal control over financial reporting. Although we are taking steps to remediate these material weaknesses, we may not be successful in doing so in a timely manner, or at all, and we may identify other material weaknesses.
In connection with the audits of our financial statements of Rasna and Arna for the years ended March 31, 2016 and 2015, our management and independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. The material weaknesses related to (i) our lack of a sufficient number of personnel with an appropriate level of knowledge and experience in the application of U.S. generally accepted accounting principles, or U.S. GAAP, commensurate with our financial reporting requirements and (ii) the fact that policies and procedures with respect to the review, supervision and monitoring of our accounting and reporting functions were either not designed and in place or not operating effectively. As a result, numerous adjustments to our consolidated financial statements were identified and made during the course of the audits.
We are currently not required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. Further, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. Had we and our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional control deficiencies may have been identified by our management or independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses. In an effort to remediate the material weaknesses, we plan to increase the number of our finance and accounting personnel and hire a full-time global corporate controller.
Assessing our procedures to improve our internal control over financial reporting is an ongoing process. We can provide no assurance that our remediation efforts described herein will be successful and that we will not have material weaknesses in the future. Any material weaknesses we identify could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our consolidated financial statements.
Risks Relating to Our Industry
The biopharmaceutical industry is subject to significant regulation and oversight in the United States, in addition to approval of products for sale and marketing.
In addition to FDA restrictions on marketing of biopharmaceutical products, several other types of state and federal laws have been applied to restrict certain marketing practices in the biopharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes.
The federal health care program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any health care item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on one hand and prescribers, purchasers and formulary managers on the other. Although there are a number of statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices may not in all cases meet all of the criteria for safe harbor protection from anti-kickback liability.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or causing to be made, a false statement to get a false claim paid. Several pharmaceutical and other health care companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of marketing of the product for unapproved, and thus non-reimbursable, uses. The majority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor. Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a manufacturer’s products from reimbursement under government programs, criminal fines and imprisonment.
Because of the breadth of these laws and the narrowness of the safe harbors, it is possible that some of our business activities could be subject to challenge under one or more of these laws, which could have a material adverse effect on our business, financial condition and results of operations.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws and health information privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
If we obtain regulatory approval for any of our product candidates and begin commercializing such product candidates in the United States, our operations may be subject to various federal and state fraud and abuse laws, including, without limitation, the federal anti-kickback statute. These laws may impact, among other things, our proposed sales, marketing and education programs. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
· the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created new federal criminal statutes that prohibit executing a scheme to defraud any healthcare benefit program and making false statements relating to healthcare matters;
· HIPAA, as amended by the Health Information Technology and Clinical Health Act and its implementing regulations, which impose certain requirements relating to the privacy, security and transmission of individually identifiable health information; and
· state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.
If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with governmental regulations, comply with federal and state health-care fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of clinical studies, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent misconduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
Health care reform measures could adversely affect our business.
In the United States and foreign jurisdictions, there have been a number of legislative and regulatory changes to the healthcare system that could affect our future results of operations. In particular, there have been and continue to be a number of initiatives at the U.S. federal and state levels that seek to reduce healthcare costs. In March 2010 the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or collectively the PPACA, was enacted, which includes measures to significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical and biotechnology industry are the following:
· new requirements to report certain financial arrangements with physicians and others, including reporting any “transfer of value” made or distributed to prescribers and other healthcare providers and reporting any investment interests held by physicians and their immediate family members;
· a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
· creation of the Independent Payment Advisory Board which, since 2014, has had the authority to recommend certain changes to the Medicare program that could result in reduced payments for prescription drugs and those recommendations could have the effect of law even if Congress does not act on the recommendations; and
· establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending that began on January 1, 2011.
In addition, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform, the cost of prescription drugs, biologics, and diagnostic tests and the reform of the Medicare and Medicaid programs. While we cannot predict the full outcome of any such legislation, it may result in decreased reimbursement. This could harm our ability to generate revenues. It is also possible that other legislative proposals having similar effects will be adopted.
Furthermore, regulatory authorities’ assessment of the data and results required to demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, changing policies and agency funding, staffing and leadership. We cannot be sure whether future changes to the regulatory environment will be favorable or unfavorable to our business prospects.
The industry in which we operate is highly regulated and the failure to obtain, or any delays in obtaining, regulatory approvals could adversely affect our ability to commercialize our candidates, if any, and generate revenue.
The industry in which we operates is highly regulated. Ultimate commercial success may be dependent upon its ability to obtain the necessary regulatory approvals for its product candidates, if any. To date we have neither submitted for, nor received, any regulatory certificates or approvals required to commercialize any product candidates. The task of obtaining appropriate regulatory clearance or approval for tests may be time consuming and costly. We will be required to demonstrate through clinical studies that our tests are effective for their intended purpose. There is no guarantee that its tests or processes will meet the applicable regulatory standards. The regulatory clearance or approval process may also require the expenditure of substantial resources, is uncertain and subject to delays. In addition, approval by a regulatory authority in one country does not ensure the approval by regulatory authorities of other countries. Failure to obtain, or any delays in obtaining, regulatory clearances or approvals could adversely affect our ability to commercialize its tests and generate revenue.
Risks Related to Third Parties
We may rely on third parties to conduct our non-clinical studies and our clinical studies. If these third parties do not perform as contractually required or expected, we may not be able to select product candidates or obtain market acceptance for our product candidates, if any, or we may be delayed in doing so.
We often rely on third parties, such as CROs, medical institutions, academic institutions, clinical investigators and contract laboratories, to conduct our clinical studies. We are responsible for confirming that our clinical studies are conducted in accordance with applicable regulations and in accordance with its general investigational plan and protocol. Our reliance on third parties does not relieve us of these responsibilities. If the third parties conducting our clinical studies do not perform their contractual duties or obligations, do not meet expected deadlines, fail to comply with Good clinical practice (GCP), do not adhere to our clinical study protocols or otherwise fail to generate reliable clinical data, we may need to enter into new arrangements with alternative third parties and our clinical study may be more costly than expected or budgeted, extended, delayed or terminated or may need to be repeated, and we may not be able to obtain regulatory approval for or commercialize the target molecules or product candidates, if any, tested in such studies.
We may explore strategic collaborations that may never materialize or may fail.
We may, in the future, periodically explore a variety of possible strategic collaborations including international distributors and partners, in an effort to gain access to new product candidates or resources. At the current time, we cannot predict what form such a strategic collaboration might take. We are likely to face significant competition in seeking appropriate strategic collaborators, and these strategic collaborations can be complicated and time-consuming to negotiate and document. We may not be able to negotiate strategic collaborations on acceptable terms, or at all. We are unable to predict when, if ever, we will enter into any additional strategic collaborations because of the numerous risks and uncertainties associated with establishing strategic collaborations.
Risks Related to Our Intellectual Property
If we are unable to protect our proprietary rights or to defend against infringement claims, we may not be able to compete effectively or operate profitably.
Our success will depend, in part, on our ability to obtain patents, operate without infringing the proprietary rights of others and maintain trade secrets, both in the United States and other countries. Patent matters in the biotechnology and pharmaceutical industries can be highly uncertain and involve complex legal and factual questions. Accordingly, the validity, breadth and enforceability of our patents and the existence of potentially blocking patent rights of others cannot be predicted, either in the United States or in other countries.
There can be no assurance that we will discover or develop patentable products or processes or that patents will issue from any of the currently pending patent applications or that claims granted on issued patents will be sufficient to protect our technology or adequately cover the actual products we may actually sell. Potential competitors or other researchers in the field may have filed patent applications, been issued patents, published articles or otherwise created prior art that could restrict or block our efforts to obtain additional patents. There also can be no assurance that our issued patents or pending patent applications, if issued, will not be challenged, invalidated, rendered unenforceable or circumvented or that the rights granted hereunder will provide us with proprietary protection or competitive advantages. Our patent rights also depend on our compliance with technology and patent licenses upon which our patent rights are based and upon the validity of assignments of patent rights from consultants and other inventors that were, or are, not employed by us.
In addition, competitors may manufacture and sell our potential products in those foreign countries where we have not filed for patent protection or where patent protection may be unavailable, not obtainable or ultimately not enforceable. In addition, even where patent protection is obtained, third-party competitors may challenge our patent claims in the various patent offices, for example via opposition in the European Patent Office or reexamination or interference proceedings in the United States Patent and Trademark Office, or USPTO. The ability of such competitors to sell such products in the United States or in foreign countries where we have obtained patents is usually governed by the patent laws of the countries in which the product is sold.
We will incur significant ongoing expenses in maintaining our patent portfolio. Should we lack the funds to maintain our patent portfolio or to enforce our rights against infringers, we could be adversely impacted. Even if claims of infringement are without merit, any such action could divert the time and attention of management and impair our ability to access additional capital and/or cost us significant funds to defend.
Intellectual property rights do not necessarily address all potential threats to our competitive advantage.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:
· Others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed.
· We or our licensors or strategic collaborators might not have been the first to make the inventions covered by the issued patent or pending patent application that we own or have exclusively licensed.
· We or our licensors or strategic collaborators might not have been the first to file patent applications covering certain of our inventions.
· Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.
· It is possible that our pending patent applications will not lead to issued patents.
· Issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by our competitors.
· Our competitors might conduct research and development activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.
· We may not develop additional proprietary technologies that are patentable.
· The patents of others may have an adverse effect on our business.
Should any of these events occur, they could significantly harm our business, results of operations and prospects.
Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.
On September 16, 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. The USPTO is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act will not become effective until one year or 18 months after its enactment. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business, our current and pending patent portfolio and future intellectual property strategy. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents, all of which could have a material adverse effect on our business and financial condition.
We may be subject to litigation with respect to the ownership and use of intellectual property that will be costly to defend or pursue and uncertain in its outcome.
Our success also will depend, in part, on our refraining from infringing patents or otherwise violating intellectual property owned or controlled by others. Pharmaceutical companies, biotechnology companies, universities, research institutions and others may have filed patent applications or have received, or may obtain, issued patents in the United States or elsewhere relating to aspects of our technology. It is uncertain whether the issuance of any third-party patents will require us to alter our products or processes, obtain licenses, or cease certain activities. Some third-party applications or patents may conflict with our issued patents or pending applications. Any such conflict could result in a significant reduction of the scope or value of our issued or licensed patents.
In addition, if patents issued to other companies contain blocking, dominating or conflicting claims and such claims are ultimately determined to be valid, we may be required to obtain licenses to these patents or to develop or obtain alternative non-infringing technology and cease practicing those activities, including potentially manufacturing or selling any products deemed to infringe those patents. If any licenses are required, there can be no assurance that we will be able to obtain any such licenses on commercially favorable terms, if at all, and if these licenses are not obtained, we might be prevented from pursuing the development and commercialization of certain of our potential products. Our failure to obtain a license to any technology that we may require to commercialize our products on favorable terms may have a material adverse impact on our business, financial condition and results of operations.
Litigation, which could result in substantial costs to us (even if determined in our favor), may also be necessary to enforce any patents issued or licensed to us or to determine the scope and validity of the proprietary rights of others. The FDA has only recently published draft guidance documents for implementation of the Biologics Price Competition and Innovation Act (BPCIA) under the PPACA, related to the development of follow-on biologics (biosimilars), and detailed guidance for patent litigation procedures under this act has not yet been provided. If another company files for approval to market a competing follow-on biologic, and/or if such approval is given to such a company, we may be required to promptly initiate patent litigation to prevent the marketing of such biosimilar version of our product prior to the normal expiration of the patent. There can be no assurance that our issued or
licensed patents would be held valid by a court of competent jurisdiction or that any follow-on biologic would be found to infringe our patents.
In addition, if our competitors file or have filed patent applications in the United States that claim technology also claimed by us, we may have to participate in interference proceedings to determine priority of invention. These proceedings, if initiated by the USPTO, could result in substantial costs to us, even if the eventual outcome is favorable to us. Such proceedings can be lengthy, are costly to defend and involve complex questions of law and fact, the outcomes of which are difficult to predict. Moreover, we may have to participate in post-grant proceedings or third-party ex parte or inter partes reexamination proceedings under the USPTO. An adverse outcome with respect to a third-party claim or in an interference proceeding could subject us to significant liabilities, require us to license disputed rights from third parties, or require us to cease using such technology, any of which could have a material adverse effect on our business, financial condition and results of operations.
We also rely on trade secrets to protect technology, especially where patent protection is not believed to be appropriate or obtainable or where patents have not issued. For example, our manufacturing process involves a number of trade secret steps, processes, and conditions. We attempt to protect our proprietary technology and processes, in part, with confidentiality agreements and assignment of invention agreements with our employees and confidentiality agreements with our consultants and certain contractors. There can be no assurance that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors. We may fail in certain circumstances to obtain the necessary confidentiality agreements, or their scope or term may not be sufficiently broad to protect our interests.
If our trade secrets or other intellectual property become known to our competitors, it could result in a material adverse effect on our business, financial condition and results of operations. To the extent that we or our consultants or research collaborators use intellectual property owned by others in work for us, disputes may also arise as to the rights to related or resulting know-how and inventions.
The patent protection and patent prosecution for some of our target molecules and product candidates, if any, is dependent or may be dependent in the future on third parties.
While we normally seek and gain the right to fully prosecute the patents relating to our target molecules and product candidates, if any, there may be times when platform technology patents or product-specific patents that relate to the target molecules or product candidates are controlled by our licensors. In addition, our licensors and/or licensees may have back-up rights to prosecute patent applications in the event that we do not do so or choose not to do so, and our licensees may have the right to assume patent prosecution rights after certain milestones are reached. If any of our licensing collaborators fails to appropriately prosecute and maintain patent protection for patents covering any of our product candidates, our ability to develop and commercialize those product candidates may be adversely affected and we may not be able to prevent competitors from making, using and selling competing products.
We have licensed, or will license, from third parties certain technology necessary to develop and commercialize its therapeutics. If these licenses terminate, or if these third parties do not comply with the terms of the license, or if the underlying licensed patents are found to be invalid, our business could be negatively impacted.
We have licensed, or will license, from third parties, technology necessary to research, develop and commercialize LSD1. In return for the use of their technology, we have paid or agreed, or will agree, to pay the licensor certain fees. We may need to license additional technology to in the future. If these licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third parties, if the licensed patents or other rights are found to be invalid or if we are unable to enter into necessary licenses on acceptable terms, our business could be negatively impacted.
We may incur significant expenses or be prevented from developing or commercializing our product candidates, if any, as a result of an intellectual property infringement claim.
Our commercial success depends in part on its ability to operate without infringing the patents and other proprietary rights of third parties. Infringement proceedings in the biopharmaceutical industry may be lengthy, costly and time-consuming and their outcome is uncertain. If we become involved in any patent litigation, interference or other administrative proceedings, it will incur substantial expense and the efforts of its technical and management personnel will be significantly diverted. As a result of such litigation or proceedings, we could lose our proprietary position and be restricted or prevented from developing, manufacturing and selling its product candidates, if any, incur significant damage awards, including punitive damages, or be required to seek third-party licenses that may not be available on commercially acceptable terms, if at all.
Risks Relating to Litigation
We are exposed to potential product liability or similar claims, and insurance against these claims may not be available to us at a reasonable rate in the future.
Our business exposes us to potential liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic products. Clinical trials involve the testing of product candidates on human subjects or volunteers under a research plan, and carry a risk of liability for personal injury or death to patients due to unforeseen adverse side effects, improper administration of the product candidate, or other factors. Many of these patients are already seriously ill and are therefore particularly vulnerable to further illness or death.
We currently carry clinical trial liability insurance but there can be no assurance that we will be able to maintain such insurance or that the amount of such insurance will be adequate to cover claims. We could be materially and adversely affected if we were required to pay damages or incur defense costs in connection with a claim outside the scope of indemnity or insurance coverage, if the indemnity is not performed or enforced in accordance with its terms, or if our liability exceeds the amount of applicable insurance. In addition, there can be no assurance that insurance will continue to be available on terms acceptable to us, if at all, or that if obtained, the insurance coverage will be sufficient to cover any potential claims or liabilities. Similar risks would exist upon the commercialization or marketing of any products by us or our collaborators.
Regardless of their merit or eventual outcome, product liability claims may result in:
· decreased demand for our product;
· injury to our reputation and significant negative media attention;
· withdrawal of clinical trial volunteers;
· costs of litigation;
· distraction of management; and
· substantial monetary awards to plaintiffs.
Should any of these events occur, it could have a material adverse effect on our business and financial condition.
Security Ownership of Certain Beneficial Owners and Management
The following tables set forth certain information regarding the ownership of our common stock as of August 15, 2016, by:
· each director;
· each person known by us to own beneficially 5% or more of our Common Stock;
· each officer named in the summary compensation table elsewhere in this report; and
· all directors and executive officers as a group.
The amounts and percentages of common stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has the right to acquire beneficial ownership within 60 days. Under these rules more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
Unless otherwise indicated below, to the best of our knowledge each beneficial owner named in the table has sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Unless otherwise indicated, the address of each beneficial owner is c/o 420 Lexington Avenue, New York, NY 10170.
|
Name of Beneficial Owner |
|
Number of Shares Beneficially
|
|
Percentage
|
|
Executive Officers and Directors : |
|
|
|
|
|
James Tripp |
|
0 |
|
* |
|
Kunwar Shailubhai |
|
954 |
|
* |
|
Riccardo Dalla-Favera |
|
26,400(2) |
|
* |
|
Jim Mervis |
|
26,400(2) |
|
* |
|
John Alex Martin |
|
0 |
|
|
|
John Brancaccio |
|
0 |
|
|
|
Alessandro Padova |
|
0 |
|
|
|
All executive officers and directors as a group (7 persons) |
|
53,754 |
|
* |
|
5% or Greater Stockholders: |
|
|
|
|
|
Panetta Partners Ltd.(3) |
|
2,677,478(4) |
|
13.4 |
|
TES Pharma Srl (5) |
|
1,716,000(4) |
|
8.6 |
|
Eurema Consulting Srl (6) |
|
1,716,000(4) |
|
8.6 |
|
MS Investment Holding, Inc. (7) |
|
1,878,923 |
|
9.4 |
|
Howard I. Freedberg Revocable Trust (8) |
|
1,805,770 |
|
9.1 |
*less than 1%
(1) Based on 19,901,471 shares of our common stock issued and outstanding as of August 15, 2016 after giving effect to the Split-Off.
(2) Consists of shares of common stock issuable upon exercise of vested stock options.
(3) Gabriele Cerrone is a director of Panetta Partners Ltd. and in such capacity holds voting and dispositive power over our securities held by such entity. Mr. Cerrone’s address is c/o Panetta Partners Ltd., Via Sant’ Andrea 18, Milan, Italy 20121.
(4) Includes 66,000 shares of common stock issuable upon exercise of vested stock options.
(5) Dr. Roberto Pellicciari holds voting and dispositive power over securities of the company held by such entity.
(6) Brunangelo Falini holds voting and dispositive power over securities of the company held by such entity.
(7) Morris Silverman holds voting and dispositive power over securities of the company held by such entity.
(8) Howard Freedberg is the trustee of the Howard I. Freedberg Revocable Trust and in such capacity holds voting and dispositive power over securities of the company held by such entity.
Executive Officers and Directors
The following persons are our executive officers and directors as of August 15, 2016 and hold the positions set forth opposite their respective names.
|
Name |
|
Age |
|
Position |
|
James Tripp |
|
46 |
|
Acting Chief Executive Officer, Director |
|
Kunwar Shailubhai |
|
59 |
|
Director |
|
Riccardo Dalla-Favera |
|
63 |
|
Director |
|
Jim Mervis |
|
67 |
|
Director |
|
John Brancaccio |
|
68 |
|
Director |
|
Alessandro Padova |
|
47 |
|
Director |
|
John Alex Martin |
|
49 |
|
Director |
James Tripp
Acting Chief Executive Officer, Director
Mr. Tripp is a global bio/pharmaceutical executive with over twenty years’ experience in biopharmaceutical operations and clinical R&D management. He has been involved in all phases of drug development from discovery through commercialization. He started his career in pharmaceuticals while attending Harvard School of Public Health and at Massachusetts General Hospital in Boston, MA. From 2012 to 2014 he was Director, Clinical Management at Novo Nordisk, A/S, where he managed the US project teams overseeing the insulin/GLP-1, Victoza®, and Saxenda® portfolios. From 2007 to 2012, Mr. Tripp was a Director at Regeneron Pharmaceuticals where he started as a Therapeutic Area Project Manager (TAPM) for inflammation programs, focusing on developing IL-1 Trap (Arcalyst®) and then creating and heading up the Compliance & Training group for the Clinical & Project Management Office. Earlier Mr. Tripp has also had senior roles on both Nasonex® and Clarinex® at Schering-Plough (now Merck) and overseeing global operations/managing the successful co-development collaborations with GSK, while at Bayer Pharmaceuticals on Baycol®, and while at Hoffman-La Roche on Boniva®.
Kunwar Shailubhai
Director
Dr. Shailubhai is a Co-Founder of Synergy Pharmaceuticals Inc. and has served as Chief Scientific Officer since 2008. From March 2004 until July 2008 he served as Senior Vice President, Drug Discovery, of Synergy which at that time was a subsidiary of Callisto Pharmaceuticals, Inc. (“Synergy DE”). From May 2003 until March 2004, Dr. Shailubhai served as Executive Vice President, Research and Development of Synergy DE. From 2001 to April 2003, Dr. Shailubhai held the position of Vice President, Drug Discovery at Synergy DE where he was chiefly responsible for the preclinical development of our GC-C agonist program for drugs to treat colon cancer and GI inflammation. Between 1993 and 2000, he was with Monsanto Company, serving as Group Leader of the cancer chemoprevention group. Dr. Shailubhai previously served as a Senior Staff Fellow at the National Institutes of Health, and as an Assistant Professor at the University of Maryland. Dr. Shailubhai received his Ph.D. in microbiology in 1984 from the University of Baroda, India, and his M.B.A. in 2001 from the University of Missouri, St. Louis.
Dr. Riccardo Dalla-Favera, MD
Director
Dr. Dalla-Favera is a leader in the field of molecular oncology and has made fundamental contributions to the field of cancer, especially in the study of the molecular genetics of B cell malignancies. As a researcher, he has contributed much of the current knowledge on the genetic lesions responsible for human B cell lymphoma, which have led to the development of diagnostic tests and are being tested as targets in clinical trials with lymphoma patients. A Columbia faculty member for more than 15 years, Dr. Dalla-Favera helped found and has led the Institute for Cancer Genetics at Columbia University since 1999. He is the Percy and Joanne Uris Professor of Pathology and Professor of Genetics & Development at the Columbia University College of Physicians and Surgeons. He is also a director of the Specialised Center for research on Lymphoma at Columbia University funded by the Leukemia Lymphoma Society. Dr. Dalla-Favera joined Columbia’s College of Physicians and Surgeons in the Department of Pathology in 1989. He completed a fellowship at the National Cancer Institute and was previously a faculty member at New York University School of Medicine. Dr. Dalla-Favera currently serves as a director of Tiziana Life Sciences plc. Dr. Dalla-Favera co-founded Therasis, Inc. in 2007 and has since served as a director of that company. He has been a member of the Scientific Advisory Board of Trovagene, Inc. since April 2010. He serves as a member of the Scientific Advisory Board of Xigen SA. Dr. Dalla-Favera was a director of the Herbert Irving Comprehensive Cancer Centre (HICCC) from 2005 to 2011. He has served as the Chair of the Scientific Advisory Board of the Yale Cancer Centre. He served as the Co-Chair of the National Centre Institute Program Review Group for Leukemia, Lymphoma and Myeloma and as a member of the boards of the Scientific Counsellors of the National Institute of Environmental Health and the National Cancer Institute.
Jim Mervis
Director
Mr. Mervis has been Managing Director of Bioscience Strategies NZ Limited, a consulting company, since March 2009. In addition, Mr. Mervis has been Chairman of CoDa Therapeutics, Inc. since 2006 and a director of Engender Technologies Ltd. since 2013. Mr. Mervis has been a Senior Advisor to the University of Auckland’s technology transfer arm Auckland Uniservices since 2010 and the New Zealand government’s Return On Science investment committee since 2013. Mr. Mervis has been Senior Advisor to Professor Roberto Pellicciari and his lab TES Pharma since 2012. He was a litigation associate at the New York firm of Rubin
Wachtell Baum & Levin from 1973 to 1978. From 1979 to 1985, Mr. Mervis held senior executive positions in the pioneering days of cable television, pay television and home video, at Viacom International, Showtime Pay Television, CBS Video Enterprises and MGM/UA Home Entertainment. From 1985 to 1989, he was a key business development consultant to Virgin Communications, Childrens Television Workshop, EMI Music, Roy Orbison, Sergio Leone and Island Pictures. In 1990, he co-founded one of the first interactive media companies where he produced the interactive version of Stephen Hawking’s A Brief History of Time (released 1993). Mr. Mervis obtained his BS from Cornell University in 1969 and his JD from Fordham University School of Law in 1972.
John Brancaccio
Director
Since April 2004, Mr. Brancaccio has been the Chief Financial Officer of Accelerated Technologies, Inc., an incubator for medical device companies. Mr. Brancaccio served as a director of Callisto Pharmaceuticals, Inc. from April 2004 until its merger with Synergy Pharmaceuticals, Inc. in January 2013 and has been a director of Tamir Biotechnology, Inc. (formerly Alfacell Corporation) since April 2004, as well as a director of Trovagene, Inc. since December 2005, Synergy Pharmaceuticals Inc. since July 2008 and ContraVir Pharmaceuticals, Inc. since December 2013.
Alessandro Padova
Director
Since October 2015, Dr. Padova has served as Chief Executive Officer of Fondazione Ri.MED, a foundation based in Sicily, that promotes, supports and leads biomedical and biotechnological research projects. From July 2014 to September 2015, Dr. Padova was Senior Director, Strategy and Business Development and from June 2013 to June 2014, Director of Strategic Alliances for IRBM Group in Rome, Italy, a diversified industrial group operating within the biotech and pharmaceutical sector. From May 2004 to March 2013, Dr. Padova was held various positions with Siena Biotech S.p.A., a drug discovery and development company, most recently as General Manager. Dr. Padova graduated from University of Kent with a degree in Chemistry and received his Ph.D. in Chemistry from University of Exeter.
John Alex Martin
Director
Mr. Martin has been Chief Executive Officer of Puricore Inc., a biopharmaceutical company focused on dermatology, ophthalmology, and rare diseases since 2015. From 2011 to 2015, Mr. Martin was President of Moksha8 Pharmaceuticals, Inc., an emerging markets pharmaceutical company. From 2009 to 2011, Mr. Martin was Managing Director of The Sophocles Group, a private consulting company. From 2007 to 2009, Mr. Martin was Chief Operating Officer of Intercept Pharmaceuticals, Inc. Mr. Martin graduated from Cornell University with a BA degree in Government and received his MBA from Harvard Graduate School of Business Administration.
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
There are no family relationships between any of our directors and our executive officers.
Involvement in Certain Legal Proceedings
Except as set forth in the director and officer biographies above, to the Company’s knowledge, during the past ten (10) years, none of the Company’s directors, executive officers, promoters, control persons, or nominees has been:
· the subject of 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;
· convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
· 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; or
· 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.
Corporate Governance
Board Independence
We currently have seven directors serving on our board of directors. Our Board of Directors has adopted the definition of “independence” as described in NASDAQ Rules 4200 and 4350. Independent directors would not include anyone who, within the past three years, be employed by our Company or any parent or subsidiary of our Company or any of their family members; or any director who is, or who has a family member who is, a controlling shareholder. Our Board of Directors has determined that a majority of our directors do meet the independence requirements.
EXECUTIVE COMPENSATION
None of our executive officers have received any compensation for the last two fiscal years..
Outstanding Equity Awards at Fiscal Year-End
Stock Incentive Plan
Our board and a majority of our shareholders adopted the 2016 Equity Incentive Plan (the “Plan”). The Plan reserves 3,000,000 shares of common stock for grant to directors, officers, consultants, advisors or employees of the Company.
Employment Agreements
We currently do not have any employment agreements with any of our executive officers.
Director Compensation
We have not adopted compensation arrangements for members of our board of directors.
Directors’ and Officers’ Liability Insurance
The Company is in the process of obtaining directors’ and officers’ liability insurance insuring its directors and officers against liability for acts or omissions in their capacities as directors or officers, subject to certain exclusions. Such insurance also insures the Company against losses which we may incur in indemnifying our officers and directors. In addition, the Company has entered into indemnification agreements with key officers and directors and such persons shall also have indemnification rights under applicable laws, and the Company’s Certificate of Incorporation and Bylaws.
Certain Relationships and Related Party Transactions
Except as described below, during the past three years, there have been no transactions, whether directly or indirectly, between Rasna and any of its officers, directors or their family members.
At March 31, 2016 and 2015, Rasna UK owed $607,159 and $720,810, respectively, to Arna. Riccardo Dalla-Favera and Jim Mervis, both directors of the Company, and Gabriele Cerrone, a director of Panetta Partners Ltd., a principal stockholder of the Company, were directors of Arna. The funds represented a bank account held on behalf of Arna. During the years ended March 31, 2016 and 2015, Arna paid $113,651 and $1,817,471, respectively, on behalf of Rasna UK.
TES Pharma Srl (“TES”), a principal stockholder of the Company, has performed research on behalf of Arna. For the year ended March 31, 2015, Arna paid TES $1,125,000.
Eurema Consulting Srl (“Eurema”), a principal stockholder of the Company, has provided consulting services to Arna. During the year ended March 31, 2016 and the year ended March 31, 2015, Arna paid $100,000 and $100,000, respectively, to Eurema for consulting services. At March 31, 2016 and March 31, 2015, Arna owed Eurema $225,000 and $125,000, respectively.
For the year ended March 31, 2016 and the year ended March 31, 2015, Mr. Cerrone charged Arna $100,000 and $100,000, respectively, for consulting services. As of March 31, 2016 and 2015, Arna owed Mr. Cerrone $125,000 and $25,000, respectively.
For the year ended March 31, 2016 and the year ended March 31, 2015, Roberto Pellicceri, the sole stockholder of TES and a director of Arna, charged Arna $100,000 and $100,000, respectively, for consulting fees. At March 31, 2016 and 2015, Arna owed Dr. Pellicceri $125,000 and $25,000, respectively.
Market Information
Our common shares are quoted on the OTC Markets — OTC Pink Current under the trading symbol “ATVM”. Our shares have been quoted on the OTC Markets — OTC Pink Current since March 27, 2014. There have been no trades in our shares of common stock since February 24, 2015.
Our transfer agent is Island Stock Transfer, of 15500 Roosevelt Boulevard, Suite 301Clearwater, FL 33760; telephone number 727-289-0010; facsimile: 727-289-0069.
As of August 15, 2016, we had approximately 55 shareholders of record of our common stock.
Dividend Policy
We have not paid any cash dividends to date and do not anticipate or contemplate paying dividends in the foreseeable future. It is the present intention of management to utilize all available funds for the development of our business.
Authorized Capital Stock
Our authorized capital stock consists of 65,000,000 shares of common stock, with a par value of $0.001 per share, and 10,000,000 shares of preferred stock, with a par value of $0.001 per share. As of August 15, 2016, there were 19,901,471 shares of our common stock issued and outstanding after giving effect to the Merger and the Split-Off. There are no preferred shares issued.
Common Stock
Our common stock is entitled to one vote per share on all matters submitted to a vote of the stockholders, including the election of directors. Except as otherwise required by law, the holders of our common stock will possess all voting power. Generally, all matters to be voted on by stockholders must be approved by a majority or, in the case of election of directors, by a plurality, of the votes entitled to be cast by all shares of our common stock that are present in person or represented by proxy. Two persons present and being, or represented by proxy, shareholders of the Company are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation. Our Articles of Incorporation do not provide for cumulative voting in the election of directors. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Pre-emptive Rights
Holders of common stock are not entitled to pre-emptive or subscription or conversion rights, and there are no redemption or sinking fund provisions applicable to the common stock.
Warrants
As of August 15, 2016, warrants to purchase 447,675 shares of common stock have been issued. The warrants have an exercise price of $1.20 per share and are exercisable until March 31, 2026.
Options
As of August 15, 2016, 516,667 stock options under the Plan have been granted to various individuals.
Convertible Securities
We have not issued and do not have outstanding any securities convertible into common shares or any rights convertible or exchangeable into common shares.
Indemnification of Directors and Officers
Section 78.7502(1) of the Nevada Revised Statutes (“NRS”) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
NRS Section 78.7502(2) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (a) is not liable pursuant to NRS 78.138; or (b) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals there from, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
NRS Section 78.747 provides that except as otherwise provided by specific statute, no director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the director or officer acts as the alter ego of the corporation. The court as a matter of law must determine the question of whether a director or officer acts as the alter ego of a corporation.
The Company’s Articles of Incorporation and By-Laws provide that it will indemnify and hold harmless, to the fullest extent permitted by NRS 78.7502, as amended from time to time, each person that such section grants us the power to indemnify.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 3.02 Unregistered Sales of Equity Securities.
Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
Item 5.01 Changes in Control of Registrant
Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
Item 5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
On August 12, 2016, the Company’s Board approved the Amended and Restated Bylaws.
Item 5.06 Change in Shell Company Status
As a result of the consummation of the Merger described in Item 2.01 of this Current Report on Form 8-K, we believe that we are no longer a shell corporation as that term is defined in Rule 405 of the Securities Act and Rule 12b-2 of the Exchange Act.
Item 5.07 Submission of Matters to a Vote of Security Holders
Reference is made to the disclosure set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired . In accordance with Item 9.01(a), (i) Rasna UK and Arna’s audited financial statements for the years ended March 31 2016 and 2015, are filed in this Current Report on Form 8-K as Exhibit 99.1.
(b) Pro Forma Financial Information . In accordance with Item 9.01(b), our pro forma financial statements are filed in this Current Report on Form 8-K as Exhibit 99.2.
(d) Exhibits.
The exhibits listed in the following Exhibit Index are filed as part of this Current Report on Form 8-K.
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Exhibit No . |
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Description |
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2.1 |
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Agreement and Plan of Merger, dated as of August 15, 2016, by and among Active With Me, Inc., Rasna Therapeutics, Inc. and Rasna Acquisition Corp. |
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2.2 |
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Agreement and Plan of Reorganization by and among Rasna Therapeutics, Inc., Falconridge Holdings Limited and Arna Therapeutics Limited dated as of May 17, 2016. |
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3.1 |
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Amended and Restated By-Laws of Active With Me, Inc. |
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4.1 |
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2016 Equity Incentive Plan. |
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10.1 |
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Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations dated as of August 15, 2016 by Active With Me, Inc. and Active With Me Holdings, Inc. (Split-off) |
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10.2 |
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Stock Purchase Agreement dated as of August 15, 2016 (Split-off) |
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21 |
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List of Subsidiaries |
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99.1 |
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Rasna Therapeutics Limited audited financial statements for the years ended March 31, 2016 and 2015.
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99.2 |
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Unaudited pro forma financial statements |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 16, 2016
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ACTIVE WITH ME, INC. |
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By: |
/s/ James Tripp |
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Name: |
James Tripp |
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Title: |
Acting Chief Executive Officer |
Exhibit 2.1
AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
BY AND AMONG
ACTIVE WITH ME, INC.
RASNA ACQUISITION CORP.
and
RASNA THERAPEUTICS, INC.
Dated as of August 15, 2016
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “ Agreement ”) is made and entered into on August 15, 2016 by and among Active With Me, Inc., a Nevada corporation (“ Parent ”), Rasna Acquisition Corp., a Delaware corporation (“ Acquisition Corp. ”), which is a wholly-owned subsidiary of Parent, and Rasna Therapeutics, Inc., a Delaware corporation (the “ Company ”).
W I T N E S S E T H :
WHEREAS, the Board of Directors of each of Acquisition Corp., Parent and the Company have each determined that it is fair to and in the best interests of their respective corporations and stockholders for Acquisition Corp. to be merged with and into the Company (the “ Merger ”) upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of each of Parent, Acquisition Corp. and the Company have approved the Merger in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”) and upon the terms and subject to the conditions set forth herein and in the Delaware Certificate of Merger, attached hereto as Exhibit A ;
WHEREAS, the requisite stockholders of the Company and Parent have each approved this Agreement, the Certificate of Merger and the transactions contemplated and described hereby and thereby, including, without limitation, the Merger, and Parent, as the sole stockholder of Acquisition Corp., has approved by written consent pursuant to Section 228(a) of the DGCL, this Agreement, the Certificate of Merger and the transactions contemplated and described hereby and thereby, including, without limitation, the Merger; and
WHEREAS, the parties hereto intend that the Merger contemplated herein shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”), by reason of Section 368(a)(2)(E) of the Code.
NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 Merger . Subject to the terms and conditions of this Agreement and the Certificate of Merger, Acquisition Corp. shall be merged with and into the Company in accordance with Section 251 of the DGCL. At the Effective Time (as defined below), the separate legal existence of Acquisition Corp. shall cease, and the Company shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”) and shall continue its corporate existence under the laws of the State of Delaware under the name “Rasna Therapeutics, Inc.”
Section 1.02 Effective Time . The Merger shall become effective upon the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with
Section 251 of the DGCL. The time at which the Merger shall become effective as aforesaid is referred to hereinafter as the “ Effective Time .”
Section 1.03 Closing . The closing of the Merger (the “ Closing ”) shall occur concurrently with the Effective Time (the “ Closing Date ”). The Closing shall occur at the offices of Sichenzia Ross Friedman Ference LLP or such other time and place as the parties determine. At the Closing, all of the documents, certificates, agreements, opinions and instruments referenced in Articles I and VII will be executed and delivered as described therein. At the Effective Time, all actions to be taken at the Closing shall be deemed to be taken simultaneously.
Section 1.04 Certificate of Incorporation, By-Laws,
(a) The Amended and Restated Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, attached as Exhibit B hereto, as amended by the Certificate of Merger, shall be the Certificate of Incorporation of the Surviving Corporation from and after the Effective Time until amended in accordance with applicable law and such Certificate of Incorporation.
(b) The By-Laws of the Company, as in effect immediately prior to the Effective Time, attached as Exhibit C hereto, shall be the By-Laws of the Surviving Corporation from and after the Effective Time until amended in accordance with applicable law, the Certificate of Incorporation of the Surviving Corporation and such By-Laws.
Section 1.05 Assets and Liabilities . At the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises of a public as well as of a private nature, and be subject to all the restrictions, disabilities and duties of each of Acquisition Corp. and the Company (collectively, the “ Constituent Corporations ”); and all the rights, privileges, powers and franchises of each of the Constituent Corporations, and all property, real, personal and mixed, and all debts due to any of the Constituent Corporations on whatever account, as well as all other things in action or belonging to each of the Constituent Corporations, shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of the several and respective Constituent Corporations, and the title to any real estate vested by deed or otherwise in either of such Constituent Corporations shall not revert or be in any way impaired by the Merger; but all rights of creditors and all liens upon any property of any of the Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the Surviving Corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.
Section 1.06 Manner and Basis of Converting Shares .
(a) At the Effective Time:
(i) each share of common stock, par value $0.0001 per share of Acquisition Corp. that shall be outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive one (1) share of common stock, $0.0001 par value, of the Surviving
Corporation, so that at the Effective Time, Parent shall be the holder of all of the issued and outstanding shares of the Surviving Corporation;
(ii) each share of common stock, $0.0001 par value, of the Company (the “ Company Common Stock ”) beneficially owned by the stockholders (the “ Stockholders”) listed on Schedule 1.06(a)(ii) (other than (A) shares of Company Common Stock as to which appraisal rights are perfected pursuant to the applicable provisions of the DGCL and not withdrawn or otherwise forfeited), shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive .33 shares of common stock, par value $0.001 per share, of Parent (the “ Parent Common Stock ”), with fractional shares of Parent Common Stock rounded up or down to the nearest whole share (the “ Merger Consideration ”); and
(iii) each share of Company Common Stock held in the treasury of the Company immediately prior to the Effective Time shall be cancelled in the Merger and cease to exist.
(b) After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time.
(c) At the Effective Time, the outstanding options to purchase Company Common Stock outstanding and set forth on Schedule 1.06(c) (the “ Company Options ”) shall be assumed by the Parent and the holder thereof shall thereafter have the right to receive options to purchase Parent Common Stock pursuant to the Parent’s 2016 Equity Incentive Plan, in such amounts and with such conditions and restrictions as set forth on Schedule 1.06(c) hereto (the “ Parent Options ”).
(d) At the Effective Time, the outstanding warrants to purchase Company Common Stock outstanding and set forth on Schedule 1.06(d) (the “Company Warrants”) shall be assumed by the Parent and the holder thereof shall thereafter have the right to receive warrants to purchase Parent Common Stock, in such amounts as set forth on Schedule 1.06(d) hereto and in the form substantially set forth as Exhibit D , attached hereto (the “ Parent Warrants ”)
Section 1.07 Surrender and Exchange of Certificates .
Promptly after the Effective Time and upon (a) surrender of a certificate or certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time or an affidavit and indemnification in form reasonably acceptable to counsel for Parent stating that such Stockholder has lost its certificate or certificates or that such have been destroyed or upon receipt by the Parent of a list of Stockholders for whom shares of Company Common Stock held were un-certificated and (b) delivery of a Letter of Transmittal (as described in Article IV hereof), Parent shall issue to each record holder of Company Common Stock surrendering such certificate, certificates or affidavit, Letter of Transmittal, a certificate or certificates registered in the name of such Stockholder representing the number of shares of Parent Common Stock that such Stockholder shall be entitled to receive as set forth in Sections 1.06(a)(ii) hereof. Until the certificate, certificates, affidavit or certified list of
Stockholders is or are surrendered together with the Letter of Transmittal as contemplated by this Section 1.07 and Article IV hereof, each certificate or affidavit that immediately prior to the Effective Time represented any outstanding shares of Company Common Stock shall be deemed at and after the Effective Time to represent only the right to receive upon surrender as aforesaid the Parent Common Stock specified in Schedule 1.06(a)(ii) for the holder thereof or to perfect any rights of appraisal that such holder may have pursuant to the applicable provisions of the DGCL. Additionally, promptly after the Effective Time and upon surrender of certificates evidencing the Company Warrants and the Company Options outstanding immediately prior to the Effective Time, the Parent shall deliver to the applicable holders of Company Warrants and/or Company Options, the Parent Warrants and the Parent Options, respectively.
Section 1.08 Parent Stock . Parent agrees that it will cause the Parent Common Stock into which the Company Common Stock is converted at the Effective Time pursuant to Section 1.06(a)(ii) to be available for such purposes. Parent further covenants that immediately following the Effective Time, Parent will effect cancellations of certain of its outstanding shares of Parent Common Stock and that there will be no more than 3,305,000 pre-Merger shares of Parent Common Stock issued and outstanding, and that no other pre-Merger common or preferred stock or equity securities or any options, warrants, rights or other agreements or instruments convertible, exchangeable or exercisable into common or preferred stock or other equity securities shall be issued or outstanding, except as described herein.
Section 1.09 Operation of Surviving Corporation . The Company acknowledges that upon the effectiveness of the Merger, and the material compliance by Parent and Acquisition Corp. with their respective duties and obligations hereunder, Parent shall have the absolute and unqualified right to deal with the assets and business of the Surviving Corporation as its own property without limitation on the disposition or use of such assets or the conduct of such business.
Section 1.10 Further Assurances . From time to time, from and after the Effective Time, as and when reasonably requested by Parent, the proper officers and directors of the Company as of the Effective Time shall, for and on behalf and in the name of the Company or otherwise, execute and deliver all such deeds, bills of sale, assignments and other instruments and shall take or cause to be taken such further actions as Parent, Acquisition Corp. or their respective successors or assigns reasonably may deem necessary or desirable in order to confirm or record or otherwise transfer to the Surviving Corporation title to and possession of all of the properties, rights, privileges, powers, franchises and immunities of the Company or otherwise to carry out fully the provisions and purposes of this Agreement and the Certificate of Merger.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition Corp. as follows. Notwithstanding anything to the contrary contained herein, disclosure of items in the draft Current Report on Form 8-K of Parent with respect to the Merger, and all exhibits thereto, a copy of which is attached hereto as Exhibit E (collectively, the “ Disclosures ”) shall be deemed to be disclosure of such items for all purposes under this Agreement, including, without limitation, for all applicable representations and warranties of the Company:
Section 2.01 Organization, Standing, Subsidiaries, Etc .
(a) The Company is a corporation duly organized and existing in good standing under the laws of the State of Delaware and has all requisite power and authority (corporate and other) to carry on its business, to own or lease its properties and assets, to enter into this Agreement, the Certificate of Merger and to carry out the terms hereof and thereof. Copies of the Amended and Restated Certificate of Incorporation and By-Laws of the Company that have been delivered to Parent and Acquisition Corp. prior to the execution of this Agreement are true and complete and have not since been amended or repealed.
(b) Except for Falconridge Holdings Limited, the Company has no subsidiaries or direct or indirect interest (by way of stock ownership or otherwise) in any firm, corporation, limited liability company, partnership, association or business.
Section 2.02 Qualification . The Company is duly qualified to conduct business as a foreign corporation and is in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business operations, results of operations or prospects of the Company taken as a whole (the “ Condition of the Company ”).
Section 2.03 Capitalization of the Company . The authorized capital stock of the Company consists of One Hundred and Twenty Million (120,000,000) shares of Company Common Stock, of which 54,837,790 shares are outstanding and Twenty Million (20,000,000) shares of preferred stock, par value 0.0001 per share, none of which are issued and outstanding, and such shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable, and none of such shares have been issued in violation of the preemptive rights of any natural person, corporation, business trust, association, limited liability company, partnership, joint venture, other entity, government, agency or political subdivision (each, a “ Person ”). The offer, issuance and sale of such shares of Company Common Stock were (a) exempt from the registration and prospectus delivery requirements of the Securities Act of 1933, as amended (the “ Securities Act ”), (b) registered or qualified (or were exempt from registration or qualification) under the registration or qualification requirements of all applicable state securities laws and (c) accomplished in conformity with all other applicable securities laws. None of such shares of Company Common Stock are subject to a right of withdrawal or a right of rescission under any federal or state securities or “Blue Sky” law. Except as otherwise set forth on Schedule 2.03 attached hereto, the Company has no outstanding options, rights or commitments to issue Company Common Stock or other Equity Securities (as defined below) of the Company, and there are no outstanding securities convertible or exercisable into or exchangeable for Company Common Stock or other Equity Securities of the Company. For purposes of this Agreement, “ Equity Security ” shall mean any stock or similar security of an issuer or any security (whether stock or Indebtedness for Borrowed Money (as defined below)) convertible, with or without consideration, into any stock or other equity security, or any security (whether stock or Indebtedness for Borrowed Money) carrying any warrant or right to subscribe to or purchase any stock or similar security, or any such warrant or right.
Section 2.04 Indebtedness . Except as provided in the Company’s Financial Statements (as defined below), the Company has no Indebtedness for Borrowed Money. For purposes of this Agreement, “ Indebtedness for Borrowed Money ” shall mean (a) all Indebtedness in respect of money borrowed including, without limitation, Indebtedness that represents the unpaid amount of the purchase price of any property and is incurred in lieu of borrowing money or using available funds to pay such amounts and not constituting an account payable or expense accrual incurred or assumed in the ordinary course of business of the Company, (b) all Indebtedness evidenced by a promissory note, bond or similar written obligation to pay money or (c) all such Indebtedness guaranteed by the Company or for which the Company is otherwise contingently liable. Furthermore, for purposes of this Agreement, “ Indebtedness ” shall mean any obligation of the Company which, under generally accepted accounting principles in the United Stated (“ GAAP ”), is required to be shown on the balance sheet of the Company as a liability. Any obligation secured by a mortgage, pledge, security interest, encumbrance, lien or charge of any kind (a “ Lien ”), shall be deemed to be Indebtedness, even though such obligation is not assumed by the Company.
Section 2.05 Company Stockholders . Schedule 2.05 hereto contains a true and complete list of the names of the record owners of all of the outstanding shares of Company Common Stock and other Equity Securities of the Company, together with the number of securities held or to which such Person has rights to acquire. To the knowledge of the Company, there is no voting trust, agreement or arrangement among any of the beneficial holders of Company Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Company Common Stock.
Section 2.06 Corporate Acts and Proceedings . The execution, delivery and performance of this Agreement and the Certificate of Merger (together, the “ Merger Documents ”) have been duly authorized by the Board of Directors of the Company and have been approved by the requisite vote of the Stockholders, and all of the corporate acts and other proceedings required for the due and valid authorization, execution, delivery and performance of the Merger Documents and the consummation of the Merger have been validly and appropriately taken, except for the filings referred to in Section 1.02.
Section 2.07 Governmental Consents . All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of the Company required in connection with the consummation of the Merger shall have been obtained prior to, and be effective as of, the Closing.
Section 2.08 Compliance with Laws and Instruments . The business, products and operations of the Company have been and are being conducted in compliance in all material respects with all applicable laws, rules and regulations, except for such violations thereof for which the penalties, in the aggregate, would not have a material adverse effect on the Condition of the Company. The execution, delivery and performance by the Company of the Merger Documents and the consummation by the Company of the transactions contemplated by this Agreement: (a) will not cause the Company to violate or contravene (i) any provision of law, (ii) any rule or regulation of any agency or government, (iii) any order, judgment or decree of any court, or (iv) any provision of the Amended and Restated Certificate of Incorporation or By-
Laws of the Company, (b) will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time, or both) a default under, any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other contract, agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected, except as would not have a material adverse effect on the Condition of the Company and (c) will not result in the creation or imposition of any Lien upon any property or asset of the Company. The Company is not in violation of, or (with or without notice or lapse of time, or both) in default under, any term or provision of its Amended and Restated Certificate of Incorporation or By-Laws or of any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or, except as would not materially and adversely affect the Condition of the Company, any other material agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected.
Section 2.09 Binding Obligations . The Merger Documents constitute the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their respective terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
Section 2.10 Broker’s and Finder’s Fees . No Person has, or as a result of the transactions contemplated or described herein will have, any right or valid claim against the Company, Parent, Acquisition Corp. or any Stockholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity.
Section 2.11 Financial Statements . Parent has previously been provided with the Company’s (i) audited balance sheets (the “ Balance Sheet ”) as of March 31, 2016 and 2015 (the “ Company Balance Sheet Date ”) and (ii) audited statements of operations and accumulated deficits and cash flows for the fiscal years ended March 31, 2016 and 2015. Such financial statements are collectively referred to as the “ Financial Statements ”. The Financial Statements (a) are in accordance with the books and records of the Company, (b) present fairly in all material respects the financial condition of the Company at the dates therein specified and the results of its operations and changes in financial position for the periods therein specified and (c) have been prepared in accordance with GAAP applied on a basis consistent with prior accounting periods.
Section 2.12 Absence of Undisclosed Liabilities . The Company has no material obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due), arising out of any transaction entered into at or prior to the Closing, except (a) as disclosed in the Balance Sheet, (b) to the extent set forth on or reserved against in the Balance Sheet or the notes to the Financial Statements, (c) current liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business since the Company Balance Sheet Date, none of which (individually or in the aggregate) has had or will have a material adverse effect on the Condition of the Company and (d) by the specific terms of any written agreement, document or arrangement identified in the Disclosures.
Section 2.13 Changes . Since the Company Balance Sheet Date and except as set forth on Schedule 2.13 , the Company has not (a) incurred any debts, obligations or liabilities, absolute,
accrued, contingent or otherwise, whether due or to become due, except for fees, expenses and liabilities incurred in connection with the Merger and related transactions and current liabilities incurred in the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the Balance Sheet and current liabilities incurred since the Company Balance Sheet Date, in each case in the usual and ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its assets, except in the usual and ordinary course of business, (e) cancelled or compromised any debt or claim, or waived or released any right, of material value, (f) suffered any physical damage, destruction or loss (whether or not covered by insurance) materially and adversely affecting the Condition of the Company, (g) entered into any transaction other than in the usual and ordinary course of business, (h) encountered any labor union difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary course of business consistent with past practice, or entered into any employment agreement, (j) issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted any options (including employee stock options), warrants or other rights with respect thereto, (k) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or condition affecting, the Condition of the Company other than changes, events or conditions in the usual and ordinary course of its business, none of which (either by itself or in conjunction with all such other changes, events and conditions) has been materially adverse, (m) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, (n) made or permitted any amendment or termination of any material contract, agreement or license to which it is a party, (o) suffered any material loss not reflected in the Balance Sheet or its statement of income for the period ended on the Company Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $50,000 in the aggregate or (r) entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
Section 2.14 Assets and Contracts .
(a) Schedule 2.14(a) contains a true and complete list of all real property leased by the Company and of all tangible personal property owned or leased by the Company having a cost or fair market value of greater than $150,000. All the real property listed in Schedule 2.14(a) is leased by the Company under valid leases enforceable in accordance with their terms, and there is not, under any such lease, any existing default or event of default or event which with notice or lapse of time, or both, would constitute a default by the Company, and the Company has not received any notice or claim of any such default by the Company. The Company does not own any real property.
(b) Except as expressly set forth in this Agreement, the Financial Statements or the notes thereto, or as disclosed in Schedule 2.14(b) hereto, the Company is not a party to any
written or oral agreement not made in the ordinary course of business that is material to the Company. Except as disclosed in Schedule 2.14(b) hereto, the Company is not a party to any written or oral (i) agreement for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (ii) agreement for the employment of any officer, individual employee or other Person on a full-time basis or any agreement with any Person for consulting services, (iii) indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security agreement, promissory note or other agreement or instrument relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of the Company to any Lien or evidencing any Indebtedness, (iv) guaranty of any Indebtedness, (v) other than as set forth in Schedule 2.14(a) hereto, lease or agreement under which the Company is lessee of or holds or operates any property, real or personal, owned by any other Person under which payments to such Person exceed $150,000 per year, (vi) agreement granting any preemptive right, right of first refusal or similar right to any Person, (vii) agreement or arrangement with any Affiliate or any “associate” (as such term is defined in Rule 405 under the Securities Act) of the Company or any present or former officer, director or stockholder of the Company, (viii) agreement obligating the Company to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (ix) covenant not to compete or other material restriction on its ability to conduct a business or engage in any other activity, (x) agreement to register securities under the Securities Act or (xi) collective bargaining agreement. None of the agreements, contracts, leases, instruments or other documents or arrangements listed in Schedules 2.14(a) and 2.14(b) requires the consent of any of the parties thereto other than the Company to permit the contract, agreement, lease, instrument or other document or arrangement to remain effective following consummation of the Merger and the transactions contemplated hereby. For purposes of this Agreement, an “ Affiliate ” shall mean any Person that directly or indirectly controls, is controlled by, or is under common control with, the indicated Person.
(c) The Company has made available to Parent and Acquisition Corp. true and complete copies of all material agreements and other documents, as well as any additional agreements or documents, requested by Parent or Acquisition Corp. The Company has in all material respects performed all obligations required to be performed by it to date and is not in default in any material respect under any of the contracts, agreements, leases, documents, commitments or other arrangements to which it is a party or by which it or any of its property is otherwise bound or affected.
Section 2.15 Personnel . The Company has complied in all material respects with all laws relating to the employment of labor, and the Company has encountered no material labor union difficulties. Other than pursuant to ordinary arrangements of compensation to personnel, the Company is not under any obligation or liability to any officer, director, consultant or staff member of the Company.
Section 2.16 Tax Returns and Audits .
(a) All required federal, state and local Tax Returns (as defined below) of the Company have been accurately prepared and duly and timely filed, and all federal, state and local Taxes (as defined below) required to be paid with respect to the periods covered by such returns have been paid. The Company is not and has not been delinquent in the payment of any Tax. The Company has not had a Tax deficiency proposed or assessed against it and has not
executed a waiver of any statute of limitations on the assessment or collection of any Tax. None of the Company’s federal income tax returns has been audited by any governmental authority; and none of the Company’s state or local income or franchise tax returns has been audited by any governmental authority. The reserves for Taxes reflected on the Balance Sheet, if any, are and will be sufficient for the payment of all unpaid Taxes payable by the Company as of the Company Balance Sheet Date. Since the Company Balance Sheet Date, the Company has made adequate provisions on its books of account for all Taxes with respect to its business, properties and operations for such period. The Company has withheld or collected from each payment made to each of its employees the amount of all taxes (including, but not limited to, federal, state and local income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be withheld or collected therefrom, and has paid the same to the proper Tax receiving officers or authorized depositaries. There are no federal, state, local or foreign audits, actions, suits, proceedings, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns of the Company now pending, and the Company has not received any notice of any proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns. The Company is not obligated to make a payment, nor is it a party to any agreement that under certain circumstances could obligate it to make a payment that would not be deductible under Section 280G of the Code. The Company has not agreed, nor is it required, to make any adjustments under Section 481(a) of the Code (or any similar provision of state, local and foreign law), whether by reason of a change in accounting method or otherwise, for any Tax period for which the applicable statute of limitations has not yet expired. The Company (i) is not a party to, nor is it bound by or obligated under, any Tax sharing agreement, Tax indemnification agreement or similar contract or arrangement, whether written or unwritten (collectively, “ Tax Sharing Agreements ”), and (ii) does not have any potential liability or obligation to any Person as a result of, or pursuant to, any such Tax Sharing Agreements.
(b) For purposes of this Agreement, the following terms shall have the meanings provided below:
(i) “ Tax ” or “ Taxes ” shall mean (A) any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts, deficiencies and other governmental charges of any kind whatsoever (including, but not limited to, taxes on or with respect to net or gross income, franchise, profits, gross receipts, capital, sales, use, ad valorem, value added, transfer, real property transfer, transfer gains, transfer taxes, inventory, capital stock, license, payroll, employment, social security, unemployment, severance, occupation, real or personal property, estimated taxes, rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative minimum, doing business, withholding and stamp), together with any interest thereon, penalties, fines, damages costs, fees, additions to tax or additional amounts with respect thereto, imposed by the United States (federal, state or local) or other applicable jurisdiction; (B) any liability for the payment of any amounts described in clause (A) as a result of being a member of an affiliated, consolidated, combined, unitary or similar group or as a result of transferor or successor liability, including, without limitation, by reason of Regulation section 1.1502-6; and (C) any liability for the payments of any amounts as a result of being a party to any Tax Sharing Agreement or as a result of any express or implied obligation to indemnify any other Person with respect to the payment of any amounts of the type described in clause (A) or (B).
(ii) “ Tax Return ” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065) required to be supplied to a Tax authority relating to Taxes.
Section 2.17 Patents and Other Intangible Assets .
(a) The Company (i) owns or has the right to use, free and clear of all Liens, claims and restrictions, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing used in or necessary for the conduct of its business as now conducted or proposed to be conducted without infringing upon or otherwise acting adversely to the right or claimed right of any Person under or with respect to any of the foregoing and (ii) is not obligated or under any liability to make any payments by way of royalties, fees or otherwise to any owner or licensor of, or other claimant to, any patent, trademark, service mark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business or otherwise.
(b) To the knowledge of the Company, the Company owns and has the unrestricted right to use all trade secrets, if any, including know-how, negative know-how, formulas, patterns, programs, devices, methods, techniques, inventions, designs, processes, computer programs and technical data and all information that derives independent economic value, actual or potential, from not being generally known or known by competitors (collectively, “ Intellectual Property ”) required for or incident to the development, operation and sale of all products and services sold by the Company, free and clear of any right, Lien or claim of others; provided , however , that the possibility exists that other Persons, completely independently of the Company or its employees or agents, could have developed Intellectual Property similar or identical to that of the Company. The Company is not aware of any such development of substantially identical trade secrets or technical information by others. All Intellectual Property can and will be transferred by the Company to the Surviving Corporation as a result of the Merger and without the consent of any Person other than the Company.
Section 2.18 Employee Benefit Plans; ERISA .
(a) There are no “employee benefit plans” (within the meaning of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs of every type other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by the Company, whether written or unwritten and whether or not funded.
(b) All current and prior material documents, including all amendments thereto, with respect to each Employee Benefit Plan have been made available to Parent and Acquisition Corp. or their advisors.
(c) To the knowledge of the Company, all Employee Benefit Plans are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.
(d) There are no pending claims or lawsuits that have been asserted or instituted against any Employee Benefit Plan, the assets of any of the trusts or funds under the Employee Benefit Plans, the plan sponsor or the plan administrator of any of the Employee Benefit Plans or against any fiduciary of an Employee Benefit Plan with respect to the operation of such plan, nor does the Company have any knowledge of any incident, transaction, occurrence or circumstance that might reasonably be expected to form the basis of any such claim or lawsuit.
(e) There is no pending or, to the knowledge of the Company, contemplated investigation, or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Employee Benefit Plan and the Company has no knowledge of any incident, transaction, occurrence or circumstance which might reasonably be expected to trigger such an investigation or enforcement action.
(f) No actual or, to the knowledge of the Company, contingent liability exists with respect to the funding of any Employee Benefit Plan or for any other expense or obligation of any Employee Benefit Plan, except as disclosed on the financial statements of the Company, and no contingent liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
(g) No events have occurred or are expected to occur with respect to any Employee Benefit Plan that would cause a material change in the costs of providing benefits under such Employee Benefit Plan or would cause a material change in the cost of providing for other liabilities of such Employee Benefit Plan.
Section 2.19 Title to Property and Encumbrances . The Company has good, valid and indefeasible marketable title to all properties and assets used in the conduct of its business (except for property held under valid and subsisting leases that are in full force and effect and which are not in default) free of all Liens and other encumbrances, except Permitted Liens (as defined below) and such ordinary and customary imperfections of title, restrictions and encumbrances as do not, individually or in the aggregate, materially detract from the value of the property or assets or materially impair the use made thereof by the Company in its business. Without limiting the generality of the foregoing, the Company has good and indefeasible title to all of its properties and assets reflected in the Balance Sheet, except for property disposed of in the usual and ordinary course of business since the Company Balance Sheet Date and for property held under valid and subsisting leases that are in full force and effect and that are not in default. For purposes of this Agreement, “ Permitted Liens ” shall mean (a) Liens for taxes and assessments or governmental charges or levies not at the time due or in respect of which the validity thereof shall currently be contested in good faith by appropriate proceedings; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers’, warehousemen’s, mechanics’, laborers’ and materialmens’ and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings and (c) Liens incidental to the conduct of the business of the Company that were not incurred in connection with the borrowing of money or the obtaining of advances or credits and that do not in the aggregate materially detract from the value of its property or materially impair the use made thereof by the Company in its business.
Section 2.20 Condition of Properties . All facilities, machinery, equipment, fixtures and other properties owned, leased or used by the Company are in reasonably good operating condition and repair, subject to ordinary wear and tear, and are adequate and sufficient for the Company’s business.
Section 2.21 Insurance Coverage . There is in full force and effect one or more policies of insurance issued by insurers of recognized responsibility, insuring the Company and its properties, products and business against such losses and risks, and in such amounts, as are customary for corporations of established reputation engaged in the same or similar business and similarly situated. The Company has not been refused any insurance coverage sought or applied for, and the Company has no reason to believe that it will be unable to renew its existing insurance coverage as and when the same shall expire upon terms at least as favorable to those currently in effect, other than possible increases in premiums that do not result from any act or omission of the Company. No suit, proceeding or action or, to the best current actual knowledge of the Company, threat of suit, proceeding or action has been asserted or made against the Company within the last five years due to alleged bodily injury, disease, medical condition, death or property damage arising out of the function or malfunction of a product, procedure or service designed, manufactured, sold or distributed by the Company.
Section 2.22 Litigation . There is no legal action, suit, arbitration or other legal, administrative or other governmental proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company or its properties, assets or business, and after reasonable investigation, the Company is not aware of any incident, transaction, occurrence or circumstance that might reasonably be expected to result in or form the basis for any such action, suit, arbitration or other proceeding. The Company is not in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or any governmental agency or instrumentality or arbitration authority.
Section 2.23 Licenses . The Company possesses from all appropriate governmental authorities all licenses, permits, authorizations, approvals, franchises and rights necessary for the Company to engage in the business currently conducted by it, all of which are in full force and effect.
Section 2.24 Interested Party Transactions . No officer, director or stockholder of the Company or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any such Person or the Company has or has had, either directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by the Company or (ii) purchases from or sells or furnishes to the Company any goods or services, or (b) a beneficial interest in any contract or agreement to which the Company is a party or by which it may be bound or affected.
Section 2.25 Environmental Matters .
(a) To the knowledge of the Company, the Company has never generated, used, handled, treated, released, stored or disposed of any Hazardous Materials (as defined below) on any real property on which it now has or previously had any leasehold or ownership interest, except in compliance with all applicable Environmental Laws (as defined below).
(b) To the knowledge of the Company, the historical and present operations of the business of the Company are in compliance with all applicable Environmental Laws, except where any non-compliance has not had and would not reasonably be expected to have a material adverse effect on the Condition of the Company.
(c) There are no material pending or, to the knowledge of the Company, threatened, demands, claims, information requests or notices of noncompliance or violation against or to the Company relating to any Environmental Law; and, to the knowledge of the Company, there are no conditions or occurrences on any of the real property used by the Company in connection with its business that would reasonably be expected to lead to any such demands, claims or notices against or to the Company, except such as have not had, and would not reasonably be expected to have, a material adverse effect on the Condition of the Company.
(d) To the knowledge of the Company, (i) the Company has not sent or disposed of, otherwise had taken or transported, arranged for the taking or disposal of (on behalf of itself, a customer or any other party) or in any other manner participated or been involved in the taking of or disposal or release of a Hazardous Material to or at a site that is contaminated by any Hazardous Material or that, pursuant to any Environmental Law, (A) has been placed on the “National Priorities List”, the “CERCLIS” list, or any similar state or federal list, or (B) is subject to or the source of a claim, an administrative order or other request to take “removal”, “remedial”, “corrective” or any other “response” action, as defined in any Environmental Law, or to pay for the costs of any such action at the site; (ii) the Company is not involved in (and has no basis to reasonably expect to be involved in) any suit or proceeding and has not received (and has no basis to reasonably expect to receive) any notice, request for information or other communication from any governmental authority or other third party with respect to a release or threatened release of any Hazardous Material or a violation or alleged violation of any Environmental Law, and has not received (and has no basis to reasonably expect to receive) notice of any claims from any Person relating to property damage, natural resource damage or to personal injuries from exposure to any Hazardous Material; and (iii) the Company has timely filed every report required to be filed, acquired all necessary certificates, approvals and permits, and generated and maintained all required data, documentation and records under all Environmental Laws, in all such instances except where the failure to do so would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on the Condition of the Company.
(e) For purposes of this Agreement, the following terms shall have the meanings provided below:
(i) “ Environmental Laws ” shall mean the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601, et seq.; the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq.; the Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 136, et seq. and comparable state statutes dealing with the registration, labeling and use of pesticides and herbicides; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801,
et seq.; as any of the above statutes have been amended as of the date hereof, all rules, regulations and policies promulgated pursuant to any of the above statutes, and any other foreign, federal, state or local law, statute, ordinance, rule, regulation or policy governing environmental matters, as the same have been amended as of the date hereof.
(ii) “ Hazardous Material ” shall mean any substance or material meeting any one or more of the following criteria: (a) it is or contains a substance designated as or meeting the characteristics of a hazardous waste, hazardous substance, hazardous material, pollutant, contaminant or toxic substance under any Environmental Law; (b) its presence at some quantity requires investigation, notification or remediation under any Environmental Law; or (c) it contains, without limiting the foregoing, asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived substances or waste, pesticides, herbicides, crude oil or any fraction thereof, nuclear fuel, natural gas or synthetic gas.
Section 2.26 Questionable Payments . Neither the Company nor any director, officer or, to the knowledge of the Company, agent, employee or other Person associated with or acting on behalf of the Company, has used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payments to government officials or employees from corporate funds; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any false or fictitious entries on the books of record of any such corporations; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
Section 2.27 Obligations to or by Stockholders . The Company has no liability or obligation or commitment to any Stockholder or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any Stockholder, nor does any Stockholder or any such Affiliate or associate have any liability, obligation or commitment to the Company.
Section 2.28 Duty to Make Inquiry . To the extent that any of the representations or warranties in this Article II are qualified by “knowledge” or “belief,” the Company represents and warrants that it has made due and reasonable inquiry and investigation concerning the matters to which such representations and warranties relate, including, but not limited to, diligent inquiry of its directors, officers and key personnel.
Section 2.29 Disclosure . There is no fact relating to the Company that the Company has not disclosed to Parent and Acquisition Corp. in writing that has had or is currently having a material and adverse effect or, insofar as the Company can now foresee, will materially and adversely affect the Condition of the Company. No representation or warranty by the Company herein and no information disclosed in the schedules or exhibits hereto by the Company contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION CORP.
Parent and Acquisition Corp. represent and warrant to the Company as follows. Notwithstanding anything to the contrary contained herein, disclosure of items in the Parent SEC
Documents (as defined below) shall be deemed to be disclosure of such items for all purposes under this Agreement, including, without limitation, for all applicable representations and warranties of Parent and Acquisition Corp.:
Section 3.01 Organization and Standing . Parent is a corporation duly organized and existing in good standing under the laws of the State of Nevada. Acquisition Corp. is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Parent and Acquisition Corp. have heretofore delivered to the Company complete and correct copies of their respective Articles or Certificate of Incorporation and By-Laws as now in effect. Parent and Acquisition Corp. have full corporate power and authority to carry on their respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets. Neither Parent nor Acquisition Corp. has any subsidiaries (except Parent’s ownership of Acquisition Corp.) or direct or indirect interest (by way of stock ownership or otherwise) in any firm, corporation, limited liability company, partnership, association or business. Parent owns all of the issued and outstanding capital stock of Acquisition Corp. free and clear of all Liens, and Acquisition Corp. has no outstanding options, warrants or rights to purchase capital stock or other securities of Acquisition Corp., other than the capital stock owned by Parent. Unless the context otherwise requires, all references in this Article III to “Parent” shall be treated as being a reference to Parent and Acquisition Corp. taken together as one enterprise.
Section 3.02 Qualification . Parent is duly qualified to conduct business as a foreign corporation and is in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the condition, properties, assets, liabilities or business operations of Parent (the “ Condition of the Parent ”).
Section 3.03 Corporate Authority . Each of Parent and/or Acquisition Corp. (as the case may be) has full corporate power and authority to enter into the Merger Documents and the other agreements to be made pursuant to the Merger Documents, and to carry out the transactions contemplated hereby and thereby. All corporate acts and proceedings required for the authorization, execution, delivery and performance of the Merger Documents and such other agreements and documents by Parent and/or Acquisition Corp. (as the case may be) have been duly and validly taken or will have been so taken prior to the Closing. Each of the Merger Documents constitutes a legal, valid and binding obligation of Parent and/or Acquisition Corp. (as the case may be), each is enforceable against it and/or them in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally and by general principles of equity.
Section 3.04 Broker’s and Finder’s Fees . No Person is entitled by reason of any act or omission of Parent or Acquisition Corp. to any broker’s or finder’s fees, commission or other similar compensation with respect to the execution and delivery of the Merger Documents, or with respect to the consummation of the transactions contemplated thereby, except as set forth in the Disclosures.
Section 3.05 Capitalization .
(a) The authorized capital stock of Parent consists of (i) Sixty Five Million (65,000,000) shares of Parent Common Stock, of which 3,305,000 shares are issued and outstanding and (ii) Ten Million (10,000,000) shares of preferred stock, par value $0.001 per share, of which no shares are issued and outstanding. Parent has no outstanding options, rights or commitments to issue shares of Parent Stock or any other Equity Security of Parent or Acquisition Corp., and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Parent Common Stock or any other Equity Security of Parent or Acquisition Corp. There is no voting trust, agreement or arrangement among any of the beneficial holders of Parent Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Parent Common Stock. The offer, issuance and sale of such shares of Parent Common Stock were (a) exempt from the registration and prospectus delivery requirements of the Securities Act, (b) registered or qualified (or were exempt from registration or qualification) under the registration or qualification requirements of all applicable state securities laws and (c) accomplished in conformity with all other applicable securities laws. None of such shares of Parent Common Stock are subject to a right of withdrawal or a right of rescission under any federal or state securities or “Blue Sky” law.
(b) The authorized capital stock of Acquisition Corp. consists of 3,000 shares of common stock, par value $0.0001 per share (the “ Acquisition Corp. Common Stock ”), of which 1,000 shares are issued and outstanding. All of the outstanding Acquisition Corp. Common Stock is owned by Parent. All outstanding shares of the capital stock of Acquisition Corp. are validly issued and outstanding, fully paid and non-assessable, and none of such shares have been issued in violation of the preemptive rights of any Person. Acquisition Corp. has no outstanding options, rights or commitments to issue shares of Acquisition Corp. Common Stock or any other Equity Security of Acquisition Corp., and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Acquisition Corp. Common Stock or any other Equity Security of Acquisition Corp.
Section 3.06 Acquisition Corp . Acquisition Corp. is a wholly-owned Delaware subsidiary of Parent that was formed specifically for the purpose of the Merger and that has not conducted any business or acquired any property, and will not conduct any business or acquire any property prior to the Closing Date, except in preparation for and otherwise in connection with the transactions contemplated by the Merger Documents and the other agreements to be made pursuant to or in connection with the Merger Documents.
Section 3.07 Validity of Shares . The shares of Parent Common Stock to be issued at the Closing pursuant to Section 1.06(a)(ii) hereof, when issued and delivered in accordance with the terms of the Merger Documents, shall be duly and validly issued, fully paid and non-assessable. The issuance of the Parent Common Stock upon consummation of the Merger pursuant to Sections 1.06(a)(ii) will be exempt from the registration and prospectus delivery requirements of the Securities Act and from the qualification or registration requirements of any applicable state “Blue Sky” or securities laws.
Section 3.08 SEC Reporting and Compliance .
(a) Parent filed a registration statement on Form S-1 under the Securities Act, which became effective on December 6, 2013 (the “ Parent Registration Statement ”). Since
December 6, 2013, the Parent has filed with the U.S. Securities and Exchange Commission (the “ Commission ”) all registration statements, proxy statements, information statements and reports required to be filed pursuant to the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”). Parent has not filed with the Commission a certificate on Form 15 pursuant to Rule 12h-3 of the Exchange Act.
(b) Parent has made available to the Company true and complete copies of the registration statements, information statements and other reports filed by Parent with the Commission since December 6, 2013 (collectively, the “ Parent SEC Documents ”) filed by Parent with the Commission since December 6, 2013. None of the Parent SEC Documents, as of their respective dates, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements contained therein not misleading.
(c) Prior to and until the Closing, Parent will provide to the Company copies of any and all amendments or supplements to the Parent SEC Documents filed with the Commission and all subsequent registration statements and reports filed by Parent subsequent to the filing of the Parent SEC Documents with the Commission and any and all subsequent information statements, proxy statements, reports or notices filed by Parent with the Commission or delivered to the stockholders of Parent.
(d) Parent is not an investment company within the meaning of Section 3 of the Investment Company Act of 1940, as amended.
(e) The shares of Parent Common Stock are quoted on the OTC Pink Marketplace under the symbol “ATVM” and Parent is in compliance in all material respects with all rules and regulations of the OTC Pink Marketplace applicable to it and the Parent Common Stock.
(f) Between the date hereof and the Closing Date, Parent shall continue to satisfy the filing requirements of the Exchange Act and all other requirements of applicable securities laws and of the OTCBB.
(g) The Parent SEC Documents include all certifications and statements required of it, if any, by (i) Rule 13a-14 or 15d-14 under the Exchange Act, and (ii) 18 U.S.C. Section 1350 (Section 906 of the Sarbanes-Oxley Act of 2002), and each of such certifications and statements contain no qualifications or exceptions to the matters certified therein other than a knowledge qualification, permitted under such provision, and have not been modified or withdrawn and neither Parent nor any of its officers has received any notice from the Commission questioning or challenging the accuracy, completeness, form or manner of filing or submission of such certifications or statements.
(h) Parent has otherwise complied with the Securities Act, Exchange Act and all other applicable federal and state securities laws.
Section 3.09 Financial Statements . The balance sheets and statements of operations, stockholders’ equity and cash flows contained in the Parent SEC Documents (the “ Parent Financial Statements ”) (a) have been prepared in accordance with GAAP applied on a basis consistent with prior periods (and, in the case of unaudited financial information, on a basis
consistent with year-end audits), (b) are in accordance with the books and records of Parent and (c) present fairly in all material respects the financial condition of Parent at the dates therein specified and the results of its operations and changes in financial position for the periods therein specified. The annual financial statements included in parent’s Registration Statement and Parent SEC Documents were audited by Anton & Chia LLC, Parent’s independent registered public accounting firm.
Section 3.10 Governmental Consents . All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of Parent or Acquisition Corp. required in connection with the consummation of the Merger shall have been obtained prior to, and be effective as of, the Closing.
Section 3.11 Compliance with Laws and Other Instruments . The execution, delivery and performance by Parent of the Merger Documents and the other agreements to be made by Parent pursuant to or in connection with the Merger Documents and the consummation by Parent of the transactions contemplated by the Merger Documents will not cause Parent to violate or contravene (a) any provision of law, (b) any rule or regulation of any agency or government, (c) any order, judgment or decree of any court or (d) any provision of their respective charters or By-laws as amended and in effect on and as of the Closing Date and will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time, or both) a default under any material indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other agreement or contract to which Parent is a party or by which Parent or any of its properties is bound.
Section 3.12 No General Solicitation . In issuing the Parent Stock in the Merger hereunder, neither Parent nor anyone acting on its behalf has offered to sell the Parent Stock by any form of general solicitation or advertising.
Section 3.13 Binding Obligations . The Merger Documents constitute the legal, valid and binding obligations of Parent and Acquisition Corp., and are enforceable against Parent and Acquisition Corp., in accordance with their respective terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
Section 3.14 Absence of Undisclosed Liabilities . Neither Parent nor Acquisition Corp. has any material obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether due or to become due), arising out of any transaction entered into at or prior to the Closing, except (a) as disclosed in the Parent SEC Documents, (b) to the extent set forth on or reserved against in the balance sheet of Parent in the most recent Parent SEC Document filed by Parent (the “ Parent Balance Sheet ”) or the notes to the Parent Financial Statements, (c) current liabilities incurred and obligations under agreements entered into in the usual and ordinary course of business since the date of the Parent Balance Sheet (the “ Parent Balance Sheet Date ”), none of which (individually or in the aggregate) materially and adversely affects the Condition of Parent and (d) by the specific terms of any written agreement, document or arrangement attached as an exhibit to the Parent SEC Documents.
Section 3.15 Changes . Since the Parent Balance Sheet Date, Parent has not (a) incurred any debts, obligations or liabilities, absolute, accrued or, to Parent’s knowledge, contingent, whether due or to become due, except for current liabilities incurred in the usual and ordinary course of business, (b) discharged or satisfied any Liens other than those securing, or paid any obligation or liability other than, current liabilities shown on the Parent Balance Sheet and current liabilities incurred since the Parent Balance Sheet Date, in each case in the usual and ordinary course of business, (c) mortgaged, pledged or subjected to Lien any of its assets, tangible or intangible, other than in the usual and ordinary course of business, (d) sold, transferred or leased any of its assets, except in the usual and ordinary course of business, (e) cancelled or compromised any debt or claim, or waived or released any right of material value, (f) suffered any physical damage, destruction or loss (whether or not covered by insurance) that could reasonably be expected to have a material adverse effect on the Condition of the Parent, (g) entered into any transaction other than in the usual and ordinary course of business, (h) encountered any labor union difficulties, (i) made or granted any wage or salary increase or made any increase in the amounts payable under any profit sharing, bonus, deferred compensation, severance pay, insurance, pension, retirement or other employee benefit plan, agreement or arrangement, other than in the ordinary course of business consistent with past practice, or entered into any employment agreement, (j) issued or sold any shares of capital stock, bonds, notes, debentures or other securities or granted any options (including employee stock options), warrants or other rights with respect thereto, (k) declared or paid any dividends on or made any other distributions with respect to, or purchased or redeemed, any of its outstanding capital stock, (l) suffered or experienced any change in, or condition affecting, the Condition of the Parent other than changes, events or conditions in the usual and ordinary course of its business, none of which (either by itself or in conjunction with all such other changes, events and conditions) could reasonably be expected to have a material adverse effect on the Condition of the Parent, (m) made any change in the accounting principles, methods or practices followed by it or depreciation or amortization policies or rates theretofore adopted, (n) made or permitted any amendment or termination of any material contract, agreement or license to which it is a party, (o) suffered any material loss not reflected in the Parent Balance Sheet or its statement of income for the year ended on the Parent Balance Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses or special compensation of any kind or any severance or termination pay to any present or former officer, director, employee, stockholder or consultant, (q) made or agreed to make any charitable contributions or incurred any non-business expenses in excess of $5,000 in the aggregate or (r) entered into any agreement, or otherwise obligated itself, to do any of the foregoing.
Section 3.16 Tax Returns and Audits . All required federal, state and local Tax Returns of Parent have been accurately prepared in all material respects and duly and timely filed, and all federal, state and local Taxes required to be paid with respect to the periods covered by such returns have been paid to the extent that the same are material and have become due, except where the failure so to file or pay could not reasonably be expected to have a material adverse effect upon the Condition of the Parent. Parent is not and has not been delinquent in the payment of any Tax. Parent has not had a Tax deficiency assessed against it. None of Parent’s federal income, state and local income and franchise tax returns has been audited by any governmental authority. The reserves for Taxes reflected on the Parent Balance Sheet are sufficient for the payment of all unpaid Taxes payable by Parent with respect to the period ended on the Parent Balance Sheet Date. There are no federal, state, local or foreign audits, actions, suits,
proceedings, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns of Parent now pending, and Parent has not received any notice of any proposed audits, investigations, claims or administrative proceedings relating to Taxes or any Tax Returns.
Section 3.17 Employee Benefit Plans; ERISA .
(a) Except as disclosed in the Parent SEC Documents, there are no “employee benefit plans” (within the meaning of Section 3(3) of ERISA) nor any other employee benefit or fringe benefit arrangements, practices, contracts, policies or programs other than programs merely involving the regular payment of wages, commissions, or bonuses established, maintained or contributed to by Parent. Any plans listed in the Parent SEC Documents are hereinafter referred to as the “ Parent Employee Benefit Plans .”
(b) Any current and prior material documents, including all amendments thereto, with respect to each Parent Employee Benefit Plan have been given to the Company or its advisors.
(c) All Parent Employee Benefit Plans are in material compliance with the applicable requirements of ERISA, the Code and any other applicable state, federal or foreign law.
(d) There are no pending, or to the knowledge of Parent, threatened, claims or lawsuits which have been asserted or instituted against any Parent Employee Benefit Plan, the assets of any of the trusts or funds under the Parent Employee Benefit Plans, the plan sponsor or the plan administrator of any of the Parent Employee Benefit Plans or against any fiduciary of a Parent Employee Benefit Plan with respect to the operation of such plan.
(e) There is no pending, or to the knowledge of Parent, threatened, investigation or pending or possible enforcement action by the Pension Benefit Guaranty Corporation, the Department of Labor, the Internal Revenue Service or any other government agency with respect to any Parent Employee Benefit Plan.
(f) No actual or, to the knowledge of Parent, contingent liability exists with respect to the funding of any Parent Employee Benefit Plan or for any other expense or obligation of any Parent Employee Benefit Plan, except as disclosed on the financial statements of Parent or the Parent SEC Documents, and to the knowledge of Parent, no contingent liability exists under ERISA with respect to any “multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of ERISA.
Section 3.18 Litigation . There is no legal action, suit, arbitration or other legal, administrative or other governmental proceeding pending or, to the knowledge of Parent, threatened against or affecting Parent or Acquisition Corp. or any of their respective properties, assets or businesses. To the knowledge of Parent, neither Parent nor Acquisition Corp. is in default with respect to any order, writ, judgment, injunction, decree, determination or award of any court or any governmental agency or instrumentality or arbitration authority.
Section 3.19 Licenses . Parent possesses from all appropriate governmental authorities all licenses, permits, authorizations, approvals, franchises and rights necessary for the Company to engage in the business currently conducted by it, all of which are in full force and effect.
Section 3.20 Interested Party Transactions . No officer, director or stockholder of Parent or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any such Person or of Parent has or has had, either directly or indirectly, (a) an interest in any Person that (i) furnishes or sells services or products that are furnished or sold or are proposed to be furnished or sold by Parent or (ii) purchases from or sells or furnishes to Parent any goods or services, or (b) a beneficial interest in any contract or agreement to which Parent is a party or by which it or any of its assets may be bound or affected.
Section 3.21 Questionable Payments . Neither Parent, Acquisition Corp. nor, to the knowledge of Parent, any director, officer, agent, employee or other Person associated with or acting on behalf of Parent or Acquisition Corp. has used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; made any direct or indirect unlawful payments to government officials or employees from corporate funds; established or maintained any unlawful or unrecorded fund of corporate monies or other assets; made any false or fictitious entries on the books of record of any such corporations; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment.
Section 3.22 Obligations to or by Stockholders . Parent has no liability or obligation or commitment to any stockholder of Parent or any Affiliate or “associate” (as such term is defined in Rule 405 under the Securities Act) of any stockholder of Parent, nor does any stockholder of Parent or any such Affiliate or associate have any liability, obligation or commitment to Parent.
Section 3.23 Assets and Contracts . Except as expressly set forth in this Agreement, the Parent Balance Sheet or the notes thereto, or the Parent SEC Documents, Parent is not a party to any written or oral agreement not made in the ordinary course of business that is material to Parent. Parent does not own any real property. Except as expressly set forth in this Agreement, the Parent Balance Sheet or the notes thereto, or the Parent SEC Documents, Parent is not a party to or otherwise barred by any written or oral (a) agreement with any labor union, (b) agreement for the purchase of fixed assets or for the purchase of materials, supplies or equipment in excess of normal operating requirements, (c) agreement for the employment of any officer, individual employee or other Person on a full-time basis or any agreement with any Person for consulting services, (d) bonus, pension, profit sharing, retirement, stock purchase, stock option, deferred compensation, medical, hospitalization or life insurance or similar plan, contract or understanding with respect to any or all of the employees of Parent or any other Person, (e) indenture, loan or credit agreement, note agreement, deed of trust, mortgage, security agreement, promissory note or other agreement or instrument relating to or evidencing Indebtedness for Borrowed Money or subjecting any asset or property of Parent to any Lien or evidencing any Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under which Parent is lessee of or holds or operates any property, real or personal, owned by any other Person, (h) lease or agreement under which Parent is lessor or permits any Person to hold or operate any property, real or personal, owned or controlled by Parent, (i) agreement granting any preemptive right, right of first refusal or similar right to any Person, (j) agreement or arrangement with any Affiliate or any “associate” (as such term is defined in Rule 405 under the Securities Act) of
Parent or any present or former officer, director or stockholder of Parent, (k) agreement obligating Parent to pay any royalty or similar charge for the use or exploitation of any tangible or intangible property, (1) covenant not to compete or other restriction on its ability to conduct a business or engage in any other activity, (m) distributor, dealer, manufacturer’s representative, sales agency, franchise or advertising contract or commitment, (n) agreement to register securities under the Securities Act, (o) collective bargaining agreement or (p) agreement or other commitment or arrangement with any Person continuing for a period of more than three months from the Closing Date that involves an expenditure or receipt by Parent in excess of $1,000. Parent maintains no insurance policies or insurance coverage of any kind with respect to Parent, its business, premises, properties, assets, employees and agents. No consent of any bank or other depository is required to maintain any bank account, other deposit relationship or safety deposit box of Parent in effect following the consummation of the Merger and the transactions contemplated hereby.
Section 3.24 Employees . Other than pursuant to ordinary arrangements of employment compensation, Parent is not under any obligation or liability to any officer, director, employee or Affiliate of Parent.
Section 3.25 Disclosure . There is no fact relating to Parent that Parent has not disclosed to the Company in writing that materially and adversely affects nor, insofar as Parent can now foresee, will materially and adversely affect, the condition (financial or otherwise), properties, assets, liabilities, business operations, results of operations or prospects of Parent. No representation or warranty by Parent herein and no information disclosed in the schedules or exhibits hereto by Parent contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
ARTICLE IV.
DELIVERIES OF THE STOCKHOLDERS
Promptly after the Effective Time, Parent shall cause to be mailed to each holder of record of Company Common Stock that was converted pursuant to Section 1.06 hereof into the right to receive Parent Stock a letter of transmittal (“ Letter of Transmittal ”) that shall contain additional representations, warranties and covenants of such Stockholder, including without limitation, that (a) such Stockholder has full right, power and authority to deliver such Company Common Stock and Letter of Transmittal, (b) the delivery of such Company Common Stock will not violate or be in conflict with, result in a breach of or constitute a default under, any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other agreement or instrument to which such Stockholder is bound or affected, (c) such Stockholder has good, valid and marketable title to all shares of Company Common Stock indicated in such Letter of Transmittal and that such Stockholder is not affected by any voting trust, agreement or arrangement affecting the voting rights of such Company Common Stock, (d) whether such Stockholder is an “accredited investor,” as such term is defined in Regulation D under the Securities Act and that such Stockholder is acquiring Parent Stock for investment purposes, and not with a view to selling or otherwise distributing such Parent Stock in violation of the Securities Act or the securities laws of any state, (e) such Stockholder has had an opportunity to ask and receive answers to any questions such Stockholder may have had concerning the terms and conditions of the Merger and the Parent Stock and has obtained any additional information
that such Stockholder has requested and (f) such Stockholder shall refrain from disposing of any shares of Parent Stock received in connection with the Merger for a period of eighteen (18) months from the Effective Time. Delivery shall be effected, and risk of loss and title to the Company Common Stock shall pass, only upon delivery to Parent (or an agent of Parent) of (x) certificates evidencing ownership thereof as contemplated by Section 1.07 hereof (or affidavit of lost certificate) and (y) the Letter of Transmittal containing the representations, warranties and covenants contemplated by this Article IV, duly executed by such Stockholder.
ARTICLE V.
CONDUCT OF BUSINESSES PENDING THE MERGER.
Section 5.01 Conduct of Business by the Company Pending the Merger . Prior to the Effective Time, unless Parent or Acquisition Corp. shall otherwise agree in writing or as otherwise contemplated by this Agreement:
(a) the business of the Company shall be conducted only in the ordinary course;
(b) the Company shall not (i) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (ii) amend its Amended and Restated Certificate of Incorporation or By-laws except to effectuate the transactions contemplated in the Disclosures or (iii) split, combine or reclassify the outstanding Company Common Stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to any such stock;
(c) the Company shall not (i) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire any shares of, Company Common Stock, except to issue shares of Company Common Stock in connection with any matter relating to the Disclosures; (ii) acquire or dispose of any fixed assets or acquire or dispose of any other substantial assets other than in the ordinary course of business; (iii) incur additional Indebtedness or any other liabilities or enter into any other transaction other than in the ordinary course of business; (iv) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing or (v) except as contemplated by this Agreement, enter into any contract, agreement, commitment or arrangement to dissolve, merge, consolidate or enter into any other material business combination; and
(d) the Company shall use its best efforts to preserve intact the business organization of the Company, to keep available the service of its present officers and key employees, and to preserve the good will of those having business relationships with it.
Section 5.02 Conduct of Business by Parent and Acquisition Corp. Pending the Merger . Prior to the Effective Time, unless the Company shall otherwise agree in writing or as otherwise contemplated by this Agreement:
(a) the business of Parent and Acquisition Corp. shall be conducted only in the ordinary course; provided , however , that Parent shall take the steps necessary to have
discontinued its existing business without liability to Parent or Acquisition Corp. immediately following the Effective Time;
(b) neither Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase or otherwise acquire or agree to redeem, purchase or otherwise acquire any shares of its capital stock; (ii) amend its charter or by-laws other than to effectuate the transactions contemplated hereby; or (iii) split, combine or reclassify its capital stock or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to such stock;
(c) neither Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional shares of, or options, warrants or rights of any kind to acquire shares of, its capital stock; (ii) acquire or dispose of any assets other than in the ordinary course of business (except for dispositions in connection with Section 5.02(a) hereof); (iii) incur additional Indebtedness or any other liabilities or enter into any other transaction except in the ordinary course of business; (iv) enter into any contract, agreement, commitment or arrangement with respect to any of the foregoing or (v) except as contemplated by this Agreement, enter into any contract, agreement, commitment or arrangement to dissolve, merge, consolidate or enter into any other material business contract or enter into any negotiations in connection therewith;
(d) neither Parent nor Acquisition Corp. will, nor will they authorize any director or authorize or permit any officer or employee or any attorney, accountant or other representative retained by them to, make, solicit, encourage any inquiries with respect to, or engage in any negotiations concerning, any Acquisition Proposal (as defined below for purposes of this paragraph). Parent will promptly advise the Company orally and in writing of any such inquiries or proposals (or requests for information) and the substance thereof. As used in this paragraph, “ Acquisition Proposal ” shall mean any proposal for a merger or other business combination involving Parent or Acquisition Corp. or for the acquisition of a substantial equity interest in either of them or any material assets of either of them other than as contemplated by this Agreement. Parent will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person conducted heretofore with respect to any of the foregoing; and
(e) neither Parent nor Acquisition Corp. will enter into any new employment agreements with any of their officers or employees or grant any increases in the compensation or benefits of their officers and employees.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 Access and Information . The Company, on the one hand, and Parent and Acquisition Corp., on the other hand, shall each afford to the other and to the other’s accountants, counsel and other representatives full access during normal business hours throughout the period prior to the Effective Time to all of its properties, books, contracts, commitments and records (including but not limited to tax returns) and during such period, each shall furnish promptly to the other all information concerning its business, properties and personnel as such other party may reasonably request, provided that no investigation pursuant to
this Section 6.01 shall affect any representations or warranties made herein. Each party shall hold, and shall cause its employees and agents to hold, in confidence all such information (other than such information that (a) is already in such party’s possession or (b) becomes generally available to the public other than as a result of a disclosure by such party or its directors, officers, managers, employees, agents or advisors or (c) becomes available to such party on a non-confidential basis from a source other than a party hereto or its advisors, provided that such source is not known by such party to be bound by a confidentiality agreement with or other obligation of secrecy to a party hereto or another party until such time as such information is otherwise publicly available; provided , however , that (i) any such information may be disclosed to such party’s directors, officers, employees and representatives of such party’s advisors who need to know such information for the purpose of evaluating the transactions contemplated hereby (it being understood that such directors, officers, employees and representatives shall be informed by such party of the confidential nature of such information), (ii) any disclosure of such information may be made as to which the party hereto furnishing such information has consented in writing and (iii) any such information may be disclosed pursuant to a judicial, administrative or governmental order or request; provided , further , that the requested party will promptly so notify the other party so that the other party may seek a protective order or appropriate remedy and/or waive compliance with this Agreement and if such protective order or other remedy is not obtained or the other party waives compliance with this provision, the requested party will furnish only that portion of such information that is legally required and will exercise its best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the information furnished. If this Agreement is terminated, each party will deliver to the other all documents and other materials (including copies) obtained by such party or on its behalf from the other party as a result of this Agreement or in connection herewith, whether so obtained before or after the execution hereof.
Section 6.02 Additional Agreements . Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its commercially reasonable efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including using its commercially reasonable efforts to satisfy the conditions precedent to the obligations of any of the parties hereto, to obtain all necessary waivers, and to lift any injunction or other legal bar to the Merger (and, in such case, to proceed with the Merger as expeditiously as possible). In order to obtain any necessary governmental or regulatory action or non-action, waiver, consent, extension or approval, each of Parent, Acquisition Corp. and the Company agrees to take all reasonable actions and to enter into all reasonable agreements as may be necessary to obtain timely governmental or regulatory approvals and to take such further action in connection therewith as may be necessary. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and/or directors of Parent, Acquisition Corp. and the Company shall take all such necessary action.
Section 6.03 Publicity . No party shall issue any press release or public announcement pertaining to the Merger that has not been agreed upon in advance by Parent and the Company, except as Parent reasonably determines to be necessary in order to comply with the rules of the Commission or of the principal trading exchange or market for the Parent Common Stock,
provided, that in such case Parent will use its best efforts to allow the Company to review and reasonably approve any such press release or public announcement prior to its release.
Section 6.01 Lockup of Merger Consideration . For good and valuable consideration , the receipt and sufficiency of which are hereby acknowledged, during the period beginning on the Effective Time and ending on the twenty four (24) month anniversary thereof (the “Lockup Period”), each Stockholder will not directly or indirectly, (i) offer, sell, offer to sell, contract to sell, hedge, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or sell (or announce any offer, sale, offer of sale, contract of sale, hedge, pledge, sale of any option or contract to purchase, purchase of any option or contract of sale, grant of any option, right or warrant to purchase or other sale or disposition), or otherwise transfer or dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future), any portion of the Merger Consideration, beneficially owned, within the meaning of Rule 13d-3 under the Exchange Act, by such Stockholder on the date hereof or hereafter acquired or (ii) enter into any swap or other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of any portion of the Merger Consideration, whether or not any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of any Merger Consideration
ARTICLE VII.
CONDITIONS TO PARTIES’ OBLIGATIONS
Section 7.01 Conditions to Parent and Acquisition Corp. Obligations . The obligations of Parent and Acquisition Corp. under the Merger Documents are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by Parent:
(a) The representations and warranties of the Company under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.
(b) The Company shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it on or before the Closing Date.
(c) There shall not exist on the Closing Date any Default (as defined below) or Event of Default (as defined below) or any event or condition that, with the giving of notice or lapse of time or both, would constitute a Default or Event of Default and, since the Company Balance Sheet Date, there shall have been no material adverse change in the Condition of the Company. For purposes of this Agreement, “ Default ” shall mean a default or failure in the due observance or performance of any covenant, condition or agreement on the part of a party to be observed or performed under the terms of the Merger Documents, if such default or failure in performance shall remain un-remedied for five (5) days. Furthermore, for purposes of this Agreement, “ Event of Default ” shall mean (i) the failure to pay any Indebtedness for Borrowed Money, or any interest or premium thereon, within five (5) days after the same shall become due, whether such Indebtedness shall become due by scheduled maturity, by required prepayment, by
acceleration, by demand or otherwise, (ii) an event of default under any agreement or instrument evidencing or securing or relating to any such Indebtedness or (iii) the failure to perform or observe any material term, covenant, agreement or condition on its part to be performed or observed under any agreement or instrument evidencing or securing or relating to any such Indebtedness when such term, covenant or agreement is required to be performed or observed.
(d) No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Merger Documents or the carrying out of the transactions contemplated by the Merger Documents.
(e) Parent and Acquisition Corp. shall have received the following:
(i) copies of resolutions of the Board of Directors and the Stockholders, certified by the Secretary of the Company, authorizing and approving the execution, delivery and performance of the Merger Documents and all other documents and instruments to be delivered pursuant thereto;
(ii) a certificate of incumbency executed by the Secretary of the Company certifying the names, titles and signatures of the officers authorized to execute any documents referred to in this Agreement and further certifying that the Amended and Restated Certificate of Incorporation and By-laws of the Company delivered to Parent and Acquisition Corp. at the time of the execution of this Agreement have been validly adopted and have not been amended or modified;
(iii) a certificate, dated the Closing Date, executed by the Chief Executive Officer of the Company certifying that he has no knowledge of any plan to issue any securities of the Company, and the Company has not entered into any agreement, written or oral, to issue any securities of the Company except as described in the Disclosures or this Agreement;
(iv) evidence as of a recent date of the good standing and corporate existence of the Company issued by the Secretary of State of the State of Delaware and evidence that the Company is qualified to transact business as a foreign corporation and is in good standing in each state of the United States and in each other jurisdiction where the character of the property owned or leased by it or the nature of its activities makes such qualification necessary;
(v) copies, certified by the Secretary of State of Delaware, dated not more than five (5) days prior to the Closing Date, of the Amended and Restated Certificate of Incorporation of the Company, and all amendments thereto;
(vi) the certificates representing the Company Common Stock;
(vii) the certificates representing the Company Warrants
(viii) the certificates representing the Company Options; and
(ix) such additional supporting documentation and other information with respect to the transactions contemplated hereby as Parent and Acquisition Corp. may reasonably request.
(f) All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transactions shall be reasonably satisfactory in form and substance to Parent and Acquisition Corp. The Company shall furnish to Parent and Acquisition Corp. such supporting documentation and evidence of the satisfaction of any or all of the conditions precedent specified in this Section 7.01 as Parent or its counsel may reasonably request.
Section 7.02 Conditions to the Company’s Obligations . The obligations of the Company under the Merger Documents are subject to the fulfillment, at or prior to the Closing, of the following conditions, any of which may be waived in whole or in part by the Company.
(a) The representations and warranties of Parent and Acquisition Corp. under this Agreement shall be deemed to have been made again on the Closing Date and shall then be true and correct in all material respects.
(b) Parent and Acquisition Corp. shall have performed and complied in all material respects with all agreements and conditions required by the Merger Documents to be performed or complied with by them on or before the Closing Date.
(c) There shall not exist on the Closing Date any Default or Event of Default or any event or condition that, with the giving of notice or lapse of time or both, would constitute a Default or Event of Default and, since the Parent Balance Sheet Date, there shall have been no material adverse change in the Condition of the Parent.
(d) The Company shall have received the following:
(i) copies of resolutions of Parent’s and Acquisition Corp.’s respective boards of directors and the sole stockholder of Acquisition Corp., certified by their respective Secretaries, authorizing and approving, to the extent applicable, the execution, delivery and performance of the Merger Documents and all other documents and instruments to be delivered by them pursuant thereto;
(ii) a certificate of incumbency executed by the respective Secretaries of Parent and Acquisition Corp. certifying the names, titles and signatures of the officers authorized to execute the documents referred to in this Agreement and further certifying that the respective Articles or Certificate of Incorporation and By-Laws of Parent and Acquisition Corp. appended thereto have not been amended or modified.
(iii) a certificate, dated the Closing Date, executed by the President or Chief Executive Officer of each of the Parent and Acquisition Corp., certifying that (A) except for the filing of the Certificate of Merger, all consents, authorizations, orders and approvals of, and filings and registrations with, any court, governmental body or instrumentality that are required for the execution and delivery of the Merger Documents and the consummation of the
Merger shall have been duly made or obtained, and all material consents by third parties required for the Merger have been obtained and (B) no action or proceeding before any court, governmental body or agency has been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Merger Documents or the carrying out of the transactions contemplated by any of the Merger Documents;
(iv) evidence as of a recent date and within five (5) days of the Effective Date of the good standing and corporate existence of each of Parent and Acquisition Corp. issued by the Secretaries of State of the State of Nevada and Delaware, respectively, and evidence that Parent and Acquisition Corp. are qualified to transact business as foreign corporations and are in good standing in each state of the United States and in each other jurisdiction where the character of the property owned or leased by them or the nature of their activities makes such qualification necessary; and
(v) evidence of the election of James Tripp, Kunwar Shailubhai, Dr. Riccardo Dalla-Favara, Jim Mervis, John Brancaccio, John Alex Martin and Dr. Alessandro Padova to the Parent’s Board of Directors and evidence of the resignation of Sheri Strangway from the Parent’s Board of Directors, effective as of the Closing Date;
(vi) evidence of the election of James Tripp as the Chief Executive Officer of the Parent, effective on the Closing Date and evidence of Sheri Strangway’s resignation as President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer of Parent; and
(vii) such additional supporting documentation and other information with respect to the transactions contemplated hereby as the Company may reasonably request.
(e) All corporate and other proceedings and actions taken in connection with the transactions contemplated hereby and all certificates, opinions, agreements, instruments and documents mentioned herein or incident to any such transactions shall be satisfactory in form and substance to the Company. Parent and Acquisition Corp. shall furnish to the Company such supporting documentation and evidence of satisfaction of any or all of the conditions specified in this Section 7.02 as the Company may reasonably request.
(f) No action or proceeding before any court, governmental body or agency shall have been threatened, asserted or instituted to restrain or prohibit, or to obtain substantial damages in respect of, the Merger Documents or the carrying out of the transactions contemplated by the Merger Documents.
ARTICLE VIII.
INDEMNIFICATION AND RELATED MATTERS
Section 8.01 Indemnification by Parent . Parent shall indemnify and hold harmless the Company and the Stockholders (together the “ Company Indemnified Parties ”), and shall reimburse the Company Indemnified Parties for, any loss, liability, claim, damage, expense (including, but not limited to, costs of investigation and defense and reasonable attorneys’ fees) or diminution of value (collectively, “ Damages ”) arising from or in connection with (a) any inaccuracy, in any material respect, in any of the representations and warranties of Parent and
Acquisition Corp. in this Agreement or in any certificate delivered by Parent and Acquisition Corp. to the Company pursuant to this Agreement, or any actions, omissions or statements of fact inconsistent with any such representation or warranty, (b) any failure by Parent or Acquisition Corp. to perform or comply in any material respect with any covenant or agreement in this Agreement, (c) any claim for brokerage or finder’s fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such party with Parent or Acquisition Corp. in connection with any of the transactions contemplated by this Agreement, (d) taxes attributable to any transaction or event occurring on or prior to the Closing, (e) any claim relating to or arising out of any liabilities whether or not reflected in the Parent Financial Statement or with respect to accounting fees arising thereafter or (f) any litigation, action, claim, proceeding or investigation by any third party relating to or arising out of the business or operations of Parent, or the actions of Parent or any holder of Parent capital stock prior to the Effective Time.
Section 8.02 Survival . (a) All representations, warranties, covenants and agreements of Parent and Acquisition Corp. contained in this Agreement or in any certificate delivered pursuant to this Agreement shall survive the Closing. The representations and warranties of the Company contained in this Agreement or in any certificate delivered pursuant to this Agreement shall not survive the Closing.
(b) If, at any time, any of the Company Indemnified Parties shall assert a claim for indemnification pursuant to Section 8.01, such Company Indemnified Party shall submit to Parent a written claim in good faith signed by an authorized officer of the Company or other Company Indemnified Party, as applicable, stating (i) that a Company Indemnified Party incurred or reasonably believes it may incur Damages and the reasonable estimate of the amount of any such Damages and (ii) in reasonable detail, the facts alleged as the basis for such claim and the section or sections of this Agreement alleged as the basis or bases for the claim. If the claim is for Damages which the Company Indemnified Parties reasonably believe may be incurred or are otherwise un-liquidated, the written claim of the applicable Company Indemnified Party shall state the reasonable estimate of such Damages, in which event a claim shall be deemed to have been asserted under this Article VIII in the amount of such estimated Damages.
(c) In the event that any action, suit or proceeding is brought against any Company Indemnified Party with respect to which Parent may have liability under this Article VIII, Parent shall have the right, at its cost and expense, to defend such action, suit or proceeding in the name and on behalf of the Company Indemnified Party; provided , however , that a Company Indemnified Party shall have the right to retain its own counsel, with fees and expenses paid by Parent, if representation of the Company Indemnified Party by counsel retained by Parent would be inappropriate because of actual or potential differing interests between Parent and the Company Indemnified Party. In connection with any action, suit or proceeding subject to Article VIII, Parent and each Company Indemnified Party agree to render to each other such assistance as may reasonably be required in order to ensure proper and adequate defense of such action, suit or proceeding. Parent shall not, without the prior written consent of the applicable Company Indemnified Party, which consent shall not be unreasonably withheld or delayed, settle or compromise any claim or demand if such settlement or
compromise does not include an irrevocable and unconditional release of such Company Indemnified Party for any liability arising out of such claim or demand.
ARTICLE IX.
TERMINATION PRIOR TO CLOSING
Section 9.01 Termination of Agreement . This Agreement may be terminated at any time prior to the Closing:
(a) by the mutual written consent of the Company, Acquisition Corp. and Parent;
(b) by the Company, if Parent or Acquisition Corp. (i) fails to perform in any material respect any of its agreements contained herein required to be performed by it on or prior to the Closing Date, or (ii) materially breach any of their representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after the Company has notified Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant to this paragraph (b);
(c) by Parent and Acquisition Corp. if the Company (i) fails to perform in any material respect any of its agreements contained herein required to be performed by it on or prior to the Closing Date or (ii) materially breaches any of its representations, warranties or covenants contained herein, which failure or breach is not cured within thirty (30) days after Parent or Acquisition Corp. has notified the Company of its intent to terminate this Agreement pursuant to this paragraph (c);
(d) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if there shall be any order, writ, injunction or decree of any court or governmental or regulatory agency binding on Parent, Acquisition Corp. or the Company that prohibits or materially restrains any of them from consummating the transactions contemplated hereby, provided that the parties hereto shall have used their best efforts to have any such order, writ, injunction or decree lifted and the same shall not have been lifted within ninety (90) days after entry by any such court or governmental or regulatory agency; or
(e) by either the Company, on the one hand, or Parent and Acquisition Corp., on the other hand, if the Closing has not occurred on or prior to August 31, 2016, for any reason other than delay or nonperformance of the party seeking such termination.
Section 9.02 Termination of Obligations . Termination of this Agreement pursuant to this Article IX shall terminate all obligations of the parties hereunder, except for the obligations under Sections 10.03 and 10.11; provided , however , that termination pursuant to paragraphs (b) or (c) of Section 9.01 shall not relieve the defaulting or breaching party or parties from any liability to the other parties hereto.
ARTICLE X.
MISCELLANEOUS
Section 10.01 Notices . Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:
(a) If to Parent or Acquisition Corp.:
(b) If to the Company:
Notices shall be deemed received at the earlier of actual receipt or three (3) business days following mailing. Counsel for a party (or any authorized representative) shall have authority to accept delivery of any notice on behalf of such party.
Section 10.02 Entire Agreement . This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein, contains the entire understanding of the parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements and undertakings between the parties with respect to such subject matter.
Section 10.03 Expenses . Each party shall bear and pay all of the legal, accounting and other expenses incurred by it in connection with the transactions contemplated by this Agreement.
Section 10.04 Time . Time is of the essence in the performance of the parties’ respective obligations herein contained.
Section 10.05 Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 10.06 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and heirs; provided, however, that neither party shall directly or indirectly transfer or assign any of its rights hereunder in whole or in part without the written consent of the others, which may be withheld in its sole discretion, and any such transfer or assignment without said consent shall be void.
Section 10.07 No Third Parties Benefited . This Agreement is made and entered into for the sole protection and benefit of the parties hereto, their successors, assigns and heirs, and no other Person shall have any right or action under this Agreement.
Section 10.08 Counterparts . This Agreement may be executed in one or more counterparts, with the same effect as if all parties had signed the same document. Each such
counterpart shall be an original, but all such counterparts together shall constitute a single agreement.
Section 10.09 Recitals, Schedules and Exhibits . The Recitals, Schedules and Exhibits to this Agreement are incorporated herein and, by this reference, made a part hereof as if fully set forth herein.
Section 10.10 Section Headings and Gender . The Section headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.
Section 10.11 Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to principles of conflicts of laws, except that the applicable terms of Section 1 shall be governed by the DGCL.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.
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PARENT: |
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ACTIVE WITH ME, INC. |
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Name: Sheri Strangway |
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Title: President and Chief Executive Officer |
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ACQUISITION CORP: |
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RASNA ACQUISITION CORP. |
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COMPANY: |
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RASNA THERAPEUTICS, INC. |
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Title: |
[SIGNATURE PAGE TO AGREEMENT OF MERGER AND PLAN OF REORGANIZATION]
Exhibit 2.2
AGREEMENT OF MERGER AND
PLAN OF REORGANIZATION
BY AND AMONG
RASNA THERAPEUTICS, INC.
FALCONRIDGE HOLDINGS LIMITED
and
ARNA THERAPEUTICS LIMITED
Dated as of May 17, 2016
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “ Agreement ”) is made and entered into on May 17, 2016 by and among Rasna Therapeutics, Inc., a Delaware corporation (“ Parent ”), Falconridge Holdings Limited, a corporation organized under the laws of the British Virgin Islands (“ Falconridge ”), which is a wholly-owned subsidiary of Parent, and Arna Therapeutics Limited, a corporation formed under the laws of the British Virgin Islands (the “ Company ”).
W I T N E S S E T H :
WHEREAS, the Board of Directors of each of Falconridge, Parent and the Company have each determined that it is fair to and in the best interests of their respective corporations and stockholders for the Company to be merged with and into Falconridge (the “ Merger ”) upon the terms and subject to the conditions set forth herein;
WHEREAS, the Board of Directors of each of Parent, Falconridge and the Company have approved the Merger in accordance with the laws of the British Virgin Islands (“ BVI Law ”) and upon the terms and subject to the conditions set forth herein, in the applicable filings required pursuant to BVI Law;
WHEREAS, the requisite stockholders of the Company (the “ Stockholders ”) have approved this Agreement and the transactions contemplated and described hereby and thereby, including, without limitation, the Merger, and Parent, as the sole stockholder of Falconridge, has approved by written consent pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, BVI Law, this Agreement and the transactions contemplated and described hereby and thereby, including, without limitation, the Merger; and
WHEREAS, the parties hereto intend that the Merger contemplated herein shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the “ Code ”), by reason of Section 368(a)(2)(E) of the Code.
NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties hereto agree as follows:
ARTICLE I.
THE MERGER
Section 1.01 Merger . Subject to the terms and conditions of this Agreement, the Company shall be merged with and into Falconridge in accordance with BVI Law. At the Effective Time (as defined below), the separate legal existence of the Company shall cease, and Falconridge shall be the surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”) and shall continue its corporate existence under BVI Law under the name “Falconridge Holdings Limited”.
Section 1.02 Effective Time . The Merger shall become effective upon the filing of the appropriate certificates pursuant to the relevant provisions of BVI Law. The time at which the Merger shall become effective as aforesaid is referred to hereinafter as the “ Effective Time .”
Section 1.03 Closing . The closing of the Merger (the “ Closing ”) shall occur concurrently with the Effective Time (the “ Closing Date ”). The Closing shall occur at such time and place as shall be determined by the parties hereto. At the Closing, all of the documents, certificates, agreements, opinions and instruments referenced in Articles I will be executed and delivered as described therein. At the Effective Time, all actions to be taken at the Closing shall be deemed to be taken simultaneously.
Section 1.04 Certificate of Incorporation,
(a) The Certificate of Incorporation of Falconridge, as in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation from and after the Effective Time until amended in accordance with applicable law and such Certificate of Incorporation.
Section 1.05 Assets and Liabilities . At the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises of a public as well as of a private nature, and be subject to all the restrictions, disabilities and duties of each of Falconridge and the Company (collectively, the “ Constituent Corporations ”); and all the rights, privileges, powers and franchises of each of the Constituent Corporations, and all property, real, personal and mixed, and all debts due to any of the Constituent Corporations on whatever account, as well as all other things in action or belonging to each of the Constituent Corporations, shall be vested in the Surviving Corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectively the property of the Surviving Corporation as they were of the several and respective Constituent Corporations, and the title to any real estate vested by deed or otherwise in either of such Constituent Corporations shall not revert or be in any way impaired by the Merger; but all rights of creditors and all liens upon any property of any of the Constituent Corporations shall be preserved unimpaired, and all debts, liabilities and duties of the Constituent Corporations shall thenceforth attach to the Surviving Corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it.
Section 1.06 Manner and Basis of Converting Shares .
(a) At the Effective Time:
(i) each share of common stock of Falconridge that shall be outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive one (1) share of common stock of the Surviving Corporation, so that at the Effective Time, Parent shall be the holder of all of the issued and outstanding shares of the Surviving Corporation;
(ii) each share of common stock of the Company (the “ Company Common Stock ”) beneficially owned by the Stockholders listed on Schedule 1.06(a)(ii) shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive an aggregate of 35,668,290 shares of common stock, par value $0.01 per share, of Parent (the “ Parent Common Stock ”), with fractional shares of Parent Common Stock rounded up or down to the nearest whole share (the “ Merger Consideration ”); and
(iii) each share of Company Common Stock held in the treasury of the Company immediately prior to the Effective Time shall be cancelled in the Merger and cease to exist.
(b) After the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time.
(c) At the Effective Time, the outstanding options to purchase Company Common Stock outstanding and set forth on Schedule 1.06(c) shall be assumed by the Parent and the holder thereof shall thereafter have the right to receive options to purchase Parent Common Stock, in such amounts and with such conditions and restrictions as set forth on Schedule 1.06(c) hereto (the “ Parent Options ”).
(d) At the Effective Time, the outstanding warrants to purchase Company Common Stock outstanding and set forth on Schedule 1.06(d) (the “Company Warrants”) shall be assumed by the Parent and the holder thereof shall thereafter have the right to receive warrants to purchase Parent Common Stock, in such amounts as set forth on Schedule 1.06(d) hereto and in the form substantially set forth as Exhibit D, attached hereto (the “Parent Warrants”).
Section 1.07 Surrender and Exchange of Certificates .
Promptly after the Effective Time and upon surrender of a certificate or certificates representing shares of Company Common Stock that were outstanding immediately prior to the Effective Time or an affidavit and indemnification in form reasonably acceptable to counsel for Parent stating that such Stockholder has lost its certificate or certificates or that such have been destroyed or upon receipt by the Parent of a list of Stockholders for whom shares of Company Common Stock held were un-certificated, Parent shall issue to each record holder of Company Common Stock surrendering such certificate, certificates or affidavit, a certificate or certificates registered in the name of such Stockholder representing the number of shares of Parent Common Stock that such Stockholder shall be entitled to receive as set forth in Sections 1.06(a)(ii) hereof. Until the certificate, certificates, affidavit or certified list of Stockholders is or are surrendered as contemplated by this Section 1.07, each certificate or affidavit that immediately prior to the Effective Time represented any outstanding shares of Company Common Stock shall be deemed at and after the Effective Time to represent only the right to receive upon surrender as aforesaid the Parent Common Stock specified in Schedule 1.06(a)(ii) for the holder thereof. Additionally, promptly after the Effective Time and upon surrender of certificates evidencing the Company Warrants and Company Options outstanding immediately prior to the Effective Time, the Parent shall deliver to the applicable holders of Company Warrants and/or Company Options, the Parent Warrants and Parent Options, respectively.
Section 1.08 Parent Stock . Parent agrees that it will cause the Parent Common Stock into which the Company Common Stock is converted at the Effective Time pursuant to Section 1.06(a)(ii) to be available for such purposes.
Section 1.09 Operation of Surviving Corporation . The Company acknowledges that upon the effectiveness of the Merger, and the material compliance by Parent and Falconridge with their respective duties and obligations hereunder, Parent shall have the absolute and unqualified right to deal with the assets and business of the Surviving Corporation as its own property without limitation on the disposition or use of such assets or the conduct of such business.
Section 1.10 Further Assurances . From time to time, from and after the Effective Time, as and when reasonably requested by Parent, the proper officers and directors of the Company as of the Effective Time shall, for and on behalf and in the name of the Company or otherwise, execute and deliver all such deeds, bills of sale, assignments and other instruments and shall take or cause to be taken such further actions as Parent, Falconridge or their respective successors or assigns reasonably may deem necessary or desirable in order to confirm or record or otherwise transfer to the Surviving Corporation title to and possession of all of the properties, rights, privileges, powers, franchises and immunities of the Company or otherwise to carry out fully the provisions and purposes of this Agreement.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Falconridge as follow:
Section 2.01 Organization, Standing, Subsidiaries, Etc .
(a) The Company is a corporation duly organized and existing in good standing under the laws of the British Virgin Islands and has all requisite power and authority (corporate and other) to carry on its business, to own or lease its properties and assets, to enter into this Agreement, the applicable certificates or filings required pursuant to BVI Law and to carry out the terms hereof and thereof. Copies of the Certificate of Incorporation of the Company that have been delivered to Parent and Falconridge prior to the execution of this Agreement are true and complete and have not since been amended or repealed.
(b) The Company has no subsidiaries or direct or indirect interest (by way of stock ownership or otherwise) in any firm, corporation, limited liability company, partnership, association or business.
Section 2.02 Qualification . The Company is duly qualified to conduct business as a foreign corporation and is in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business operations, results of operations or prospects of the Company taken as a whole (the “ Condition of the Company ”).
Section 2.03 Capitalization of the Company . The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock, US$0.01 par value, of which 35,668,290 shares are outstanding, and such shares of Company Common Stock are duly authorized, validly issued, fully paid and non-assessable, and none of such shares have been
issued in violation of the preemptive rights of any natural person, corporation, business trust, association, limited liability company, partnership, joint venture, other entity, government, agency or political subdivision (each, a “ Person ”).
Section 2.04 Company Stockholders . Schedule 2.04 hereto contains a true and complete list of the names of the record owners of all of the outstanding shares of Company Common Stock of the Company, together with the number of securities held or to which such Person has rights to acquire. To the knowledge of the Company, there is no voting trust, agreement or arrangement among any of the beneficial holders of Company Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Company Common Stock.
Section 2.05 Corporate Acts and Proceedings . The execution, delivery and performance of this Agreement and the requisite certificates to be filed pursuant to BVI Law (together, the “ Merger Documents ”) have been duly authorized by the Board of Directors of the Company and have been approved by the requisite vote of the Stockholders, and all of the corporate acts and other proceedings required for the due and valid authorization, execution, delivery and performance of the Merger Documents and the consummation of the Merger have been validly and appropriately taken, except for the filings referred to in Section 1.02.
Section 2.06 Governmental Consents . All material consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with any federal or state governmental authority on the part of the Company required in connection with the consummation of the Merger shall have been obtained prior to, and be effective as of, the Closing.
Section 2.07 Compliance with Laws and Instruments . The business, products and operations of the Company have been and are being conducted in compliance in all material respects with all applicable laws, rules and regulations, except for such violations thereof for which the penalties, in the aggregate, would not have a material adverse effect on the Condition of the Company. The execution, delivery and performance by the Company of the Merger Documents and the consummation by the Company of the transactions contemplated by this Agreement: (a) will not cause the Company to violate or contravene (i) any provision of law, (ii) any rule or regulation of any agency or government, (iii) any order, judgment or decree of any court, or (iv) any provision of the Certificate of Incorporation of the Company, (b) will not violate or be in conflict with, result in a breach of or constitute (with or without notice or lapse of time, or both) a default under, any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or other contract, agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected, except as would not have a material adverse effect on the Condition of the Company and (c) will not result in the creation or imposition of any lien upon any property or asset of the Company. The Company is not in violation of, or (with or without notice or lapse of time, or both) in default under, any term or provision of its Certificate of Incorporation or of any indenture, loan or credit agreement, deed of trust, mortgage, security agreement or, except as would not materially and adversely affect the Condition of the Company, any other material agreement or instrument to which the Company is a party or by which the Company or any of its properties is bound or affected.
Section 2.08 Binding Obligations . The Merger Documents constitute the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with their respective terms, except as such enforcement is limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.
Section 2.09 Broker’s and Finder’s Fees . No Person has, or as a result of the transactions contemplated or described herein will have, any right or valid claim against the Company, Parent, Falconridge or any Stockholder for any commission, fee or other compensation as a finder or broker, or in any similar capacity.
Section 2.10 Disclosure . There is no fact relating to the Company that the Company has not disclosed to Parent and Falconridge in writing that has had or is currently having a material and adverse effect or, insofar as the Company can now foresee, will materially and adversely affect the Condition of the Company. No representation or warranty by the Company herein and no information disclosed in the schedules or exhibits hereto by the Company contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PARENT AND FALCONRIDGE
Parent and Falconridge represent and warrant to the Company as follows:
Section 3.01 Organization and Standing . Parent is a corporation duly organized and existing in good standing under the laws of the State of Delaware. Falconridge is a corporation duly organized and existing in good standing under the laws of the British Virgin Islands. Parent and Falconridge have heretofore delivered to the Company complete and correct copies of their respective Certificates of Incorporation and By-Laws, as applicable, as now in effect. Parent and Falconridge have full corporate power and authority to carry on their respective businesses as they are now being conducted and as now proposed to be conducted and to own or lease their respective properties and assets. Neither Parent nor Falconridge has any subsidiaries (except Parent’s ownership of Falconridge) or direct or indirect interest (by way of stock ownership or otherwise) in any firm, corporation, limited liability company, partnership, association or business. Parent owns all of the issued and outstanding capital stock of Falconridge free and clear of all liens, and Falconridge has no outstanding options, warrants or rights to purchase capital stock or other securities of Falconridge, other than the capital stock owned by Parent. Unless the context otherwise requires, all references in this Article III to “Parent” shall be treated as being a reference to Parent and Falconridge taken together as one enterprise.
Section 3.02 Qualification . Parent is duly qualified to conduct business as a foreign corporation and is in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased makes such qualification necessary, except where the failure to be so qualified would not have a material adverse effect on the condition, properties, assets, liabilities or business operations of Parent (the “ Condition of the Parent ”).
Section 3.03 Corporate Authority . Each of Parent and Falconridge (as the case may be) has full corporate power and authority to enter into the Merger Documents and the other agreements to be made pursuant to the Merger Documents, and to carry out the transactions contemplated hereby and thereby. All corporate acts and proceedings required for the authorization, execution, delivery and performance of the Merger Documents and such other agreements and documents by Parent and Falconridge (as the case may be) have been duly and validly taken or will have been so taken prior to the Closing. Each of the Merger Documents constitutes a legal, valid and binding obligation of Parent and Falconridge (as the case may be), each is enforceable against it and/or them in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting creditors’ rights generally and by general principles of equity.
Section 3.04 Broker’s and Finder’s Fees . No Person is entitled by reason of any act or omission of Parent or Falconridge to any broker’s or finder’s fees, commission or other similar compensation with respect to the execution and delivery of the Merger Documents, or with respect to the consummation of the transactions contemplated thereby.
Section 3.05 Capitalization .
(a) The authorized capital stock of Parent consists of (i) One Hundred and Twenty Million (120,000,000) shares of Parent Common Stock, of which 19,187,500 shares are issued and outstanding (with fractional shares rounded up to the nearest whole share) and (ii) Twenty Million (20,000,000) shares of preferred stock, par value $0.0001 per share, of which no shares are issued and outstanding. Parent has no outstanding options, rights or commitments to issue shares of Parent Stock or any other equity security of Parent or Falconridge, and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Parent Common Stock or any other equity security of Parent or Falconridge There is no voting trust, agreement or arrangement among any of the beneficial holders of Parent Common Stock affecting the nomination or election of directors or the exercise of the voting rights of Parent Common Stock. The offer, issuance and sale of such shares of Parent Common Stock were (a) exempt from the registration and prospectus delivery requirements of the Securities Act, (b) registered or qualified (or were exempt from registration or qualification) under the registration or qualification requirements of all applicable state securities laws and (c) accomplished in conformity with all other applicable securities laws. None of such shares of Parent Common Stock are subject to a right of withdrawal or a right of rescission under any federal or state securities or “Blue Sky” law.
(b) The authorized capital stock of Falconridge consists of 150,000,000 shares of common stock (the “ Falconridge Common Stock ”), US$1.00 par value, of which 1 share is issued and outstanding. All of the outstanding Falconridge Common Stock is owned by Parent. All outstanding shares of the capital stock of Falconridge are validly issued and outstanding, fully paid and non-assessable, and none of such shares have been issued in violation of the preemptive rights of any Person. Falconridge has no outstanding options, rights or commitments to issue shares of Falconridge Common Stock or any other equity security of Falconridge, and there are no outstanding securities convertible or exercisable into or exchangeable for shares of Falconridge Common Stock or any other equity security of Falconridge
Section 3.06 Validity of Shares . The shares of Parent Common Stock to be issued at the Closing pursuant to Section 1.06(a)(ii) hereof, when issued and delivered in accordance with the terms of the Merger Documents, shall be duly and validly issued, fully paid and non-assessable. The issuance of the Parent Common Stock upon consummation of the Merger pursuant to Sections 1.06(a)(ii) will be exempt from the registration and prospectus delivery requirements of the Securities Act and from the qualification or registration requirements of any applicable state “Blue Sky” or securities laws.
ARTICLE IV.
MISCELLANEOUS
Section 4.01 Notices . Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:
(a) If to Parent or Falconridge:
(b) If to the Company:
Offshore Incorporate Centre
P.O. Box 957
Road Town, Tortola, British Virgin Islands
Notices shall be deemed received at the earlier of actual receipt or three (3) business days following mailing. Counsel for a party (or any authorized representative) shall have authority to accept delivery of any notice on behalf of such party.
Section 4.02 Entire Agreement . This Agreement, including the schedules and exhibits attached hereto and other documents referred to herein, contains the entire understanding of the parties hereto with respect to the subject matter hereof. This Agreement supersedes all prior agreements and undertakings between the parties with respect to such subject matter.
Section 4.03 Expenses . Each party shall bear and pay all of the legal, accounting and other expenses incurred by it in connection with the transactions contemplated by this Agreement.
Section 4.04 Time . Time is of the essence in the performance of the parties’ respective obligations herein contained.
Section 4.05 Severability . Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.
Section 4.06 Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and heirs; provided, however, that neither party shall directly or indirectly transfer or assign any of its rights hereunder in whole or in part without the written consent of the others, which may be withheld in its sole discretion, and any such transfer or assignment without said consent shall be void.
Section 4.07 No Third Parties Benefited . This Agreement is made and entered into for the sole protection and benefit of the parties hereto, their successors, assigns and heirs, and no other Person shall have any right or action under this Agreement.
Section 4.08 Counterparts . This Agreement may be executed in one or more counterparts, with the same effect as if all parties had signed the same document. Each such counterpart shall be an original, but all such counterparts together shall constitute a single agreement.
Section 4.09 Recitals, Schedules and Exhibits . The Recitals, Schedules and Exhibits to this Agreement are incorporated herein and, by this reference, made a part hereof as if fully set forth herein.
Section 4.10 Section Headings and Gender . The Section headings used herein are inserted for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. All personal pronouns used in this Agreement shall include the other genders, whether used in the masculine, feminine or neuter gender, and the singular shall include the plural, and vice versa, whenever and as often as may be appropriate.
Section 4.11 Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York without regard to principles of conflicts of laws.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be binding and effective as of the day and year first above written.
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RASNA THERAPEUTICS, INC. |
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FALCONRIDGE HOLDINGS LIMITED |
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ARNA THERAPEUTICS LIMITED |
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[SIGNATURE PAGE TO AGREEMENT OF MERGER AND PLAN OF REORGANIZATION]
Exhibit 3.1
AMENDED AND RESTATED
BY-LAWS OF
ACTIVE WITH ME, INC.
(a Nevada Corporation)
Adopted as of August 12, 2016
ARTICLE I OFFICES
1. Registered Office . The registered office of Active With Me, Inc. (the “Corporation”) in the State of Nevada shall be in such location as the directors determine in the State of Nevada.
2. Other Offices . The Corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the Board of Directors, and may also have offices at such other places, both within and without the State of Nevada as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
CORPORATE SEAL
Corporate Seal . The corporate seal shall consist of a die bearing the name of the Corporation and the inscription, “Corporate Seal-Nevada.” Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
ARTICLE III
SHARES OF STOCK
1. Certificates Representing Stock; Uncertificated Shares .
a. Form and Execution of Certificates . Certificates for the shares of stock of the Corporation shall be in such form as is consistent with the Articles of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, the President or any Vice President and by the Chief Financial Officer, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary, certifying the number of shares owned by him in the Corporation. Any or all of the signatures on the certificate may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. Subject to any conditions imposed by the Nevada Revised Statutes, the Board of Directors of the Corporation may provide by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares.
b. Legends and Restrictions . Each certificate shall state upon the face or back thereof, in full or in summary, all of the powers, designations, preferences, and rights, and the limitations or restrictions of the shares authorized to be issued or shall, except as otherwise required by law, set forth on the face or back a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional, or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to this section or otherwise required by law or with respect to this section a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights. Except as otherwise expressly provided by law, the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.
c. Lost, Stolen or Destroyed Certificates . A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The Corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.
2. Fractional Share Interests . The Corporation may, but shall not be required to, issue fractions of a share.
3. Stock Transfers .
a. Transfers of Record . Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and upon the surrender of a properly endorsed certificate or certificates for a like number of shares.
b. Restriction on Transfer by Contract . The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Nevada Revised Statutes.
c. Restriction on Transfer of Unregistered Shares . If the Corporation issues any shares which are not registered under the Securities Act of 1933, as amended and registered or qualified under any applicable state securities laws, the Corporation may restrict transfer of the shares and may place an appropriate legend on the certificates representing the shares restricting transfer and requiring an opinion of counsel acceptable to the Corporation before transmitting any transfer regarding compliance with applicable securities laws.
4. Registered Stockholders . The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE IV
STOCKHOLDERS’ MEETINGS
1. Place of Meeting . Meetings of the stockholders of the Corporation shall be held at such place, either within or without the State of Nevada, as may be designated from time to time by the Board of Directors, or, if not so designated, then at the office of the Corporation required to be maintained pursuant to Article I, Section 1.
2. Annual Meeting .
a. Time and Place of Annual Meeting . The annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.
b. Advance Notice of Business Before a Meeting .
i. General . At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be:
1. specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof);
2. otherwise properly brought before the meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof); or
3. otherwise properly brought before the meeting by a stockholder of the Corporation who (1) is a stockholder of record at the time of giving notice provided for in this Article IV, Section 2 on the record date for the meeting, and at the time of the meeting, (2) is entitled to vote at the meeting, and (3) complies with the notice procedures set forth in this Article IV, Section 2.
ii. Timing of Notice by a Stockholder . For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than forty-five (45) or more than seventy five (75) days prior to the first anniversary of the date on which the Corporation first mailed its proxy materials for the preceding year’s annual meeting; provided, however, that in the event that the date of the annual meeting is more than thirty (30) days before or more than thirty (30) days after the anniversary date of the preceding year’s annual meeting, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth (90) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60th) day prior to such annual meeting or the close of business on the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Corporation.
iii. Content of Stockholder Associated Person’s Notice . As to a stockholder giving notice, or beneficial owner, if any, on whose behalf the proposal is made (such stockholder or such beneficial owner, a “Stockholder Associated Person”), to be in proper form, a Stockholder Associated Person’s notice to the Secretary must set forth as to each matter the Stockholder Associated Person proposes to bring before the annual meeting:
1. a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any
material interest in such business of any Stockholder Associated Person;
2. the name and address, as they appear on the Corporation’s books, of the Stockholder Associated Person proposing such business;
3. as to the Stockholder Associated Person, and including any interests described below held by any member of such Stockholder Associated Person’s immediate family sharing the same household, as of the date of such Stockholder Associated Person’s notice (which information shall be confirmed or updated, if necessary, by such Stockholder Associated Person not later than ten (10) days after the record date for the meeting to disclose such ownership as of the record date): (1) the class or series and number of shares of capital stock of the Corporation which are, directly or indirectly, beneficially owned and owned of record by such Stockholder Associated Person; (2) the class or series, if any, and number of options, warrants, convertible securities, stock appreciation rights or similar rights with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares or other securities of the Corporation, or any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation, or any contract, derivative, swap or other transaction or series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of shares of the Corporation, through the delivery of cash or other property, or otherwise, and without regard of whether any Stockholder Associated Person may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly, beneficially owned by such Stockholder Associated Person; (3) a description of any other direct or indirect opportunity to profit or share in any profit (including any performance-based fees) derived from any increase or decrease in the value of shares or other securities of the Corporation or Derivative Instruments, if any, including without limitation any such interests held by members of such Stockholder Associated Person’s immediate family sharing the same household; (4) any proxy, contract, arrangement, understanding, or relationship pursuant to which any Stockholder Associated Person has a right to vote any shares or other securities of the Corporation; (5) any rights to dividends on the shares of the Corporation owned beneficially by any Stockholder Associated Person that are separated or separable from the underlying shares of the Corporation; (6) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership; (7) a description of all agreements, arrangements and understandings between any Stockholder Associated Person and any other person(s) (including their name(s)) in connection with or related to the ownership or voting of capital stock of the Corporation or Derivative Securities; (8) any agreement, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by any Stockholder Associated Person, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share
price changes for, or increase or decrease the voting power of, such stockholder with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of the shares of the Corporation (any of the foregoing, “Short Interests”); (9) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by any Stockholder Associated Person; and (10) any direct or indirect interest of any Stockholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement);
4. if the matter a Stockholder Associated Person proposes to bring before any meeting of stockholders involves an amendment to the Corporation’s Bylaws, the specific wording of such proposed amendment;
5. a representation that such Stockholder Associated Person is a holder of record of shares of the Corporation entitled to vote at such meeting and that such Stockholder Associated Person or its agent or designee intends to appear in person or by proxy at the meeting to bring such business before the meeting;
6. a statement as to whether such Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting share required under applicable law to approve the proposal and/or otherwise solicit proxies from stockholders in support of such proposal; and
7. any other information that is required to be provided by any Stockholder Associated Person pursuant to Regulation 14A under the 1934 Act, in his capacity as a proponent to a Stockholder Associated Person proposal.
Notwithstanding the foregoing, in order to include information with respect to a Stockholder Associated Person proposal in the proxy statement and form of proxy for a stockholder’s meeting, Stockholder Associated Persons must provide notice as required by the regulations promulgated under the 1934 Act.
For the purpose of these Bylaws, “beneficially owned” (and phrases of similar import), when referring to shares owned by a person, shall mean all shares which such person is deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the 1934 Act and the rules and regulations promulgated thereunder, including shares which are beneficially owned, directly or indirectly, by any other person with which such person has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of the capital stock of the Corporation.
c. Advanced Notice of Director Nominations .
i. General . Unless otherwise required by applicable law or the Articles of Incorporation, only persons who are nominated in accordance with the procedures set forth in this Article IV, Section 2(c) shall be eligible for election as directors, except as may otherwise be provided in the instrument of designation of any series of preferred stock of the Corporation to nominate and elect a specified number of directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors or by any stockholder of the Corporation entitled to vote in the election of directors at the meeting who complies with the notice procedures set forth in this Article IV, Section 2(c).
ii. Timing of Notice by a Stockholder Associated Person . Director nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation in accordance with the provisions of Article IV, Section 2(b). Notwithstanding the foregoing, if the number of directors to be elected to the Board of Directors of the Corporation at any annual meeting of stockholders is increased and there is no public announcement specifying the size of the increased Board of Directors made by the Corporation or naming all of the nominees for director at least fifty five (55) days prior to the first anniversary of the preceding year’s annual meeting of stockholders (or, if the annual meeting is held more than thirty (30) days before or sixty (60) days after the first anniversary of the preceding year’s annual meeting, at least seventy (70) days prior to such annual meeting), then a Stockholder Associated Person’s notice required by this section will also be considered timely, but only with respect to nominees for any new positions created by such increase, if it is delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10 th ) day following the day on which such public announcement is first made by the Corporation. Notwithstanding the forgoing, in the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such Stockholder Associate Person may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the Stockholder Associated Person’s notice required by Article IV, Section 2(b) of these Bylaws shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the ninetieth (90 th ) day prior to such special meeting nor later than the close of business on the later of the sixtieth (60 th ) day prior to such special meeting, or the tenth (10 th ) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.
iii. Content of Stockholder Associated Person’s Notice . A Stockholder Associated Person’s notice for nomination of a director shall set forth:
1. as to each person, if any, whom the Stockholder Associated Person proposes to nominate for election or re-election as a director: (a) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (b) the name, age, business address and residence address of the person or persons to be nominated, (c) a description of all arrangements or understandings between the Stockholder Associated Person and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the Stockholder Associated Person, (d) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three (3) years, and any other material relationships, between or among any Stockholder Associated Person, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert therewith, on the other hand, including, without limitation all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if such Stockholder Associated Person were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant; and (f) a written questionnaire with respect to the background and qualification of such person and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request), and a
written representation and agreement (in the form provided by the Secretary upon written request) that such person (1) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law, (C) agrees to comply with all policies of the Corporation as in effect from time to time and (D) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed therein. In addition, the Stockholder Associated Person making such proposal shall promptly provide any other information reasonably requested by the Corporation.
2. as to a Stockholder Associated Person: (a) the name and address of such Stockholder Associated Person, as they appear on the Corporation’s books, and of each other Stockholder Associated Person; (b) (1) the class and number of shares of the Corporation which are owned beneficially and of record by such Stockholder Associated Person; (2) any Derivative Instrument directly or indirectly owned beneficially by such Stockholder Associated Person, (3) any proxy, contract, arrangement, understanding, or relationship pursuant to which any Stockholder Associated Person has a right to vote any class or series of shares of the Corporation, (4) any Short Interests engaged in, directly or indirectly, by any Stockholder Associated Person, (5) any rights to dividends on the shares of the Corporation owned beneficially by any Stockholder Associated Person that are separated or separable from the underlying shares of the Corporation, (6) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which any Stockholder Associated Person is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership, (7) a description of any other direct or indirect opportunity to profit or share in any profit (including any performance- based fees) derived from any increase or decrease in the value of shares or other securities of the Corporation or Derivative Instruments, if any, including without limitation any such interests held by members of such Stockholder Associated Person’s immediate family sharing the same household, (8) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by any Stockholder Associated Person, and (9) any direct or indirect interest of any Stockholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement); (d) any other information relating to any Stockholder Associated Person that would be required to be disclosed in a proxy statement and form of proxy or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder; and (e) a representation that the Stockholder Associated Person is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice.
d. Determination by Chairman . Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at any annual meeting except in accordance with the procedures set
forth in this Article IV, Section 2. The chairman of the annual meeting, or special meeting if applicable, shall, if the facts warrant, determine and declare at the meeting that business or a proposed nomination was not properly brought before the meeting and in accordance with the provisions of this Article IV, Section 2, and, if he should so determine, he shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted, or any defective nomination shall be disregarded.
3. Special Meetings .
a. Calling of Meeting . Special meetings of the stockholders of the Corporation may only be called, for any purpose or purposes, only by the Board of Directors pursuant to a resolution adopted by a majority of the Whole Board and upon written request from the Secretary, who shall be required to submit such a request stating the purpose of such a meeting, if at least one-quarter (1/4) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, requesting together as a single class, call for a special meeting. For the purposes of these Bylaws, the term “Whole Board” shall mean the total number of authorized directors whether or not there exist any vacancies in previously authorized directorships. Special meetings shall be held at such place, on such date, and at such time as the Board of Directors, shall determine.
b. Notice and Timing of Meeting . If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the Chief Executive Officer, or the Secretary of the Corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than ten (10) nor more than sixty (60) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Article IV, Section 4 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this Article IV, Section 3(b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.
4. Notice of Meeting by the Board of Directors . Except as otherwise provided by law or the Articles of Incorporation, written notice of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour and purpose or purposes of the meeting. Notice of the time, place and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any stockholder by his attendance in person or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.
5. Quorum . At all meetings of stockholders, except where otherwise provided by statute or by the Articles of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holder or holders of not less than a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, all action taken by the holders of a majority of the votes cast, excluding abstentions, at any meeting at which a quorum is present shall be valid and binding upon the Corporation; provided, however, that directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and, except where otherwise provided by the statute or by the Articles of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of the votes cast, including abstentions, by the holders of shares of such class or classes or series shall be the act of such class or classes or series.
6. Adjournment and Notice of Adjourned Meetings . Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares casting votes, excluding abstentions. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
7. Voting Rights and Proxies .
a. Voting Rights . Every stockholder of record of the Corporation shall be entitled, at each meeting of the stockholders, to one vote for each share of stock standing in his name on the books of the Corporation, except as otherwise provided in the Articles of Incorporation or in any resolution or resolutions of the Board of Directors creating any series of Preferred Stock pursuant to the Articles of Incorporation.
b. Stockholders of Record . For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the Corporation on the record date, as provided in Article IV, Section 2 of these Bylaws, shall be entitled to vote at any meeting of stockholders.
c. Proxies . Every person entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a proxy granted in accordance with Nevada law. An agent so appointed need not be a stockholder. Subject to the provisions of the Nevada Revised Statutes Section 78.355, no proxy shall be valid after the expiration of six (6) months from the date of its execution, unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. Subject to the preceding sentence, any proxy properly created is not revoked and continues in full force and effect until:
i. another instrument or transmission revoking it or a properly created proxy bearing a later date is filed with or transmitted to the Secretary of the Corporation or another person or persons appointed by the Corporation to count the votes of stockholders and determine the validity of proxies and ballots; or
ii. the stockholder revokes the proxy by attending the meeting and voting the stockholder’s shares in person, in which case, any vote cast by the person or persons designated by the stockholder to act as a proxy or proxies must be disregarded by the Corporation when the votes are counted.
8. Joint Owners of Stock . If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one votes, his act binds all; (b) if more than one votes, the act of the majority so voting binds all; and (c) if more than one votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally.
9. Action Without Meeting . Any action required or permitted to be taken by the stockholders of the Corporation may be effected only at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by written consent.
10. Organization of Stockholder Meetings .
a. Conduct of Meetings . All meetings of stockholders shall be presided over by the Chairman of the Board of Directors, or in his absence, by the Chief Executive Officer, or in his absence, by the President, if any, or in his absence, by a Vice President, or in the absence of the foregoing persons, by a chairman designated by the Board of Directors, or in the absence of such designation, by a chairman chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, at the meeting. The Secretary of the Corporation shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. The chairman of the meeting shall determine the order of business and the procedure at any meeting of the stockholders, including but not limited to, rules respecting the manner of voting, the time allotted to stockholders to speak, determinations of whether business has been properly brought before the meeting, and the power to adjourn the meeting.
b. Rules or Regulations Regarding Conduct of Meetings . The Board of Directors of the Corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.
11. Fixing Record Dates .
a. Meeting Record Dates . In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting (except as provided for in Article IV Section 9). If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
b. Dividend/Distribution Record Date . In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) nor less than ten (10) days prior to such action. If no record date is filed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
ARTICLE V
DIRECTORS
1. Number, Tenure and Qualification .
a. Number . Subject to the rights of the holders of any Preferred Stock then outstanding to elect additional directors under specified circumstances, the authorized number of directors of the Corporation shall be fixed from time to time exclusively by th Board of Directors pursuant to a resolution adopted by a majority of the Whole Board; provided that no decrease in the number of directors shall shorten the term of any incumbent directors.
b. Election of Directors . Except as provided in Article V, Section 3, directors shall be elected as provided for in Article IV.
c. Tenure . Subject to the rights of the holders of shares of any series of Preferred Stock then outstanding to elect additional directors under specified circumstances, the Board of Directors of the Corporation shall be divided into three classes, with the term of office of the first class to expire at the first annual meeting of stockholders following the initial classification of directors, the term of office of the second class to expire at the second annual meeting of stockholders, following the initial classification of directors, and the term of office of the third class to expire at the third annual meeting of stockholders following the initial classification of directors. At each annual meeting of stockholders, directors elected to succeed those directors whose terms expire, other than directors elected by the holders of any series of Preferred Stock, shall be elected for a term of office to expire at the third succeeding annual meeting of stockholders after their election and until their successors are duly elected and qualified. Directors shall be elected at the annual meeting of the stockholders of the Corporation by a plurality of votes as provided for in Article IV. A separate vote for the election of directors shall be held at each meeting for each class of directors having nominees for election at such meeting. If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.
d. Qualification . Directors need not be stockholders unless so required by the Articles of Incorporation. Each director must be a natural person at least 18 years of age.
2. Duties and Powers . The business of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised of done by the stockholders.
3. Vacancies . Unless otherwise provided in the Articles of Incorporation and subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall not be filled by stockholder vote, but shall be filled only by the affirmative vote of a majority of the directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board of Directors shall be deemed to exist under these Bylaws in the case of the death, removal or resignation of any director. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may exercise the powers of the full Board of Directors until the vacancy is filled.
4. Resignation . Any director may resign at any time by written notice to the Corporation. Any such resignation shall take effect at the date of receipt of such notice or at any later time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. When one or more directors shall resign from the Board of Directors, effective at a future date, the board may fill the vacancy or vacancies to take effect when the resignation or resignations become effective, each director so appointed to hold office during the remainder of the term of office of the resigning director or directors.
5. Removal . Except as provided in the Articles of Incorporation or these Bylaws and subject to the rights of the holders of any series of Preferred Stock then outstanding, any director or the entire Board of Directors may be removed, with cause, by the holders of two-thirds (2/3) of shares entitled to vote at an election of directors, voting together as a single class.
6. Meetings .
a. Regular Meetings . Regular meetings of the Board of Directors may be held at such time and place as shall from time to time be determined by the Board of Directors.
b. Special Meetings . Unless otherwise restricted by the Articles of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Nevada whenever called by the Chairman of the Board or the Chief Executive Officer, and shall be called by the Secretary if requested by a majority of the Whole Board, and shall be held at such place, on such date and at such time as he or she or they shall fix.
c. Telephone Meetings . Any member of the Board of Directors, or of any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting, if the corporation has implemented reasonable measures to:
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Verify the identity of each person participating through such means as a director or member of the governing body or committee, as the case may be; and |
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Provide the directors or members a reasonable opportunity to participate in the meeting and to vote on matters submitted to the directors or members, as the case may be, including an opportunity to communicate and to read or hear the proceedings of the meeting in a substantially concurrent manner with such proceedings. |
d. Notice of Meetings . Notice of the time and place of all meetings of the Board of Directors shall be given to each director by whom it is not waived by mailing written notice at least two (2) days before the date and time of the meeting, or orally, by telegraph, telex, cable, telecopy or electronic transmission given not less than twelve (12) hours before the meeting. Notice of any meeting may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
e. Waiver of Notice . The transaction of all business at any meeting of the Board of Directors, or any
committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present shall sign a written waiver of notice. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.
7. Quorum and Voting .
a. Quorum . Unless the Articles of Incorporation requires a greater number, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Articles of Incorporation or these Bylaws, provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.
b. Voting . At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Articles of Incorporation or these Bylaws.
8. Participation in Meetings by Conference Telephone . Members of the Board of Directors, or any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.
9. Action Without Meeting . Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing, and such writing or writings are filed with the minutes of proceedings of the Board of Directors or committee, except that such written consent is not required to be signed by:
a. A common or interested director who abstains in writing from providing consent to the action. If a common or interested director abstains in writing from providing consent:
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Such fact must be described in the written consent. |
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The board of directors or committee must approve, authorize or ratify the action in good faith by unanimous consent without counting the abstention of the common or interested director. |
b. A director who is a party to an action, suit or proceeding who abstains in writing from providing consent to the action of the board of directors or committee. If a director who is a party to an action, suit or proceeding abstains in writing from providing consent on the basis that he or she is a party to an action, suit or proceeding, the board of directors or committee must:
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Make a determination pursuant to Nevada Revised Statutes 78.751 that indemnification of the director is proper under the circumstances. |
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Approve, authorize or ratify the action of the board of directors or committee in good faith by unanimous consent without counting the abstention of the director who is a party to an action, suit or proceeding. |
10. Compensation . The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum and/or an amount of shares of the Corporation’s stock (or options or other rights to purchase or obtain shares of the Corporation’s stock) for attendance at each meeting of the Board of Directors and/or as compensation for service as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.
11. Committees .
a. Executive Committee . The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of one (1) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, including without limitation the power or authority to declare a dividend, to authorize the issuance of stock and to adopt a certificate of ownership and merger, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Articles of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the Bylaws of the Corporation.
b. Other Committees . The Board of Directors shall adopt resolutions establishing an audit committee, a compensation committee, and a nominating and corporate governance committee. In addition, the Board of Directors may, by resolution passed by a majority of the whole Board of Directors, from time to time appoint such other committees as may be permitted by law. Each committee shall consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution or resolutions establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, but in no event shall such committee have the powers denied to the Executive Committee in these Bylaws. Each committee shall keep regular minutes and report to the Board of Directors as requested or required.
c. Term . Each member of a committee of the Board of Directors shall serve a term on the committee coterminous with such member’s term on the Board of Directors. The Board of Directors, subject to the provisions of subsections (a) or (b) of this Bylaw may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the
committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
d. Meetings . Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to Article V, Section 11 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. One-third (1/3) of the members of any such committee shall constitute a quorum for the transaction of business unless the committee shall consist of one (1) or two (2) members, in which event (1) member shall constitute a quorum, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.
12. Organization . At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Chief Executive Officer, or if the Chief Executive Officer is absent, the President, or if the President is absent, the most senior Vice President, or, in the absence of any such officer, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his absence, an Assistant Secretary directed to do so by the Chief Executive Officer, shall act as secretary of the meeting.
ARTICLE VI
OFFICERS
1. General . The officers of the Corporation shall be chosen by the Board of Directors and shall include, if and when designated, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer. The Board of Directors may also appoint one or more Assistant Secretaries, Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary. The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the Corporation shall be fixed by or in the manner designated by the Board of Directors.
2. Tenure and Duties of Officers . The Board of Directors at its first meeting held after each annual meeting of Stockholders shall appoint the officers of the Corporation, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors shall have been chosen and qualified, or until their earlier resignation or removal. Any officer appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors and/or the Compensation Committee thereof.
3. Chairman of the Board of Directors . The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board of Directors
shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors. The Chairman of the Board of Directors may also serve as the Chief Executive Officer and President of the Corporation and shall have the powers and duties prescribed in these Bylaws.
4. Chief Executive Officer . The Chief Executive Officer shall, subject to the control of the Board of Directors and the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all corporate instruments, securities and agreements as provided for in Articles X and XI. In the absence or disability of the Chairman of the Board of Directors, the Chief Executive Officer shall preside at all meetings of the stockholders and, if a member of the Board of Directors, of the Board of Directors. The Chief Executive Officer shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.
5. President . The President, who may be the same person as the Chief Executive Officer, shall have such powers and duties as generally pertain to the office of President and as the Board of Directors may from time to time prescribe, subject generally to the direction of the Board of Directors and the Executive Committee, if any. If the Chief Executive Officer and the President are not the same individual, at the request of the Chief Executive Officer or in his absence, or in the event of his inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. If there be no President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the Chief Executive Officer, or in the event of the inability or refusal of the Chief Executive Officer to act, shall perform the duties of the Chief Executive Officer, and when so acting, such officer shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer.
6. Chief Financial Officer . The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time. The President may direct the Treasurer or any Assistant Treasurer to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer shall perform other duties commonly incident to his office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
7. Vice Presidents . Each Vice President may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant. The Vice President(s) shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
8. Secretary . The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties, when required, for the committees of the Board of Directors. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the Chief Executive Officer may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it, and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing
by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
9. Treasurer . The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation.
10. Assistant Secretary . Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
11. Assistant Treasurer . Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the Chief Executive Officer, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer.
12. Other Officers . Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
13. Delegation of Authority . The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.
14. Resignations . Any officer may resign at any time by giving written notice to the Board of Directors or to the President or to the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.
15. Removal . Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.
16. Outside of Private Employment . No officer or employee shall have any outside or private employment or affiliation with any firm or organization incompatible with his concurrent employment by the Corporation, nor shall he accept or perform any outside or private employment which the Chief Executive Officer of the Corporation determines will interfere with the efficient performance of his official duties.
17. Bond . If required by the Board of Directors, any officer shall give the Corporation a bond in such sum and with such surety or sureties and upon such terms and conditions as shall be satisfactory to the Board of Directors, including, without limitation, a bond for the faithful performance of the duties of his office and for the restoration to the Corporation of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his control and belonging to the Corporation.
ARTICLE VII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
1. Discretionary and Mandatory Indemnification of Officers, Directors, Employees and Agents .
a. Power to Indemnify in Actions, Suits or Proceedings other than those by or in the Right of the Corporation . Subject to Article VII, Section 1(c), the Corporation shall, to the fullest extent permitted by the Nevada Revised Statutes, as now or hereafter in effect, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Corporation, by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (i) is not liable pursuant to Nevada Revised Statutes Section 78.138; or (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the person is liable pursuant to the Nevada Revised Statutes Section 78.138 or did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, or that, with respect to any criminal action or proceeding, he had reasonable cause to believe that his conduct was unlawful.
b. Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation . Subject to Article VII, Section 1(c), the Corporation shall, to the fullest extent permitted by the Nevada Revised Statutes, as now or hereafter in effect, indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (i) is not liable pursuant to Nevada Revised Statutes Section 78.138; or (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
c. Authorization . Any indemnification pursuant to Article VII, Section 1, unless ordered by a court or advanced pursuant to Article VII, Section 6, shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (i) by the stockholders; (ii) by the board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (iii) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; or (iv) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion.. To the extent, however, that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Article VII, Section 1, or in defense of any claim, issue or matter therein, the Corporation shall indemnify such person against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.
2. Expenses Payable in Advance . Expenses incurred by a current or former director or officer in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation, upon the determination by the Board of Directors, in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VII, provided the Corporation approves in advance counsel selected by the director or officer (which approval shall not be unreasonably withheld). The provisions of this Article VII, Section 2 do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise by law.
3. Contract Rights . The provisions of this Article VII shall be deemed to be a contract right between the Corporation and each director, officer, employee or agent of the Corporation who serves in any such capacity at any time while this Article VII and the relevant provisions of the Nevada Revised Statutes or other applicable law are in effect. Such contract right shall vest for each director and officer at the time such person is elected or appointed to such position, and no repeal or modification of this Article VII or any such law shall affect any such vested rights or obligations then existing with respect to any state of facts or proceeding arising after such election or appointment.
4. Non-exclusivity of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by or granted pursuant to this Article VII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under the Articles of Incorporation or any Bylaws, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, it being the policy of the Corporation that indemnification of the persons specified in Article VII, Section 1 shall be made to the fullest extent permitted by law. The provisions of this Article VII shall not be deemed to preclude the indemnification of any person who is not specified in Article VII, Section 1 but whom the Corporation has the power or obligation to indemnify under the provisions of the Nevada Revised Statutes, or otherwise. However, indemnification, unless ordered by a court pursuant to Article VII, Section 6 or for the advancement of expenses made pursuant to Article VII, Section 2, may not be made to or on behalf of any director, officer, employee or agent of the Corporation if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action.
5. Insurance . The Corporation may purchase and maintain insurance on behalf of any person who is or was a director or officer of the Corporation, or is or was a director or officer of the Corporation serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VII.
6. Indemnification by a Court . Notwithstanding any contrary determination in the specific case under Article VII, Section 1(c), and notwithstanding the absence of any determination thereunder, any director or officer may apply to any court of competent jurisdiction in the State of Nevada for indemnification to the extent otherwise permissible under Article VII, Section 1. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director or officer is proper in the circumstances because he has met the applicable standards of conduct set forth in Article VII, Section 1, as the case may be. Neither a contrary determination in the specific case under Article VII, Section 1(c) nor the absence of any determination thereunder shall be a defense to such application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any application for indemnification pursuant to Article VII, Section 6 shall be given to the Corporation promptly upon the filing of such application. If successful, in whole or in part, the director or officer seeking indemnification shall also be entitled to be paid the expense of prosecuting such application to the fullest extent permitted by law.
7. Limitation on Indemnification . Notwithstanding anything contained in this Article VII, Section 6 to the contrary, except for proceedings to enforce rights to indemnification (which shall be governed by Section 5 of this Article VII), the Corporation shall not be obligated to indemnify any director or officer in connection with a proceeding (or part thereof) initiated by such person unless such proceeding (or part thereof) was authorized or consented to by the Board of Directors of the Corporation.
8. Severability . If these Bylaws or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each person as provided above as to the expenses (including attorney’s fees), judgments, fines and amounts paid in settlement with respect to any action, suit or proceeding, whether civil, criminal, administrative or investigative, including a grand jury proceeding and an action by the Corporation, to the full extent permitted by any applicable portion of these Bylaws that shall not have been invalidated or by any other applicable law.
9. Survival of Indemnification and Advancement of Expenses . The indemnification and advancement of expenses provided by the Corporation pursuant to this Article VII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such person.
10. Certain Definitions . For purposes of this Article VII, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors or officers, so that any person who is or was a director or officer of such constituent corporation, or is or was a director or officer of such constituent corporation serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, shall stand in the same position under the provisions of this Article VII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. For purposes of this Article VII, references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the Corporation” shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by, such director or officer with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Corporation” as referred to in this Article VII.
ARTICLE VIII
NOTICES
1. Notices . Whenever notice is required by law, and except as otherwise specifically provided herein or required by law, all notices required to be given to any stockholder, director, member of a committee, officer, employee or agent shall be in writing and may in every instance be effectively given by hand delivery, by mail, postage paid, by facsimile transmission or by electronic transmission. Any such notice shall be addressed to such stockholder, director, officer, employee or agent at such stockholder’s last known address as it appears on the books of the Corporation. The time when such notice shall be deemed received, if hand delivered, or dispatched, if sent by mail or facsimile or electronic transmission, shall be the time of the giving of the notice.
2. Waivers of Notice . Whenever any notice is required by law, the Articles of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by
the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.
3. Notice of Electronic Transmission . Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws, any notice to stockholders given by the Corporation under any provision of the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation. Any such consent shall be deemed revoked if:
a. the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent; and
b. such inability becomes known to the secretary or an assistant secretary of the Corporation or to the transfer agent, or other agent of the Corporation responsible for the giving of notice.
However, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
4. Notice by Electronic Transmission Deemed to be Given . Any notice given pursuant to Article VIII, Section 3 shall be deemed given:
a. if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;
b. if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice;
c. if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (i) such posting and (ii) the giving of such separate notice; and
d. if by any other form of electronic transmission, when directed to the stockholder.
e. An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
5. Definition of Electronic Transmission . An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including without limitation any facsimile transmission or communication by electronic mail.
ARTICLE IX
BOOKS AND RECORDS
Books . There shall be kept at such office of the Corporation as the Board of Directors shall determine, within or without the State of Nevada, correct books and records of account of all its business and transactions, minutes of the proceedings of its stockholders, Board of Directors and committees, and the stock book, containing the names and addresses of the stockholders, the number of shares held by them, respectively, and the dates when they respectively became the owners of record thereof, and in which the transfer of stock shall be registered, and such other books and records as the Board of Directors may from time to time determine.
ARTICLE X
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION
1. Execution of Corporate Instruments . The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation. Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the Corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the Corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, and by the Secretary, Chief Financial Officer, Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.
2. Disbursements . All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do from time to time.
3. Authority to Bind . Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
4. Voting of Securities Owned by the Corporation . Unless otherwise specifically authorized by resolution of the Board of Directors, all rights and powers, including any right to vote, incident to any stock or other securities of other corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be exercised in person or by proxy by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President of the Corporation on behalf of the Corporation, in no more restricted manner or limited extent than would apply to any owner thereof.
ARTICLE XI
OTHER SECURITIES OF THE CORPORATION
Execution of Other Securities . All bonds, debentures and other corporate securities of the Corporation, other than stock certificates (covered in Article III Section 1(a), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Chief Financial Officer, Treasurer or an Assistant Treasurer of the Corporation or such other person as may be authorized by the Board of Directors or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation.
ARTICLE XII
DIVIDENDS
1. Declaration of Dividends . Dividends upon the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation.
2. Dividend Reserve . Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
ARTICLE XIII
FISCAL YEAR
Fiscal Year . The fiscal year of the Corporation shall be fixed, and shall be subject to change, by resolution of the Board Directors.
ARTICLE XIV
FORUM SELECTION
Forum Selection . Unless the Corporation consents in writing to the selection of an alternative forum, a state or federal court located within the State of New York shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim for breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any actions asserting a claim arising pursuant to any provision of the Nevada Revised Statutes, the Articles of Incorporation or these Bylaws, in each case as amended, or (iv) any action asserting a claim governed by the internal affairs doctrine, in each such case subject to such court having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article XIV.
ARTICLE XV
AMENDMENTS
General . Subject to the provisions of the Articles of Incorporation, as such may be amended from time to time, and the provisions of the Nevada General Corporation Law, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted by the Board of Directors or by the Stockholders. Notwithstanding the prior sentence, any vote of the stockholders to alter, amend or repeal any section of these Bylaws in any respect shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the outstanding voting power of the Corporation, voting together as a single class, at any meeting at which a proposal to amend or repeal these Bylaws is properly presented.
Exhibit 4.1
ACTIVE WITH ME, INC.
2016 EQUITY INCENTIVE PLAN
1. PURPOSE OF PLAN
1.1 The purpose of this 2016 Equity Incentive Plan (this “ Plan ”) of Active With Me, Inc., a Nevada corporation (the “ Corporation ”), is to promote the success of the Corporation and to increase stockholder value by providing an additional means through the grant of awards to attract, motivate, retain and reward selected employees and other eligible persons.
2. ELIGIBILITY
2.1 The Administrator (as such term is defined in Section 3.1) may grant awards under this Plan only to those persons that the Administrator determines to be Eligible Persons. An “ Eligible Person ” is any person who is either: (a) an officer (whether or not a director) or employee of the Corporation or one of its Subsidiaries; (b) a director of the Corporation or one of its Subsidiaries; or (c) a consultant who renders bona fide services (other than services in connection with the offering or sale of securities of the Corporation or one of its Subsidiaries in a capital-raising transaction or as a market maker or promoter of securities of the Corporation or one of its Subsidiaries) to the Corporation or one of its Subsidiaries and who is selected to participate in this Plan by the Administrator; provided, however, that a person who is otherwise an Eligible Person under clause (c) above may participate in this Plan only if such participation would not adversely affect either the Corporation’s eligibility to use Form S-8 to register under the Securities Act of 1933, as amended (the “ Securities Act ”), the offering and sale of shares issuable under this Plan by the Corporation, or the Corporation’s compliance with any other applicable laws. An Eligible Person who has been granted an award (a “ Participant ”) may, if otherwise eligible, be granted additional awards if the Administrator shall so determine. As used herein, “ Subsidiary ” means any corporation or other entity a majority of whose outstanding voting stock or voting power is beneficially owned directly or indirectly by the Corporation; and “ Board ” means the Board of Directors of the Corporation.
3. PLAN ADMINISTRATION
3.1 The Administrator . This Plan shall be administered by and all awards under this Plan shall be authorized by the Administrator. The “ Administrator ” means the Board or one or more committees appointed by the Board or another committee (within its delegated authority) to administer all or certain aspects of this Plan. Any such committee shall be comprised solely of one or more directors or such number of directors as may be required under applicable law. A committee may delegate some or all of its authority to another committee so constituted. The Board or a committee comprised solely of directors may also delegate, to the extent permitted by Section 78.200 of the Nevada Revised Statutes and any other applicable law, to one or more officers of the Corporation, its powers under this Plan (a) to designate Eligible Persons who will receive grants of awards under this Plan, and (b) to determine the number of shares subject to, and the other terms and conditions of, such awards. The Board may delegate different levels of authority to different committees with administrative and grant authority under this Plan. Unless otherwise provided in the bylaws of the Corporation or the applicable charter of any Administrator: (a) a majority of the members of the acting Administrator shall constitute a quorum, and (b) the affirmative vote of a majority of the members present assuming the presence of a quorum or the unanimous written consent of the members of the Administrator shall constitute due authorization of an action by the acting Administrator.
With respect to awards intended to satisfy the requirements for performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”), this Plan shall be administered by a committee consisting solely of two or more outside directors (as this requirement is applied under Section 162(m) of the Code); provided, however, that the failure to satisfy such requirement shall not affect the validity of the action of any committee otherwise duly authorized and acting in the matter. Award grants, and transactions in or involving awards, intended to be exempt under Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), must be duly and timely authorized by the Board or a committee consisting solely of two or more non-employee directors (as this requirement is applied under Rule 16b-3 promulgated under the Exchange Act). To the extent required by any applicable stock exchange, this Plan shall be administered by a committee composed
entirely of independent directors (within the meaning of the applicable stock exchange). Awards granted to non-employee directors shall not be subject to the discretion of any officer or employee of the Corporation and shall be administered exclusively by a committee consisting solely of independent directors.
3.2 Powers of the Administrator . Subject to the express provisions of this Plan, the Administrator is authorized and empowered to do all things necessary or desirable in connection with the authorization of awards and the administration of this Plan (in the case of a committee or delegation to one or more officers, within the authority delegated to that committee or person(s)), including, without limitation, the authority to:
(a) determine eligibility and, from among those persons determined to be eligible, the particular Eligible Persons who will receive awards under this Plan;
(b) grant awards to Eligible Persons, determine the price at which securities will be offered or awarded and the number of securities to be offered or awarded to any of such persons, determine the other specific terms and conditions of such awards consistent with the express limits of this Plan, establish the installments (if any) in which such awards shall become exercisable or shall vest (which may include, without limitation, performance and/or time-based schedules), or determine that no delayed exercisability or vesting is required, establish any applicable performance targets, and establish the events of termination or reversion of such awards;
(c) approve the forms of award agreements (which need not be identical either as to type of award or among participants);
(d) construe and interpret this Plan and any agreements defining the rights and obligations of the Corporation, its Subsidiaries, and participants under this Plan, further define the terms used in this Plan, and prescribe, amend and rescind rules and regulations relating to the administration of this Plan or the awards granted under this Plan;
(e) cancel, modify, or waive the Corporation’s rights with respect to, or modify, discontinue, suspend, or terminate any or all outstanding awards, subject to any required consent under Section 8.6.5;
(f) accelerate or extend the vesting or exercisability or extend the term of any or all such outstanding awards (in the case of options or stock appreciation rights, within the maximum ten-year term of such awards) in such circumstances as the Administrator may deem appropriate (including, without limitation, in connection with a termination of employment or services or other events of a personal nature) subject to any required consent under Section 8.6.5;
(g) adjust the number of shares of Common Stock subject to any award, adjust the price of any or all outstanding awards or otherwise change previously imposed terms and conditions, in such circumstances as the Administrator may deem appropriate, in each case subject to compliance with applicable stock exchange requirements, Sections 4 and 8.6 and the applicable requirements of Code Section 162(m) and treasury regulations thereunder with respect to awards that are intended to satisfy the requirements for performance-based compensation under Section 162(m), and provided that in no case (except due to an adjustment contemplated by Section 7 or any repricing that may be approved by stockholders) shall such an adjustment constitute a repricing (by amendment, cancellation and regrant, exchange or other means) of the per share exercise or base price of any stock option or stock appreciation right or other award granted under this Plan, and further provided that any adjustment or change in terms made pursuant to this Section 3.2(g) shall be made in a manner that, in the good faith determination of the Administrator will not likely result in the imposition of additional taxes or interest under Section 409A of the Code;
(h) determine the date of grant of an award, which may be a designated date after but not before the date of the Administrator’s action (unless otherwise designated by the Administrator, the date of grant of an award shall be the date upon which the Administrator took the action granting an award);
(i) determine whether, and the extent to which, adjustments are required pursuant to Section 7 hereof and authorize the termination, conversion, substitution, acceleration or succession of awards upon the occurrence of an event of the type described in Section 7;
(j) acquire or settle (subject to Sections 7 and 8.6) rights under awards in cash, stock of equivalent value, or other consideration; and
(k) determine the Fair Market Value (as defined in Section 5.6) of the Common Stock or awards under this Plan from time to time and/or the manner in which such value will be determined.
3.3 Binding Determinations. Any action taken by, or inaction of, the Corporation, any Subsidiary, or the Administrator relating or pursuant to this Plan and within its authority hereunder or under applicable law shall be within the absolute discretion of that entity or body and shall be conclusive and binding upon all persons. Neither the Board, the Administrator, nor any Board committee, nor any member thereof or person acting at the direction thereof, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with this Plan (or any award made under this Plan), and all such persons shall be entitled to indemnification and reimbursement by the Corporation in respect of any claim, loss, damage or expense (including, without limitation, legal fees) arising or resulting therefrom to the fullest extent permitted by law and/or under any directors and officers liability insurance coverage that may be in effect from time to time.
3.4 Reliance on Experts. In making any determination or in taking or not taking any action under this Plan, the Administrator may obtain and may rely upon the advice of experts, including professional advisors to the Corporation. The Administrator shall not be liable for any such action or determination taken or made or omitted in good faith based upon such advice.
3.5 Delegation of Non-Discretionary Functions. In addition to the ability to delegate certain grant authority to officers of the Corporation as set forth in Section 3.1, the Administrator may also delegate ministerial, non-discretionary functions to individuals who are officers or employees of the Corporation or any of its Subsidiaries or to third parties.
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMIT
4.1 Shares Available. Subject to the provisions of Section 7.1, the capital stock available for issuance under this Plan shall be shares of the Corporation’s authorized but unissued Common Stock. For purposes of this Plan, “ Common Stock ” shall mean the common stock of the Corporation and such other securities or property as may become the subject of awards under this Plan, or may become subject to such awards, pursuant to an adjustment made under Section 7.1.
4.2 Share Limit. The maximum number of shares of Common Stock that may be delivered pursuant to awards granted to Eligible Persons under this Plan may not exceed 3,000,000 shares of Common Stock (the “ Share Limit ”).
The foregoing Share Limit is subject to adjustment as contemplated by Section 4.3, Section 7.1, and Section 8.10.
4.3 Awards Settled in Cash, Reissue of Awards and Shares. The Administrator may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments in accordance with this Section 4.3. Shares shall be counted against those reserved to the extent such shares have been delivered and are no longer subject to a substantial risk of forfeiture. Accordingly, (i) to the extent that an award under the Plan, in whole or in part, is canceled, expired, forfeited, settled in cash, settled by delivery of fewer shares than the number of shares underlying the award, or otherwise terminated without delivery of shares to the participant, the shares retained by or returned to the Corporation will not be deemed to have been delivered under the Plan and will be deemed to remain or to become available under this Plan; and (ii) shares that are withheld from such an award or separately surrendered by the participant in payment of the exercise price or taxes relating to such an award shall be deemed to constitute shares not delivered and will be deemed to remain or to become available under the Plan. The foregoing adjustments to the Share Limit of this Plan are subject to any applicable limitations under Section 162(m) of the Code with respect to awards intended as performance-based compensation thereunder.
4.4 Reservation of Shares; No Fractional Shares. The Corporation shall at all times reserve a number of shares of Common Stock sufficient to cover the Corporation’s obligations and contingent obligations to deliver shares with respect to awards then outstanding under this Plan (exclusive of any dividend equivalent obligations to the extent the Corporation has the right to settle such rights in cash). No fractional shares shall be delivered under this Plan. The Administrator may pay cash in lieu of any fractional shares in settlements of awards under this Plan.
5. AWARDS
5.1 Type and Form of Awards. The Administrator shall determine the type or types of award(s) to be made to each selected Eligible Person. Awards may be granted singly, in combination or in tandem. Awards also may be made in combination or in tandem with, in replacement of, as alternatives to, or as the payment form for grants or rights under any other employee or compensation plan of the Corporation or one of its Subsidiaries. The types of awards that may be granted under this Plan are:
5.1.1 Stock Options. A stock option is the grant of a right to purchase a specified number of shares of Common Stock during a specified period as determined by the Administrator. An option may be intended as an incentive stock option within the meaning of Section 422 of the Code (an “ ISO ”) or a nonqualified stock option (an option not intended to be an ISO). The award agreement for an option will indicate if the option is intended as an ISO; otherwise it will be deemed to be a nonqualified stock option. The maximum term of each option (ISO or nonqualified) shall be ten (10) years. The per share exercise price for each option shall be not less than 100% of the Fair Market Value of a share of Common Stock on the date of grant of the option. When an option is exercised, the exercise price for the shares to be purchased shall be paid in full in cash or such other method permitted by the Administrator consistent with Section 5.5.
5.1.2 Additional Rules Applicable to ISOs. To the extent that the aggregate Fair Market Value (determined at the time of grant of the applicable option) of stock with respect to which ISOs first become exercisable by a participant in any calendar year exceeds $100,000, taking into account both Common Stock subject to ISOs under this Plan and stock subject to ISOs under all other plans of the Corporation or one of its Subsidiaries (or any parent or predecessor corporation to the extent required by and within the meaning of Section 422 of the Code and the regulations promulgated thereunder), such options shall be treated as nonqualified stock options. In reducing the number of options treated as ISOs to meet the $100,000 limit, the most recently granted options shall be reduced first. To the extent a reduction of simultaneously granted options is necessary to meet the $100,000 limit, the Administrator may, in the manner and to the extent permitted by law, designate which shares of Common Stock are to be treated as shares acquired pursuant to the exercise of an ISO. ISOs may only be granted to employees of the Corporation or one of its subsidiaries (for this purpose, the term “subsidiary” is used as defined in Section 424(f) of the Code, which generally requires an unbroken chain of ownership of at least 50% of the total combined voting power of all classes of stock of each subsidiary in the chain beginning with the Corporation and ending with the subsidiary in question). There shall be imposed in any award agreement relating to ISOs such other terms and conditions as from time to time are required in order that the option be an “incentive stock option” as that term is defined in Section 422 of the Code. No ISO may be granted to any person who, at the time the option is granted, owns (or is deemed to own under Section 424(d) of the Code) shares of outstanding Common Stock possessing more than 10% of the total combined voting power of all classes of stock of the Corporation, unless the exercise price of such option is at least 110% of the Fair Market Value of the stock subject to the option and such option by its terms is not exercisable after the expiration of five years from the date such option is granted.
5.1.3 Stock Appreciation Rights. A stock appreciation right or “ SAR ” is a right to receive a payment, in cash and/or Common Stock, equal to the number of shares of Common Stock being exercised multiplied by the excess of (i) the Fair Market Value of a share of Common Stock on the date the SAR is exercised, over (ii) the Fair Market Value of a share of Common Stock on the date the SAR was granted as specified in the applicable award agreement (the “ base price ”). The maximum term of a SAR shall be ten (10) years.
5.1.4 Restricted Shares .
(a) Restrictions . Restricted shares are shares of Common Stock subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Administrator may impose, which restrictions
may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Administrator may determine at the date of grant or thereafter. Except to the extent restricted under the terms of this Plan and the applicable award agreement relating to the restricted stock, a participant granted restricted stock shall have all of the rights of a shareholder, including the right to vote the restricted stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Administrator).
(b) Certificates for Shares . Restricted shares granted under this Plan may be evidenced in such manner as the Administrator shall determine. If certificates representing restricted stock are registered in the name of the participant, the Administrator may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such restricted stock, that the Corporation retain physical possession of the certificates, and that the participant deliver a stock power to the Corporation, endorsed in blank, relating to the restricted stock. The Administrator may require that restricted shares are held in escrow until all restrictions lapse
(c) Dividends and Splits . As a condition to the grant of an award of restricted stock, subject to applicable law, the Administrator may require or permit a participant to elect that any cash dividends paid on a share of restricted stock be automatically reinvested in additional shares of restricted stock or applied to the purchase of additional awards under this Plan. Unless otherwise determined by the Administrator, stock distributed in connection with a stock split or stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the restricted stock with respect to which such stock or other property has been distributed.
5.1.5 Restricted Share Units .
(a) Grant of Restricted Share Units . A restricted share unit, or “ RSU ”, represents the right to receive from the Corporation on the respective scheduled vesting or payment date for such RSU, one Common Share. An award of RSUs may be subject to the attainment of specified performance goals or targets, forfeitability provisions and such other terms and conditions as the Administrator may determine, subject to the provisions of this Plan. At the time an award of RSUs is made, the Administrator shall establish a period of time during which the restricted share units shall vest and the timing for settlement of the RSU.
(b) Dividend Equivalent Accounts . Subject to the terms and conditions of the Plan and the applicable award agreement, as well as any procedures established by the Administrator, prior to the expiration of the applicable vesting period of an RSU, the Administrator may determine to pay dividend equivalent rights with respect to RSUs, in which case, the Corporation shall establish an account for the participant and reflect in that account any securities, cash or other property comprising any dividend or property distribution with respect to the shares of Common Stock underlying each RSU. Each amount or other property credited to any such account shall be subject to the same vesting conditions as the RSU to which it relates. The participant shall have the right to be paid the amounts or other property credited to such account upon vesting of the subject RSU.
(c) Rights as a Shareholder . Subject to the restrictions imposed under the terms and conditions of this Plan and the applicable award agreement, each participant receiving RSUs shall have no rights as a shareholder with respect to such RSUs until such time as shares of Common Stock are issued to the participant. No shares of Common Stock shall be issued at the time a RSU is granted, and the Company will not be required to set aside a fund for the payment of any such award. Except as otherwise provided in the applicable award agreement, shares of Common Stock issuable under an RSU shall be treated as issued on the first date that the holder of the RSU is no longer subject to a substantial risk of forfeiture as determined for purposes of Section 409A of the Code, and the holder shall be the owner of such shares of Common Stock on such date. An award agreement may provide that issuance of shares of Common Stock under an RSU may be deferred beyond the first date that the RSU is no longer subject to a substantial risk of forfeiture, provided that such deferral is structured in a manner that is intended to comply with the requirements of Section 409A of the Code.
5.1.6 Cash Awards . The Administrator may, from time to time, subject to the provisions of the Plan and such other terms and conditions as it may determine, grant cash bonuses (including without limitation, discretionary awards, awards based on objective or subjective performance criteria, awards subject to other vesting criteria or
awards granted consistent with Section 5.2 below). Cash awards shall be awarded in such amount and at such times during the term of the Plan as the Administrator shall determine.
5.1.7 Other Awards. The other types of awards that may be granted under this Plan include: (a) stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Common Stock (subject to the requirements of Section 5.1.1 and in compliance with applicable laws), upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof; or (b) any similar securities with a value derived from the value of or related to the Common Stock and/or returns thereon.
5.2 Section 162(m) Performance-Based Awards . Without limiting the generality of the foregoing, any of the types of awards listed in Sections 5.1.4 through 5.1.7 above may be, and options and SARs granted with an exercise or base price not less than the Fair Market Value of a share of Common Stock at the date of grant (“ Qualifying Options ” and “ Qualifying SARs ,” respectively) typically will be, granted as awards intended to satisfy the requirements for “performance-based compensation” within the meaning of Section 162(m) of the Code (“ Performance-Based Awards ”). The grant, vesting, exercisability or payment of Performance-Based Awards may depend (or, in the case of Qualifying Options or Qualifying SARs, may also depend) on the degree of achievement of one or more performance goals relative to a pre-established targeted level or levels using the Business Criteria provided for below for the Corporation on a consolidated basis or for one or more of the Corporation’s subsidiaries, segments, divisions or business units, or any combination of the foregoing. Such criteria may be evaluated on an absolute basis or relative to prior periods, industry peers, or stock market indices. Any Qualifying Option or Qualifying SAR shall be subject to the requirements of Section 5.2.1 and 5.2.3 in order for such award to satisfy the requirements for “performance-based compensation” under Section 162(m) of the Code. Any other Performance-Based Award shall be subject to all of the following provisions of this Section 5.2.
5.2.1 Class; Administrator. The eligible class of persons for Performance-Based Awards under this Section 5.2 shall be officers and employees of the Corporation or one of its Subsidiaries. The Administrator approving Performance-Based Awards or making any certification required pursuant to Section 5.2.4 must be constituted as provided in Section 3.1 for awards that are intended as performance-based compensation under Section 162(m) of the Code.
5.2.2 Performance Goals. The specific performance goals for Performance-Based Awards (other than Qualifying Options and Qualifying SARs) shall be, on an absolute or relative basis, established based on such business criteria as selected by the Administrator in its sole discretion (“ Business Criteria ”), including the following: (1) earnings per share, (2) cash flow (which means cash and cash equivalents derived from either (i) net cash flow from operations or (ii) net cash flow from operations, financing and investing activities), (3) total stockholder return, (4) price per share of Common Stock, (5) gross revenue, (6) revenue growth, (7) operating income (before or after taxes), (8) net earnings (before or after interest, taxes, depreciation and/or amortization), (9) return on equity, (10) capital employed, or on assets or on net investment, (11) cost containment or reduction, (12) cash cost per ounce of production, (13) operating margin, (14) debt reduction, (15) resource amounts, (16) production or production growth, (17) resource replacement or resource growth, (18) successful completion of financings, or (19) any combination of the foregoing. To qualify awards as performance-based under Section 162(m), the applicable Business Criterion (or Business Criteria, as the case may be) and specific performance goal or goals (“targets”) must be established and approved by the Administrator during the first 90 days of the performance period (and, in the case of performance periods of less than one year, in no event after 25% or more of the performance period has elapsed) and while performance relating to such target(s) remains substantially uncertain within the meaning of Section 162(m) of the Code. Performance targets shall be adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring gains and losses, accounting changes or other extraordinary events not foreseen at the time the targets were set unless the Administrator provides otherwise at the time of establishing the targets; provided that the Administrator may not make any adjustment to the extent it would adversely affect the qualification of any compensation payable under such performance targets as “performance-based compensation” under Section 162(m) of Code. The applicable performance measurement period may not be less than 3 months nor more than 10 years.
5.2.3 Form of Payment. Grants or awards intended to qualify under this Section 5.2 may be paid in cash or shares of Common Stock or any combination thereof.
5.2.4 Certification of Payment. Before any Performance-Based Award under this Section 5.2 (other than Qualifying Options and Qualifying SARs) is paid and to the extent required to qualify the award as performance-based compensation within the meaning of Section 162(m) of the Code, the Administrator must certify in writing that the performance target(s) and any other material terms of the Performance-Based Award were in fact timely satisfied.
5.2.5 Reservation of Discretion . The Administrator will have the discretion to determine the restrictions or other limitations of the individual awards granted under this Section 5.2 including the authority to reduce awards, payouts or vesting or to pay no awards, in its sole discretion, if the Administrator preserves such authority at the time of grant by language to this effect in its authorizing resolutions or otherwise.
5.2.6 Expiration of Grant Authority . As required pursuant to Section 162(m) of the Code and the regulations promulgated thereunder, the Administrator’s authority to grant new awards that are intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code (other than Qualifying Options and Qualifying SARs) shall terminate upon the first meeting of the Corporation’s stockholders that occurs in the fifth year following the year in which the Corporation’s stockholders first approve this Plan (the “ 162(m) Term ”).
5.2.7 Compensation Limitations . The maximum aggregate number of shares of Common Stock that may be issued to any Eligible Person during the term of this Plan pursuant to Qualifying Options and Qualifying SARs may not exceed the Share Limit. The maximum aggregate number of shares of Common Stock that may be issued to any Eligible Person pursuant to Performance-Based Awards granted during the 162(m) Term (other than cash awards granted pursuant to Section 5.1.6 and Qualifying Options or Qualifying SARs) may not exceed the Share Limit. The maximum amount that may be paid to any Eligible Person pursuant to Performance-Based Awards granted pursuant to Sections 5.1.6 (cash awards) during the 162(m) Term may not exceed $1,000,000. The limitations set forth in this Section 5.2.7 shall be proportionally adjusted upon the occurrence of a Plan Increase Event as described in Section 4.2 herein.
5.3 Award Agreements. Each award shall be evidenced by a written or electronic award agreement in the form approved by the Administrator and, if required by the Administrator, executed by the recipient of the award. The Administrator may authorize any officer of the Corporation (other than the particular award recipient) to execute any or all award agreements on behalf of the Corporation (electronically or otherwise). The award agreement shall set forth the material terms and conditions of the award as established by the Administrator consistent with the express limitations of this Plan.
5.4 Deferrals and Settlements. Payment of awards may be in the form of cash, Common Stock, other awards or combinations thereof as the Administrator shall determine, and with such restrictions as it may impose. The Administrator may also require or permit participants to elect to defer the issuance of shares of Common Stock or the settlement of awards in cash under such rules and procedures as it may establish under this Plan. The Administrator may also provide that deferred settlements include the payment or crediting of interest or other earnings on the deferral amounts, or the payment or crediting of dividend equivalents where the deferred amounts are denominated in shares. All mandatory or elective deferrals of the issuance of shares of Common Stock or the settlement of cash awards shall be structured in a manner that is intended to comply with the requirements of Section 409A of the Code.
5.5 Consideration for Common Stock or Awards. The purchase price for any award granted under this Plan or the Common Stock to be delivered pursuant to an award, as applicable, may be paid by means of any lawful consideration as determined by the Administrator and subject to compliance with applicable laws, including, without limitation, one or a combination of the following methods:
· services rendered by the recipient of such award;
· cash, check payable to the order of the Corporation, or electronic funds transfer;
· notice and third party payment in such manner as may be authorized by the Administrator;
· the delivery of previously owned shares of Common Stock that are fully vested and unencumbered;
· by a reduction in the number of shares otherwise deliverable pursuant to the award; or
· subject to such procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing for the purposes of (or who otherwise facilitates) the purchase or exercise of awards.
In the event that the Administrator allows a participant to exercise an award by delivering shares of Common Stock previously owned by such participant and unless otherwise expressly provided by the Administrator, any shares delivered which were initially acquired by the participant from the Corporation (upon exercise of a stock option or otherwise) must have been owned by the participant at least six months as of the date of delivery (or such other period as may be required by the Administrator in order to avoid adverse accounting treatment). Shares of Common Stock used to satisfy the exercise price of an option shall be valued at their Fair Market Value on the date of exercise. The Corporation will not be obligated to deliver any shares unless and until it receives full payment of the exercise or purchase price therefor and any related withholding obligations under Section 8.5 and any other conditions to exercise or purchase, as established from time to time by the Administrator, have been satisfied. Unless otherwise expressly provided in the applicable award agreement, the Administrator may at any time eliminate or limit a participant’s ability to pay the purchase or exercise price of any award by any method other than cash payment to the Corporation.
5.6 Definition of Fair Market Value. For purposes of this Plan “ Fair Market Value ” shall mean, unless otherwise determined or provided by the Administrator in the circumstances, the closing price for a share of Common Stock on the trading day immediately before the grant date, as furnished by the NASDAQ Stock Market or other principal stock exchange on which the Common Stock is then listed for the date in question, or if the Common Stock is not listed on a principal stock exchange, then by the Over-the-Counter Bulletin Board or OTC Markets. If the Common Stock is not listed on the NASDAQ Capital Market or listed on a principal stock exchange or is no longer actively traded on the Over-the-Counter Bulletin Board or OTC Markets as of the applicable date, the Fair Market Value of the Common Stock shall be the value as reasonably determined by the Administrator for purposes of the award in the circumstances.
5.7 Transfer Restrictions.
5.7.1 Limitations on Exercise and Transfer. Unless otherwise expressly provided in (or pursuant to) this Section 5.7, by applicable law and by the award agreement, as the same may be amended, (a) all awards are non-transferable and shall not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance or charge; (b) awards shall be exercised only by the participant; and (c) amounts payable or shares issuable pursuant to any award shall be delivered only to (or for the account of) the participant.
5.7.2 Exceptions. The Administrator may permit awards to be exercised by and paid to, or otherwise transferred to, other persons or entities pursuant to such conditions and procedures, including limitations on subsequent transfers, as the Administrator may, in its sole discretion, establish in writing (provided that any such transfers of ISOs shall be limited to the extent permitted under the federal tax laws governing ISOs). Any permitted transfer shall be subject to compliance with applicable federal and state securities laws.
5.7.3 Further Exceptions to Limits on Transfer. The exercise and transfer restrictions in Section 5.7.1 shall not apply to:
(a) transfers to the Corporation,
(b) the designation of a beneficiary to receive benefits in the event of the participant’s death or, if the participant has died, transfers to or exercise by the participant’s beneficiary, or, in the absence of a validly designated beneficiary, transfers by will or the laws of descent and distribution,
(c) subject to any applicable limitations on ISOs, transfers to a family member (or former family member) pursuant to a domestic relations order if approved or ratified by the Administrator,
(d) subject to any applicable limitations on ISOs, if the participant has suffered a disability, permitted transfers or exercises on behalf of the participant by his or her legal representative, or
(e) the authorization by the Administrator of “cashless exercise” procedures with third parties who provide financing for the purpose of (or who otherwise facilitate) the exercise of awards consistent with applicable laws and the express authorization of the Administrator.
5.8 International Awards. One or more awards may be granted to Eligible Persons who provide services to the Corporation or one of its Subsidiaries outside of the United States. Any awards granted to such persons may, if deemed necessary or advisable by the Administrator, be granted pursuant to the terms and conditions of any applicable sub-plans, if any, appended to this Plan and approved by the Administrator.
5.9 Vesting . Subject to Section 5.1.2 hereof, awards shall vest at such time or times and subject to such terms and conditions as shall be determined by the Administrator at the time of grant; provided, however , that in the absence of any award vesting periods designated by the Administrator at the time of grant in the applicable award agreement, awards shall vest as to one-third of the total number of shares subject to the award on each of the first, second and third anniversaries of the date of grant.
6. EFFECT OF TERMINATION OF SERVICE ON AWARDS
6.1 Termination of Employment.
6.1.1 The Administrator shall establish the effect of a termination of employment or service on the rights and benefits under each award under this Plan and in so doing may make distinctions based upon, inter alia, the cause of termination and type of award. If the participant is not an employee of the Corporation or one of its Subsidiaries and provides other services to the Corporation or one of its Subsidiaries, the Administrator shall be the sole judge for purposes of this Plan (unless a contract or the award agreement otherwise provides) of whether the participant continues to render services to the Corporation or one of its Subsidiaries and the date, if any, upon which such services shall be deemed to have terminated.
6.1.2 For awards of stock options or SARs, unless the award agreement provides otherwise, the exercise period of such options or SARs shall expire: (1) three months after the last day that the participant is employed by or provides services to the Corporation or a Subsidiary (provided; however, that in the event of the participant’s death during this period, those persons entitled to exercise the option or SAR pursuant to the laws of descent and distribution shall have one year following the date of death within which to exercise such option or SAR); (2) in the case of a participant whose termination of employment is due to death or disability (as defined in the applicable award agreement), 12 months after the last day that the participant is employed by or provides services to the Corporation or a Subsidiary; and (3) immediately upon a participant’s termination for “cause”. The Administrator will, in its absolute discretion, determine the effect of all matters and questions relating to a termination of employment, including, but not by way of limitation, the question of whether a leave of absence constitutes a termination of employment and whether a participant’s termination is for “cause.”
If not defined in the applicable award agreement, “ Cause ” shall mean:
(i) conviction of a felony or a crime involving fraud or moral turpitude; or
(ii) theft, material act of dishonesty or fraud, intentional falsification of any employment or Company records, or commission of any criminal act which impairs participant’s ability to perform appropriate employment duties for the Corporation; or
(iii) intentional or reckless conduct or gross negligence materially harmful to the Company or the successor to the Corporation after a Change in Control , including violation of a non-competition or confidentiality agreement; or
(iv) willful failure to follow lawful instructions of the person or body to which participant reports; or
(v) gross negligence or willful misconduct in the performance of participant’s assigned duties. Cause shall not include mere unsatisfactory performance in the achievement of participant’s job objectives.
6.1.3 For awards of restricted shares, unless the award agreement provides otherwise, restricted shares that are subject to restrictions at the time that a participant whose employment or service is terminated shall be forfeited and reacquired by the Corporation; provided that, the Administrator may provide, by rule or regulation or in any award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to restricted shares shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Administrator may in other cases waive in whole or in part the forfeiture of restricted shares. Similar rules shall apply in respect of RSUs.
6.2 Events Not Deemed Terminations of Service. Unless the express policy of the Corporation or one of its Subsidiaries, or the Administrator, otherwise provides, the employment relationship shall not be considered terminated in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence authorized by the Corporation or one of its Subsidiaries, or the Administrator; provided that unless reemployment upon the expiration of such leave is guaranteed by contract or law, such leave is for a period of not more than 3 months. In the case of any employee of the Corporation or one of its Subsidiaries on an approved leave of absence, continued vesting of the award while on leave from the employ of the Corporation or one of its Subsidiaries may be suspended until the employee returns to service, unless the Administrator otherwise provides or applicable law otherwise requires. In no event shall an award be exercised after the expiration of the term set forth in the award agreement.
6.3 Effect of Change of Subsidiary Status. For purposes of this Plan and any award, if an entity ceases to be a Subsidiary of the Corporation, a termination of employment or service shall be deemed to have occurred with respect to each Eligible Person in respect of such Subsidiary who does not continue as an Eligible Person in respect of another entity within the Corporation or another Subsidiary that continues as such after giving effect to the transaction or other event giving rise to the change in status.
7. ADJUSTMENTS; ACCELERATION
7.1 Adjustments . Upon or in contemplation of any of the following events described in this Section 7.1,: any reclassification, recapitalization, stock split (including a stock split in the form of a stock dividend) or reverse stock split (“ stock split ”); any merger, arrangement, combination, consolidation, or other reorganization; any spin-off, split-up, or similar extraordinary dividend distribution in respect of the Common Stock (whether in the form of securities or property); any exchange of Common Stock or other securities of the Corporation, or any similar, unusual or extraordinary corporate transaction in respect of the Common Stock; then the Administrator shall in such manner, to such extent and at such time as it deems appropriate and equitable in the circumstances (but subject to compliance with applicable laws and stock exchange requirements) proportionately adjust any or all of (1) the number and type of shares of Common Stock (or other securities) that thereafter may be made the subject of awards (including the number of shares provided for in this Plan), (2) the number, amount and type of shares of Common Stock (or other securities or property) subject to any or all outstanding awards, (3) the grant, purchase, or exercise price (which term includes the base price of any SAR or similar right) of any or all outstanding awards, (4) the securities, cash or other property deliverable upon exercise or payment of any outstanding awards, and (5) the 162(m) compensation limitations set forth in Section 5.2.7 and (subject to Section 8.8.3(a)) the performance standards applicable to any outstanding awards (provided that no adjustment shall be allowed to the extent inconsistent with the requirements of Code section 162(m)). Any adjustment made pursuant to this Section 7.1 shall be made in a manner that, in the good faith determination of the Administrator, will not likely result in the imposition of additional taxes or interest under Section 409A of the Code. With respect to any award of an ISO, the Administrator
may make such an adjustment that causes the option to cease to qualify as an ISO without the consent of the affected participant.
7.2 Change in Control . Upon a Change in Control, each then-outstanding option and SAR shall automatically become fully vested, all restricted shares then outstanding shall automatically fully vest free of restrictions, and each other award granted under this Plan that is then outstanding shall automatically become vested and payable to the holder of such award unless the Administrator has made appropriate provision for the substitution, assumption, exchange or other continuation of the award pursuant to the Change in Control. Notwithstanding the foregoing, the Administrator, in its sole and absolute discretion, may choose (in an award agreement or otherwise) to provide for full or partial accelerated vesting of any award upon a Change In Control (or upon any other event or other circumstance related to the Change in Control, such as an involuntary termination of employment occurring after such Change in Control, as the Administrator may determine), irrespective of whether such any such award has been substituted, assumed, exchanged or otherwise continued pursuant to the Change in Control.
For purposes of this Plan, “ Change in Control ” shall be deemed to have occurred if:
(i) a tender offer (or series of related offers) shall be made and consummated for the ownership of 50% or more of the outstanding voting securities of the Corporation, unless as a result of such tender offer more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Corporation (as of the time immediately prior to the commencement of such offer), any employee benefit plan of the Corporation or its Subsidiaries, and their affiliates;
(ii) the Corporation shall be merged or consolidated with another entity, unless as a result of such merger or consolidation more than 50% of the outstanding voting securities of the surviving or resulting entity shall be owned in the aggregate by the stockholders of the Corporation (as of the time immediately prior to such transaction), any employee benefit plan of the Corporation or its Subsidiaries, and their affiliates;
(iii) the Corporation shall sell substantially all of its assets to another entity that is not wholly owned by the Corporation, unless as a result of such sale more than 50% of such assets shall be owned in the aggregate by the stockholders of the Corporation (as of the time immediately prior to such transaction), any employee benefit plan of the Corporation or its Subsidiaries and their affiliates; or
(iv) a Person (as defined below) shall acquire 50% or more of the outstanding voting securities of the Corporation (whether directly, indirectly, beneficially or of record), unless as a result of such acquisition more than 50% of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the stockholders of the Corporation (as of the time immediately prior to the first acquisition of such securities by such Person), any employee benefit plan of the Corporation or its Subsidiaries, and their affiliates.
For purposes of this Section 5(c), ownership of voting securities shall take into account and shall include ownership as determined by applying the provisions of Rule 13d-3(d)(I)(i) (as in effect on the date hereof) under the Exchange Act. In addition, for such purposes, “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; provided , however , that a Person shall not include (A) the Company or any of its Subsidiaries; (B) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Subsidiaries; (C) an underwriter temporarily holding securities pursuant to an offering of such securities; or (D) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportion as their ownership of stock of the Company.
Notwithstanding the foregoing, (1) the Administrator may waive the requirement described in paragraph (iv) above that a Person must acquire more than 50% of the outstanding voting securities of the Corporation for a Change in Control to have occurred if the Administrator determines that the percentage acquired by a person is significant (as determined by the Administrator in its discretion) and that waiving such condition is appropriate in light of all facts and circumstances, and (2) no compensation that has been deferred for purposes of Section 409A of the Code shall be payable as a result of a Change in Control unless the Change in Control qualifies as a change in ownership or effective control of the Corporation within the meaning of Section 409A of the Code.
7.3 Early Termination of Awards . Any award that has been accelerated as required or permitted by Section 7.2 upon a Change in Control (or would have been so accelerated but for Section 7.4 or 7.5) shall terminate upon such event, subject to any provision that has been expressly made by the Administrator, through a plan of reorganization or otherwise, for the survival, substitution, assumption, exchange or other continuation of such award and provided that, in the case of options and SARs that will not survive, be substituted for, assumed, exchanged, or otherwise continued in the transaction, the holder of such award shall be given reasonable advance notice of the impending termination and a reasonable opportunity to exercise his or her outstanding options and SARs in accordance with their terms before the termination of such awards (except that in no case shall more than ten days’ notice of accelerated vesting and the impending termination be required and any acceleration may be made contingent upon the actual occurrence of the event).
The Administrator may make provision for payment in cash or property (or both) in respect of awards terminated pursuant to this section as a result of the Change in Control and may adopt such valuation methodologies for outstanding awards as it deems reasonable and, in the case of options, SARs or similar rights, and without limiting other methodologies, may base such settlement solely upon the excess if any of the per share amount payable upon or in respect of such event over the exercise or base price of the award.
7.4 Other Acceleration Rules . Any acceleration of awards pursuant to this Section 7 shall comply with applicable legal and stock exchange requirements and, if necessary to accomplish the purposes of the acceleration or if the circumstances require, may be deemed by the Administrator to occur a limited period of time not greater than 30 days before the event. Without limiting the generality of the foregoing, the Administrator may deem an acceleration to occur immediately prior to the applicable event and/or reinstate the original terms of an award if an event giving rise to the acceleration does not occur. Notwithstanding any other provision of the Plan to the contrary, the Administrator may override the provisions of Section 7.2, 7.3, and/or 7.5 by express provision in the award agreement or otherwise. The portion of any ISO accelerated pursuant to Section 7.2 or any other action permitted hereunder shall remain exercisable as an ISO only to the extent the applicable $100,000 limitation on ISOs is not exceeded. To the extent exceeded, the accelerated portion of the option shall be exercisable as a nonqualified stock option under the Code.
7.5 Possible Rescission of Acceleration . If the vesting of an award has been accelerated expressly in anticipation of an event and the Administrator later determines that the event will not occur, the Administrator may rescind the effect of the acceleration as to any then outstanding and unexercised or otherwise unvested awards; provided, that , in the case of any compensation that has been deferred for purposes of Section 409A of the Code, the Administrator determines that such rescission will not likely result in the imposition of additional tax or interest under Code Section 409A.
8. OTHER PROVISIONS
8.1 Compliance with Laws. This Plan, the granting and vesting of awards under this Plan, the offer, issuance and delivery of shares of Common Stock, the acceptance of promissory notes and/or the payment of money under this Plan or under awards are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law, federal margin requirements) and to such approvals by any applicable stock exchange listing, regulatory or governmental authority as may, in the opinion of counsel for the Corporation, be necessary or advisable in connection therewith. The person acquiring any securities under this Plan will, if requested by the Corporation or one of its Subsidiaries, provide such assurances and representations to the Corporation or one of its Subsidiaries as the Administrator may deem necessary or desirable to assure compliance with all applicable legal and accounting requirements.
8.2 Future Awards/Other Rights. No person shall have any claim or rights to be granted an award (or additional awards, as the case may be) under this Plan, subject to any express contractual rights (set forth in a document other than this Plan) to the contrary.
8.3 No Employment/Service Contract. Nothing contained in this Plan (or in any other documents under this Plan or in any award) shall confer upon any Eligible Person or other participant any right to continue in the employ or other service of the Corporation or one of its Subsidiaries, constitute any contract or agreement of employment or other service or affect an employee’s status as an employee at will, nor shall interfere in any way
with the right of the Corporation or one of its Subsidiaries to change a person’s compensation or other benefits, or to terminate his or her employment or other service, with or without cause. Nothing in this Section 8.3, however, is intended to adversely affect any express independent right of such person under a separate employment or service contract other than an award agreement.
8.4 Plan Not Funded. Awards payable under this Plan shall be payable in shares or from the general assets of the Corporation, and no special or separate reserve, fund or deposit shall be made to assure payment of such awards. No participant, beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock, except as expressly otherwise provided) of the Corporation or one of its Subsidiaries by reason of any award hereunder. Neither the provisions of this Plan (or of any related documents), nor the creation or adoption of this Plan, nor any action taken pursuant to the provisions of this Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Corporation or one of its Subsidiaries and any participant, beneficiary or other person. To the extent that a participant, beneficiary or other person acquires a right to receive payment pursuant to any award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Corporation.
8.5 Tax Withholding. Upon any exercise, vesting, or payment of any award, the Corporation or one of its Subsidiaries shall have the right at its option to:
(a) require the participant (or the participant’s personal representative or beneficiary, as the case may be) to pay or provide for payment of at least the minimum amount of any taxes which the Corporation or one of its Subsidiaries may be required to withhold with respect to such award event or payment; or
(b) deduct from any amount otherwise payable in cash to the participant (or the participant’s personal representative or beneficiary, as the case may be) the minimum amount of any taxes which the Corporation or one of its Subsidiaries may be required to withhold with respect to such cash payment.
In any case where a tax is required to be withheld in connection with the delivery of shares of Common Stock under this Plan, the Administrator may in its sole discretion (subject to Section 8.1) grant (either at the time of the award or thereafter) to the participant the right to elect, pursuant to such rules and subject to such conditions as the Administrator may establish, to have the Corporation reduce the number of shares to be delivered by (or otherwise reacquire) the appropriate number of shares, valued in a consistent manner at their Fair Market Value or at the sales price in accordance with authorized procedures for cashless exercises, necessary to satisfy the minimum applicable withholding obligation on exercise, vesting or payment. In no event shall the shares withheld exceed the minimum whole number of shares required for tax withholding under applicable law.
8.6 Effective Date, Termination and Suspension, Amendments.
8.6.1 Effective Date and Termination. This Plan was approved by the Board and became effective on July 19, 2016. Unless earlier terminated by the Board, this Plan shall terminate at the close of business on July 19, 2026. After the termination of this Plan either upon such stated expiration date or its earlier termination by the Board, no additional awards may be granted under this Plan, but previously granted awards (and the authority of the Administrator with respect thereto, including the authority to amend such awards) shall remain outstanding in accordance with their applicable terms and conditions and the terms and conditions of this Plan.
8.6.2 Board Authorization. The Board may, at any time, terminate or, from time to time, amend, modify or suspend this Plan, in whole or in part. No awards may be granted during any period that the Board suspends this Plan.
8.6.3 Stockholder Approval. To the extent then required by applicable law or any applicable stock exchange or required under Sections 162, 422 or 424 of the Code to preserve the intended tax consequences of this Plan, or deemed necessary or advisable by the Board, this Plan and any amendment to this Plan shall be subject to stockholder approval.
8.6.4 Amendments to Awards. Without limiting any other express authority of the Administrator under (but subject to) the express limits of this Plan, the Administrator by agreement or resolution may waive conditions of or limitations on awards to participants that the Administrator in the prior exercise of its discretion has imposed, without the consent of a participant, and (subject to the requirements of Sections 3.2 and 8.6.5) may make other changes to the terms and conditions of awards. Any amendment or other action that would constitute a repricing of an award is subject to the limitations set forth in Section 3.2(g).
8.6.5 Limitations on Amendments to Plan and Awards. No amendment, suspension or termination of this Plan or change of or affecting any outstanding award shall, without written consent of the participant, affect in any manner materially adverse to the participant any rights or benefits of the participant or obligations of the Corporation under any award granted under this Plan prior to the effective date of such change. Changes, settlements and other actions contemplated by Section 7 shall not be deemed to constitute changes or amendments for purposes of this Section 8.6.
8.7 Privileges of Stock Ownership. Except as otherwise expressly authorized by the Administrator or this Plan, a participant shall not be entitled to any privilege of stock ownership as to any shares of Common Stock not actually delivered to and held of record by the participant. No adjustment will be made for dividends or other rights as a stockholder for which a record date is prior to such date of delivery.
8.8 Governing Law; Construction; Severability.
8.8.1 Choice of Law. This Plan, the awards, all documents evidencing awards and all other related documents shall be governed by, and construed in accordance with the laws of the State of Nevada.
8.8.2 Severability. If a court of competent jurisdiction holds any provision invalid and unenforceable, the remaining provisions of this Plan shall continue in effect.
8.8.3 Plan Construction.
(a) Rule 16b-3. It is the intent of the Corporation that the awards and transactions permitted by awards be interpreted in a manner that, in the case of participants who are or may be subject to Section 16 of the Exchange Act, qualify, to the maximum extent compatible with the express terms of the award, for exemption from matching liability under Rule 16b-3 promulgated under the Exchange Act. Notwithstanding the foregoing, the Corporation shall have no liability to any participant for Section 16 consequences of awards or events under awards if an award or event does not so qualify.
(b) Section 162(m). Awards under Sections 5.1.4 through 5.1.7 to persons described in Section 5.2 that are either granted or become vested, exercisable or payable based on attainment of one or more performance goals related to the Business Criteria, as well as Qualifying Options and Qualifying SARs granted to persons described in Section 5.2, that are approved by a committee composed solely of two or more outside directors (as this requirement is applied under Section 162(m) of the Code) shall be deemed to be intended as performance-based compensation within the meaning of Section 162(m) of the Code unless such committee provides otherwise at the time of grant of the award. It is the further intent of the Corporation that (to the extent the Corporation or one of its Subsidiaries or awards under this Plan may be or become subject to limitations on deductibility under Section 162(m) of the Code) any such awards and any other Performance-Based Awards under Section 5.2 that are granted to or held by a person subject to Section 162(m) will qualify as performance-based compensation or otherwise be exempt from deductibility limitations under Section 162(m).
(c) Code Section 409A Compliance. The Board intends that, except as may be otherwise determined by the Administrator, any awards under the Plan are either exempt from or satisfy the requirements of Section 409A of the Code and related regulations and Treasury pronouncements (“ Section 409A ”) to avoid the imposition of any taxes, including additional income or penalty taxes, thereunder. If the Administrator determines that an award, award agreement, acceleration, adjustment to the terms of an award, payment, distribution, deferral election, transaction or any other action or arrangement contemplated by the provisions of the Plan would, if undertaken, cause a participant’s award to become subject to Section 409A, unless the Administrator expressly determines otherwise, such award, award agreement, payment, acceleration, adjustment, distribution, deferral election, transaction or other
action or arrangement shall not be undertaken and the related provisions of the Plan and/or award agreement will be deemed modified or, if necessary, rescinded in order to comply with the requirements of Section 409A to the extent determined by the Administrator without the content or notice to the participant. Notwithstanding the foregoing, neither the Company nor the Administrator shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any participant under Section 409A and neither the Company nor the Administrator will have any liability to any participant for such tax or penalty.
(d) No Guarantee of Favorable Tax Treatment. Although the Company intends that awards under the Plan will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any participant for any tax, interest or penalties the participant might owe as a result of the grant, holding, vesting, exercise or payment of any award under the Plan
8.9 Captions. Captions and headings are given to the sections and subsections of this Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of this Plan or any provision thereof.
8.10 Stock-Based Awards in Substitution for Stock Options or Awards Granted by Other Corporation. Awards may be granted to Eligible Persons in substitution for or in connection with an assumption of employee stock options, SARs, restricted stock or other stock-based awards granted by other entities to persons who are or who will become Eligible Persons in respect of the Corporation or one of its Subsidiaries, in connection with a distribution, arrangement, business combination, merger or other reorganization by or with the granting entity or an affiliated entity, or the acquisition by the Corporation or one of its Subsidiaries, directly or indirectly, of all or a substantial part of the stock or assets of the employing entity. The awards so granted need not comply with other specific terms of this Plan, provided the awards reflect only adjustments giving effect to the assumption or substitution consistent with the conversion applicable to the Common Stock in the transaction and any change in the issuer of the security. Any shares that are delivered and any awards that are granted by, or become obligations of, the Corporation, as a result of the assumption by the Corporation of, or in substitution for, outstanding awards previously granted by an acquired company (or previously granted by a predecessor employer (or direct or indirect parent thereof) in the case of persons that become employed by the Corporation or one of its Subsidiaries in connection with a business or asset acquisition or similar transaction) shall not be counted against the Share Limit or other limits on the number of shares available for issuance under this Plan, except as may otherwise be provided by the Administrator at the time of such assumption or substitution or as may be required to comply with the requirements of any applicable stock exchange.
8.11 Non-Exclusivity of Plan. Nothing in this Plan shall limit or be deemed to limit the authority of the Board or the Administrator to grant awards or authorize any other compensation, with or without reference to the Common Stock, under any other plan or authority.
8.12 No Corporate Action Restriction. The existence of this Plan, the award agreements and the awards granted hereunder shall not limit, affect or restrict in any way the right or power of the Board or the stockholders of the Corporation to make or authorize: (a) any adjustment, recapitalization, reorganization or other change in the capital structure or business of the Corporation or any Subsidiary, (b) any merger, arrangement, business combination, amalgamation, consolidation or change in the ownership of the Corporation or any Subsidiary, (c) any issue of bonds, debentures, capital, preferred or prior preference stock ahead of or affecting the capital stock (or the rights thereof) of the Corporation or any Subsidiary, (d) any dissolution or liquidation of the Corporation or any Subsidiary, (e) any sale or transfer of all or any part of the assets or business of the Corporation or any Subsidiary, or (f) any other corporate act or proceeding by the Corporation or any Subsidiary. No participant, beneficiary or any other person shall have any claim under any award or award agreement against any member of the Board or the Administrator, or the Corporation or any employees, officers or agents of the Corporation or any Subsidiary, as a result of any such action.
8.13 Other Corporation Benefit and Compensation Programs. Payments and other benefits received by a participant under an award made pursuant to this Plan shall not be deemed a part of a participant’s compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any,
provided by the Corporation or any Subsidiary, except where the Administrator expressly otherwise provides or authorizes in writing or except as otherwise specifically set forth in the terms and conditions of such other employee welfare or benefit plan or arrangement. Awards under this Plan may be made in addition to, in combination with, as alternatives to or in payment of grants, awards or commitments under any other plans or arrangements of the Corporation or its Subsidiaries.
8.14 Prohibition on Repricing . Subject to Section 4, the Administrator shall not, without the approval of the stockholders of the Corporation (i) reduce the exercise price, or cancel and reissue options so as to in effect reduce the exercise price or (ii) change the manner of determining the exercise price so that the exercise price is less than the fair market value per share of Common Stock.
As adopted by the Board of Directors of Active With Me, Inc. on August 12, 2016.
Exhibit 10.1
AGREEMENT OF CONVEYANCE, TRANSFER AND ASSIGNMENT OF ASSETS AND ASSUMPTION OF OBLIGATIONS
This Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations (“ Transfer and Assumption Agreement ”) is made as of August 15, 2016, by Active With Me, Inc., a Nevada corporation (“ Assignor ”), and Active With Me Holdings, Inc., a Delaware corporation and a wholly-owned subsidiary of Assignor (“ Assignee ”).
WHEREAS, Assignor was engaged in the business of creating an online resource for activity-based travel, as well as any and all other operations conducted by Assignor prior to the date hereof (the “ Former Business ”); and
WHEREAS, Assignor desires to convey, transfer and assign to Assignee, and Assignee desires to acquire from Assignor, all of the assets of Assignor relating to the operation of the Former Business, and in connection therewith, Assignee has agreed to assume all of the liabilities of Assignor relating to the Former Business, on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual promises and agreements contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1 . Assignment.
1.1. Assignment of Assets . For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged by Assignor, Assignor does hereby assign, grant, bargain, sell, convey, transfer and deliver to Assignee, and its successors and assigns, all of Assignor’s right, title and interest in, to and under the assets, properties and business, of every kind and description, wherever located, real, personal or mixed, tangible or intangible, owned, held or used in the conduct of the Former Business (the “ Assets ”), including, but not limited to, the Assets listed on Exhibit A hereto, and identified in part by reference to Assignor’s predecessor’s balance sheet as of March 31, 2016, filed with the Securities and Exchange Commission as part of Assignor’s quarterly report on Form 10-Q on May 20, 2016, as amended (the “ Balance Sheet ”). Notwithstanding anything to the contrary contained herein, the term Assets shall not include either the assets of or the business conducted by Rasna Therapeutics, Inc., a Delaware subsidiary, or any of its subsidiaries.
1.2 Further Assurances . Assignor shall from time to time after the date hereof at the request of Assignee and without further consideration execute and deliver to Assignee such additional instruments of transfer and assignment, including without limitation any bills of sale, assignments of leases, deeds, and other recordable instruments of assignment, transfer and conveyance, in addition to this Transfer and Assumption Agreement, as Assignee shall reasonably request to evidence more fully the assignment by Assignor to Assignee of the Assets.
Section 2 . Assumption.
2.1 Assumed Liabilities . As of the date hereof, Assignee hereby assumes and agrees to pay, perform and discharge, fully and completely, all liabilities, commitments, contracts, agreements, obligations or other claims against Assignor, whether known or unknown, asserted or unasserted, accrued or unaccrued, absolute or contingent, liquidated or unliquidated, due or to become due, and whether contractual, statutory, or otherwise associated with the Former Business whenever arising (the “ Liabilities ”), including, but not limited to, the Liabilities listed on Exhibit B , and identified in part by reference to the Balance Sheet.
2.2 Further Assurances . Assignee shall from time to time after the date hereof at the request of Assignor and without further consideration execute and deliver to Assignor such additional instruments of assumption in addition to this Transfer and Assumption Agreement as Assignor shall reasonably request to evidence more fully the assumption by Assignee of the Liabilities.
Section 3 . Headings . The descriptive headings contained in this Transfer and Assumption Agreement are for convenience of reference only and shall not affect in any way the meaning or interpretation of this Transfer and Assumption Agreement.
Section 4 . Governing Law . This Transfer and Assumption Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed entirely within that state, except that any conveyances of leaseholds and real property made herein shall be governed by the laws of the respective jurisdictions in which such property is located.
[ The remainder of this page is blank intentionally .]
[SIGNATURE PAGE TO TRANSFER AND ASSUMPTION AGREEMENT]
IN WITNESS WHEREOF, this Transfer and Assumption Agreement has been duly executed and delivered by the parties hereto as of the date first above written.
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ACTIVE WITH ME, INC. |
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Jim Tripp |
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Chief Executive Officer |
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ACTIVE WITH ME HOLDINGS, INC. |
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Sheri Strangway |
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President and Chief Executive Officer |
Exhibit A
(a) All of the equipment, computers, servers, hardware, appliances, implements, and all other tangible personal property that are owned by Assignor and have been used in the conduct of the Former Business;
(b) all inventory associated with the Former Business;
(c) all real property and real property leases to which Assignor is a party, and which affect the Former Business or the Assets;
(d) all contracts to which Assignor is a party, or which affect the Former Business or the Assets, including leases of personal property;
(e) all rights, claims and causes of action against third parties resulting from or relating to the operation of the Former Business or the Assets, including without limitation, any rights, claims and causes of action arising under warranties from vendors and other third parties;
(f) all governmental licenses, permits, authorizations, consents or approvals affecting or relating to the Former Business or the Assets;
(g) all accounts receivable, notes receivable, prepaid expenses and insurance and indemnity claims to the extent related to any of the Assets or the Former Business;
(h) all goodwill associated with the Assets and the Former Business;
(i) all business records, regardless of the medium of storage, relating to the Assets and/or the Former Business, including without limitation, all schematics, drawings, customer data, subscriber lists, statistics, promotional graphics, original art work, mats, plates, negatives, accounting and financial information concerning the Assets or Former Business;
(j) all internet domain names and URLs of the Former Business, software, inventions, art works, patents, patent applications, processes, shop rights, formulas, brand names, trade secrets, know-how, service marks, trade names, trademarks, trademark applications, copyrights, source and object codes, customer lists, drawings, ideas, algorithms, processes, computer software programs or applications (in code and object code form), tangible or intangible proprietary information and any other intellectual property and similar items and related rights owned by or licensed to Assignor used in the Former Business, together with any goodwill associated therewith and all rights of action on account of past, present and future unauthorized use or infringement thereof; and
(k) all other privileges, rights, interests, properties and assets of whatever nature and wherever located that are owned, used or intended for use in connection with, or that are necessary to the continued conduct of, the Former Business as presently conducted or planned to be conducted.
Exhibit B
(a) All liabilities in respect of indebtedness of Assignor related to the Former Business;
(b) product liability and warranty claims relating to any product or service of Assignor associated with the Former Business;
(c) taxes, duties, levies, assessments and other such charges, including any penalties, interests and fines with respect thereto, payable by Assignor to any federal, provincial, municipal or other government, domestic or foreign, incurred in the conduct of the Former Business;
(d) liabilities for salary, bonus, vacation pay, severance payments damages for wrongful dismissal, or other compensation or benefits relating to Assignor’s employees employed in the conduct of the Former Business; and
(e) any liability or claim for liability (whether in contract, in tort or otherwise, and whether or not successful) related to any lawsuit or threatened lawsuit or claim (including any claim for breach or non-performance of any contract) based upon actions, omissions or events relating to the Former Business.
Exhibit 10.2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this “ Agreement ”), dated as of August 15, 2016, is made by and between ACTIVE WITH ME, Inc. a Nevada corporation (“ Seller ”), and each of the individuals listed under the heading “Buyers” on the signature page hereto (collectively, “ Buyers ”).
RECITALS
A. Seller owns all of the issued and outstanding shares of common stock $0.001 par value per share (the “ Shares ”) of ACTIVE WITH ME HOLDINGS, INC., a Delaware corporation (the “ Company ”), which Shares constitute, as of the date hereof, all of the issued and outstanding capital stock of the Company.
B. Buyers hold 1,500,000 shares of common stock, $0.001 par value per share, of Seller (the “ Purchase Price Shares ”), and Buyers have agreed to transfer such shares back to Seller for cancellation (the “ Repurchase ”).
C. In connection with the Repurchase, Buyers wish to acquire from Seller, and Seller wishes to transfer to Buyers, the Shares, upon the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
1. Purchase and Sale of Stock .
(a) Purchased Shares . Subject to the terms and conditions provided below, Seller shall sell and transfer to Buyers and Buyers shall purchase from Seller, on the Closing Date (as defined in Section 1(c)), all of the Shares.
(b) Purchase Price . The purchase price for the Shares shall be the transfer and delivery by Buyers to Seller of the Purchase Price Shares, deliverable as provided in Section 2(b).
(c) Closing . The closing of the transactions contemplated in this Agreement (the “ Closing ”) shall take place as soon as practicable following the execution of this Agreement. The date on which the Closing occurs shall be referred to herein as the Closing Date (the “ Closing Date ”).
2. Closing .
(a) Transfer of Shares . At the Closing, Seller shall deliver to Buyers certificates representing the Shares, duly endorsed to Buyers or as directed by Buyers, which delivery shall vest Buyers with good and marketable title to all of the issued and outstanding shares of capital stock of the Company, free and clear of all liens and encumbrances.
(b) Payment of Purchase Price . At the Closing, Buyers shall deliver to Seller a certificate or certificates representing the Purchase Price Shares duly endorsed to Seller, which
delivery shall vest Seller with good and marketable title to the Purchase Price Shares, free and clear of all liens and encumbrances.
3. Representations and Warranties of Seller . Seller represents and warrants to Buyers as of the date hereof as follows:
(a) Corporate Authorization; Enforceability . The execution, delivery and performance by Seller of this Agreement is within the corporate powers and has been, duly authorized by all necessary corporate action on the part of Seller. This Agreement has been duly executed and delivered by Seller and constitutes the valid and binding agreement of Seller, enforceable against Seller in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general equitable principles.
(b) Governmental Authorization . The execution, delivery and performance by Seller of this Agreement requires no consent, approval, Order, authorization or action by or in respect of, or filing with, any Governmental Authority.
(c) Non-Contravention; Consents . The execution, delivery and performance by Seller of this Agreement and the consummation of the transactions contemplated hereby do not (i) violate the amended and restated articles of incorporation or bylaws of Seller or (ii) violate any applicable Law or Order.
(d) Capitalization . As of the date hereof, Seller owns the Shares, which shares represent 100% of the authorized, issued and outstanding capital stock of the Company. The Shares are duly authorized, validly issued, fully-paid, non-assessable and free and clear of any Liens.
4. Representations and Warranties of Buyers . Buyers, jointly and severally, represent and warrant to Seller as of the date hereof as follows:
(a) Enforceability . The execution, delivery and performance by Buyers of this Agreement are within Buyers’ powers. This Agreement has been duly executed and delivered by Buyers and constitutes the valid and binding agreement of Buyers, enforceable against Buyers in accordance with its terms, except to the extent that its enforceability may be subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting the enforcement of creditors’ rights generally and by general equitable principles.
(b) Governmental Authorization . The execution, delivery and performance by Buyers of this Agreement require no consent, approval, Order, authorization or action by or in respect of, or filing with, any Governmental Authority.
(c) Non-Contravention; Consents . The execution, delivery and performance by Buyers of this Agreement, and the consummation of the transactions contemplated hereby do not violate any applicable Law or Order.
(d) Purchase for Investment . Buyers are financially able to bear the economic risks of acquiring an interest in the Company and the other transactions contemplated hereby,
and have no need for liquidity in this investment. Buyers have such knowledge and experience in financial and business matters in general, and with respect to businesses of a nature similar to the business of the Company, so as to be capable of evaluating the merits and risks of, and making an informed business decision with regard to, the acquisition of the Shares. Buyers are acquiring the Shares solely for their own account and not with a view to or for resale in connection with any distribution or public offering thereof, within the meaning of any applicable securities laws and regulations, unless such distribution or offering is registered under the Securities Act of 1933, as amended (the “ Securities Act ”), or an exemption from such registration is available. Buyers have (i) received all the information they have deemed necessary to make an informed investment decision with respect to the acquisition of the Shares, (ii) had an opportunity to make such investigation as they have desired pertaining to the Company and the acquisition of an interest therein, and to verify the information which is, and has been, made available to them and (iii) had the opportunity to ask questions of Seller concerning the Company. Buyers have received no public solicitation or advertisement with respect to the offer or sale of the Shares. Buyers realize that the Shares are “restricted securities” as that term is defined in Rule 144 promulgated by the Securities and Exchange Commission under the Securities Act, the resale of the Shares is restricted by federal and state securities laws and, accordingly, the Shares must be held indefinitely unless their resale is subsequently registered under the Securities Act or an exemption from such registration is available for their resale. Buyers understand that any resale of the Shares by them must be registered under the Securities Act (and any applicable state securities law) or be effected in circumstances that, in the opinion of counsel for the Company at the time, create an exemption or otherwise do not require registration under the Securities Act (or applicable state securities laws). Buyers acknowledge and consent that certificates now or hereafter issued for the Shares will bear a legend substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS (THE “STATE ACTS”), HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND QUALIFICATION UNDER THE STATE ACTS OR PURSUANT TO EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS (INCLUDING, IN THE CASE OF THE SECURITIES ACT, THE EXEMPTIONS AFFORDED BY SECTION 4(1) OF THE SECURITIES ACT AND RULE 144 THEREUNDER). AS A PRECONDITION TO ANY SUCH TRANSFER, THE ISSUER OF THESE SECURITIES SHALL BE FURNISHED WITH AN OPINION OF COUNSEL OPINING AS TO THE AVAILABILITY OF EXEMPTIONS FROM SUCH REGISTRATION AND QUALIFICATION AND/OR SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY THERETO THAT ANY SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES LAWS.
Buyers understand that the Shares are being sold to them pursuant to the exemption from registration contained in Section 4(1) of the Securities Act and that Seller is relying upon the representations made herein as one of the bases for claiming the Section 4(1) exemption.
(e) Liabilities . Following the Closing, Seller will have no debts, liabilities or obligations relating to the Company or its business or activities, whether before or after the Closing, and there are no outstanding guaranties, performance or payment bonds, letters of credit or other contingent contractual obligations that have been undertaken by Seller directly or indirectly in relation to the Company or its business and that may survive the Closing.
(f) Title to Purchase Price Shares . Buyers are the sole record and beneficial owners of the Purchase Price Shares. At Closing, Buyers will have good and marketable title to the Purchase Price Shares, which Purchase Price Shares are, and at the Closing will be, free and clear of all options, warrants, pledges, claims, liens and encumbrances, and any restrictions or limitations prohibiting or restricting transfer to Seller, except for restrictions on transfer as contemplated by applicable securities laws.
5. Indemnification and Release .
(a) Indemnification . Buyers covenant and agree to jointly and severally indemnify, defend, protect and hold harmless Seller, and its officers, directors, employees, stockholders, agents, representatives and affiliates (collectively, together with Seller, the “ Seller Indemnified Parties ”) at all times from and after the date of this Agreement from and against all losses, liabilities, damages, claims, actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including specifically, but without limitation, reasonable attorneys’ fees and expenses of investigation), whether or not involving a third party claim and regardless of any negligence of any Seller Indemnified Party (collectively, “ Losses ”), incurred by any Seller Indemnified Party as a result of or arising from (i) any breach of the representations and warranties of Buyers set forth herein or in certificates delivered in connection herewith, (ii) any breach or nonfulfillment of any covenant or agreement on the part of Buyers under this Agreement, (iii) any debt, liability or obligation of the Company, whether incurred or arising prior to the date hereof or after, (iv) any debt, liability or obligation of Seller for actions taken prior to that certain merger by and between Seller, Seller’s wholly owned subsidiary, RASNA Acquisition Corp. and RASNA Therapeutics, Inc., a Delaware corporation (the “ Merger ”), including, without limitation, any amounts due or owing to any former officer, director or Affiliate of Seller, (v) the conduct and operations of the business of the Company whether before or after the Closing, (vi) claims asserted against the Company whether arising before or after the Closing, or (vii) any federal or state income tax payable by Seller and attributable to the transaction contemplated by this Agreement or activities prior to the Merger or with respect to the Company after the Merger.
(b) Third Party Claims .
(i) If any claim or liability (a “ Third-Party Claim ”) should be asserted against any of the Seller Indemnified Parties (the “ Indemnitee ”) by a third party after the Closing for which Buyers have an indemnification obligation under the terms of Section 5(a), then the Indemnitee shall notify Buyers (the “ Indemnitor ”) within 20 days after the Third-Party Claim is asserted by a third party (said notification being referred to as a “ Claim Notice ”) and give the Indemnitor a reasonable opportunity to take part in any examination of the books and records of the Indemnitee relating to such Third-Party Claim and to assume the defense of such Third-Party Claim and in connection therewith and to conduct any proceedings or negotiations relating
thereto and necessary or appropriate to defend the Indemnitee and/or settle the Third-Party Claim. The expenses (including reasonable attorneys’ fees) of all negotiations, proceedings, contests, lawsuits or settlements with respect to any Third-Party Claim shall be borne by the Indemnitor. If the Indemnitor agrees to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, through counsel reasonably satisfactory to Indemnitee, then the Indemnitor shall be entitled to control the conduct of such defense, and shall be responsible for any expenses of the Indemnitee in connection with the defense of such Third-Party Claim so long as the Indemnitor continues such defense until the final resolution of such Third-Party Claim. The Indemnitor shall be responsible for paying all settlements made or judgments entered with respect to any Third-Party Claim the defense of which has been assumed by the Indemnitor. Except as provided in subsection (ii) below, both the Indemnitor and the Indemnitee must approve any settlement of a Third-Party Claim. A failure by the Indemnitee to timely give the Claim Notice shall not excuse Indemnitor from any indemnification liability except only to the extent that the Indemnitor is materially and adversely prejudiced by such failure.
(ii) If the Indemnitor shall not agree to assume the defense of any Third-Party Claim in writing within 20 days after the Claim Notice of such Third-Party Claim has been delivered, or shall fail to continue such defense until the final resolution of such Third-Party Claim, then the Indemnitee may defend against such Third-Party Claim in such manner as it may deem appropriate and the Indemnitee may settle such Third-Party Claim, in its sole discretion, on such terms as it may deem appropriate. The Indemnitor shall promptly reimburse the Indemnitee for the amount of all settlement payments and expenses, legal and otherwise, incurred by the Indemnitee in connection with the defense or settlement of such Third-Party Claim. If no settlement of such Third-Party Claim is made, then the Indemnitor shall satisfy any judgment rendered with respect to such Third-Party Claim before the Indemnitee is required to do so, and pay all expenses, legal or otherwise, incurred by the Indemnitee in the defense against such Third-Party Claim.
(c) Non-Third-Party Claims . Upon discovery of any claim for which Buyers have an indemnification obligation under the terms of this Section 5 which does not involve a claim by a third party against the Indemnitee, the Indemnitee shall give prompt notice to Buyers of such claim and, in any case, shall give Buyers such notice within 30 days of such discovery. A failure by Indemnitee to timely give the foregoing notice to Buyers shall not excuse Buyers from any indemnification liability except to the extent that Buyers are materially and adversely prejudiced by such failure.
(d) Release . Buyers, on behalf of themselves and their Related Parties, hereby release and forever discharge Seller and its individual, joint or mutual, past and present representatives, Affiliates, officers, directors, employees, agents, attorneys, stockholders, controlling persons, subsidiaries, successors and assigns (individually, a “ Releasee ” and collectively, “ Releasees ”) from any and all claims, demands, proceedings, causes of action, orders, obligations, contracts, agreements, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity, which Buyers or any of their Related Parties now have or have ever had against any Releasee. Buyers hereby irrevocably covenant to refrain from, directly or indirectly, asserting any claim or demand, or commencing, instituting or causing to be commenced, any proceeding of any kind against any Releasee, based
upon any matter released hereby. “ Related Parties ” shall mean, with respect to Buyers, (i) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with Buyers, (ii) any Person in which Buyers hold a Material Interest or (iii) any Person with respect to which any Buyer serves as a general partner or a trustee (or in a similar capacity). For purposes of this definition, “ Material Interest ” shall mean direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting securities or other voting interests representing at least ten percent (10%) of the outstanding voting power of a Person or equity securities or other equity interests representing at least ten percent (10%) of the outstanding equity securities or equity interests in a Person.
6. Definitions . As used in this Agreement:
(a) “ Affiliate ” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with the first Person. For the purposes of this definition, “ Control ,” when used with respect to any Person, means the possession, directly or indirectly, of the power to (i) vote 10% or more of the securities having ordinary voting power for the election of directors (or comparable positions) of such Person or (ii) direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “ Controlling ” and “ Controlled ” have meanings correlative to the foregoing;
(b) “ Governmental Authority ” means any domestic or foreign governmental or regulatory authority;
(c) “ Law ” means any federal, state or local statute, law, rule, regulation, ordinance, code, Permit, license, policy or rule of common law;
(d) “ Lien ” means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement, a Person will be deemed to own, subject to a Lien, any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset;
(e) “ Order ” means any judgment, injunction, judicial or administrative order or decree;
(f) “ Permit ” means any government or regulatory license, authorization, permit, franchise, consent or approval; and
(h) “ Person ” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
7. Miscellaneous .
(a) Counterparts . This Agreement may be signed in any number of counterparts, each of which will be deemed an original but all of which together shall constitute one and the same instrument.
(b) Amendments and Waivers .
(i) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.
(ii) No failure or delay by any party in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided will be cumulative and not exclusive of any rights or remedies provided by Law.
(c) Successors and Assigns . The provisions of this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer (including by operation of Law) any of its rights or obligations under this Agreement without the consent of each other party hereto.
(d) No Third Party Beneficiaries . This Agreement is for the sole benefit of the parties hereto and their permitted successors and assigns and nothing herein expressed or implied will give or be construed to give to any Person, other than the parties hereto, those referenced in Section 5 above, and such permitted successors and assigns, any legal or equitable rights hereunder.
(e) Governing Law . This Agreement will be governed by, and construed in accordance with, the internal substantive law of the State of New York.
(f) Headings . The headings in this Agreement are for convenience of reference only and will not control or affect the meaning or construction of any provisions hereof.
(g) Entire Agreement . This Agreement constitutes the entire agreement among the parties with respect to the subject matter of this Agreement. This Agreement supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof of this Agreement.
(h) Severability . If any provision of this Agreement or the application of any such provision to any Person or circumstance is held invalid, illegal or unenforceable in any respect by a court of competent jurisdiction, the remainder of the provisions of this Agreement (or the application of such provision in other jurisdictions or to Persons or circumstances other than those to which it was held invalid, illegal or unenforceable) will in no way be affected,
impaired or invalidated, and to the extent permitted by applicable Law, any such provision will be restricted in applicability or reformed to the minimum extent required for such provision to be enforceable. This provision will be interpreted and enforced to give effect to the original written intent of the parties prior to the determination of such invalidity or unenforceability.
(i) Notices . Any notice, request or other communication hereunder shall be given in writing and shall be served either personally, by overnight delivery or delivered by mail, certified return receipt and addressed to the following addresses:
(a) If to Buyers:
(b) If to Seller:
[Signature Page Follows]
[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered, effective as of the date first above written.
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“SELLER” |
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ACTIVE WITH ME, INC. |
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By: |
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Name: |
Jim Tripp |
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Title: |
Chief Executive Officer |
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“BUYER” |
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Sheri Strangway |
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No. of Shares: |
1,500,000 |
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Exhibit 21
Rasna Therapeutics, Inc. - Delaware
Exhibit 99.1
RASNA THERAPEUTICS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
RASNA THERAPEUTICS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
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CONTENTS |
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PAGE |
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
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F-1 |
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CONSOLIDATED BALANCE SHEETS |
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F-2 |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS |
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F-3 |
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CONSOLIDATED STATEMENTS OF CASH FLOWS |
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F-4 |
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CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT |
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F-5 |
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS |
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F-6 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholder
Rasna Therapeutics Limited
London, United Kingdom
We have audited the consolidated balance sheets of Rasna Therapeutics Limited, as of 31 March 2016 and 2015, and the related consolidated statements of comprehensive loss, shareholder’s deficit, and cash flows for the each of the two years in the period ended 31 March 2016. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Rasna Therapeutics Limited as of 31 March 2016 and 2015, and the results of its operations and its cash flows for each of the two years in the period ended 31 March 2016, in accordance with accounting principles generally accepted in the United States of America.
/s/ BDO LLP
BDO LLP
London, United Kingdom
16 August 2016
CONSOLIDATED BALANCE SHEETS
AT 31 MARCH 2016 AND 2015
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31 March |
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31 March |
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2016 |
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2015 |
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$ |
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$ |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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5,220,440 |
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391,513 |
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Other receivables |
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15,510 |
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9,762 |
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Related party receivables |
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10,209 |
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— |
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TOTAL ASSETS |
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5,246,159 |
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401,275 |
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LIABILITIES AND SHAREHOLDER’S DEFICIT |
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Liabilities |
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Current Liabilities: |
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Accounts and other payables |
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318,039 |
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628,781 |
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Related party payables |
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622,815 |
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720,810 |
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Subscriptions received in advance, net |
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6,753,754 |
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— |
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Total Current Liabilities |
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7,694,608 |
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1,349,591 |
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TOTAL LIABILITIES |
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7,694,608 |
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1,349,591 |
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Commitment and contingencies (Note 8) |
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— |
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— |
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Shareholder’s deficit: |
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Common stock (1 ordinary share of £1 issued and outstanding) |
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2 |
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2 |
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Accumulated deficit |
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(2,448,451 |
) |
(948,318 |
) |
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Total Shareholder’s deficit |
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(2,448,449 |
) |
(948,316 |
) |
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TOTAL LIABILITIES AND SHAREHOLDER’S DEFICIT |
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5,246,159 |
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401,275 |
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The accompanying notes are an integral part of these financial statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
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2016 |
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2015 |
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$ |
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$ |
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Revenue |
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— |
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— |
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Gross profit |
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— |
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— |
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Cost of revenue |
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Legal and professional fees |
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(135,176 |
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(27,400 |
) |
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Foreign currency exchange gain |
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3,701 |
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1,984 |
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Research and development expenses |
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(1,056,644 |
) |
(584,261 |
) |
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General and administrative expenses |
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(312,014 |
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(338,641 |
) |
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Loss from operations |
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(1,500,133 |
) |
(948,318 |
) |
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Loss before income tax |
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(1,500,133 |
) |
(948,318 |
) |
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Income tax |
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— |
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— |
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Total comprehensive loss |
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(1,500,133 |
) |
(948,318 |
) |
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Loss per share (Basic and diluted) |
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(1,500,133 |
) |
(948,318 |
) |
The accompanying notes are an integral part of these financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
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2016 |
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2015 |
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$ |
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$ |
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Cash flows from operating activities: |
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Net loss |
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(1,500,133 |
) |
(948,318 |
) |
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Adjustments to reconcile net loss to net cash generated by operating activities: |
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Increase in related party receivables |
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(10,209 |
) |
— |
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Increase in other receivables |
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(5,748 |
) |
(9,762 |
) |
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(Decrease) / Increase in accounts and other payables |
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(310,742 |
) |
628,781 |
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(Decrease) / Increase in related party payables |
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(97,995 |
) |
720,810 |
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NET CASH (USED IN)/GENERATED BY OPERATING ACTIVITIES |
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(1,924,827 |
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391,511 |
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Cash flow from financing activities: |
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Issuance of share capital |
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— |
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2 |
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Subscriptions received in advance, net |
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6,753,754 |
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— |
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NET CASH GENERATED BY FINANCING ACTIVITIES |
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6,753,754 |
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2 |
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NET INCREASE IN CASH AND CASH EQUIVALENTS |
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4,828,927 |
|
391,513 |
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Cash and cash equivalents at beginning of year |
|
391,513 |
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— |
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|
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CASH AND CASH EQUIVALENTS AT END OF YEAR |
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5,220,440 |
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391,513 |
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|
|
|
2016 |
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2015 |
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|
|
|
$ |
|
$ |
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|
Supplemental Cash Flow Information: |
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|
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|
|
|
|
|
|
|
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NON CASH FINANCING ACTIVITY: |
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|
|
|
|
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Expenses paid on behalf of Arna Therapeutics Limited |
|
113,651 |
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1,817,471 |
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Expenses paid on behalf of Tiziana Pharma Limited |
|
10,209 |
|
— |
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The accompanying notes are an integral part of these financial statements
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
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Common |
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Accumulated |
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Shareholder’s |
|
|
|
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Stock |
|
Deficit |
|
deficit |
|
|
|
|
$ |
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$ |
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$ |
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Balance as at 1 April 2014 |
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2 |
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— |
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2 |
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Loss for year |
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— |
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(948,318 |
) |
(948,318 |
) |
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|
|
|
|
|
|
|
|
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Balance as at 31 March 2015 |
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2 |
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(948,318 |
) |
(948,316 |
) |
|
|
|
|
|
|
|
|
|
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Loss for year |
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— |
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(1,500,133 |
) |
(1,500,133 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as at 31 March 2016 |
|
2 |
|
(2,448,451 |
) |
(2,448,449 |
) |
The accompanying notes are an integral part of these financial statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
1. GENERAL INFORMATION
Rasna Therapeutics Limited (“the Company”) is a private limited company incorporated in England and Wales under the U.K. Companies Act on 10 February 2014 (inception). The address of its registered office is 18 South Street, Mayfair, London, W1K 1DG. The company only has one segment of activity which is that of is research and development in clinical drugs for the treatment of leukemia
These financial statements are presented in United States dollars (“USD”) which is also the functional currency of the primary economic environment in which the Company operates. Foreign operations are included in accordance with policies set out in note 2 below.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all the periods presented unless otherwise stated.
Basis of preparation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
These financial statements were prepared for purposes of inclusion in a Form 8-K to be filed with the United States Securities and Exchange Commission. These financial statements do not constitute statutory accounts within the meaning of section 434 of Companies Act 2006 in the United Kingdom. The Company has prepared the statutory financial statements for FY 2015, as permitted by rules and regulations of the Companies Act 2006, which have been filed with the Registrar of Companies in the United Kingdom. The Independent Auditors’ Report of Grant Thornton LLP on the Statutory Financial Statements for FY 2015 was unqualified and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The statutory financial statements of the Company for FY 2016 will be prepared in accordance with the Companies Act 2006 and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and Ireland and applicable law, for the year ended March 31, 2016, which will be filed with the Registrar of Companies when issued by its directors.
Consolidation
The financial statements consolidate Rasna Therapuetics Limited and its subsidiary Falconridge Holdings Limited in which we own 100% of the voting rights.
Going concern
The directors are currently in the process of restructuring the company by down streaming and combining the business with a number of other entities.
The directors will ensure that the obligations of the company are met prior to the merger and do not believe that the financial statements need to be adjusted. Additionally, as this is a merger with another entity, the financial statements are not required to be presented under the liquidation basis of accounting in accordance with ASC 205 Presentation of Financial Statements. See note 8 for additional information on this transaction.
Subscriptions received in advance
During November 2016, the Company entered into a securities purchase agreement with a number of new subscribers of shares in the Company at a price of $0.40 per share price. A total of 19.2 million ordinary shares were subscribed for and paid during December 2015, net of issue costs of $0.9 million. Such common stock had not been issued to subscribers as at March 31, 2016.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting year. We evaluate our estimates on an ongoing basis, including those related to income taxes and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on deposit with banks with an original maturity of three months or less.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
Fair Value
The carrying value of our financial instruments, including cash and cash equivalents, related party balances, accounts payable and other liabilities, approximates fair value because of the short-term nature of such financial instruments. We measure certain other assets, including our nonmarketable equity securities, at fair value on a nonrecurring basis when they are deemed to be other-than-temporarily impaired.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash and cash equivalents.
Deposits held with banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and bear minimal risk. We believe that the institutions that hold our instruments are financially sound and are subject to minimal credit risk.
Income Taxes
We account for income taxes using the liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in our tax returns. Deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. We assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent we believe, based upon the weight of available evidence, that it is more likely than not that all or a portion of deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
We account for uncertainty in income taxes recognized in our financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination by the taxing authorities, based on the technical merits of the position. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate. The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions. In the event the Group receives an assessment of interest and/or penalties, the interest would be classified as interest expense while the penalties would be classified as operating expense.
Earnings per share
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the year. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the year using the treasury stock method. Dilutive potential common shares include outstanding stock options, stock awards, and shared performance stock awards. There is no difference between basic and diluted EPS for Rasna Therapeutics Limited.
The Basic and Diluted EPS is calculated as follows:
|
|
|
2016 |
|
2015 |
|
||
|
Loss for the year |
|
(1,500,133 |
) |
(948,318 |
) |
||
|
Number of shares |
|
1 |
|
1 |
|
||
|
EPS ( Basic and diluted) |
|
$ |
(1,500,133 |
) |
$ |
(948,318 |
) |
Foreign Currency
Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the Company operates. The financial statements are presented in United States dollars (“USD”), which is the Company’s functional and presentational currency.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
Recent Accounting Pronouncements Not Yet Adopted (Continued)
Foreign currency transactions are translated using the rate of exchange applicable at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year end of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive loss.
Research and development
Expenditure on research and development is charged to the statement of comprehensive loss in the year in which it is incurred with the exception of expenditure incurred in respect of the development of major new products where the outcome of those projects is assessed as being reasonably certain as regards viability and technical feasibility. Such expenditure is capitalised and amortised straight line over the estimated period of sale for each product, commencing in the year that sales of the product are first made. To date, the Company has not capitalized any such expenditures.
Recent Accounting Pronouncements Not Yet Adopted
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern. The guidance in this update applies to all entities and require their management to assess the entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in United States auditing standards. Specifically, the update (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The update will be effective for the annual period ending after 15 December 2016 and for annual periods and interim periods thereafter. Early application is permitted. The amendments of ASU 2014-15, when adopted, are not expected to have a material impact on our financial statements. Management is in the process of assessing the impact of this standard
Recent Accounting Pronouncements Not Yet Adopted (Continued)
On 12 June 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements, which amends a number of topics in the FASB Accounting Standards Codification. The update is a part of an ongoing project on the FASB’s agenda to facilitate Codification updates for non-substantive technical corrections, clarifications, and improvements that are not expected to have a significant effect on accounting practice or create a significant administrative cost to most entities. The ASU will apply to all reporting entities within the scope of the affected accounting guidance. Certain amendments in the update require transition guidance and are effective for all entities for fiscal years, and interim periods within those years, beginning after 15 December 2015. Early adoption is permitted, including adoption in an interim period. Management is in the process of assessing the impact of this standard
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
3. TAXATION
The provision for income taxes consist of the following:
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Current: |
|
|
|
|
|
|
Corporation Tax |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
— |
|
|
Deferred: |
|
|
|
|
|
|
Corporation Tax |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
— |
|
Deferred tax assets comprise the following:
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Deferred tax assets: |
|
|
|
|
|
|
Brought forward |
|
189,250 |
|
— |
|
|
Net operating losses |
|
300,028 |
|
189,250 |
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
489,278 |
|
189,250 |
|
|
Valuation allowance |
|
(489,278 |
) |
(189,250 |
) |
|
|
|
|
|
|
|
|
Total deferred tax assets, net of valuation allowance |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Deferred tax liabilities |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities) |
|
— |
|
— |
|
The following is a reconciliation of the statutory corporation tax rate to our effective tax rate:
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Tax benefit at corporation tax statutory rate 20% at 2016 and 2015 |
|
(300,028 |
) |
(189,250 |
) |
|
Valuation Allowance |
|
300,028 |
|
189,250 |
|
|
|
|
|
|
|
|
|
Income tax expense |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Net operating losses |
|
1,500,133 |
|
948,318 |
|
The company is subject to the UK taxing jurisdiction. The examination period for a particular tax year by HMRC is two years. Accordingly, the periods to 31 March 2016 are available for examination. Tax penalties paid for 2016 and 2015 were $nil. The losses are available to carry forward indefinitely so long as they are utilised against the same activity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
4. OTHER RECEIVABLES
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Other receivables |
|
15,510 |
|
9,762 |
|
None of the amounts above are past due. The directors consider that the carrying amount of other receivables is approximately equal to their fair value.
5. ACCOUNTS AND OTHER PAYABLES
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Accounts payables |
|
113,038 |
|
280,559 |
|
|
Other accruals |
|
205,001 |
|
348,222 |
|
|
|
|
|
|
|
|
|
|
|
318,039 |
|
628,781 |
|
6. RELATED PARTY TRANSACTIONS
During the normal course of its business, the company enters into various transactions with entities that are both business and individuals. The following is a summary of the related party transactions and balances for the years ended 31 March 2016 and 2015.
Related party receivables are comprised of:
Tiziana Pharma Limited
Tiziana Pharma Limited’s directors, Gabriele Cerrone and Riccardo Dalla Favera, are both also directors of the Company. As at 31 March 2016 the Company was owed $10,209, which was incurred in respect of expenses paid on behalf of Tiziana Pharma Limited by Rasna Therapeutics Limited. No amounts were incurred or outstanding during 2015.
Related party payables are comprised of:
Arna Therapeutics Limited
Arna Therapeutics Limited’s directors, Gabriele Cerrone, Jim Mervis and Riccardo Dalla Favera are also directors of the Company. As at the 31 March 2016 and 2015 the Company owed $607,159 and $720,810, respectively, to Arna Therapeutics Limited. This represented a bank account held on behalf of Arna Therapeutics Limited; the movement on the account is expenses paid by Rasna Therapeutics Limited.
Riccardo Dalla Favera
Riccardo Dalla Favera is a Director of Rasna Therapeutics Limited. During the years ended 31 March 2016 and 2015 Riccardo Dalla Favera charged the Company for consulting services of $12,500 in each year, which is included in Administrative expense on the statement of comprehensive loss. At 31 March 2016 the Company owed Riccardo Dalla Fevera $12,500 (2015: $Nil).
James Mervis
James Mervis is a Director of Rasna Therapeutics Limited. During the years ended 31 March 2016 and 2015 James Mervis charged the Company $2,197 and $55,067, respectively, for travel expenses and consulting services, which is included in Administrative expense on the statement of comprehensive loss. At 31 March 2016 $3,156 (2015: $Nil) was due to James Mervis.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
6. RELATED PARTY TRANSACTIONS (continued)
Other related party transactions:
Gabriele Cerrone
Gabriele Cerrone has a significant indirect ownership and is a director of the Company. In the years ended 31 March 2016 and 2015 he recharged costs and expenses related to travel, hotels and entertaining totalling $47,115 and $46,701, respectively, which is included in administrative expense on the statement of comprehensive loss.
During the period ended 31 March 2015 Gabriele Cerrone charged the Company consulting expenses of $50,000 which is included in Administrative expense on the statement of comprehensive loss. No amount was incurred in 2016.
No amounts were outstanding at 31 March 2016 and 2015.
7. COMMITMENTS AND CONTINGENCIES
There are no commitments or contingencies at 31 March 2016 and 2015. There are no lease costs within the business. The reason for this is that most of the work is undertaken via Consultancy and Research agreements. There will be leased assets within these other operations that are recharged to the company as part of the agreement however these cannot be readily ascertained.
8. SUBSEQUENT EVENTS
On 27 April 2016, Rasna Therapeutics Limited entered into a sale agreement with Rasna Therapeutics, Inc., a related party (see note 6), pursuant to which Rasna Therapeutics Limited sold its stake, represented by one share of the issued share capital, in Falconridge Holdings Limited to Rasna Therapeutics, Inc for $1. This transaction does not impact the Company’s 31 March 2016 financial statements.
During April 2016, the Company entered into an amended and restated securities purchase agreement to replace the existing securities purchase agreement entered into in November 2015 for shares to be issued by the Company, to be replaced with shares issued by Rasna Therapeutics Inc., an entity with common management to the Company. Such shares were issued at the same price of $0.40 per share. At the time of the execution of such agreement, the Company was relieved of its obligation to issue common stock to subscribers of its shares by those subscribers, and the existing liability was replaced with a payable to Rasna Therapeutics Inc.
On 5 May 2016, Rasna Therapeutics Limited entered into a sale agreement with Falconridge Holdings Limited, a related party, pursuant to which Rasna Therapeutics Limited sold its intellectual property to Falconridge Holdings Limited for $236,269. As at 31 March 2016 and 2015, this intellectual property was not capitalized on the Company’s balance sheets. This transaction does not impact the Company’s 31 March 2016 financial statements.
ARNA THERAPEUTICS LIMITED
FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
ARNA THERAPEUTICS LIMITED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
|
CONTENTS |
|
PAGE |
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
|
F-12 |
|
|
|
|
|
BALANCE SHEETS |
|
F-13 |
|
|
|
|
|
STATEMENTS OF COMPREHENSIVE LOSS |
|
F-14 |
|
|
|
|
|
STATEMENTS OF CASH FLOWS |
|
F-15 |
|
|
|
|
|
STATEMENTS OF SHAREHOLDERS’ EQUITY |
|
F-16 |
|
|
|
|
|
NOTES TO THE FINANCIAL STATEMENTS |
|
F-17 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Arna Therapeutics Limited
Tortola, British Virgin Islands
We have audited the balance sheets of Arna Therapeutics Limited, as of 31 March 2016 and 2015, and the related statements of comprehensive loss, shareholders’ equity, and cash flows for the each of the two years in the period ended 31 March 2016. 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 audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Arna Therapeutics Limited as of 31 March 2016 and 2015, and the results of its operations and its cash flows for each of the two years in the period ended 31 March 2016, in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
We draw attention to note 9 to the accompanying financial statements, which describes significant transactions and relationships with certain related parties.
/s/ BDO LLP
BDO LLP
London, United Kingdom
16 August 2016
BALANCE SHEETS
AS AT 31 MARCH 2016 AND 31 MARCH 2015
The accompanying notes are an integral part of these financial statements
STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
|
|
|
2016 |
|
2015 |
|
||
|
|
|
$ |
|
$ |
|
||
|
|
|
|
|
|
|
||
|
Revenue |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Cost of revenue |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Gross profit |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Research and development costs undertaken by a related party |
|
— |
|
1,125,000 |
|
||
|
Consultancy fees third parties |
|
67,500 |
|
67,500 |
|
||
|
Consultancy fees related parties |
|
350,000 |
|
350,000 |
|
||
|
Legal and professional fees |
|
99,930 |
|
103,230 |
|
||
|
Equity-Based Payments to Non-Employees |
|
60,676 |
|
117,304 |
|
||
|
General and administrative expenses |
|
— |
|
5,364 |
|
||
|
|
|
|
|
|
|
||
|
Loss from operations |
|
(578,106 |
) |
(1,768,398 |
) |
||
|
|
|
|
|
|
|
||
|
Loss before income tax |
|
(578,106 |
) |
(1,768,398 |
) |
||
|
|
|
|
|
|
|
||
|
Income tax expense |
|
— |
|
— |
|
||
|
|
|
|
|
|
|
||
|
Net loss and total comprehensive loss for the year |
|
(578,106 |
) |
(1,768,398 |
) |
||
|
|
|
|
|
|
|
||
|
Loss per share (Basic and Diluted) |
|
$ |
0.016 |
|
$ |
0.05 |
|
The accompanying notes are an integral part of these financial statements
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
Net loss |
|
(578,106 |
) |
(1,768,398 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
Equity-Based Payments to Non-Employees |
|
60,676 |
|
117,304 |
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
Decrease in related party receivable |
|
113,651 |
|
1,817,471 |
|
|
Increase in accounts and other payables |
|
53,779 |
|
113,026 |
|
|
Increase/(Decrease) in related party payables |
|
350,000 |
|
(279,403 |
) |
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH GENERATED FROM INVESTING ACTIVITIES |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH GENERATED FROM FINANCING ACTIVITIES |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
NET MOVEMENT IN CASH AND CASH EQUIVALENTS |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR |
|
— |
|
— |
|
Supplemental Cash Flow Information :
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
NON CASH FINANCING ACTIVITY: |
|
|
|
|
|
|
Expenses paid by Rasna Therapeutics Limited on behalf of the Company |
|
113,651 |
|
1,817,471 |
|
The accompanying notes are an integral part of these financial statements
STATEMENTS OF SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
|
|
|
|
|
Additional |
|
|
|
Total |
|
|
|
|
Common |
|
paid in |
|
Accumulated |
|
Shareholders |
|
|
|
|
stock |
|
capital |
|
Deficit |
|
equity |
|
|
|
|
$ |
|
$ |
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2014 |
|
356,503 |
|
5,568,497 |
|
(2,477,544 |
) |
3,447,456 |
|
|
Loss for year |
|
— |
|
— |
|
(1,768,398 |
) |
(1,768,398 |
) |
|
Equity-Based Payments to Non-Employees |
|
— |
|
117,304 |
|
— |
|
117,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 March 2015 |
|
356,503 |
|
5,685,801 |
|
(4,245,942 |
) |
1,796,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for year |
|
— |
|
— |
|
(578,106 |
) |
(578,106 |
) |
|
Equity-Based Payments to Non-Employees |
|
— |
|
60,676 |
|
— |
|
60,676 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as at 31 March 2016 |
|
356,503 |
|
5,746,477 |
|
(4,824,048 |
) |
1,278,932 |
|
The accompanying notes are an integral part of these financial statements
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
1. GENERAL INFORMATION
Arna Therapeutics Limited (“the Company” or “Arna”) is a company incorporated in the British Virgin Islands under applicable law and regulation. The address of its registered office is PO Box 3175, Road Town, Tortola, British Virgin Islands. The company was incorporated on 30 September 2013. The company only has one segment of activity which is that of a clinical stage biotechnology company focussed on targeted drugs to treat diseases in oncology and immunology, mainly focussing on the treatment of Leukemia.
These financial statements are presented in United States dollars (“USD”) which is also the functional currency of the primary economic environment in which the Company operates. Foreign operations are included in accordance with policies set out in note 2 below.
2. ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied consistently to all the years presented unless otherwise stated.
Basis of preparation
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). These financial statements were prepared for purposes of inclusion in a Form 8-K to be filed with the United States Securities and Exchange Commission.
Going concern
The directors are currently in the process of restructuring the company by down streaming and combining the business with a number of other entities. The directors will ensure that the obligations of the company are met prior to the merger and do not believe that the financial statements need to be adjusted. Additionally, as this is a merger with another entity, the financial statements are not required to be presented under the liquidation basis of accounting in accordance with ASC 205 Presentation of Financial Statements. See note 11 for additional information on this transaction.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. We evaluate our estimates on an ongoing basis, including those related to the fair values of stock based awards, income taxes and contingent liabilities, among others. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates and such differences could be material to our consolidated financial position and results of operations.
Fair Value
The carrying value of our financial instruments, including related party balances, accounts payable and accrued liabilities, approximates fair value because of the short-term nature of such financial instruments.
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist principally of related party receivables.
Intangible assets
Intangible assets are made up solely by in-process research and development, (“IPR&D”). IPR&D assets represent the fair value assigned to technologies that we acquire, which at the time of acquisition have not reached technological feasibility and have no alternative future use. Intangible assets, such as the acquired in-process research and development costs, are considered to have an indefinite useful life until the completion or abandonment of the associated research and development projects at which time they will be amortized on a straight-line basis over the shorter of their economic or legal useful life.
Management evaluates indefinite life intangible assets for impairment on an annual basis and on an interim basis if events or changes in circumstances between annual impairment tests indicate that the asset might be impaired. The ongoing evaluation for impairment of its indefinite life intangible assets requires significant management estimates and judgment. Management reviews definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There were no impairment charges during the years ended 31 March 2016 or 31 March 2015.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
Research and development
Expenditure on research and development is charged to the statements of operation and total comprehensive loss in the year in which it is incurred with the exception of expenditure incurred in respect of the development of major new products where the outcome of those projects is assessed as being reasonably certain as regards viability and technical feasibility. Such expenditure is capitalised and amortised straight line over the estimated period of sale for each product, commencing in the year that sales of the product are first made. To date, the Company has not capitalized any such expenditures.
Foreign Currency
Items included in the financial statements are measured using their functional currency, being the currency of the primary economic environment in which the company operates. The financial statements are presented in USD, which is the company’s functional and presentational currency.
Foreign currency transactions are translated using the rate of exchange applicable at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-translation at the year end of monetary assets and liabilities denominated in foreign currencies are recognised in the statements of operations.
Earnings per share
Basic earnings per share (“EPS”) is computed based on the weighted average number of shares of common stock outstanding during the year. Diluted EPS is computed based on the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the year using the treasury stock method. Dilutive potential common shares include outstanding stock options, stock awards, and shared performance stock awards.
The Basic and diluted EPS is calculated as follows:
|
|
|
2016 |
|
2015 |
|
||
|
Loss for the year |
|
(578,106 |
) |
(1,768,398 |
) |
||
|
|
|
|
|
|
|
||
|
Number of shares |
|
35,650,289 |
|
35,650,289 |
|
||
|
|
|
|
|
|
|
||
|
EPS ( Basic and diluted) |
|
$ |
(0.016 |
) |
$ |
(0.05 |
) |
Equity-Based Payments to Non-Employees
We record stock-based compensation awards based on fair value as of the grant date. We use the Black-Scholes-Merton option-pricing model to estimate the fair value of our stock options on the dates of grant.
Given our limited history with employee grants, we use the “simplified” method in estimating the expected term for stock option awards. The “simplified” method, is calculated as the average of the contractual term and the average vesting period. Estimated volatility is based upon the historical volatility of similar entities whose share prices are publicly available, as we did not have sufficient trading history for our common stock. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award is granted, with a maturity equal to the expected term of the stock option award. The expected dividend assumption is based on our current expectations about our anticipated dividend policy.
We amortize the fair value of an award expected to vest on a straight-line basis over the requisite service period of the award, which is generally the period from the grant date to the end of the vesting period. For awards with service only conditions and a graded vesting schedule, we elected to recognize costs on a straight-line basis. We use historical data to estimate the number of future forfeitures.
Recent Accounting Pronouncements Not Yet Adopted
On 19 June 2014, the FASB issued ASU 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide a Performance Target Could Be Achieved after the Requisite Service Period. The update is intended to resolve the diverse accounting treatment of these types of awards in practice. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. A reporting entity should apply existing guidance in “Compensation — Stock Compensation (Topic 718)” as it relates to awards with performance conditions that affect vesting to account for such awards. As such, the performance target should not be reflected in estimating the grant-date fair value of the award.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
Recent Accounting Pronouncements Not Yet Adopted (continued)
Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved, and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The ASU is effective for interim and annual reporting periods that begin after 15 December 2015. Management has determined that the implementation of this pronouncement does not have a material impact to the Company’s net loss, financial position or cash flows. Management is in the process of assessing the impact of this standard.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern. The guidance in this update applies to all entities and require their management to assess the entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in United States auditing standards. Specifically, the update (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim periods, (3) provides principles for considering the mitigating effect of management’s plans, (4) requires certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) requires an express statement and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The update will be effective for the annual period ending after 15 December 2016 and for annual periods and interim periods thereafter. Early application is permitted. The amendments of ASU 2014-15, when adopted, are not expected to have a material impact on our financial statements. Management is in the process of assessing the impact of this standard.
In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-09, Compensation- Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting to provide guidance that changes the accounting for certain aspects of share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. We are required to adopt this standard in the first quarter of fiscal 2018, but have early adopted this standard during the fourth quarter of fiscal 2016 as permitted. Management has determined that the implementation of this pronouncement does not have a material impact to the Company’s net loss, financial position or cash flows. Management is in the process of assessing the impact of this standard.
On 12 June 2015, the FASB issued ASU 2015-10, Technical Corrections and Improvements, which amends a number of topics in the FASB Accounting Standards Codification. The update is a part of an ongoing project on the FASB’s agenda to facilitate Codification updates for non-substantive technical corrections, clarifications, and improvements that are not expected to have a significant effect on accounting practice or create a significant administrative cost to most entities. The ASU will apply to all reporting entities within the scope of the affected accounting guidance. Certain amendments in the update require transition guidance and are effective for all entities for fiscal years, and interim periods within those years, beginning after 15 December 2015. Management is in the process of assessing the impact of this standard.
3. TAXATION
Arna Therapeutics Limited is registered in British Virgin Islands, with a standard rate of tax of 0%, and as such has no tax liability in this jurisdiction. Additionally, there are no material uncertain tax positions in any of the jurisdictions that the Company operates.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
4. COMMON STOCK
|
|
|
2016 |
|
2015 |
|
||
|
|
|
|
|
|
|
||
|
Issued, allotted, called up and fully paid: |
|
|
|
|
|
||
|
Number of shares |
|
35,650,289 |
|
35,650,289 |
|
||
|
|
|
|
|
|
|
||
|
Ordinary shares at par value of $0.01 |
|
$ |
356,503 |
|
$ |
356,503 |
|
All shares are Ordinary shares and entitled to one vote per share with an equal share of any dividends declared. On winding up of the company all shares have an equal right to the proceeds of the wind up.
Since Incorporation the following shares were issued, on 22 October 2013, 15,000,000 at $0.01 per share on 23 October 2014, 7,692,308 at $0.13 per share and on 24 January 2014, 12,957,981 at $0.28 per share.
5. ADDITIONAL PAID-IN CAPITAL
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
|
|
|
|
|
|
|
Opening balance |
|
5,685,801 |
|
5,568,497 |
|
|
Stock based compensation |
|
60,676 |
|
117,304 |
|
|
|
|
|
|
|
|
|
|
|
5,746,477 |
|
5,685,801 |
|
6. EQUITY-BASED PAYMENTS TO NON-EMPLOYEES
The company operates share-based payment arrangements to remunerate non-employees in the form of a share option scheme. The exercise price of the option is normally equal to the market price of an ordinary share in the company at the date of grant. The options may be exercised over periods ranging from one to four years from the date of grant and lapse if not exercised by that date. The options are settled by issuing new shares in the company.
The following table summarises stock option activity:
|
|
|
|
|
Weighted |
|
|
|
|
Number |
|
Average |
|
|
|
|
of |
|
Exercise |
|
|
|
|
Options |
|
Price $ |
|
|
Granted in year to 31 March 2015 |
|
1,820,000 |
|
0.20 |
|
|
|
|
|
|
|
|
|
Options outstanding at 31 March 2015 |
|
1,820,000 |
|
0.20 |
|
|
|
|
|
|
|
|
|
Options Forfeited |
|
(270,000 |
) |
0.20 |
|
|
|
|
|
|
|
|
|
Options outstanding at 31 March 2016 |
|
1,550,000 |
|
0.20 |
|
|
|
|
|
|
|
|
|
Options exercisable, 31 March 2016 |
|
775,000 |
|
0.20 |
|
|
|
|
|
|
|
|
|
Options expected to vest, 31 March 2016 |
|
— |
|
— |
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
6. EQUITY-BASED PAYMENTS TO NON-EMPLOYEES (Continued)
The following table summarises information about stock options outstanding and exercisable as of 31 March 2015 and 31 March 2016:
|
|
|
|
|
|
|
Weighted |
|
Weighted |
|
|
|
|
|
|
Number |
|
Average |
|
Average |
|
|
|
|
Range of |
|
of |
|
Exercise |
|
Remaining |
|
|
|
|
Exercise Price $ |
|
Options |
|
Price $ |
|
life |
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
0.20 |
|
1,820,000 |
|
0.20 |
|
12 years |
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 |
|
0.20 |
|
1,550,000 |
|
0.20 |
|
11 years |
|
The weighted average fair value of the options granted during the prior year was determined using the Black-Scholes option pricing model and was 13 cents per option. The significant inputs to the model were a weighted average share price of 20 cents, exercise price as shown above based on the fact that all outstanding options were issued at an exercise price of $0.20, an expected option life of 1-4 years, expected volatility of 59.62% and a risk-free rate of return of 0.51-1.27%. The volatility is based on analysis of the volatility of the historical share price of Tiziana Life Sciences plc a listed entity similar to Arna. The total share-based payment expense recognised in the statement of comprehensive income in respect of share options granted to non-employees is $60,676 (2015: $117,304).
7. INTANGIBLE ASSETS
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
In-process research and development |
|
1,300,000 |
|
1,300,000 |
|
On 17 December 2013 the Company’s shareholder, Panetta Partners Limited, transferred 5,000,000 of its shares in Arna Therapeutics Limited to Eurema Consulting S.r.l. and 5,000,000 shares in Arna Therapeutics Limited to TES Pharma S.r.l. In exchange for the shares, Panetta Partners Limited obtained intellectual property in the form of IPR&D from TES Pharma S.r.l and Eurema Consulting S.r.l. Panetta Partners Limited then assigned the IPR&D to Arna Therapeutics Limited, which was accounted for as a capital contribution. The fair value of the shares exchanged for the IPR&D was $0.13 per share; in addition the issue price for shares in October 2013 was $0.13 per share (shares issued post acquisition of the IPR&D were issued at $0.28) and accordingly the Company valued the IPR&D at $1.3 million. The IPR&D is considered to have an indefinite life and there were no impairment charges recognised during the years ended 31 March 2016 or 31 March 2015.
8. ACCOUNTS PAYBLE AND ACCRUED EXPENSES
|
|
|
2016 |
|
2015 |
|
|
|
|
$ |
|
$ |
|
|
Accounts payable |
|
— |
|
2,114 |
|
|
Accrued expenses |
|
78,227 |
|
22,334 |
|
|
|
|
|
|
|
|
|
|
|
78,227 |
|
24,448 |
|
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
9. RELATED PARTY TRANSACTIONS
During the normal course of its business, the company enters into various transactions with entities that are both business and individuals. The following is a summary of the related party transactions and balances for the years ended 31 March 2016 and 2015.
|
|
|
Rasna
|
|
Panetta
|
|
TES
|
|
Eurema
|
|
Non-
|
|
|
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
|
Balance due from /(to) related parties at 1 April 2014 |
|
2,538,281 |
|
(125 |
) |
— |
|
(25,000 |
) |
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and Development provided |
|
|
|
— |
|
(1,125,000 |
) |
— |
|
— |
|
|
Consultancy services provided |
|
— |
|
— |
|
— |
|
(100,000 |
) |
(263,810 |
) |
|
Payments made |
|
(1,817,471 |
) |
125 |
|
1,125,000 |
|
— |
|
188,810 |
|
|
Balance due from / (to) related parties at 31 March 2015 |
|
720,810 |
|
— |
|
— |
|
(125,000 |
) |
(75,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses paid out on Arna’s behalf |
|
(113,651 |
) |
— |
|
— |
|
— |
|
— |
|
|
Consultancy services provided |
|
— |
|
— |
|
— |
|
(100,000 |
) |
(250,000 |
) |
|
Balance due from / (to) related parties at 31 March 2016 |
|
607,159 |
|
— |
|
— |
|
(225,000 |
) |
(325,000 |
) |
There is no interest charged on the balances with related parties. There are no defined repayment terms and such amounts can be called for payment at any time.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
9. RELATED PARTY TRANSACTIONS (Continued)
(1) Rasna Therapeutics Limited
At 31 March 2016, the company was owed $607,159 (2015: $720,810) from Rasna Therapeutics Limited (UK), a company of which Gabriele Cerrone, James Mervis and Riccardo Dalla Favera are also common directors with Arna (see below non-corporate related parties). The amounts are in respect of two bank accounts which were transferred to Rasna Therapeutics Limited from the company. In the year ended 31 March 2016, Rasna paid $113,651 of expenses on behalf of Arna (2015: $1,817,471).
(2) Panetta Partners Limited
Panetta Partners Limited, a shareholder of Arna, is a company in which Gabriele Cerrone has a significant interest and also serves as director. At 31 March 2014 Arna Therapeutics Limited owed Panetta Partners Limited $125 in respect of expenses incurred, in the year to 31 March 2015 these were repaid. At 31 March 2016 and 2015 there was no balance owed to or from Panetta Partners Limited.
(3) TES Pharma Srl
TES Pharma Srl, is a company in which Roberto Pellicceri, director of Arna, is the sole shareholder. In the year ended 31 March 2015 TES Phama Srl charged the company $1,125,000 in respect of research fees. No amount was incurred in the year ended 31 March 2016 and no amount was outstanding at 31 March 2016 and 2015.
(4) Eurema Consulting S.r.l.
Eurema Consulting S.r.l. is a significant shareholder of Arna Therapeutics Limited. During the year ended 31 March 2016 Eurema Consulting S.r.l. supplied Arna Therapeutics Limited with consulting services amounting to $100,000 (2015 $100,000). At 31 March 2016 Eurema Consulting S.r.l was owed $225,000 (2015: $125,000) by Arna Therapeutics Limited.
(5) Non-corporate related parties.
Riccardo Dalla Favera
Riccardo Dalla Favera is a Director of Arna Therapeutics Limited. In the year ended 31 March 2016 Riccardo Dalla Favera charged the company $25,000 (2015: $25,000) in respect of consultancy fees. At 31 March 2016 the balance due to Riccardo Dalla Favera was $43,750 (2015: $18,750).
James Mervis
James Mervis is a Director of Arna Therapeutics Limited. In the year ended 31 March 2016, James Mervis charged the company $25,000 (2015: $38,810) in respect of consultancy fees, travel and reimbursement of professional fees. At 31 March 2016 the balance due to James Mervis was $31,250 (2015: $6,250).
Gabriele Cerrone
Gabriele Cerrone is a Director of Arna Therapeutics Limited. In the year ended 31 March 2016 Gabriele Cerrone charged the company $100,000 (2015: $100,000) in respect of consultancy fees. At 31 March 2016 the balance due to Gabriele Cerrone was $125,000 (2015: $25,000).
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 MARCH 2016 AND 31 MARCH 2015
9. RELATED PARTY TRANSACTIONS (Continued)
Roberto Pellicceri
Roberto Pellicceri is a Director of Arna Therapeutics Limited and sole shareholder of TES Pharma Srl. In the year ended 31 March 2016 Roberto Pellicceri charged the company $100,000 (2015: $100,000) in respect of consultancy fees. At 31 March 2016 the balance due to Roberto Pellicceri was $125,000 (2015: $25,000).
10. COMMITMENTS AND CONTINGENCES
There are no commitments and contingences at 31 March 2016 and 2015. The reason for this is that most of the work is undertaken via Consultancy and Research agreements. There will be leased assets within these other operations that are recharged to the company as part of the agreement however these cannot be readily ascertained.
11. SUBSEQUENT EVENTS
On 17 May 2016, Arna Therapeutics Limited novated certain standstill agreements between it and its shareholders, TES Pharma Srl and Eurema Consulting Srl, to Rasna Therapeutics, Inc.
In addition, on 17 May 2016, Rasna Therapeutics, Inc. and its subsidiary Falconridge Holdings Limited, a related party, entered into an agreement of merger and plan of reorganization with Arna Therapeutics Limited. Pursuant to the agreement, Arna Therapeutics Limited was merged into Falconridge Holdings Limited and the shareholders of Arna Therapeutics Limited were issued shares of Rasna Therapeutics, Inc. (credited as fully paid) in exchange for shares of Arna Therapeutics Limited.
Exhibit 99.2
Active With Me, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial statements give effect to the Transactions (as defined below) which were consummated on August 15, 2016, pursuant to the Transaction Documents by and between the parties set out below the Transactions and gives effect to the equity offering. The Transactions are inclusive of the following:
· On April 27, 2016, Rasna Therapeutics Limited sold its stake in Falconridge Holdings Limited to Rasna Therapeutics, Inc. for $1.
· On May 5, 2016, Rasna Therapeutics Limited sold its intellectual property to Falconridge Holdings Limited for $236,269. This was accounted for as an asset acquisition under ASC 350, and the fair value of the intellectual property was deemed to be the $236,269 based on the consideration received.
· On May 17, 2016, Arna Therapeutics Limited was merged into Falconridge Holdings Limited and the shareholders of Arna Therapeutics Limited were issued shares of Rasna Therapeutics Inc. in exchange for shares of Arna Therapeutics Limited.
· On May 17, 2016, Rasna Therapeutics, Inc. and its subsidiary Falconridge Holdings Limited, entered into an agreement of merger and plan of reorganization with Arna Therapeutics Limited. Pursuant to the agreement, Arna Therapeutics Limited was merged into Falconridge Holdings Limited and the shareholders of Arna Therapeutics Limited were issued shares of Rasna Therapeutics, Inc. in exchange for shares of Arna Therapeutics Limited.
· On August 15, 2016, Rasna Therapeutics, Inc. entered into a plan of reorganization in which each share of Rasna Therapeutics, Inc. common stock is converted into the right to receive .33 shares of common stock, par value $0.001, of Active With Me, Inc.
Because Active With Me, Inc. is a shell company, Rasna Therapeutics, Inc. and Falconridge Holdings Limited were non-trading holding companies and Arna Therapeutics Limited operations will comprise the ongoing operations of the combined entity and its senior management will serve as the senior management of the combined entity, Arna Therapeutics Limited is deemed to be the accounting acquirer.
The unaudited pro forma condensed combined balance sheet as of March 31, 2016 combine the unaudited balance sheet of Active With Me, Inc. at March 31, 2016 with the audited balance sheets of Rasna Therapeutics Limited and Arna Therapeutics Limited, giving effect to the Transactions as if they were consummated on March 31, 2016.
The unaudited pro forma condensed combined statement of operations for the year ended March 31, 2016 and 2015 include the unaudited statements of operations for the nine months ended March 31, 2016 and year ended June 30, 2015 of Active With Me, Inc., and the audited Rasna Therapeutics Limited and Arna Therapeutics Limited results of operations for the years ended March 31, 2016 and 2015 as if the Transactions were consummated on April 1, 2014.
The results of operations of Active With Me, Inc. for the year ended June 30, 2015 are derived from the audited financial statements of Active With Me, Inc. at June 30, 2015, 2015 and for the year then ended. The unaudited balance sheet as of March 31, 2016 and the results of operations for the nine months ended March 31, 2016 of Active With Me, Inc. are derived from the unaudited condensed financial statements of Active With Me, Inc. as of March 31, 2016 and for the nine months then ended. The results of operations of Rasna Therapeutics Limited and Arna Therapeutics Limited for the years ended March 31, 2016 and 2015 are derived from the respective audited financial statements of Rasna Therapeutics Limited and Arna Therapeutics Limited at March 31, 2016 and each of the two years then ended.
The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements and accompanying notes of Active With Me, Inc. which are not included in this Form 8-K and the historical financial statements and accompanying notes of Rasna Therapeutics Limited and Arna Therapeutics Limited, which are included in this Form 8-K.
The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the merger, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the merger.
The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent the financial condition or results of operations had the acquisition been completed as of the dates indicated, nor are they necessarily indicative of future consolidated results of operations or financial position.
Active With Me, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Active With Me, Inc.
Pro-forma Balance Sheet
March 31, 2016
(in US Dollars, except share amounts)
|
|
|
Active
|
|
Rasna
|
|
Arna
|
|
Proforma
|
|
Active With Me, Inc.
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalent |
|
134 |
|
5,220,440 |
|
— |
|
— |
|
5,220,574 |
|
|
Other receivables |
|
350 |
|
15,510 |
|
— |
|
— |
|
15,860 |
|
|
Related Party Receivables |
|
— |
|
10,209 |
|
607,159 |
|
(607,159 |
)(a) |
10,209 |
|
|
Current Assets |
|
484 |
|
5,246,159 |
|
607,159 |
|
(607,159 |
) |
5,246,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
— |
|
— |
|
1,300,000 |
|
236,269 |
(b) |
1,536,269 |
|
|
Total Assets |
|
484 |
|
5,246,159 |
|
1,907,159 |
|
(370,890 |
) |
6,782,912 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts and other payables |
|
18,564 |
|
318,039 |
|
78,227 |
|
— |
|
414,830 |
|
|
Related Party Payables |
|
— |
|
622,815 |
|
550,000 |
|
(607,159 |
)(a) |
565,656 |
|
|
Subscriptions received in advance |
|
— |
|
6,753,754 |
|
— |
|
(6,753,754 |
)(c) |
— |
|
|
Current Liabilities |
|
18,564 |
|
7,694,608 |
|
628,227 |
|
(7,360,913 |
) |
980,486 |
|
|
Total Liabilities |
|
18,564 |
|
7,694,608 |
|
628,227 |
|
(7,360,913 |
) |
980,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
3,305 |
|
2 |
|
356,503 |
|
(339,909 |
)(d) |
19,901 |
|
|
Additional paid-in capital |
|
47,795 |
|
— |
|
5,746,477 |
|
7,329,932 |
(e) |
13,124,204 |
|
|
Accumulated (deficit)/equity |
|
(69,180 |
) |
(2,448,451 |
) |
(4,824,048 |
) |
— |
|
(7,341,679 |
) |
|
Total stockholders’ equity |
|
(18,080 |
) |
(2,448,449 |
) |
1,278,932 |
|
6,990,023 |
|
5,802,426 |
|
|
Total Liabilities and shareholders’ Equity |
|
484 |
|
5,246,159 |
|
1,907,159 |
|
(370,890 |
) |
6,782,912 |
|
See notes to pro forma condensed combined financial statements
Active With Me, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Condensed Pro Forma Statement of Operations:
Active With Me, Inc.
Pro-forma Statement of operations
Year Ended March 31, 2016
|
|
|
9 Months Ended |
|
Year Ended |
|
|
|
||||
|
|
|
Active With Me,
|
|
Rasna
|
|
Arna
|
|
Proforma
|
|
Active With Me, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Cost of Sales |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Gross Profit |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
— |
|
1,056,644 |
|
— |
|
— |
|
1,056,644 |
|
|
Consultancy fees, third party |
|
— |
|
— |
|
67,500 |
|
— |
|
67,500 |
|
|
Consultancy fees, related party |
|
— |
|
— |
|
350,000 |
|
— |
|
350,000 |
|
|
Legal and professional fees |
|
— |
|
135,176 |
|
99,930 |
|
— |
|
235,106 |
|
|
Foreign exchange loss / (gain) |
|
— |
|
(3,701 |
) |
— |
|
— |
|
(3,701 |
) |
|
Equity based payments to non-employees |
|
— |
|
— |
|
60,676 |
|
— |
|
60,676 |
|
|
General and administrative expenses |
|
1,822 |
|
312,014 |
|
— |
|
— |
|
313,836 |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
Loss from operations |
|
(1,822 |
) |
(1,500,133 |
) |
(578,106 |
) |
— |
|
(2,080,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
(1,822 |
) |
(1,500,133 |
) |
(578,106 |
) |
— |
|
(2,080,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(1,822 |
) |
(1,500,133 |
) |
(578,106 |
) |
— |
|
(2,080,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
(0.00 |
) |
|
|
|
|
— |
|
(0.10 |
) |
|
Weighted-average common shares outstanding |
|
3,305,000 |
|
|
|
|
|
— |
(f) |
19,901,471 |
|
See notes to pro forma condensed combined financial statements
Active With Me, Inc.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Active With Me, Inc.
Pro-forma Statement of operations
Year Ended March 31, 2015
|
|
|
Year Ended
|
|
Year Ended March 31, 2015 |
|
|
|
||||
|
|
|
Active With
|
|
Rasna
|
|
Arna
|
|
Proforma
|
|
Active With Me, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Cost of Sales |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
Gross Profit |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development |
|
— |
|
584,261 |
|
1,125,000 |
|
— |
|
1,709,261 |
|
|
Consultancy fees, third party |
|
— |
|
— |
|
67,500 |
|
— |
|
67,500 |
|
|
Consultancy fees, related party |
|
— |
|
— |
|
350,000 |
|
— |
|
350,000 |
|
|
Legal and professional fees |
|
— |
|
27,400 |
|
103,230 |
|
— |
|
130,630 |
|
|
Foreign exchange loss / (gain) |
|
— |
|
(1,984 |
) |
— |
|
— |
|
(1,984 |
) |
|
Equity based payments to non-employees |
|
— |
|
— |
|
117,304 |
|
— |
|
117,304 |
|
|
General and administrative expenses |
|
16,757 |
|
338,641 |
|
5,364 |
|
— |
|
360,762 |
|
|
Loss from operations |
|
(16,757 |
) |
(948,318 |
) |
(1,768,398 |
) |
— |
|
(2,733,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax |
|
(16,757 |
) |
(948,318 |
) |
(1,768,398 |
) |
— |
|
(2,733,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(16,757 |
) |
(948,318 |
) |
(1,768,398 |
) |
— |
|
(2,733,473 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share |
|
(0.01 |
) |
|
|
|
|
— |
|
(0.14 |
) |
|
Weighted-average common shares outstanding |
|
3,305,000 |
|
|
|
|
|
— |
(f) |
19,901,471 |
|
See notes to pro forma condensed combined financial statements
Active With Me, Inc.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(a) To record the combining elimination adjustment of related party receivable and payable balances between Rasna Therapeutics Limited and Arna Therapeutics Limited.
(b) To record Rasna Therapeutics Limited intellectual property purchased by Falconridge Holdings Limited for $236,269.
(c) To record replacement for Rasna Therapeutics Inc. share subscription, initially received by Rasna Therapeutics Limited. Total of 19,187,500 shares issued at $0.40 per share in the amount of $7.7 million, net of $921 thousand in issuance costs.
(d) Adjustment in common stock is due to: (i) Rasna Therapeutics Inc. share subscription of 19,187,500 shares at $0.0001 par value, (ii) write off of Rasna Therapeutics Limited and Arna Therapeutics Limited historical common stock par values and (iii) adjustment to reflect the additional share capital in Active With Me, Inc. after giving effect to Merger and Split-Off.
(e) Adjustment in additional paid-in capital is due to: (i) Rasna Therapeutics Inc. share subscription of 19,187,500 shares net of par value, (ii) write off of Rasna Therapeutics Limited and Arna Therapeutics Limited historical additional paid-in capital, (iii) Rasna Therapeutics Limited intellectual property purchased by Falconridge Holdings Limited and (iv) adjustment to reflect the additional share capital in Active With Me, Inc. after giving effect to Merger and Split-Off.
(f) Adjustments to weighted-average common shares outstanding: (i) exchange of 35,650,289 Arna Therapeutics Limited shares for shares of Rasna Therapeutics Inc., (ii) Rasna Therapeutics Inc. share subscription of 19,187,500 shares, (iii) total share capital of 54,837,789 converted into the right to receive .33 shares of common stock in Active With Me, Inc, and (iv) the Company’s cancellation of 1,500,000 shares in the Split-Off.