Exhibit 2.1
| Form 1-A Issuer Information |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 1-A REGULATION A OFFERING STATEMENT UNDER THE SECURITIES ACT OF 1933 | OMB APPROVAL |
FORM 1-A | OMB Number: 3235-0286 Estimated average burden hours per response: 608.0 |
| Issuer CIK | 0001946585 |
| Issuer CCC | XXXXXXXX |
| DOS File Number | |
| Offering File Number | |
| Is this a LIVE or TEST Filing? | ☒ LIVE ☐ TEST |
| Would you like a Return Copy? | ☐ |
| Notify via Filing Website only? | ☐ |
| Since Last Filing? | ☐ |
| Name | |
| Phone | |
| E-Mail Address |
| Exact name of issuer as specified in the issuer's charter | Balincan USA, Inc. |
| Jurisdiction of Incorporation / Organization |
DELAWARE
|
| Year of Incorporation | 2002 |
| CIK | 0001946585 |
| Primary Standard Industrial Classification Code | SERVICES-PREPACKAGED SOFTWARE |
| I.R.S. Employer Identification Number | 95-4217605 |
| Total number of full-time employees | 22 |
| Total number of part-time employees | 23 |
| Address 1 | 555 Middle Creek Parkway |
| Address 2 | Suite 100 |
| City | Colorado Springs |
| State/Country |
COLORADO
|
| Mailing Zip/ Postal Code | 80921 |
| Phone | 719-419-6709 |
| Name | Jeff Turner |
| Address 1 | |
| Address 2 | |
| City | |
| State/Country | |
| Mailing Zip/ Postal Code | |
| Phone |
| Industry Group (select one) | ☐ Banking ☐ Insurance ☒ Other |
| Cash and Cash Equivalents |
$
492267.00 |
| Investment Securities |
$
|
| Total Investments |
$
|
| Accounts and Notes Receivable |
$
402777.00 |
| Loans |
$
|
| Property, Plant and Equipment (PP&E): |
$
1523833.00 |
| Property and Equipment |
$
|
| Total Assets |
$
2429272.00 |
| Accounts Payable and Accrued Liabilities |
$
1082964.00 |
| Policy Liabilities and Accruals |
$
|
| Deposits |
$
|
| Long Term Debt |
$
160581.00 |
| Total Liabilities |
$
11692779.00 |
| Total Stockholders' Equity |
$
-9263507.00 |
| Total Liabilities and Equity |
$
2429272.00 |
| Total Revenues |
$
1277968.00 |
| Total Interest Income |
$
|
| Costs and Expenses Applicable to Revenues |
$
762188.00 |
| Total Interest Expenses |
$
|
| Depreciation and Amortization |
$
0.00 |
| Net Income |
$
-2807409.00 |
| Earnings Per Share - Basic |
$
-2.58 |
| Earnings Per Share - Diluted |
$
-2.58 |
| Name of Auditor (if any) | n/a |
| Name of Class (if any) Common Equity | Common |
| Common Equity Units Outstanding | 150218141 |
| Common Equity CUSIP (if any): | 616348108 |
| Common Equity Units Name of Trading Center or Quotation Medium (if any) | OTC Markets |
| Preferred Equity Name of Class (if any) | Series A |
| Preferred Equity Units Outstanding | 9962000 |
| Preferred Equity CUSIP (if any) | 000000000 |
| Preferred Equity Name of Trading Center or Quotation Medium (if any) | n/a |
| Debt Securities Name of Class (if any) | Series B |
| Debt Securities Units Outstanding | 1000000 |
| Debt Securities CUSIP (if any): | 000000000 |
| Debt Securities Name of Trading Center or Quotation Medium (if any) | n/a |
Check this box to certify that all of the following statements are true for the issuer(s)
☒
Check this box to certify that, as of the time of this filing, each person described in Rule 262 of Regulation A is either not disqualified under that rule or is disqualified but has received a waiver of such disqualification.
☒
Check this box if "bad actor" disclosure under Rule 262(d) is provided in Part II of the offering statement.
☐
| Check the appropriate box to indicate whether you are conducting a Tier 1 or Tier 2 offering | ☒ Tier1 ☐ Tier2 |
| Check the appropriate box to indicate whether the financial statements have been audited | ☒ Unaudited ☐ Audited |
| Types of Securities Offered in this Offering Statement (select all that apply) |
| ☒Equity (common or preferred stock) |
| Does the issuer intend to offer the securities on a delayed or continuous basis pursuant to Rule 251(d)(3)? | ☒ Yes ☐ No |
| Does the issuer intend this offering to last more than one year? | ☐ Yes ☒ No |
| Does the issuer intend to price this offering after qualification pursuant to Rule 253(b)? | ☒ Yes ☐ No |
| Will the issuer be conducting a best efforts offering? | ☒ Yes ☐ No |
| Has the issuer used solicitation of interest communications in connection with the proposed offering? | ☐ Yes ☒ No |
| Does the proposed offering involve the resale of securities by affiliates of the issuer? | ☐ Yes ☒ No |
| Number of securities offered | 100000000 |
| Number of securities of that class outstanding | 150218141 |
| Price per security |
$
0.1000 |
| The portion of the aggregate offering price attributable to securities being offered on behalf of the issuer |
$
10000000.00 |
| The portion of the aggregate offering price attributable to securities being offered on behalf of selling securityholders |
$
0.00 |
| The portion of the aggregate offering price attributable to all the securities of the issuer sold pursuant to a qualified offering statement within the 12 months before the qualification of this offering statement |
$
0.00 |
| The estimated portion of aggregate sales attributable to securities that may be sold pursuant to any other qualified offering statement concurrently with securities being sold under this offering statement |
$
0.00 |
| Total (the sum of the aggregate offering price and aggregate sales in the four preceding paragraphs) |
$
10000000.00 |
| Underwriters - Name of Service Provider | Underwriters - Fees |
$
| |
| Sales Commissions - Name of Service Provider | Sales Commissions - Fee |
$
| |
| Finders' Fees - Name of Service Provider | Finders' Fees - Fees |
$
| |
| Audit - Name of Service Provider | Audit - Fees |
$
| |
| Legal - Name of Service Provider | JDT Legal, PLLC | Legal - Fees |
$
15000.00 |
| Promoters - Name of Service Provider | Promoters - Fees |
$
| |
| Blue Sky Compliance - Name of Service Provider | Various | Blue Sky Compliance - Fees |
$
10000.00 |
| CRD Number of any broker or dealer listed: | 0 |
| Estimated net proceeds to the issuer |
$
9975000.00 |
| Clarification of responses (if necessary) |
| Selected States and Jurisdictions |
ALABAMA
ALASKA
ARIZONA
ARKANSAS
CALIFORNIA
COLORADO
CONNECTICUT
DELAWARE
FLORIDA
GEORGIA
HAWAII
IDAHO
ILLINOIS
INDIANA
IOWA
KANSAS
KENTUCKY
LOUISIANA
MAINE
MARYLAND
MASSACHUSETTS
MICHIGAN
MINNESOTA
MISSISSIPPI
MISSOURI
MONTANA
NEBRASKA
NEVADA
NEW HAMPSHIRE
NEW JERSEY
NEW MEXICO
NEW YORK
NORTH CAROLINA
NORTH DAKOTA
OHIO
OKLAHOMA
OREGON
PENNSYLVANIA
RHODE ISLAND
SOUTH CAROLINA
SOUTH DAKOTA
TENNESSEE
TEXAS
UTAH
VERMONT
VIRGINIA
WASHINGTON
WEST VIRGINIA
WISCONSIN
WYOMING
DISTRICT OF COLUMBIA
PUERTO RICO
ALBERTA, CANADA
BRITISH COLUMBIA, CANADA
MANITOBA, CANADA
NEW BRUNSWICK, CANADA
NEWFOUNDLAND, CANADA
NOVA SCOTIA, CANADA
ONTARIO, CANADA
PRINCE EDWARD ISLAND, CANADA
QUEBEC, CANADA
SASKATCHEWAN, CANADA
YUKON, CANADA
CANADA (FEDERAL LEVEL)
|
| None | ☒ |
| Same as the jurisdictions in which the issuer intends to offer the securities | ☐ |
| Selected States and Jurisdictions |
None ☐
As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:
| (a)Name of such issuer | Balincan USA, Inc. |
| (b)(1) Title of securities issued | Common |
| (2) Total Amount of such securities issued | 127599250 |
| (3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer. | 0 |
| (c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof. | Shares were issued as partial consideration for and in conjunction with the acquisition of Tekumo LLC. |
| (2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)). |
As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:
| (a)Name of such issuer | Balincan USA, Inc. |
| (b)(1) Title of securities issued | Series A |
| (2) Total Amount of such securities issued | 1000000 |
| (3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer. | 0 |
| (c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof. | Shares were issued as partial consideration for and in conjunction with the acquisition of Tekumo LLC. |
| (2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)). |
As to any unregistered securities issued by the issuer of any of its predecessors or affiliated issuers within one year before the filing of this Form 1-A, state:
| (a)Name of such issuer | Balincan USA, Inc. |
| (b)(1) Title of securities issued | Series B |
| (2) Total Amount of such securities issued | 1000000 |
| (3) Amount of such securities sold by or for the account of any person who at the time was a director, officer, promoter or principal securityholder of the issuer of such securities, or was an underwriter of any securities of such issuer. | 0 |
| (c)(1) Aggregate consideration for which the securities were issued and basis for computing the amount thereof. | Shares were issued as partial consideration for and in conjunction with the acquisition of Tekumo LLC. |
| (2) Aggregate consideration for which the securities listed in (b)(3) of this item (if any) were issued and the basis for computing the amount thereof (if different from the basis described in (c)(1)). |
| (e) Indicate the section of the Securities Act or Commission rule or regulation relied upon for exemption from the registration requirements of such Act and state briefly the facts relied upon for such exemption | Section 4(a)(2) |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 1-A
Dated: September 23, 2022
REGULATION A OFFERING CIRCULAR UNDER THE SECURITIES ACT OF 1933
Balincan USA, Inc.
(Exact name of issuer as specified in its charter)
Delaware
(State of other jurisdiction of incorporation or organization)
555 Middle Creek Parkway
Suite 100
Colorado Springs, CO 80921
719-419-6709
(Address, including zip code, and telephone number,
including area code of issuer’s principal executive office)
Jeff Turner
897 W Baxter Dr.
South Jordan, UT 84095
801-810-4465
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
| 7372 | 95-4217605 | |
| (Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
This Preliminary Offering Circular shall only be qualified upon order of the Commission, unless a subsequent amendment is filed indicating the intention to become qualified by operation of the terms of Regulation A.
This Offering Circular is following the Offering Circular format described in Part II (a)(1)(ii) of Form 1-A.
PART II – PRELIMINARY OFFERING CIRCULAR - FORM 1-A: TIER I
An Offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the Offering statement filed with the Securities and Exchange Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Final Offering Circular or the Offering statement in which such Final Offering Circular was filed may be obtained.
PRELIMINARY OFFERING CIRCULAR
Dated: September 23, 2022
Subject to Completion
PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933
Balincan USA, Inc.
555 Middle Creek Parkway
Suite 100
Colorado Springs, CO 80921
100,000,000 Shares of Common Stock
at a price range of $0.01-$0.20 per Share
Minimum Investment: $1,000
Maximum Offering: $10,000,000
See The Offering - Page 9 and Securities Being Offered - Page 29 for further details. None of the securities offered are being sold by present security holders. This Offering will commence upon qualification of this Offering by the Securities and Exchange Commission and will terminate 365 days from the date of qualification by the Securities and Exchange Commission, unless extended or terminated earlier by the Company.
PLEASE REVIEW ALL RISK FACTORS ON PAGES 3 THROUGH PAGE 17 BEFORE MAKING AN INVESTMENT IN THIS COMPANY. AN INVESTMENT IN THIS COMPANY SHOULD ONLY BE MADE IF YOU ARE CAPABLE OF EVALUATING THE RISKS AND MERITS OF THIS INVESTMENT AND IF YOU HAVE SUFFICIENT RESOURCES TO BEAR THE ENTIRE LOSS OF YOUR INVESTMENT, SHOULD THAT OCCUR.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED OR THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SELLING LITERATURE. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM REGISTRATION.
Because these securities are being offered on a “best efforts” basis, the following disclosures are hereby made:
| Price to Public | Commissions (1) | Proceeds to Company (2) | Proceeds to Other Persons (3) | |||||||||||||
| Per Share | $ | 0.01-$0.20 | $ | 0 | $ | 0.01-$0.20 | None | |||||||||
| Minimum Investment | $ | 1,000 | $ | 0 | $ | 1,000 | None | |||||||||
| Maximum Offering | $ | 10,000,000 | $ | 0 | $ | 10,000,000 | (4) | None | ||||||||
| (1) | The Company has not presently engaged an underwriter for the sale of securities under this Offering. |
| (2) | Does not reflect payment of expenses of this Offering, which are estimated to not exceed $25,000.00 and which include, among other things, legal fees, accounting costs, reproduction expenses, due diligence, marketing, consulting, administrative services other costs of blue-sky compliance, and actual out-of-pocket expenses incurred by the Company selling the Shares. This amount represents the proceeds of the offering to the Company, which will be used as set out in “USE OF PROCEEDS TO ISSUER.” |
| (3) | There are no finder’s fees or other fees being paid to third parties from the proceeds. See ‘PLAN OF DISTRIBUTION.’ |
| (4) | Assumes a midpoint offering price of $0.10 per share. |
This Offering (the “Offering”) consists of Common Stock (the “Shares” or individually, each a “Share”) that is being offered on a “best efforts” basis, which means that there is no guarantee that any minimum amount will be sold. The Shares are being offered and sold by Balincan USA, Inc., a Delaware Corporation (the “Company”). We are offering up to 100,000,000 Shares being offered at a price to be determined after qualification pursuant to Rule 253(b). We have provided a bona fide estimate of $0.01-$0.20 per Share. This Offering has a minimum purchase of $1,000 per investor. We may waive the minimum purchase requirement on a case-by-case basis in our sole discretion. The Shares are being offered only by the Company on a best-efforts basis to an unlimited number of accredited investors and to an unlimited number of non-accredited investors subject to the limitations of Regulation A. Under Rule 251(d)(2)(i)(C) of Regulation A+, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth). The maximum aggregate amount of the Shares that will be offered is 100,000,000 Shares of Common Stock with a Maximum Offering Price of $20,000,000. There is no minimum number of Shares that needs to be sold in order for funds to be released to the Company and for this Offering to close.
Our Common Stock is currently quoted on the OTC Pink tier of the OTC Market Group, Inc. under the symbol “BCNN”. On September 15, 2022, the last reported sale price of our common stock was $0.51.
The Shares are being offered pursuant to Regulation A of Section 3(b) of the Securities Act of 1933, as amended, for Tier 1 offerings. The Shares will only be issued to purchasers who satisfy the requirements set forth in Regulation A. The offering is expected to expire on the first of: (i) all of the Shares offered are sold; or (ii) the close of business 365 days from the date of qualification by the Commission, unless sooner terminated or extended by the Company’s CEO. Pending each closing, payments for the Shares will be paid directly to the Company. Funds will be immediately transferred to the Company where they will be available for use in the operations of the Company’s business in a manner consistent with the “USE OF PROCEEDS TO ISSUER” in this Offering Circular.
THIS OFFERING CIRCULAR DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS CONCERNING THE COMPANY OTHER THAN THOSE CONTAINED IN THIS OFFERING CIRCULAR, AND IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS OFFERING CIRCULAR, OR OF ANY PRIOR OR SUBSEQUENT COMMUNICATIONS FROM THE COMPANY OR ANY OF ITS EMPLOYEES, AGENTS OR AFFILIATES, AS INVESTMENT, LEGAL, FINANCIAL OR TAX ADVICE.
GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE YOU TO REFER TO WWW.INVESTOR.GOV (WHICH IS NOT INCORPORATED BY REFERENCE INTO THIS OFFERING CIRCULAR).
This Offering is inherently risky. See “Risk Factors” beginning on page 3.
Sales of these securities will commence within two calendar days of the qualification date and the filing of a Form 253(g)(2) Offering Circular AND it will be a continuous Offering pursuant to Rule 251(d)(3)(i)(F).
The Company is following the “Offering Circular” format of disclosure under Regulation A.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
NASAA UNIFORM LEGEND
FOR RESIDENTS OF ALL STATES: THE PRESENCE OF A LEGEND FOR ANY GIVEN STATE REFLECTS ONLY THAT A LEGEND MAY BE REQUIRED BY THAT STATE AND SHOULD NOT BE CONSTRUED TO MEAN AN OFFER OR SALE MAY BE MADE IN A PARTICULAR STATE. IF YOU ARE UNCERTAIN AS TO WHETHER OR NOT OFFERS OR SALES MAY BE LAWFULLY MADE IN ANY GIVEN STATE, YOU ARE HEREBY ADVISED TO CONTACT THE COMPANY. THE SECURITIES DESCRIBED IN THIS OFFERING CIRCULAR HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS (COMMONLY CALLED ‘BLUE SKY’ LAWS).
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO FOREIGN INVESTORS
IF THE PURCHASER LIVES OUTSIDE THE UNITED STATES, IT IS THE PURCHASER’S RESPONSIBILITY TO FULLY OBSERVE THE LAWS OF ANY RELEVANT TERRITORY OR JURISDICTION OUTSIDE THE UNITED STATES IN CONNECTION WITH ANY PURCHASE OF THE SECURITIES, INCLUDING OBTAINING REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER REQUIRED LEGAL OR OTHER FORMALITIES. THE COMPANY RESERVES THE RIGHT TO DENY THE PURCHASE OF THE SECURITIES BY ANY FOREIGN PURCHASER.
PATRIOT ACT RIDER
The Investor hereby represents and warrants that Investor is not, nor is it acting as an agent, representative, intermediary or nominee for, a person identified on the list of blocked persons maintained by the Office of Foreign Assets Control, U.S. Department of Treasury. In addition, the Investor has complied with all applicable U.S. laws, regulations, directives, and executive orders relating to anti-money laundering , including but not limited to the following laws: (1) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, and (2) Executive Order 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23, 2001.
NO DISQUALIFICATION EVENT (“BAD ACTOR” DECLARATION)
NONE OF THE COMPANY, ANY OF ITS PREDECESSORS, ANY AFFILIATED ISSUER, ANY DIRECTOR, EXECUTIVE OFFICER, OTHER OFFICER OF THE COMPANY PARTICIPATING IN THE OFFERING CONTEMPLATED HEREBY, ANY BENEFICIAL OWNER OF 20% OR MORE OF THE COMPANY’S OUTSTANDING VOTING EQUITY SECURITIES, CALCULATED ON THE BASIS OF VOTING POWER, NOR ANY PROMOTER (AS THAT TERM IS DEFINED IN RULE 405 UNDER THE SECURITIES ACT OF 1933) CONNECTED WITH THE COMPANY IN ANY CAPACITY AT THE TIME OF SALE (EACH, AN “ISSUER COVERED PERSON”) IS SUBJECT TO ANY OF THE “BAD ACTOR” DISQUALIFICATIONS DESCRIBED IN RULE 506(D)(1)(I) TO (VIII) UNDER THE SECURITIES ACT OF 1933 (A “DISQUALIFICATION EVENT”), EXCEPT FOR A DISQUALIFICATION EVENT COVERED BY RULE 506(D)(2) OR (D)(3) UNDER THE SECURITIES ACT. THE COMPANY HAS EXERCISED REASONABLE CARE TO DETERMINE WHETHER ANY ISSUER COVERED PERSON IS SUBJECT TO A DISQUALIFICATION EVENT.
Continuous Offering
Under Rule 251(d)(3) to Regulation A, the following types of continuous or delayed Offerings are permitted, among others: (1) securities offered or sold by or on behalf of a person other than the issuer or its subsidiary or a person of which the issuer is a subsidiary; (2) securities issued upon conversion of other outstanding securities; or (3) securities that are part of an Offering which commences within two calendar days after the qualification date. These may be offered on a continuous basis and may continue to be offered for a period in excess of 30 days from the date of initial qualification. They may be offered in an amount that, at the time the Offering statement is qualified, is reasonably expected to be offered and sold within one year from the initial qualification date. No securities will be offered or sold “at the market.” The Shares will be sold at a fixed price to be determined after qualification. We have provided a bona fide estimate of the price range of the Offering, pursuant to Rule 253(b)(2). The Offering Price will be filed by the Company via an offering circular supplement pursuant to Rule 253(c). The supplement will not, in the aggregate, represent any change from the maximum aggregate Offering Price calculable using the information in the qualified Offering statement. This information will be filed no later than two business days following the earlier of the date of determination of such pricing information or the date of first use of the Offering Circular after qualification.
Sale of these shares will commence within two calendar days of the qualification date, and it will be a continuous Offering pursuant to Rule 251(d)(3)(i)(F).
Subscriptions are irrevocable and the purchase price is non-refundable as expressly stated in this Offering Circular. The Company, by determination of the Board of Directors, in its sole discretion, may issue the Securities under this Offering for cash, promissory notes, services, and/or other consideration without notice to subscribers. All proceeds received by the Company from subscribers for this Offering will be available for use by the Company upon acceptance of subscriptions for the Securities by the Company.
Forward Looking Statement Disclosure
This Form 1-A, Offering Circular, and any documents incorporated by reference herein or therein contain forward-looking statements and are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this Form 1-A, Offering Circular, and any documents incorporated by reference are forward-looking statements. Forward-looking statements give the Company’s current reasonable expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance, and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as ‘anticipate,’ ‘estimate,’ ‘expect,’ ‘project,’ ‘plan,’ ‘intend,’ ‘believe,’ ‘may,’ ‘should,’ ‘can have,’ ‘likely’ and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. The forward-looking statements contained in this Form 1-A, Offering Circular, and any documents incorporated by reference herein or therein are based on reasonable assumptions the Company has made in light of its industry experience, perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. As you read and consider this Form 1-A, Offering Circular, and any documents incorporated by reference, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond the Company’s control) and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual operating and financial performance and cause its performance to differ materially from the performance anticipated in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect or change, the Company’s actual operating and financial performance may vary in material respects from the performance projected in these forward- looking statements. Any forward-looking statement made by the Company in this Form 1-A, Offering Circular or any documents incorporated by reference herein speaks only as of the date of this Form 1-A, Offering Circular or any documents incorporated by reference herein. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.
About This Form 1-A and Offering Circular
In making an investment decision, you should rely only on the information contained in this Form 1-A and Offering Circular. The Company has not authorized anyone to provide you with information different from that contained in this Form 1-A and Offering Circular. We are offering to sell, and seeking offers to buy the Shares only in jurisdictions where offers and sales are permitted. You should assume that the information contained in this Form 1-A and Offering Circular is accurate only as of the date of this Form 1-A and Offering Circular, regardless of the time of delivery of this Form 1-A and Offering Circular. Our business, financial condition, results of operations, and prospects may have changed since that date. Statements contained herein as to the content of any agreements or other documents are summaries and, therefore, are necessarily selective and incomplete and are qualified in their entirety by the actual agreements or other documents.
TABLE OF CONTENTS
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OFFERING CIRCULAR SUMMARY, PERKS AND RISK FACTORS
The following summary is qualified in its entirety by the more detailed information appearing elsewhere in this Offering Circular and/or incorporated by reference in this Offering Circular. For full offering details, please (1) thoroughly review this Form 1-A filed with the Securities and Exchange Commission (2) thoroughly review this Offering Circular and (3) thoroughly review any attached documents to or documents referenced in, this Form 1-A and Offering Circular.
Unless otherwise indicated, the terms “Balincan USA,” “BCNN,” “the Company,” we,” “our,” and “us” are used in this Offering Circular to refer to Balincan USA, Inc. and its subsidiaries.
Business Overview
Balincan USA, Inc., a Delaware corporation, which operates primarily through its subsidiary, Tekumo LLC. Tekumo is an intelligent service delivery platform that solves the “last-mile” of installing, monitoring, and maintaining technology systems and smart connected devices.
For a further description of the Company and its plan of operations, see the section entitled “Description of Business” beginning on Page 13.
| Issuer: | Balincan USA, Inc. |
| Type of Stock Offering: | Common Stock |
| Price Per Share: | To be determined after qualification. We have provided a bona fide estimate of the expected range of the price per share of $0.01-$0.20. |
| Minimum Investment: | $1,000 per investor. We may waive the minimum purchase requirement on a case-by-case basis in our sole discretion. |
| Maximum Offering: | $20,000,000. The Company will not accept investments that would be, in aggregate, greater than the Maximum Offering amount. |
| Maximum Shares Offered: | 100,000,000 Shares of Common Stock |
| Investment Amount Restrictions: | Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(c) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov. |
| Method of Subscription: | After the qualification by the SEC of the Offering Statement of which this Offering Circular is a part, investors can subscribe to purchase the Shares by completing the Subscription Agreement and sending payment by check, wire transfer, ACH, credit card, or any other payment method accepted by the Company. Upon the approval of any subscription, the Company shall immediately deposit said proceeds into the bank account of the Company and may dispose of the proceeds in accordance with the Use of Proceeds. Subscriptions are irrevocable and the purchase price is non-refundable. |
| Use of Proceeds: | See the description in the section entitled “USE OF PROCEEDS TO ISSUER” on page 12 herein. |
| Voting Rights: | The Shares have full voting rights. |
| Trading Symbols: | Our common stock is directly quoted on the OTC Pink tier of the OTC Market Group, Inc. under the symbol “BCNN”. |
| Transfer Agent and Registrar: | VStock Transfer LLC is our transfer agent and registrar in connection with the Offering. |
| Length of Offering: | Shares will be offered on a continuous basis until either (1) the maximum number of Shares are sold; (2) 365 days from the date of qualification by the Commission; (3) the Company in its sole discretion extends the offering beyond 365 days from the date of qualification by the Commission, or (4) the Company in its sole discretion withdraws this Offering. |
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| Common Stock Outstanding (1) | 150,218,141 Shares | |||
| Common Stock in this Offering | 100,000,000 Shares | |||
| Stock to be outstanding after the offering (2) | 250,218,141 Shares |
| (1) | As of the date of this Offering Circular. |
| (2) | The total number of Shares of Common Stock assumes that the maximum number of Shares are sold in this Offering. The Company may not be able to sell the Maximum Offering Amount. The Company will conduct one or more closings on a rolling basis as funds are received from investors. |
There is no assurance the Company will be profitable, or that management’s opinion of the Company’s future prospects will not be outweighed by the unanticipated losses, adverse regulatory developments and other risks. Investors should carefully consider the various risk factors below before investing in the Shares.
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The purchase of the Company’s Common Stock involves substantial risks. You should carefully consider the following risk factors in addition to any other risks associated with this investment. The Shares offered by the Company constitute a highly speculative investment and you should be in an economic position to lose your entire investment. The risks listed do not necessarily comprise all those associated with an investment in the Shares and are not set out in any particular order of priority. Additional risks and uncertainties may also have an adverse effect on the Company’s business and your investment in the Shares. An investment in the Company may not be suitable for all recipients of this Offering Circular. You are advised to consult an independent professional adviser or attorney who specializes in investments of this kind before making any decision to invest. You should consider carefully whether an investment in the Company is suitable in the light of your personal circumstances and the financial resources available to you.
The discussions and information in this Offering Circular may contain both historical and forward- looking statements. To the extent that the Offering Circular contains forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of the Company’s business, please be advised that the Company’s actual financial condition, operating results, and business performance may differ materially from that projected or estimated by the Company in forward-looking statements. The Company has attempted to identify, in context, certain of the factors it currently believes may cause actual future experience and results may differ from the Company’s current expectations.
Before investing, you should carefully read and carefully consider the following risk factors:
Risks Related to the Company and Its Business
We have a limited operating history.
Our operating history is limited. There can be no assurance that our proposed plan of business can be realized in the manner contemplated and, if it cannot be, shareholders may lose all or a substantial part of their investment. There is no guarantee that we will ever realize any significant operating revenues or that our operations will ever be profitable.
We are dependent upon management, key personnel, and consultants to execute our business plan.
Our success is heavily dependent upon the continued active participation of our current management team, Strings Kozisek, Phillip Dignan and Christopher Nichols. Loss of any one of these individuals could have a material adverse effect upon our business, financial condition, or results of operations. Further, our success and the achievement of our growth plans depends on our ability to recruit, hire, train, and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in our industry, and the loss of any of such persons, or an inability to attract, retain, and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on our business. If we are unable to attract and retain the necessary personnel, consultants, and advisors, it could have a material adverse effect on our business, financial condition, or operations.
Although we are dependent upon certain key personnel, we do not have any key man life insurance policies on any such people.
We are dependent upon management in order to conduct our operations and execute our business plan; however, we have not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, should any of those key personnel, management, or founders die or become disabled, we will not receive any compensation that would assist with any such person’s absence. The loss of any such person could negatively affect our business and operations.
We are subject to income taxes as well as non-income-based taxes, such as payroll, sales, use, value-added, net worth, property, and goods and services taxes.
Significant judgment is required in determining our provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates will be reasonable: (i) there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our income tax provisions, expense amounts for non-income based taxes and accruals and (ii) any material differences could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.
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We are not subject to Sarbanes-Oxley regulation and lack the financial controls and safeguards required of public companies.
We do not have the internal infrastructure necessary, and are not required to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurances that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect to incur additional expenses and diversion of management’s time if and when it becomes necessary to perform the system and process evaluation, testing, and remediation required in order to comply with the management certification and auditor attestation requirements.
We have engaged in certain transactions with related persons.
Please see the section of this offering circular entitled “Interest of Management and Others in Certain Transactions”.
Changes in employment laws or regulation could harm our performance.
Various federal and state labor laws govern the Company’s relationship with our employees and affect operating costs, including labor laws of non-USA jurisdictions, specifically Canadian federal and provincial statutes. These laws may include minimum wage requirements, overtime pay, healthcare reform and the implementation of various federal and state healthcare laws, unemployment tax rates, workers’ compensation rates, citizenship requirements, union membership and sales taxes. A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, mandated training for employees, changing regulations from the National Labor Relations Board and increased employee litigation including claims relating to the Fair Labor Standards Act.
Our bank accounts will not be fully insured.
The Company’s regular bank accounts and the escrow account for this Offering each have federal insurance that is limited to a certain amount of coverage. It is anticipated that the account balances in each account may exceed those limits at times. In the event that any of the Company’s banks should fail, we may not be able to recover all amounts deposited in these bank accounts.
Our business plan is speculative.
Our present business and planned business are speculative and subject to numerous risks and uncertainties. There is no assurance that the Company will generate significant revenues or profits.
The Company will likely incur debt.
The Company has incurred debt in the past and expects to incur future debt in order to fund operations. Complying with obligations under such indebtedness may have a material adverse effect on the Company and on your investment.
Our expenses could increase without a corresponding increase in revenues.
Our operating and other expenses could increase without a corresponding increase in revenues, which could have a material adverse effect on our financial results and on your investment. Factors which could increase operating and other expenses include, but are not limited to (1) increases in the rate of inflation, (2) increases in taxes and other statutory charges, (3) changes in laws, regulations or government policies which increase the costs of compliance with such laws, regulations or policies, (4) significant increases in insurance premiums, and (5) increases in borrowing costs.
We may be unable to maintain or enhance our product image.
It is important that we maintain and enhance the image of our existing and new products. The image and reputation of the Company’s products may be impacted for various reasons, including litigation. Such concerns, even when unsubstantiated, could be harmful to the Company’s image and the reputation of its products. From time to time, the Company may receive complaints from customers regarding products purchased from the Company. The Company may in the future receive correspondence from customers requesting reimbursement. Certain dissatisfied customers may threaten legal action against the Company if no reimbursement is made. The Company may become subject to product liability lawsuits from customers alleging injury because of a purported defect in products sold by the Company, claiming substantial damages and demanding payments from the Company. The Company is in the chain of title when it manufactures, supplies or distributes products, and therefore is subject to the risk of being held legally responsible for them. These claims may not be covered by the Company’s insurance policies. Any resulting litigation could be costly for the Company, divert management attention, and could result in increased costs of doing business, or otherwise have a material adverse effect on the Company’s business, results of operations, and financial condition. Any negative publicity generated as a result of customer complaints about the Company’s products could damage the Company’s reputation and diminish the value of the Company’s brand, which could have a material adverse effect on the Company’s business, results of operations, and financial condition, as well as your investment. Deterioration in the Company’s brand equity (brand image, reputation and product quality) may have a material adverse effect on its financial results as well as your investment.
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If we are unable to protect our Intellectual Property effectively, we may be unable to operate our business.
Our success will depend on our ability to obtain and maintain meaningful Intellectual Property Protection for any such Intellectual Property. The names and/or logos of Company brands (whether owned by the Company or licensed to us) may be challenged by holders of trademarks who file opposition notices, or otherwise contest trademark applications by the Company for its brands. Similarly, domains owned and used by the Company may be challenged by others who contest the ability of the Company to use the domain name or URL. Such challenges could have a material adverse effect on the Company’s financial results as well as your investment.
Computer, website, or information system breakdown could negatively affect our business.
Computer, website and/or information system breakdowns as well as cyber security attacks could impair the Company’s ability to service its customers leading to reduced revenue from sales and/or reputational damage, which could have a material adverse effect on the Company’s financial results as well as your investment.
Changes in the economy could have a detrimental impact on the Company.
Changes in the general economic climate could have a detrimental impact on consumer expenditure and therefore on the Company’s revenue. It is possible that recessionary pressures and other economic factors (such as declining incomes, future potential rising interest rates, higher unemployment and tax increases) may adversely affect customers’ confidence and willingness to spend. Any of such events or occurrences could have a material adverse effect on the Company’s financial results and on your investment.
Additional financing may be necessary for the implementation of our growth strategy.
The Company may require additional debt and/or equity financing to pursue our growth and business strategies. These include but are not limited to enhancing our operating infrastructure and otherwise respond to competitive pressures. Given our limited operating history and existing losses, there can be no assurance that additional financing will be available, or, if available, that the terms will be acceptable to us. Lack of additional funding could force us to curtail substantially our growth plans. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our Shares.
Our operating plan relies in large part upon assumptions and analyses developed by the Company. If these assumptions or analyses prove to be incorrect, the Company’s actual operating results may be materially different from our forecasted results.
Whether actual operating results and business developments will be consistent with the Company’s expectations and assumptions as reflected in its forecast depends on a number of factors, many of which are outside the Company’s control, including, but not limited to:
| ● | whether the Company can obtain sufficient capital to sustain and grow its business |
| ● | our ability to manage the Company’s growth |
| ● | whether the Company can manage relationships with key vendors and advertisers |
| ● | demand for the Company’s products and services |
| ● | the timing and costs of new and existing marketing and promotional efforts and/or competition |
| ● | the Company’s ability to retain existing key management, to integrate recent hires and to attract, retain and motivate qualified personnel |
| ● | the overall strength and stability of domestic and international economies |
| ● | consumer spending habits |
Unfavorable changes in any of these or other factors, most of which are beyond the Company’s control, could materially and adversely affect its business, results of operations and financial condition.
Our operations may not be profitable.
The Company may not be able to generate significant revenues in the future. In addition, we expect to incur substantial operating expenses in order to fund the expansion of our business. As a result, we may experience substantial negative cash flow for at least the foreseeable future and cannot predict when, or even if, the Company might become profitable.
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We may be unable to manage our growth or implement our expansion strategy.
We may not be able to expand the Company’s product and service offerings, the Company’s markets, or implement the other features of our business strategy at the rate or to the extent presently planned. The Company’s projected growth will place a significant strain on our administrative, operational and financial resources. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.
Our business model is evolving.
Our business model is unproven and is likely to continue to evolve. Accordingly, our initial business model may not be successful and may need to be changed. Our ability to generate significant revenues will depend, in large part, on our ability to successfully market our products to potential users who may not be convinced of the need for our products and services or who may be reluctant to rely upon third parties to develop and provide these products. We intend to continue to develop our business model as the Company’s market continues to evolve.
The Company Needs to Increase Brand Awareness
Due to a variety of factors, our opportunity to achieve and maintain a significant market share may be limited. Developing and maintaining awareness of the Company’s brand name, among other factors, is critical. Further, the importance of brand recognition will increase as competition in the Company’s market increases. Successfully promoting and positioning our brand, products and services will depend largely on the effectiveness of our marketing efforts. Therefore, we may need to increase the Company’s financial commitment to create and maintain brand awareness. If we fail to successfully promote our brand name or if the Company incurs significant expenses promoting and maintaining our brand name, it will have a material adverse effect on the Company’s results of operations.
Our employees may engage in misconduct or improper activities.
The Company, like any business, is exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include intentional failures to comply with laws or regulations, provide accurate information to regulators, comply with applicable standards, report financial information or data accurately or disclose unauthorized activities to the Company. In particular, sales, marketing and business arrangements are subject to extensive laws and regulations intended to prevent fraud, misconduct, 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 improper or illegal activities which could result in regulatory sanctions and serious harm to our reputation.
Limitation on director liability.
The Company may provide for the indemnification of directors to the fullest extent permitted by law and, to the extent permitted by such law, eliminate or limit the personal liability of directors to the Company and its shareholders for monetary damages for certain breaches of fiduciary duty. Such indemnification may be available for liabilities arising in connection with this Offering.
Risks Related to this Offering and Investment
We may undertake additional equity or debt financing that would dilute the shares in this offering.
The Company may undertake further equity or debt financing, which may be dilutive to existing shareholders, including you, or result in an issuance of securities whose rights, preferences and privileges are senior to those of existing shareholders, including you, and also reducing the value of Shares subscribed for under this Offering.
An investment in the Shares is speculative and there can be no assurance of any return on any such investment.
An investment in the Company’s Shares is speculative, and there is no assurance that investors will obtain any return on their investment. Investors will be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.
The Shares are offered on a “Best Efforts” basis, and we may not raise the Maximum Amount being offered.
Since we are offering the Shares on a “best efforts” basis, there is no assurance that we will sell enough Shares to meet our capital needs. If you purchase Shares in this Offering, you will do so without any assurance that we will raise enough money to satisfy the full Use Of Proceeds To Issuer which we have outlined in this Offering Circular or to meet our working capital needs.
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If the maximum offering is not raised, it may increase the amount of long-term debt or the amount of additional equity we need to raise.
There is no assurance that the maximum number of Shares in this Offering will be sold. If the maximum Offering amount is not sold, we may need to incur additional debt or raise additional equity in order to finance our operations. Increasing the amount of debt will increase our debt service obligations and make less cash available for distribution to our shareholders. Increasing the amount of additional equity that we will have to seek in the future will further dilute those investors participating in this Offering.
We have not paid dividends in the past and do not expect to pay dividends in the future, so any return on investment may be limited to the value of our shares.
We have never paid cash dividends on our Shares and do not anticipate paying cash dividends in the foreseeable future. The payment of dividends on our Shares will depend on earnings, financial condition and other business and economic factors affecting it at such time that management may consider relevant. If we do not pay dividends, our Shares may be less valuable because a return on your investment will only occur if its stock price appreciates.
We may not be able to obtain additional financing.
Even if we are successful in selling the maximum number of Shares in the Offering, we may require additional funds to continue and grow our business. We may not be able to obtain additional financing as needed, on acceptable terms, or at all, which would force us to delay our plans for growth and implementation of our strategy which could seriously harm our business, financial condition and results of operations. If we need additional funds, we may seek to obtain them primarily through additional equity or debt financings. Those additional financings could result in dilution to our current shareholders and to you if you invest in this Offering.
The offering price has been arbitrarily determined.
The offering price of the Shares has been arbitrarily established by us based upon our present and anticipated financing needs and bears no relationship to our present financial condition, assets, book value, projected earnings, or any other generally accepted valuation criteria. The offering price of the Shares may not be indicative of the value of the Shares or the Company, now or in the future.
The management of the Company has broad discretion in application of proceeds.
The management of the Company has broad discretion to adjust the application and allocation of the net proceeds of this offering in order to address changed circumstances and opportunities. As a result of the foregoing, our success will be substantially dependent upon the discretion and judgment of the management of the Company with respect to the application and allocation of the net proceeds hereof.
An investment in our Shares could result in a loss of your entire investment.
An investment in the Company’s Shares offered in this Offering involves a high degree of risk and you should not purchase the Shares if you cannot afford the loss of your entire investment. You may not be able to liquidate your investment for any reason in the near future.
There is no assurance that we will be able to pay dividends to our Shareholders.
While we may choose to pay dividends at some point in the future to our shareholders, there can be no assurance that cash flow and profits will allow such distributions to ever be made.
Sales of a substantial number of shares of our stock may cause the price of our stock to decline.
If our shareholders sell substantial amounts of our Shares in the public market, Shares sold may cause the price to decrease below the current offering price. These sales may also make it more difficult for us to sell equity or equity related securities at a time and price that we deem reasonable or appropriate.
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We have made assumptions in our projections and in Forward-Looking Statements that may not be accurate.
The discussions and information in this Offering Circular may contain both historical and “forward- looking statements” which can be identified by the use of forward-looking terminology including the terms “believes,” “anticipates,” “continues,” “expects,” “intends,” “may,” “will,” “would,” “should,” or, in each case, their negative or other variations or comparable terminology. You should not place undue reliance on forward-looking statements. These forward-looking statements include matters that are not historical facts. Forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Forward-looking statements contained in this Offering Circular, based on past trends or activities, should not be taken as a representation that such trends or activities will continue in the future. To the extent that the Offering Circular contains forward-looking statements regarding the financial condition, operating results, business prospects, or any other aspect of our business, please be advised that our actual financial condition, operating results, and business performance may differ materially from that projected or estimated by us. We have attempted to identify, in context, certain of the factors we currently believe may cause actual future experience and results to differ from our current expectations. The differences may be caused by a variety of factors, including but not limited to adverse economic conditions, lack of market acceptance, reduction of consumer demand, unexpected costs and operating deficits, lower sales and revenues than forecast, default on leases or other indebtedness, loss of suppliers, loss of supply, loss of distribution and service contracts, price increases for capital, supplies and materials, inadequate capital, inability to raise capital or financing, failure to obtain customers, loss of customers, the risk of litigation and administrative proceedings involving the Company or its employees, loss of government licenses and permits or failure to obtain them, higher than anticipated labor costs, the possible acquisition of new businesses or products that result in operating losses or that do not perform as anticipated, resulting in unanticipated losses, the possible fluctuation and volatility of the Company’s operating results and financial condition, adverse publicity and news coverage, inability to carry out marketing and sales plans, loss of key executives, changes in interest rates, inflationary factors, and other specific risks that may be referred to in this Offering Circular or in other reports issued by us or by third-party publishers.
You should be aware of the long-term nature of this investment.
Because the Shares have not been registered under the Securities Act or under the securities laws of any state or non-United States jurisdiction, the Shares may have certain transfer restrictions. It is not currently contemplated that registration under the Securities Act or other securities laws will be effected. Limitations on the transfer of the Shares may also adversely affect the price that you might be able to obtain for the Shares in a private sale. You should be aware of the long-term nature of your investment in the Company. You will be required to represent that you are purchasing the Securities for your own account, for investment purposes and not with a view to resale or distribution thereof.
The Shares in this Offering have no protective provisions.
The Shares in this Offering have no protective provisions. As such, you will not be afforded protection by any provision of the Shares or as a Shareholder in the event of a transaction that may adversely affect you, including a reorganization, restructuring, merger or other similar transaction involving the Company. If there is a ‘liquidation event’ or ‘change of control’ the Shares being offered do not provide you with any protection. In addition, there are no provisions attached to the Shares in the Offering that would permit you to require the Company to repurchase the Shares in the event of a takeover, recapitalization or similar transaction.
You will not have significant influence on the management of the Company.
Substantially all decisions with respect to the management of the Company will be made exclusively by the officers, directors, managers or employees of the Company. You will have a very limited ability, if at all, to vote on issues of Company management and will not have the right or power to take part in the management of the Company and will not be represented on the board of directors or by managers of the Company. Accordingly, no person should purchase Shares unless he or she is willing to entrust all aspects of management to the Company.
There is no guarantee of any return on your investment.
There is no assurance that you will realize a return on your investment or that you will not lose your entire investment. For this reason, you should read this Offering Circular and all exhibits and referenced materials carefully and should consult with your own attorney and business advisor prior to making any investment decision.
Our Subscription Agreement identifies the state of Delaware for purposes of governing law.
The Company’s Subscription Agreement for shares issued under this Offering contains a choice of law provision stating, “all questions concerning the construction, validity, enforcement and interpretation of the Offering Circular, including, without limitation, this [Subscription] Agreement, shall be governed by and construed and enforced in accordance with the laws of the State of Delaware.” As such, excepting matters arising under federal securities laws, any disputes arising between the Company and shareholders acquiring shares under this offering shall be determined in accordance with the laws of the state of Delaware. Furthermore, the Subscription Agreement establishes the state and federal courts located in Delaware as having jurisdiction over matters arising between the Company and shareholders.
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These provisions may discourage shareholder lawsuits or limit shareholders’ ability to obtain a favorable judicial forum in disputes with the Company and its directors, officers, or other employees.
IN ADDITION TO THE RISKS LISTED ABOVE, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY THE MANAGEMENT. IT IS NOT POSSIBLE TO FORESEE ALL RISKS THAT MAY AFFECT THE COMPANY. MOREOVER, THE COMPANY CANNOT PREDICT WHETHER THE COMPANY WILL SUCCESSFULLY EFFECTUATE THE COMPANY’S CURRENT BUSINESS PLAN. EACH PROSPECTIVE PURCHASER IS ENCOURAGED TO CAREFULLY ANALYZE THE RISKS AND MERITS OF AN INVESTMENT IN THE SECURITIES AND SHOULD TAKE INTO CONSIDERATION WHEN MAKING SUCH ANALYSIS, AMONG OTHER FACTORS, THE RISK FACTORS DISCUSSED ABOVE.
DETERMINATION OF OFFERING PRICE
The Offering Price will be determined after qualification pursuant to Rule 253(b). The Offering Price will be arbitrarily determined and is not meant to reflect a valuation of the Company.
The term ‘dilution’ refers to the reduction (as a percentage of the aggregate Shares outstanding) that occurs for any given share of stock when additional Shares are issued. If all the Shares in this Offering are fully subscribed and sold, the Shares offered herein will constitute approximately 40% of the total Shares of common stock of the Company. The Company anticipates that, subsequent to this Offering, the Company may require additional capital and such capital may take the form of Common Stock, other stock or securities or debt convertible into stock. Such future fund raising or conversion of existing convertible debt or Preferred Stock will further dilute the percentage ownership of the Shares sold herein by the Company.
The Company has the following common stock equivalents as of September 15, 2022, pro forma to issuing 100,000,000 common shares offered herein:
| Common Shares (Inclusive of Offering) | 250,218,141 | |||
| Convertible Notes (1) | 159,779,672 | |||
| Warrants (2) | 145,000,000 | |||
| Convertible Debt (3) | 93,454,160 | |||
| Series A Preferred Stock (4) | 4,132,512,359 | |||
| Series B Preferred Stock (5) | 488,032,448 | |||
| Total Fully Diluted Common Shares | 5,528,776,452 |
| (1) | $797,500 Notes convertible at $0.005 |
| (2) | 7-year Warrants exercisable at $0.0055 |
| (3) | $467,271 Debt and Accrued Interest convertible at $0.005 |
| (4) | Series A Preferred Stock may be converted into 84.68% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months (assumes 250,218,441 Issued and Outstanding shares post Offering) |
| (5) | Series B Preferred Stock may be converted into 10% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months |
If you purchase shares in this Offering, your ownership interest in our Common Stock will be diluted immediately, to the extent of the difference between the price to the public charged for each share in this Offering and the net tangible book value per share of our Common Stock after this Offering.
Our historical net tangible book value as of June 30, 2022, was $(1,771,771). Historical net tangible book value equals the amount of our total tangible assets, less total liabilities, divided by the total number of shares of our Common Stock outstanding, all as of the date specified. Net tangible book value per share is an estimate based on the net tangible book value as of June 30, 2022, and 150,218,141 shares of common stock outstanding as of the date of this Offering Circular.
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The following table illustrates the per share dilution to new investors discussed above, assuming the sale of, respectively, 100%, 75%, 50% and 25% of the Shares offered for sale in this Offering (before deducting our estimated offering expenses of $25,000):
| 100% | 75% | 50% | 25% | |||||||||||||
| Funding Level | $ | 20,000,000 | $ | 15,000,000 | $ | 10,000,000 | $ | 5,000,000 | ||||||||
| Offering Price | $ | 0.20 | $ | 0.20 | $ | 0.20 | $ | 0.20 | ||||||||
| Net tangible book value per share of Common Stock before this Offering | $ | (0.0118 | ) | $ | (0.0118 | ) | $ | (0.0118 | ) | $ | (0.0118 | ) | ||||
| Increase in net tangible book value per share attributable to new investors in this Offering | $ | 0.0846 | $ | 0.0705 | $ | 0.0529 | $ | 0.0302 | ||||||||
| Net tangible book value per share of Common Stock, after this Offering | $ | 0.0728 | $ | 0.0587 | $ | 0.0411 | $ | 0.0184 | ||||||||
| Dilution per share to investors in the Offering | $ | (0.1272 | ) | $ | (0.1413 | ) | $ | (0.1589 | ) | $ | (0.1816 | ) | ||||
| (1) | Based on net tangible shareholders equity book value as of June 30, 2022, of $(1,771,771) and 150,218,141 outstanding shares of Common Stock as of the date of this Offering Circular. |
There is no material disparity between the price of the Shares in this Offering and the effective cash cost to officers, directors, promoters and affiliated persons for shares acquired by them in a transaction during the past year, or that they have a right to acquire.
We are offering a Maximum Offering of up to $20,000,000 in Shares of our Common Stock. The offering is being conducted on a best-efforts basis without any minimum number of shares or amount of proceeds required to be sold. There is no minimum subscription amount required (other than a per investor minimum purchase) to distribute funds to the Company. The Company will not initially sell the Shares through commissioned broker-dealers but may do so after the commencement of the offering. Any such arrangement will add to our expenses in connection with the offering. If we engage one or more commissioned sales agents or underwriters, we will supplement this Form 1-A to describe the arrangement. Subscribers have no right to a return of their funds. The Company may terminate the offering at any time for any reason at its sole discretion and may extend the Offering past the termination date of 365 days from the date of qualification by the Commission in the absolute discretion of the Company and in accordance with the rules and provisions of Regulation A of the JOBS Act. None of the Shares being sold in this Offering are being sold by existing securities holders.
After the Offering Statement has been qualified by the Securities and Exchange Commission (the “SEC”), the Company will accept tenders of funds to purchase the Shares. No escrow agent is involved, and the Company will receive the proceeds directly from any subscription. You will be required to complete a subscription agreement in order to invest.
All subscription agreements and checks received by the Company for the purchase of shares are irrevocable until accepted or rejected by the Company and should be delivered to the Company as provided in the subscription agreement. A subscription agreement executed by a subscriber is not binding on the Company until it is accepted on our behalf by the Company’s Chief Executive Officer or by specific resolution of our board of directors. Any subscription not accepted within 30 days will be automatically deemed rejected. Once accepted, the Company will deliver a stock certificate to a purchaser within five days from request by the purchaser; otherwise, purchasers’ shares will be noted and held on the book records of the Company.
The Company, by determination of the Board of Directors, in its sole discretion, may issue the Securities under this Offering for cash, promissory notes, services, and/or other consideration without notice to subscribers.
At this time no broker-dealer registered with the SEC and a member of the Financial Industry Regulatory Authority (“FINRA”), is being engaged as an underwriter or for any other purpose in connection with this Offering. This Offering will commence on the qualification of this Offering Circular, as determined by the Securities and Exchange Commission and continue for a period of 365 days. The Company may extend the Offering for an additional time period unless the Offering is completed or otherwise terminated by us, or unless we are required to terminate by application of Regulation A of the JOBS Act. Funds received from investors will be counted towards the Offering only if the form of payment, such as a check or wire transfer, clears the banking system and represents immediately available funds held by us prior to the termination of the subscription period, or prior to the termination of the extended subscription period if extended by the Company.
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This is an offering made under “Tier 1” of Regulation A, and the shares will not be listed on a registered national securities exchange upon qualification. Therefore, the shares will be sold only to a person if the aggregate purchase price paid by such person is no more than 10% of the greater of such person’s annual income or net worth, not including the value of his primary residence, as calculated under Rule 501 of Regulation D promulgated under Section 4(a)(2) of the Securities Act of 1933, as amended. In the case of sales to fiduciary accounts (Keogh Plans, Individual Retirement Accounts (IRAs) and Qualified Pension/Profit Sharing Plans or Trusts), the above suitability standards must be met by the fiduciary account, the beneficiary of the fiduciary account, or by the donor who directly or indirectly supplies the funds for the purchase of the shares. Investor suitability standards in certain states may be higher than those described in this Form 1-A and/or Offering Circular. These standards represent minimum suitability requirements for prospective investors, and the satisfaction of such standards does not necessarily mean that an investment in the Company is suitable for such persons. Different rules apply to accredited investors.
Each investor must represent in writing that he/she/it meets the applicable requirements set forth above and in the Subscription Agreement, including, among other things, that (i) he/she/it is purchasing the shares for his/her/its own account and (ii) he/she/it has such knowledge and experience in financial and business matters that he/she/it is capable of evaluating without outside assistance the merits and risks of investing in the shares, or he/she/it and his/her/its purchaser representative together have such knowledge and experience that they are capable of evaluating the merits and risks of investing in the shares. Broker-dealers and other persons participating in the offering must make a reasonable inquiry in order to verify an investor’s suitability for an investment in the Company. Transferees of the shares will be required to meet the above suitability standards.
The shares may not be offered, sold, transferred, or delivered, directly or indirectly, to any person who (i) is named on the list of “specially designated nationals” or “blocked persons” maintained by the U.S. Office of Foreign Assets Control (“OFAC”) at www.ustreas.gov/offices/enforcement/ofac/sdn or as otherwise published from time to time, (ii) an agency of the government of a Sanctioned Country, (iii) an organization controlled by a Sanctioned Country, or (iv) is a person residing in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC. A “Sanctioned Country” means a country subject to a sanctions program identified on the list maintained by OFAC and available at www.ustreas.gov/offices/enforcement/ofac/sdn or as otherwise published from time to time. Furthermore, the shares may not be offered, sold, transferred, or delivered, directly or indirectly, to any person who (i) has more than fifteen percent (15%) of its assets in Sanctioned Countries or (ii) derives more than fifteen percent (15%) of its operating income from investments in, or transactions with, sanctioned persons or Sanctioned Countries.
OTC Markets Considerations
The OTC Markets is separate and distinct from the New York Stock Exchange and Nasdaq stock market or other national exchange. Neither the New York Stock Exchange nor Nasdaq has a business relationship with issuers of securities quoted on the OTC Markets. The SEC’s order handling rules, which apply to New York Stock Exchange and Nasdaq-listed securities, do not apply to securities quoted on the OTC Markets.
Although other national stock markets have rigorous listing standards to ensure the high quality of their issuers and can delist issuers for not meeting those standards; the OTC Markets has no listing standards. Rather, it is the market maker who chooses to quote a security on the system, files the application, and is obligated to comply with keeping information about the issuer in its files.
Investors may have greater difficulty in getting orders filled than if we were on Nasdaq or other exchanges. Trading activity in general is not conducted as efficiently and effectively on OTC Markets as with exchange-listed securities. Also, because OTC Markets stocks are usually not followed by analysts, there may be lower trading volume than New York Stock Exchange and Nasdaq-listed securities.
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The Use of Proceeds is an estimate based on the Company’s current business plan. We may find it necessary or advisable to reallocate portions of the net proceeds reserved for one category to another, or to add additional categories, and we will have broad discretion in doing so.
The maximum gross proceeds from the sale of the Shares in this Offering are $20,000,000. The net proceeds from the offering, assuming it is fully subscribed, are expected to be approximately $19,975,000 after the payment of offering costs such as printing, mailing, marketing, legal and accounting costs, and other compliance and professional fees that may be incurred. The estimate of the budget for offering costs is an estimate only and the actual offering costs may differ from those expected by management.
Management of the Company has wide latitude and discretion in the use of proceeds from this Offering. Ultimately, management of the Company intends to use substantially all of the net proceeds for general working capital and acquisitions. At present, management’s best estimate of the use of proceeds, at various funding milestones, is set out in the chart below. However, potential investors should note that this chart contains only the best estimates of the Company’s management based upon information available to them at the present time, and that the actual use of proceeds is likely to vary from this chart based upon circumstances as they exist in the future, various needs of the Company at different times in the future, and the discretion of the Company’s management at all times.
A portion of the proceeds from this Offering may be used to compensate or otherwise make payments to officers or directors of the issuer. The officers and directors of the Company may be paid salaries and receive benefits that are commensurate with similar companies, and a portion of the proceeds may be used to pay these ongoing business expenses.
USE OF PROCEEDS
| Assuming $0.20 Offering Price (Max): | 10% | 25% | 50% | 75% | 100% | |||||||||||||||
| Working Capital | $ | 1,700,000 | $ | 4,000,000 | $ | 8,000,000 | $ | 12,000,000 | $ | 16,000,000 | ||||||||||
| Acquisition Capital | $ | 150,000 | $ | 500,000 | $ | 1,000,000 | $ | 1,500,000 | $ | 2,000,000 | ||||||||||
| Debt Repayment | $ | 150,000 | $ | 500,000 | $ | 1,000,000 | $ | 1,500,000 | $ | 2,000,000 | ||||||||||
| Total | $ | 2,000,000 | $ | 5,000,000 | $ | 10,000,000 | $ | 15,000,000 | $ | 20,000,000 |
| Assuming $0.10 Offering Price (Midpoint): | 10% | 25% | 50% | 75% | 100% | |||||||||||||||
| Working Capital | $ | 900,000 | $ | 2,000,000 | $ | 4,000,000 | $ | 6,000,000 | $ | 8,000,000 | ||||||||||
| Acquisition Capital | $ | 0 | $ | 250,000 | $ | 500,000 | $ | 750,000 | $ | 1,000,000 | ||||||||||
| Debt Repayment | $ | 100,000 | $ | 250,000 | $ | 500,000 | $ | 750,000 | $ | 1,000,000 | ||||||||||
| Total | $ | 1,000,000 | $ | 2,500,000 | $ | 5,000,000 | $ | 7,500,000 | $ | 10,000,000 |
| Assuming $0.01 Offering Price (Min): | 10% | 25% | 50% | 75% | 100% | |||||||||||||||
| Working Capital | $ | 100,000 | $ | 250,000 | $ | 450,000 | $ | 675,000 | $ | 900,000 | ||||||||||
| Acquisition Capital | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
| Debt Repayment | $ | 0 | $ | 0 | $ | 50,000 | $ | 75,000 | $ | 100,000 | ||||||||||
| Total | $ | 100,000 | $ | 250,000 | $ | 500,000 | $ | 750,000 | $ | 1,000,000 |
The expected use of net proceeds from this Offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. The precise amounts that we will devote to each of the foregoing items, and the timing of expenditures, will vary depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering.
In the event we do not sell all the shares being offered, we may seek additional financing from other sources in order to support the intended use of proceeds indicated above. If we secure additional equity funding, investors in this Offering would be diluted. In all events, there can be no assurance that additional financing would be available to us when wanted or needed and, if available, on terms acceptable to us.
The allocation of the use of proceeds among the categories of anticipated expenditures represents management’s best estimates based on the current status of the Company’s proposed operations, plans, investment objectives, capital requirements, and financial conditions. No assurances can be provided that any milestone represented herein will be achieved. Future events, including changes in economic or competitive conditions of our business plan or the completion of less than the total Offering amount, may cause the Company to modify the above-described allocation of proceeds. The Company’s use of proceeds may vary significantly in the event any of the Company’s assumptions prove inaccurate. We reserve the right to change the allocation of net proceeds from the Offering as unanticipated events or opportunities arise. Additionally, the Company may from time to time need to raise more capital to address future needs.
The Company reserves the right to change the use of proceeds set out herein based on the needs of the ongoing business of the Company and the discretion of the Company’s management. The Company may reallocate the estimated use of proceeds among the various categories or for other uses if management deems such a reallocation to be appropriate.
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Organization and History
The Company was originally incorporated as Sunland Entertainment Co. (Delaware) Inc. pursuant to a Certificate of Incorporation filed with the Secretary of the State of Delaware. Sunland Entertainment Co. was previously incorporated in California and was the successor to the Harvey Entertainment Company.
The corporation filed an Amended and Restated Certificate of Incorporation on July 16, 2002, and a Second Amended and Restated Certificate of Incorporation on September 17, 2003, in which it changed its name to Trestle Holdings, Inc. (“Trestle”). A third Amended and Restated Certificate of Incorporation was filed on November 2, 2006.
On March 15, 2009, Trestle Holdings, Inc. entered into a Share Exchange Agreement with MoqiZone Cayman (the “MoqiZone Agreement”). As of August 25, 2009, an Amended and Restated Certificate of Incorporation was filed in which the corporate name was changed to MoqiZone Holding Corporation and authorized capital was changed to forty million (40,000,000) shares of common stock and fifteen million (15,000,000) shares of preferred stock. Pursuant to additional financings closed in August 2009, a certificate of designation of Series A preferred stock and Series B preferred stock were filed on October 6, 2009, and 15,000 shares of Series A preferred stock and 10,743 shares Series B preferred stock were issued. On August 31, 2009, a one-for-254.5 reverse stock split became effective and reduced outstanding shares of common stock to 703,794 shares and the Series B Preferred Stock was automatically converted into an aggregate of 10,743,000 shares of common stock, representing approximately 95% of the then issued and outstanding shares of common stock. A certificate of designation of Series C preferred stock was filed on April 1, 2010, authorizing 2,250,000 shares of Series C preferred.
On August 24, 2015, the Company filed an Amended Certificate of Incorporation, in which it changed its name to Balincan USA, Inc. (“Balincan”).
Recent Contribution Agreement and Reorganization
On June 14, 2022, Balincan entered into a Contribution Agreement with Tekumo LLC, a Colorado limited liability corporation (“Tekumo”), in which it acquired 100% of the membership interests of Tekumo in exchange for ten million (10,000,000) shares of a newly designated Series A Preferred Stock. The Series A Preferred Stock is senior to all other classes of stock and represents 85% of the voting control of the Company and may be converted into 85% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months.
In conjunction with the change of control, the Company also issued one million (1,000,000) shares of a newly designated Series B Preferred Stock as consideration for services rendered pursuant to a third-party consulting agreement. The Series B Preferred stock is junior to the Series A Preferred Stock upon liquidation, but is senior to all other classes of stock, is non-voting, and may be converted into 10% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months.
The Company also issued a total of $797,500 in Convertible Notes pursuant to Security Purchase Agreements. The Notes may convert into 159,500,000 common shares. The Convertible Notes are accompanied by 7-year Warrants that may be exercised into 145,000,000 common shares.
All shares of the prior Series A Preferred Stock and Series C Preferred Stock were converted into common stock, representing 9,950,000 common shares and 13,437,000 common shares respectively. Unsecured Notes of $375,000 were also converted into 6,500,000 common shares pursuant to Conversion Agreements.
The immediate exercise of 38,000 Series A Preferred shares following the closing resulted in the issuance of 96,900,000 common shares and the total outstanding common shares being 150,218,141.
Finally, the Company and a voting majority of its shareholders approved an amendment to the Company’s Articles of Incorporation whereby the number of authorized shares of common stock was increased to 1.5 billion shares.
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Subsidiaries and Affiliate Companies
Tekumo LLC is a 100% owned subsidiary of BCNN. It is a Colorado limited liability company formed on August 13, 2019, and it acquired all the assets, contracts and intellectual property of Sequenza Inc. in January 2020.
Sequenza Inc. was formed in December 2013 as a managed service provider for IT and telecommunication services. As an affiliated company it remains 100% controlled by Tekumo.
Company Overview and Plan of Operation
The Company operates 100% through its subsidiary, Tekumo LLC.
Tekumo is an intelligent service delivery platform that solves the “last-mile” of installing, monitoring, and maintaining technology systems and smart connected devices.
In delivering any product or service there remains a human link in the supply chain to install and manage such offerings. Tekumo delivers on those service needs, deploying its on-demand Service as a Service platform (SaaS).
Tekumo has three main product offerings:
TekumoPRO is a platform that connects enterprises, retailers, and OEMs with local skilled resources to install and maintain technology systems. It delivers a smarter dynamic workforce, intelligent automation, real-time visibility, and full integration into client service management systems.
TekumoIOT delivers the complete service chain for smart connected devices. It installs, monitors and manages sensors, devices gateways, hubs, and data for multiple verticals including Multiple Dwelling Units (MDU’s), Quick Service Restaurants (QSR’s), Assisted Living, Retail, Hospitality, Utilities, Builders, Insurance, and Healthcare – all with 24/7 onsite support.
TekumoIQ provides real-time risk management and process management data from all connected assets, accessible via Tekumo dashboards or directly delivered into any end user ecosystem.
These offerings represent the service industry’s first on-demand, Service as a Service platform (SaaS), addressing the need for a more dynamic field workforce, connecting smart connected devices that can drive cost savings, efficiencies, and higher profitability for our product and service customers.
Employees
As of the date of this Offering Circular, the Company has 39 employees, including its officers, of which 32 are full time. There is no collective agreement between the Company and its employees. The employment relationship between employees and the Company are individual and standard for the industry.
Property
Our corporate offices are located at 555 Middle Creek Parkway Suite 100 Colorado Springs, CO 80921. At this address, the Company occupies an office premises sufficient for its current needs.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are forward-looking statements. These forward-looking statements generally are identified by the words believes, project, expects, anticipates, estimates, intends, strategy, plan, may, will, would, will be, will continue, will likely result, and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Results of Operations
Six months ended June 30, 2022, and 2021.
For the six months ended June 30, 2022, and 2021, the Company generated revenues of $1,277,968 and $862,297, respectively.
Cost of goods sold for the six months ended June 30, 2022, and 2021 was $762,188 and $479,574, respectively.
Operating Expenses for the six months ended June 30, 2022, and 2021 were $3,134,268 (inclusive of 2,148,683 in stock compensation) and $478,025, respectively.
Net Income for the six months ended June 30, 2022, and 2021 was $(2,807,409) and $(112,214), respectively.
Liquidity and Capital Resources
Net cash provided by operating activities for the six months ended June 30, 2022, and 2021 was $332,818 and $121,543, respectively.
Net cash provided by investing activities for the six months ended June 30, 2022, and 2021 was $(300,000) and $(153,000), respectively.
Net cash provided by financing activities for the six months ended June 30, 2022, and 2021 was $399,529 and $15,481, respectively.
As of June 30, 2022, the Company had $492,267 in cash to fund its operations.
Years ended December 31, 2021, and 2020.
For the years ended December 31, 2021, and 2020, the Company generated revenues of $2,773,418 and $1,537,047, respectively.
Cost of goods sold for the years ended December 31, 2021, and 2020 was $1,637,976 and $897,263, respectively.
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Operating expenses for the years ended December 31, 2021, and 2020 were $1,288,113 and $821,594, respectively.
Accrued Interest for the years ended December 31, 2021, and 2020 was $50,916 and $40,724, respectively.
Net Income for the years ended December 31, 2021, and 2020 was $(203,587) and $(222,534), respectively.
Liquidity and Capital Resources
Net cash provided by operating activities for the years ended December 31, 2021, and 2020 was $(314,079) and $(119,490), respectively.
Net cash provided by investing activities for the years ended December 31, 2021, and 2020 was $(288,000) and $(935,833), respectively.
Net cash provided by financing activities for the years ended December 31, 2021, and 2020 was $585,750 and $1,077,801, respectively.
As of December 31, 2021, we had $59,920 in cash to fund our operations.
Going Concern
The financial statements attached to this Offering Circular have been prepared assuming that the company will continue as a going concern which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. For the six months ended June 30, 2022, the Company has incurred a net loss of $658,726 from operations before stock compensation of $2,148,683 for net losses of $2,807,409. It used cash in operations of $446,130. We had an accumulated deficit of $12,365,471 inclusive of a deemed dividend of $9,430,936 and stock-based compensation of $2,148,686 as of June 30, 2022. It is management’s opinion that these matters raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The ability of the Company to continue as a going concern is dependent upon management’s ability to further implement its business plan and raise additional capital as needed from the sales of stock or issuance of debt. The Company will begin to raise capital through private placements of common stock and is planning an offering of common stock under Regulation A. Additionally the Company has been implementing cost-cutting measures and restructuring or setting up payment plans with vendors and service providers and has restructured some obligations. The accompanying financial statements do not include any adjustments that might be required should the Company be unable to continue as a going concern.
Critical Accounting Policies
The discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. In consultation with the Company’s Board of Directors, management has identified in the accompanying financial statements the accounting policies that it believes are key to an understanding of its financial statements. These are important accounting policies that require management’s most difficult, subjective judgments.
Recently Issued Accounting Pronouncements
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.
Off-Balance Sheet Arrangements
As of the date of this Offering Circular, there were no off-balance sheet arrangements.
Subsequent Material Events
The Company evaluated subsequent events that have occurred after the balance sheet date of June 30, 2022, and up through the date of this Offering Circular. There are two types of subsequent events: (i) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (ii) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. The Company has determined that there are no additional events that would require adjustment to or disclosure in the attached financial statements.
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DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES
Directors and Executive Officers
The following table sets forth regarding our executive officers, directors and significant employees, including their ages as of the date of this Offering Circular:
| Name | Position | Age | Director or Officer Since | |||
| Strings D.E. Kozisek | CEO, Director | 58 | June 2022 | |||
| Phillip Dignan | President, CFO, Director | 59 | June 2022 | |||
| Christopher Nichols | CSO, Director | 56 | June 2022 |
Strings D.E. Kozisek, CEO/President/Director
Strings has over 20 years executive technology experience in Asia and the US. He founded Media Access Group in Japan, which he successfully sold to PTS Consulting before founding Sequenza Inc in Colorado. At Sequenza, he pioneered a full-service delivery desk atop a contingent labor platform, Field Nation, to prove the Tekumo thesis of an end-to-end full-service platform.
Phillip Dignan, President, CFO, Director
Phillip is a senior corporate, finance and investment professional with “C level” experience in the technology, retail and energy segments. He has completed numerous M&A and financing transactions and was a founding partner of Appian Ventures. He was previously head of finance and corporate development at Field Nation. Phillip worked for Salomon Brothers International in both London and Tokyo in fixed income and foreign exchange.
Christopher Nichols, CSO, Director
Chris is an experienced senior level executive and entrepreneur with a demonstrated history of success. Chris is responsible for strategic direction and business development. He was previously the head of Sales and Business Development at Field Nation, one of our key labor resource partners. He was also President/CEO of Advanced Growing Systems.
Board of Directors
Our board of directors currently consists of three directors, none of which are considered “independent” as defined in Rule 4200 of FINRA’s listing standards. We may appoint additional independent directors to our board of directors in the future, particularly to serve on committees should they be established.
We have no formal policy regarding board diversity. In selecting board candidates, we seek individuals who will further the interests of our stockholders through an established record of professional accomplishment, the ability to contribute positively to our collaborative culture, knowledge of our business and understanding of our prospective markets.
Committees of the Board of Directors
We may establish an audit committee, compensation committee, a nominating and governance committee and other committees to our Board of Directors in the future but have not done so as of the date of this Offering Circular. Until such committees are established, matters that would otherwise be addressed by such committees will be acted upon by the Board of Directors.
Compensation of Directors and Executive Officers
Executive and Director Compensation
We have no standard arrangement to compensate our directors for their services in their capacity. Directors are not paid for meetings attended. However, we intend to review and consider future proposals regarding board and executive compensation. All travel and lodging expenses associated with corporate matters are reimbursed by us, if and when incurred.
Our current executive officers, Stings D.E. Kozisek, CEO, and Phillip Dignan, President & CFO receives a salary of $12,500 per month for services performed as an officer of the Company. A bonus of $7,500 per month is also accrued. Our third executive officer, Christopher Nichols, CSO, receives a salary of $8,000 per month with a bonus accrual of $4,500 per month.
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Summary Compensation Table
The following table represents information regarding the total compensation of our officers and directors for the year ended December 31, 2021.
| Name | Position | Cash Compensation | Other Compensation | Total Compensation | ||||||||||
| Strings D.E. Kozisek | CEO, Director | $ | 156,000 | (1) | - | $ | 156,000 | |||||||
| Phillip Dignan | President, CFO, Director | $ | 156,000 | (2) | - | $ | 156,000 | |||||||
| Christopher Nichols | CSO, Director | $ | 144,000 | (3) | - | $ | 144,000 | |||||||
| (1) | Includes $90,000 worth of accrued but unpaid bonuses. |
| (2) | Includes $90,000 worth of accrued but unpaid bonuses. |
| (3) | Includes $78,000 worth of accrued but unpaid bonuses. |
There are no other employment agreements between the Company and its executive officers or directors. Our executive officers and directors have the responsibility of determining the timing of remuneration programs for key personnel based upon such factors as positive cash flow, shares sales, product sales, estimated cash expenditures, accounts receivable, accounts payable, notes payable, and cash balances. At this time, management cannot accurately estimate when sufficient revenues will occur to implement this compensation, or the exact amount of compensation.
Stock Incentive Plan; Options; Equity Awards
We have not adopted any long-term incentive plan that provides compensation intended to serve as incentive for performance. None of our executive officers or directors received, nor do we have any arrangements to pay out, any bonus, stock awards, option awards, non-equity incentive plan compensation, or non-qualified deferred compensation
Limitation of Liability and Indemnification of Officers and Directors
Our Bylaws limit the liability of directors and officers of the Company to the maximum extent permitted by Delaware law. The Bylaws state that the Company shall indemnify and hold harmless each person who was or is a party or is threatened to be made a party to, or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or an officer of the Company or such director or officer is or was serving at the request of the Company as a director, officer, partner, member, manager, trustee, employee or agent of another company or of a partnership, limited liability company, joint venture, trust or other enterprise.
The Company believes that indemnification under our Bylaws covers at least negligence and gross negligence on the part of indemnified parties. The Company also may secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our Bylaws permit such indemnification.
The Company may also enter into separate indemnification agreements with its directors and officers, in addition to the indemnification provided for in our Bylaws. These agreements, among other things, may provide that we will indemnify our directors and officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of such person’s services as one of our directors or officers, or rendering services at our request, to any of its subsidiaries or any other company or enterprise. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and officers.
There is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
For additional information on indemnification and limitations on liability of our directors and officers, please review the Company’s Bylaws, which are attached to this Offering Circular.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS
The following table sets forth information regarding beneficial ownership of our Stock as of the date of this Offering Circular.
Beneficial ownership and percentage ownership are determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to Shares of stock. This information does not necessarily indicate beneficial ownership for any other purpose.
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Unless otherwise indicated and subject to applicable community property laws, to our knowledge, each Shareholder named in the following table possesses sole voting and investment power over their Shares of Stock. Percentage of beneficial ownership before the offering is based on 150,218,141 Shares of Common Stock outstanding as of the date of this Offering Circular. Percentage of beneficial ownership after the Offering assumes the sale of the Maximum Offering Amount.
| Name and Position | Class | Shares
Beneficially Owned Prior to Offering | Shares Beneficially Owned After Offering | |||||||||||||||
| Number | Percent | Number | Percent | |||||||||||||||
| Strings D.E. Kozisek, | Series A Preferred | 2,734,740 | 27.45 | % | 2,734,740 | 27.45 | % | |||||||||||
| CEO/Director | Common Shares | 32,300,000 | 21.50 | % | 32,300,000 | 12.91 | % | |||||||||||
| Phillip Dignan, | Series A Preferred | 2,984,740 | 29.96 | % | 2,984,740 | 29.96 | % | |||||||||||
| President/Director | Common Shares | 32,300,000 | 21.50 | % | 32,300,000 | 12.91 | % | |||||||||||
| Christopher Nichols, | Series A Preferred | 2,484,740 | 24.94 | % | 2,484,740 | 24.94 | % | |||||||||||
| CSO/Director | Common Shares | 32,300,000 | 21.50 | % | 32,300,000 | 12.91 | % | |||||||||||
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
As of June 30, 2022 Ascension Ventures LLC has Notes payable of $189,976. Ascension Ventures LLC is 50% controlled by Phillip Dignan.
As of June 30, 2022 Accrued Bonuses include:
| Strings D.E. Kozisek | $ | 274,000 | ||
| Phillip Dignan | $ | 299,500 | ||
| Christopher Nichols | $ | 203,500 | ||
| Junko Mano | $ | 51,500 | ||
| Graham King | $ | 39,000 |
During the last two full fiscal years and the current fiscal year, there are no other transactions or proposed transactions involving the Company and a related party, in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the Company’s total assets at year-end for its last three fiscal years.
Common Stock
The holders of our common stock are entitled to one vote per share on all matters submitted to a vote of our stockholders. The holders of the common stock have the sole right to vote, except as otherwise provided by law, by our articles of incorporation, or in a statement by our board of directors in a Preferred Stock Designation.
In addition, such holders are entitled to receive ratably such dividends, if any, as may be declared from time to time by our board of directors out of legally available funds, subject to the payment of preferential dividends or other restrictions on dividends contained in any Preferred Stock Designation, including, without limitation, the Preferred Stock Designation establishing a series of preferred stock described above. In the event of the dissolution, liquidation or winding up of Balincan USA, Inc., the holders of our common stock are entitled to share ratably in all assets remaining after payment of all our liabilities, subject to the preferential distribution rights granted to the holders of any series of our preferred stock in any Preferred Stock Designation, including, without limitation, the Preferred Stock Designation establishing a series of our preferred stock described above.
The holders of the common stock do not have cumulative voting rights or preemptive rights to acquire or subscribe for additional, unissued or treasury shares in accordance with the laws of the State of Delaware. Accordingly, excluding any voting rights granted to any series of our preferred stock, the holders of more than 50 percent of the issued and outstanding shares of the common stock voting for the election of directors can elect all of the directors if they choose to do so, and in such event, the holders of the remaining shares of the common stock voting for the election of the directors will be unable to elect any person or persons to the board of directors. All outstanding shares of the common stock are fully paid and nonassessable.
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The laws of the State of Delaware provide that the affirmative vote of a majority of the holders of the outstanding shares of our common stock and any series of our preferred stock entitled to vote thereon is required to authorize any amendment to our articles of incorporation, any merger or consolidation of Balincan USA, Inc. with any corporation, or any liquidation or disposition of any substantial assets of Balincan USA, Inc.
Preferred Stock
The Company is authorized to issue 15,000,000 shares of Preferred Stock par value of $0.001 per share. Total issued Preferred Stock is ten million nine hundred sixty-two thousand (10,962,000) shares – nine million nine hundred sixty-two thousand (9,962,000) designated as Series A Preferred (“Series A”) and one million (1,000,000) Series B Preferred (“Series B”).
Series A
The Series A (a) ranks senior, with respect to dividends and liquidation, winding up or dissolution to all other classes of stock; and (b) senior to any future designation of preferred stock (c) controls 85% of the voting interest of the Company on an if-converted to common shares basis (d) holders of Series A will be entitled to receive dividends on each outstanding share of Series A, which will accrue in at a rate equal to 4% per annum from the issuance date; (e) liquidation value of $0.6779 per share; and (e) the Series A Preferred Stock may convert into 85% of the fully diluted shares of the Company, non-dilutable for a period of 18 months from the date of Issuance.
Series B
The Series B (a) ranks senior, with respect to dividends and liquidation, winding up or dissolution to all other classes of stock, except the Series A Preferred Stock; and (b) senior to any future designation of preferred stock (c) is non-voting (d) holders of Series B will be entitled to receive dividends on each outstanding share of Series B, which will accrue in at a rate equal to 4% per annum from the issuance date; (e) liquidation value of $0.7975 per share; and (e) the Series B Preferred Stock may convert into 10% of the fully diluted shares of the Company, non-dilutable for a period of 18 months from the date of Issuance.
The Company is offering Shares of its Common Stock. Except as otherwise required by law, the Company’s Articles of Incorporation or Bylaws, each Shareholder shall be entitled to one vote for each Share held by such Shareholder on the record date of any vote of Shareholders of the Company. The Shares of Common Stock, when issued, will be fully paid and non-assessable.
The Company does not expect to create any additional classes of Common Stock during the next 12 months, but the Company is not limited from creating additional classes which may have preferred dividend, voting and/or liquidation rights or other benefits not available to holders of its common stock.
The Company does not expect to declare dividends for holders of Common Stock in the foreseeable future. Dividends will be declared, if at all (and subject to rights of holders of additional classes of securities, if any), in the discretion of the Company’s Board of Directors. Dividends, if ever declared, may be paid in cash, in property, or in shares of the capital stock of the Company, subject to the provisions of law, the Company’s Bylaws and the Certificate of Incorporation. Before payment of any dividend, there may be set aside out of any funds of the Company available for dividends such sums as the Board of Directors, in its absolute discretion, deems proper as a reserve for working capital, to meet contingencies, for equalizing dividends, for repairing or maintaining any property of the Company, or for such other purposes as the Board of Directors shall deem in the best interests of the Company.
Because this is a best-efforts offering, there is no minimum number of Shares that needs to be sold in order for funds to be released to the Company and for this Offering to hold its first closing.
The minimum subscription that will be accepted from an investor $1,000 (the ‘Minimum Subscription’).
A subscription for $1,000 or more in the Shares may be made only by tendering to the Company the executed Subscription Agreement (electronically or in writing) delivered with the subscription price in a form acceptable to the Company, via check, wire, credit or debit card, or ACH. The execution and tender of the documents required, as detailed in the materials, constitutes a binding offer to purchase the number of Shares stipulated therein and an agreement to hold the offer open until the Expiration Date or until the offer is accepted or rejected by the Company, whichever occurs first.
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The Company reserves the unqualified discretionary right to reject any subscription for Shares, in whole or in part. The Company reserves the unqualified discretionary right to accept any subscription for Shares, in an amount less than the Minimum Subscription. If the Company rejects any offer to subscribe for the Shares, it will return the subscription payment, without interest or reduction. The Company’s acceptance of your subscription will be effective when an authorized representative of the Company issues you written or electronic notification that the subscription was accepted.
There are no liquidation rights, preemptive rights, conversion rights, redemption provisions, sinking fund provisions, impacts on classification of the Board of Directors where cumulative voting is permitted or required related to the Common Stock, provisions discriminating against any existing or prospective holder of the Common Stock as a result of such Shareholder owning a substantial amount of securities, or rights of Shareholders that may be modified otherwise than by a vote of a majority or more of the shares outstanding, voting as a class defined in any corporate document as of the date of filing. The Common Stock will not be subject to further calls or assessment by the Company. There are no restrictions on alienability of the Common Stock in the corporate documents other than those disclosed in this Offering Circular. The Company has engaged Pacific Stock Transfer Co. to serve as the transfer agent and registrant for the Shares. For additional information regarding the Shares, please review the Company’s Bylaws, which are attached to this Offering Circular.
Excepting matters arising under federal securities laws, any disputes between the Company and shareholders shall be governed in reliance on the laws of the state of Delaware. Furthermore, the Subscription Agreement for this Regulation A offering appoints the state and federal courts located in the state of Delaware as having jurisdiction over any disputes related to this Regulation A offering between the Company and shareholders.
Transfer Agent
Our transfer agent is VStock Transfer LLC., 18 Lafayette Place Woodmere, NY 11598. The transfer agent is registered under the Exchange Act and operates under the regulatory authority of the SEC and FINRA.
DISQUALIFYING EVENTS DISCLOSURE
Recent changes to Regulation A promulgated under the Securities Act prohibit an issuer from claiming an exemption from registration of its securities under such rule if the issuer, any of its predecessors, any affiliated issuer, any director, executive officer, other officer participating in the offering of the interests, general partner or managing member of the issuer, any beneficial owner of 20% or more of the voting power of the issuer’s outstanding voting equity securities, any promoter connected with the issuer in any capacity as of the date hereof, any investment manager of the issuer, any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with such sale of the issuer’s interests, any general partner or managing member of any such investment manager or solicitor, or any director, executive officer or other officer participating in the offering of any such investment manager or solicitor or general partner or managing member of such investment manager or solicitor has been subject to certain “Disqualifying Events” described in Rule 506(d)(1) of Regulation D subsequent to September 23, 2013, subject to certain limited exceptions. The Company is required to exercise reasonable care in conducting an inquiry to determine whether any such persons have been subject to such Disqualifying Events and is required to disclose any Disqualifying Events that occurred prior to September 23, 2013, to investors in the Company. The Company believes that it has exercised reasonable care in conducting an inquiry into Disqualifying Events by the foregoing persons and is aware of the no such Disqualifying Events.
It is possible that (a) Disqualifying Events may exist of which the Company is not aware and (b) the SEC, a court or other finder of fact may determine that the steps that the Company has taken to conduct its inquiry were inadequate and did not constitute reasonable care. If such a finding were made, the Company may lose its ability to rely upon exemptions under Regulation A, and, depending on the circumstances, may be required to register the Offering of the Company’s Common Stock with the SEC and under applicable state securities laws or to conduct a rescission offer with respect to the securities sold in the Offering.
Trustees and other fiduciaries of qualified retirement plans or IRAs that are set up as part of a plan sponsored and maintained by an employer, as well as trustees and fiduciaries of Keogh Plans under which employees, in addition to self-employed individuals, are participants (together, “ERISA Plans”), are governed by the fiduciary responsibility provisions of Title 1 of the Employee Retirement Income Security Act of 1974 (“ERISA”). An investment in the Shares by an ERISA Plan must be made in accordance with the general obligation of fiduciaries under ERISA to discharge their duties (i) for the exclusive purpose of providing benefits to participants and their beneficiaries; (ii) with the same standard of care that would be exercised by a prudent man familiar with such matters acting under similar circumstances; (iii) in such a manner as to diversify the investments of the plan, unless it is clearly prudent not do so; and (iv) in accordance with the documents establishing the plan. Fiduciaries considering an investment in the Shares should accordingly consult their own legal advisors if they have any concern as to whether the investment would be inconsistent with any of these criteria.
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Fiduciaries of certain ERISA Plans which provide for individual accounts (for example, those which qualify under Section 401(k) of the Code, Keogh Plans and IRAs) and which permit a beneficiary to exercise independent control over the assets in his individual account, will not be liable for any investment loss or for any breach of the prudence or diversification obligations which results from the exercise of such control by the beneficiary, nor will the beneficiary be deemed to be a fiduciary subject to the general fiduciary obligations merely by virtue of his exercise of such control. On October 13, 1992, the Department of Labor issued regulations establishing criteria for determining whether the extent of a beneficiary’s independent control over the assets in his account is adequate to relieve the ERISA Plan’s fiduciaries of their obligations with respect to an investment directed by the beneficiary. Under the regulations, the beneficiary must not only exercise actual, independent control in directing the particular investment transaction, but also the ERISA Plan must give the participant or beneficiary a reasonable opportunity to exercise such control and must permit him to choose among a broad range of investment alternatives.
Trustees and other fiduciaries making the investment decision for any qualified retirement plan, IRA or Keogh Plan (or beneficiaries exercising control over their individual accounts) should also consider the application of the prohibited transactions provisions of ERISA and the Code in making their investment decision. Sales and certain other transactions between a qualified retirement plan, IRA or Keogh Plan and certain persons related to it (e.g., a plan sponsor, fiduciary, or service provider) are prohibited transactions. The particular facts concerning the sponsorship, operations and other investments of a qualified retirement plan, IRA or Keogh Plan may cause a wide range of persons to be treated as parties in interest or disqualified persons with respect to it. Any fiduciary, participant or beneficiary considering an investment in Shares by a qualified retirement plan IRA or Keogh Plan should examine the individual circumstances of that plan to determine that the investment will not be a prohibited transaction. Fiduciaries, participants or beneficiaries considering an investment in the Shares should consult their own legal advisors if they have any concern as to whether the investment would be a prohibited transaction.
Regulations issued on November 13, 1986, by the Department of Labor (the “Final Plan Assets Regulations”) provide that when an ERISA Plan or any other plan covered by Code Section 4975 (e.g., an IRA or a Keogh Plan which covers only self-employed persons) makes an investment in an equity interest of an entity that is neither a “publicly offered security” nor a security issued by an investment company registered under the Investment Company Act of 1940, the underlying assets of the entity in which the investment is made could be treated as assets of the investing plan (referred to in ERISA as “plan assets”). Programs which are deemed to be operating companies or which do not issue more than 25% of their equity interests to ERISA Plans are exempt from being designated as holding “plan assets.” Management anticipates that we would clearly be characterized as “operating” for the purposes of the regulations, and that it would therefore not be deemed to be holding “plan assets.”
Classification of our assets as “plan assets” could adversely affect both the plan fiduciary and management. The term “fiduciary” is defined generally to include any person who exercises any authority or control over the management or disposition of plan assets. Thus, classification of our assets as plan assets could make the management a “fiduciary” of an investing plan. If our assets are deemed to be plan assets of investor plans, transactions which may occur in the course of its operations may constitute violations by the management of fiduciary duties under ERISA. Violation of fiduciary duties by management could result in liability not only for management but also for the trustee or other fiduciary of an investing ERISA Plan. In addition, if our assets are classified as “plan assets,” certain transactions that we might enter into in the ordinary course of our business might constitute “prohibited transactions” under ERISA and the Code.
Under Code Section 408(i), as amended by the Tax Reform Act of 1986, IRA trustees must report the fair market value of investments to IRA holders by January 31 of each year. The Service has not yet promulgated regulations defining appropriate methods for the determination of fair market value for this purpose. In addition, the assets of an ERISA Plan or Keogh Plan must be valued at their “current value” as of the close of the plan’s fiscal year in order to comply with certain reporting obligations under ERISA and the Code. For purposes of such requirements, “current value” means fair market value where available. Otherwise, current value means the fair value as determined in good faith under the terms of the plan by a trustee or other named fiduciary, assuming an orderly liquidation at the time of the determination. We do not have an obligation under ERISA or the Code with respect to such reports or valuation although management will use good faith efforts to assist fiduciaries with their valuation reports. There can be no assurance, however, that any value so established (i) could or will actually be realized by the IRA, ERISA Plan or Keogh Plan upon sale of the Shares or upon liquidation of us, or (ii) will comply with the ERISA or Code requirements.
The income earned by a qualified pension, profit sharing or stock bonus plan (collectively, “Qualified Plan”) and by an individual retirement account (“IRA”) is generally exempt from taxation. However, if a Qualified Plan or IRA earns “unrelated business taxable income” (“UBTI”), this income will be subject to tax to the extent it exceeds $1,000 during any fiscal year. The amount of unrelated business taxable income in excess of $1,000 in any fiscal year will be taxed at rates up to 36%. In addition, such unrelated business taxable income may result in a tax preference, which may be subject to the alternative minimum tax. It is anticipated that income and gain from an investment in the Shares will not be taxed as UBTI to tax exempt shareholders, because they are participating only as passive financing sources.
DIVIDEND POLICY
Subject to preferences that may be applicable to any then-outstanding shares of Preferred Stock, if any, and any other restrictions, holders of Common Stock are entitled to receive ratably those dividends, if any, as may be declared from time to time by our board of directors out of legally available funds. We and our predecessors have not declared any dividends in the past. Further, we do not presently contemplate that there will be any future payment of any dividends on Common Stock.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been a limited market for our Common Stock on the OTC Markets. Future sales of substantial amounts of our Common Stock, or securities or instruments convertible into our Common Stock, in the public market, or the perception that such sales may occur, could adversely affect the market price of our Common Stock prevailing from time to time. Furthermore, because there will be limits on the number of shares available for resale shortly after this Offering due to contractual and legal restrictions described below, there may be resales of substantial amounts of our Common Stock in the public market after those restrictions lapse. This could adversely affect the market price of our Common Stock prevailing at that time.
Upon completion of this Offering, assuming the maximum number of shares of Common Stock offered in this Offering are sold, there will be 250,218,141 shares of our Common Stock outstanding.
Rule 144
In general, a person who has beneficially owned restricted shares of our Common Stock for at least twelve months, in the event we are a reporting company under Regulation A, or at least six months, in the event we have been a reporting company under the Exchange Act for at least 90 days before the sale, would be entitled to sell such securities, provided that such person is not deemed to be an affiliate of ours at the time of sale or to have been an affiliate of ours at any time during the 90 days preceding the sale. A person who is an affiliate of ours at such time would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of shares that does not exceed the greater of the following:
| ● | 1% of the number of shares of our Common Stock then outstanding; or |
| ● | the average weekly trading volume of our Common Stock during the four calendar weeks preceding the filing by such person of a notice on Form 144 with respect to the sale; |
provided that, in each case, we are subject to the periodic reporting requirements of the Exchange Act for at least 90 days before the sale. Rule 144 trades must also comply with the manner of sale, notice and other provisions of Rule 144, to the extent applicable.
INVESTOR ELIGIBILITY STANDARDS & ADDITIONAL INFORMATION ABOUT THE OFFERING
Investment Limitations
Generally, no sale may be made to you in this Offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth (please see below on how to calculate your net worth). Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A+. For general information on investing, we encourage you to refer to www.investor.gov.
Because this is a Tier 1, Regulation A+ offering, most investors must comply with the 10% limitation on investment in the Offering. The only investor in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under the Securities Act. If you meet one of the following tests you should qualify as an accredited investor:
| (i) | You are a natural person who has had individual income in excess of $200,000 in each of the two most recent years, or joint income with your spouse in excess of $300,000 in each of these years, and have a reasonable expectation of reaching the same income level in the current year; | |
| (ii) | You are a natural person and your individual net worth, or joint net worth with your spouse, exceeds $10,000,000 at the time you purchase Shares (please see below on how to calculate your net worth); | |
| (iii) | You are an executive officer or general partner of the issuer or a manager or executive officer of the general partner of the issuer; | |
| (iv) |
You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or the Code, a corporation, a Massachusetts or similar business trust or a partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000;
| |
| (v) | You are a bank or a savings and loan association or other institution as defined in the Securities Act, a broker or dealer registered pursuant to Section 15 of the Exchange Act, an insurance company as defined by the Securities Act, an investment company registered under the Investment Company Act of 1940 (Investment Company Act), or a business development company as defined in that act, any Small Business Investment Company licensed by the Small Business Investment Act of 1958 or a private business development company as defined in the Investment Advisers Act of 1940; |
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| (vi) | You are an entity (including an Individual Retirement Account trust) in which each equity owner is an accredited investor; | |
| (vii) | You are a trust with total assets in excess of $5,000,000, your purchase of Shares is directed by a person who either alone or with his purchaser representative(s) (as defined in Regulation D promulgated under the Securities Act) has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of the prospective investment, and you were not formed for the specific purpose of investing in the Shares; or | |
| (viii) | You are a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has assets in excess of $5,000,000. |
Offering Period and Expiration Date
This Offering will start on the date on which the SEC initially qualifies this Offering Statement (the Qualification Date) and will terminate on the Termination Date.
Procedures for Subscribing
If you decide to subscribe for our Common Stock shares in this Offering, you should:
| 1. | Electronically receive, review, execute and deliver to us a Subscription Agreement; and |
| 2. | Deliver funds directly to the Company’s designated bank account via bank wire transfer (pursuant to the wire transfer instructions set forth in our Subscription Agreement) or electronic funds transfer via wire transfer. |
Any potential investor will have ample time to review the subscription agreement, along with their counsel, prior to making any final investment decision. We shall only deliver such subscription agreement upon request after a potential investor has had ample opportunity to review this Offering Circular.
Right to Reject Subscriptions. After we receive your complete, executed subscription agreement and the funds required under the subscription agreement have been transferred to our designated account, we have the right to review and accept or reject your subscription in whole or in part, for any reason or for no reason. We will return all monies from rejected subscriptions immediately to you, without interest or deduction.
Acceptance of Subscriptions. Upon our acceptance of a subscription agreement, we will countersign the subscription agreement and issue the shares subscribed at closing. Once you submit the subscription agreement, you may not revoke or change your subscription or request your subscription funds. All submitted subscription agreements are irrevocable.
Under Rule 251 of Regulation A+, non-accredited, non-natural investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). A non-accredited, natural person may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).
NOTE: For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the Shares.
In order to purchase our Common Stock shares and prior to the acceptance of any funds from an investor, an investor will be required to represent, to the Company’s satisfaction, that such investor is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this Offering.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock offered hereby will be passed upon by Jeff Turner, JDT Legal, PLLC.
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REPORTS
Following this Tier 1, Regulation A offering, we will be required to comply with certain ongoing disclosure requirements under Rule 257 of Regulation A, in addition to our reporting requirements under the OTC Pink Basic Disclosure Guidelines.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Regulation A Offering Statement on Form 1-A under the Securities Act with respect to the shares of common stock offered hereby. This Offering Circular, which constitutes a part of the Offering Statement, does not contain all of the information set forth in the Offering Statement or the exhibits and schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the Offering Statement and the exhibits and schedules filed therewith. Statements contained in this Offering Circular regarding the contents of any contract or other document that is filed as an exhibit to the Offering Statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the Offering Statement. Upon the completion of this Offering, we will be required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Securities Exchange Act of 1934. You may read and copy this information at the SEC’s Public Reference Room, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, including us, that file electronically with the SEC. The address of this site is www.sec.gov.
Pursuant to the requirements of Regulation A, the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form 1-A and has duly caused this Offering statement to be signed on its behalf by the undersigned, thereunto duly authorized, on September 23, 2022.
| BALINCAN USA, INC. | ||
| By: | /s/ Strings D.E. Kozisek | |
| Strings D.E. Kozisek | ||
| CEO | ||
| September 23, 2022 | ||
This Offering statement has been signed by the following persons in the capacities and on the dates indicated.
| By: | /s/ Strings D.E. Kozisek | |
| String D.E. Kozisek | ||
| Principal Executive Officer, Director | ||
| September 23, 2022 | ||
| By: | /s/ Phillip Dignan | |
| Phillip Dignan | ||
| Principal Financial Officer, Director | ||
| September 23, 2022 | ||
| By: | /s/ Christopher Nichols | |
| Christopher Nichols | ||
| Director | ||
| September 23, 2022 | ||
ACKNOWLEDGEMENT ADOPTING TYPED SIGNATURES
The undersigned hereby authenticate, acknowledge, and otherwise adopt the typed signatures above and as otherwise appear in this filing and Offering.
| By: | /s/ Strings D.E. Kozisek | |
| Strings D.E. Kozisek | ||
| CEO | ||
| September 23, 2022 |
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Index to Exhibits
| Incorporated by Reference | ||||||||
| Exhibit No. | Description | Filed Herewith (*) |
Filing Type | Date Filed | ||||
| 2.1 | Articles of Incorporation, as amended | * | ||||||
| 2.2 | Bylaws | * | ||||||
| 3.1 | Series A Preferred Certificate of Designation | * | ||||||
| 3.2 | Series B Preferred Certificate of Designation | * | ||||||
| 3.3 | Series C Preferred Certificate of Designation | * | ||||||
| 4.1 | Subscription Agreement | * | ||||||
| 6.1 | Contribution Agreement with Tekumo LLC | * | ||||||
| 6.2 | Form of SPA dated 06/14/2022 | * | ||||||
| 6.3 | Form of Convertible Promissory Note dated 06/14/2022 | * | ||||||
| 6.4 | Form of Warrant dated 06/14/2022 | * | ||||||
| 6.5 | Convertible Promissory Note dated 04/18/2022 | * | ||||||
| 6.6 | Convertible Promissory Note dated 04/18/2022 | * | ||||||
| 6.7 | Convertible Promissory Note dated 04/18/2022 | * | ||||||
| 6.8 | Convertible Promissory Note dated 04/27/2022 | * | ||||||
| 12.1 | Legal Opinion and Consent | * | ||||||
III-1
PART F/S: FINANCIAL STATEMENTS
TABLE OF CONTENTS
Financial Statements for the six months ended June 30, 2022, Twelve Months Ended December 31, 2021 and Twelve Months Ended December 31, 2020
F-1
Condensed Consolidated Balance Sheets
| (As Restated for Reverse Merger) | (As Restated for Reverse Merger) | |||||||||||||||
| June
30, 2022 | June
30, 2021 | December
31, 2021 | December
31, 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| ASSETS: | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 492,267 | $ | 60,273 | $ | 59,920 | $ | 76,249 | ||||||||
| Accounts Receivable | 402,777 | 538,747 | 943,874 | 591,962 | ||||||||||||
| Total Current Assets | 895,044 | 599,020 | 1,003,794 | 668,211 | ||||||||||||
| Software & intellectual property | 1,523,833 | 1,088,833 | 1,223,833 | 935,833 | ||||||||||||
| Deposits and other assets | 10,395 | 6,930 | 10,395 | 6,929 | ||||||||||||
| Total Assets | $ | 2,429,272 | $ | 1,694,783 | $ | 2,238,022 | $ | 1,610,973 | ||||||||
| LIABILITIES AND SHAREHOLDER’S EQUITY | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Accounts payable and accrued liabilities | $ | 1,082,964 | $ | 545,081 | $ | 651,563 | $ | 406,678 | ||||||||
| Note payable, net of debt discount and issuance costs | 337,788 | 100,000 | 200,000 | - | ||||||||||||
| Derivative Liability | 9,430,936 | - | - | - | ||||||||||||
| Convertible notes, net of debt discount and issuance costs | 382,133 | - | - | - | ||||||||||||
| Line of credit | 298,377 | 333,506 | 761,636 | 391,366 | ||||||||||||
| Total Current Liabilities | 11,532,198 | 978,587 | 1,613,199 | 798,044 | ||||||||||||
| Notes Long term | 160,581 | 160,581 | 160,581 | 145,100 | ||||||||||||
| Total Long-Term Liabilities | 160,581 | 160,581 | 160,581 | 145,100 | ||||||||||||
| Total liabilities | 11,692,779 | 1,139,168 | 1,773,780 | 943,144 | ||||||||||||
| Shareholder’s Equity: | ||||||||||||||||
| Series A Preferred Stock 10,000,000 authorized, $0.001 par value, 9,962,000 issued and outstanding | 9,962 | 10,000 | 10,000 | 10,000 | ||||||||||||
| Series B Preferred Stock 1,000,000 authorized and outstanding, $0.001 par value, 1,000,000 issued and outstanding | 1,000 | - | - | - | ||||||||||||
| Common Stock, 1,500,000,000 authorized, $0.001 par value, 150,218,141 issued and outstanding | 150,218 | - | - | - | ||||||||||||
| Additional paid in capital | 2,940,784 | 581,368 | 581,368 | 581,368 | ||||||||||||
| Accumulated deficit | (12,365,471 | ) | (35,753 | ) | (127,126 | ) | 76,461 | |||||||||
| Total stockholder deficit | (9,263,507 | ) | 555,615 | 464,242 | 667,829 | |||||||||||
| Total Liabilities and Shareholder’s Equity | $ | 2,429,272 | $ | 1,694,783 | $ | 2,238,022 | $ | 1,610,973 | ||||||||
F-2
F-3
Condensed Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
As of June 30, 2022
| Series A | Series B | Additional | Total | |||||||||||||||||||||||||||||||||
| Preferred Stock | Preferred Stock | Common Stock | Paid-in | Accumulated | Shareholder’s | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance – December 31, 2020 (As Restated for Reverse Merger) | 10,000,000 | $ | 10,000 | $ | $ | $ | 571,368 | $ | 76,461 | $ | 657,829 | |||||||||||||||||||||||||
| Balance – December 31, 2021 (As Restated for Reverse Merger) | 10,000,000 | $ | 10,000 | - | $ | - | $ | $ | 571,368 | $ | (127,126) | $ | 454,242 | |||||||||||||||||||||||
| Issuance of shares upon recapitalization with public shell corporation | 53,318,141 | 53,318 | (53,318 | ) | - | |||||||||||||||||||||||||||||||
| Stock warrants issued with note payable | - | - | - | - | - | - | 361,909 | - | 361,909 | |||||||||||||||||||||||||||
| Stock based compensation | - | - | 1,000,000 | 1,000 | - | - | 2,147,686 | - | 2,148,686 | |||||||||||||||||||||||||||
| Conversion of Preferred Stock to Common Stock | (38,000 | ) | (38 | ) | - | - | 96,900,000 | 96,900 | (96,862 | ) | - | - | ||||||||||||||||||||||||
| Dividends | - | - | - | - | - | - | - | (9,430,936 | ) | (9,430,936 | ) | |||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2022 | - | - | - | - | - | - | - | (2,807,409 | ) | (2,807,409 | ) | |||||||||||||||||||||||||
| Balance – June 30, 2022 | 9,962,000 | $ | 9,962 | 1,000,000 | $ | 1,000 | 150,218,141 | $ | 150,218 | $ | 2,940,784 | $ | (12,365,471 | ) | $ | (9,263,507 | ) | |||||||||||||||||||
F-4
Condensed Consolidated Statements of Cash Flows
| Six Months | Six Months | Twelve Months | Twelve Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| June 30, 2022 | June 30, 2021 | Dec 31, 2021 | Dec 31, 2020 | |||||||||||||
| (unaudited) | (unaudited) | (unaudited) | (unaudited) | |||||||||||||
| Cash Flows From Operating Activities: | ||||||||||||||||
| Net Loss | $ | (2,807,409 | ) | $ | (112,214 | ) | $ | (203,587 | ) | $ | (222,534 | ) | ||||
| Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities | ||||||||||||||||
| Accretion Of Debt Discount | 19,043 | - | - | |||||||||||||
| Stock Based Compensation | 2,148,686 | - | - | |||||||||||||
| Changes in Operating Assets and Liabilities: | ||||||||||||||||
| (Increase) Decrease in: | ||||||||||||||||
| Accounts Receivable | 541,097 | 53,214 | (351,912 | ) | (284,515 | ) | ||||||||||
| Other Current Assets | (3,465 | ) | 3,000 | |||||||||||||
| Accounts Payable And Accrued Liabilities | 431,401 | 138,403 | 244,885 | 384,559 | ||||||||||||
| Net Cash Provided by Operating Activities | 332,818 | 79,403 | (314,079 | ) | (119,490 | ) | ||||||||||
| Cash Flows From Investing Activities: | ||||||||||||||||
| Purchase of Software & Intellectual Property | (300,000 | ) | (153,000 | ) | (288,000 | ) | (935,833 | ) | ||||||||
| Net Cash Used in Investing Activities | (300,000 | ) | (153,000 | ) | (288,000 | ) | (935,833 | ) | ||||||||
| Cash Flows From Financing Activities: | ||||||||||||||||
| Proceeds From Issuance of Convertible Notes | 725,000 | - | - | |||||||||||||
| Proceeds From Issuance of Note Payable | 137,788 | 115,481 | 215,481 | 95,100 | ||||||||||||
| Line Of Credit (Repayments) | (463,259 | ) | (57,860 | ) | 370,269 | 391,366 | ||||||||||
| Equity | 591,335 | |||||||||||||||
| Net Cash Provided By Financing Activities | 399,529 | 57,621 | 585,750 | 1,077,801 | ||||||||||||
| Net Change in Cash | 432,347 | (15,976 | ) | (16,329 | ) | 22,478 | ||||||||||
| Cash - Beginning of Period | 59,920 | 76,249 | 76,249 | 53,771 | ||||||||||||
| Cash - Ending of Period | $ | 492,267 | $ | 60,273 | $ | 59,920 | $ | 76,249 | ||||||||
| Supplemental Disclosures of Cash Flow Information: | ||||||||||||||||
| Cash Paid For Interest | - | - | - | - | ||||||||||||
| Cash Paid For Taxes | - | - | - | - | ||||||||||||
| Supplemental Schedule of Non-Cash Financing Activities: | ||||||||||||||||
| Deemed Dividend | $ | 9,430,936 | $ | $ | - | $ | - | |||||||||
| Stock Warrants Issued with Note Payable | $ | 361,909 | $ | $ | - | $ | - | |||||||||
F-5
Note 1 - Description of Business
Organization and History
The accompanying consolidated financial statements include the financial statements of Balincan USA, Inc. (formerly known as MoqiZone Holding Corporation, Trestle Holdings Inc., Sunland Entertainment Co. and Harvey Entertainment Company) (the “Company”).
The Original Share Exchange Agreement, Reverse Merger and Reorganization
On May 7, 2002, the Company was originally incorporated as Sunland Entertainment Co. (Delaware) Inc. pursuant to a Certificate of Incorporation filed with the Secretary of the State of Delaware. Sunland Entertainment Co. was previously incorporated in California and was the successor to the Harvey Entertainment Company as of June 22, 2001.
The corporation filed an Amended and Restated Certificate of Incorporation on July 16, 2002, and a Second Amended and Restated Certificate of Incorporation on September 17, 2003, in which it changed its name to Trestle Holdings, Inc. (“Trestle”). A third Amended and Restated Certificate of Incorporation was filed on November 2, 2006.
On March 15, 2009, Trestle Holdings, Inc. entered into a Share Exchange Agreement with MoqiZone Cayman (the “MoqiZone Agreement”). As of August 25, 2009, an Amended and Restated Certificate of Incorporation was filed in which the corporate name was changed to MoqiZone Holding Corporation and authorized capital was changed to forty million (40,000,000) shares of common stock and fifteen million (15,000,000) shares of preferred stock. Pursuant to additional financings closed in August 2009, a certificate of designation of Series A preferred stock and Series B preferred stock were filed on October 6, 2009, and 15,000 shares of Series A preferred stock and 10,743 shares Series B preferred stock were issued. On August 31, 2009, a one-for-254.5 reverse stock split became effective and reduced outstanding shares of common stock to 703,794 shares and the Series B Preferred Stock was automatically converted into an aggregate of 10,743,000 shares of common stock, representing approximately 95% of the then issued and outstanding shares of common stock. A certificate of designation of Series C preferred stock was filed on April 1, 2010, authorizing 2,250,000 shares of Series C preferred.
On August 24, 2015, the Company filed an Amended Certificate of Incorporation, in which it changed its name to Balincan USA, Inc. (“Balincan”).
The Current Contribution Agreement and Reorganization
On June 14, 2022, Balincan entered into a Contribution Agreement with Tekumo LLC (“Tekumo”), a Colorado limited liability corporation, in which it acquired 100% of the membership interests of Tekumo in exchange for ten million (10,000,000) shares of a newly designated Series A Preferred Stock. The Series A Preferred Stock is senior to all other classes of stock and represents 85% of the voting control of the Company and may be converted into 85% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months.
In conjunction with the change of control, the Company also issued one million (1,000,000) shares of a newly designated Series B Preferred Stock as consideration for services rendered pursuant to a third-party consulting agreement. The Series B Preferred stock is junior to the Series A Preferred Stock upon liquidation, but is senior to all other classes of stock, is non-voting, and may be converted into 10% of the Company’s fully diluted common stock, non-dilutive for a period of eighteen months.
F-6
The Company also issued a total of $797,500 in Convertible Notes pursuant to Security Purchase Agreements. The Notes may convert into 159,500,000 common shares. The Convertible Notes are accompanied by 7-year Warrants that may be exercised into 145,000,000 common shares.
To effectuate the reverse merger, consideration of 53,318,141 shares of the Company’s common stock were retained. This is inclusive of the prior Series A Preferred Stock and Series C Preferred Stock along with the $375,000 of unsecured Notes being converted into common stock
Finally, the Company and a voting majority of its shareholders approved an amendment to the Company’s Articles of Incorporation whereby the number of authorized shares of common stock was increased to 1.5 billion shares.
Note 2 - Summary of Significant Accounting Policies
Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by the accounting principles generally accepted in the United States of America.
Basis of Presentation
The condensed consolidated balance sheet as of June 30, 2022, which has been derived from unaudited financial statements and the interim unaudited condensed consolidated financial statements as of December 31, 2021 and December 31, 2020 have been prepared in accordance with U.S. GAAP for interim financial information. These condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
The condensed consolidated financial statements included herein as of and for the six month period ended June 30, 2022 and twelve months ended December 31,2021 and December 31, 2020 are unaudited; however, they contain all normal recurring accruals and adjustments that, in the opinion of the Company’s management, are necessary to present fairly the condensed consolidated financial position of the Company as of those periods. The results of operations for the six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year or any future interim periods.
The condensed consolidated statements of cash flows for the six month ended June 30, 2022 and twelve months ended December 31,2021 and December 31, 2020 are unaudited.
Use of Estimates and Critical Accounting Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. The Company uses estimates in accounting for, among other items, revenue recognition, allowance for doubtful accounts, stock-based compensation, and income tax provisions.
Actual results could differ from those estimates.
Principles of consolidation
The Company consolidates all majority-owned subsidiaries, if any, in which the parent’s power to control exists.
All inter-company balances and transactions have been eliminated.
F-7
Fair Value of Financial Instruments
The fair value measurement disclosures are grouped into three levels based on valuation factors:
| ● | Level 1 quoted prices in active markets for identical investments |
| ● | Level 2 other significant observable inputs (including quoted prices for similar investments and market corroborated inputs) |
| ● | Level 3 significant unobservable inputs (including our own assumptions in determining the fair value of investments) |
The Company’s Level 1 assets/liabilities include cash, accounts receivable, accounts payable, and other current assets. Management believes the estimated fair value of these accounts at June 30, 2022 approximate their carrying value as reflected in the balance sheets due to the short-term nature of these instruments or the use of market interest rates for debt instruments.
The Company’s Level 2 assets/liabilities include certain of the Company’s notes payable and line of credit obligations. Their carrying value approximates their fair values based upon a comparison of the interest rate and terms of such debt given the level of risk to the rates and terms of similar debt currently available to the Company in the marketplace.
The Company’s Level 3 assets/liabilities include intangible assets and derivative liabilities. Inputs to determine fair value are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques, including option pricing models and discounted cash flow models. Unobservable inputs used in the models are significant to the fair values of the assets and liabilities.
The following table provides a summary of the relevant assets and liabilities that are measured at fair value on recurring basis:
Fair Value Measurements as of
June 30, 2022
| Total | Quoted Prices in Active Markets for Identical Assets or Liabilities (Level 1) | Quoted Prices for Similar Assets or Liabilities in Active Markets (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||
| Liabilities: | |||||||||||||
| Derivative liabilities | $ | 9,430,936 | $ | - | $ | - | $ | 9,430,936 | |||||
| Total Liabilities | $ | 9,430,936 | $ | - | $ | - | $ | 9,430,936 | |||||
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) or Financial Claims Scheme (“FCS”) insurable limits. The Company has never experienced any losses related to these balances. The Company does not believe it is exposed to significant credit risk on cash and cash equivalents.
Concentration of Credit Risk and Other Risks and Uncertainties
The Company provides credit in the normal course of business. The Company maintains allowances for credit losses on factors surrounding the credit risk of specific customers, historical trends, and other information.
F-8
Long-lived Assets Including Goodwill and Other Acquired Intangible Assets
We evaluate the recoverability of acquired finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate from the use and eventual disposition. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. We routinely review the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If we change the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.
Commitments and Contingencies
The Company follows subtopic 450-20 of the FASB ASC to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Derivative Liability
The Company evaluates its debt and equity issuances to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with paragraph 815-10-05-4 and Section 815-40-25 of the FASB Accounting Standards Codification. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as either an asset or a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the consolidated statement of operations as other income or expense. Upon conversion, exercise or cancellation of a derivative instrument, the instrument is marked to fair value at the date of conversion, exercise or cancellation and then the related fair value is reclassified to equity.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.
The Company utilizes a discounted cashflow model for the anti-dilution feature for the Preferred Stock that maintains a 95% ownership in the company. The inputs utilized in the application of the discounted cashflow model included an estimate for the equity sold in the future, the probability that it will occur and a risk-free rate. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.
Revenue Recognition
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
F-9
We determine revenue recognition through the following steps:
| ● | identification of the contract, or contracts, with a customer; |
| ● | identification of the performance obligations in the contract; |
| ● | determination of the transaction price; |
| ● | allocation of the transaction price to the performance obligations in the contract |
| ● | recognition of revenue when, or as, we satisfy a performance obligation. |
Tekumo is an intelligent service delivery platform that solves the “last-mile” of installing, monitoring, and maintaining technology systems and smart connected devices. It connects enterprises, retailers, and OEM’s with local skilled resources to install and maintain technology systems.
As the Company performs services on specific activities in accordance with a customer service agreement or statement of work, it recognizes revenue when that activity has been completed.
Accounts Receivable and Allowances
Accounts receivable are recorded and carried when the Company has performed the work in accordance with the agreement. We make estimates for the allowance for doubtful accounts and allowance for unbilled receivables based upon our assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of our customers, current economic conditions, and other factors that may affect our ability to collect from customers. During the six months ended June 30, 2022, the Company recorded $0 and $0, respectively as a bad debt expense. As of December 31, 2021, and December 31, 2020 the Company has an allowance for doubtful accounts of $0 and $0, respectively.
Stock-Based Compensation
The Company recognizes compensation expense for all equity–based payments granted in accordance with Accounting Standards Codification (“ASC”) 718 “Compensation – Stock Compensation”. Under fair value recognition provisions, the Company recognizes equity–based compensation over the requisite service period of the award. The company has a relatively low forfeiture rate of stock-based compensation and forfeitures are recognized as they occur.
Determining the appropriate fair value model and calculating the fair value of equity–based payment awards requires the input of the subjective assumptions described above. The assumptions used in calculating the fair value of equity–based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, our equity–based compensation could be materially different in the future. The Company issues awards of equity instruments, such as Series B Preferred Stock granted to certain non-employees. Compensation expense related to these awards is based on the fair value of the underlying stock on the award date and is amortized over the service period. Compensation expense is reduced for actual forfeitures as they occur.
Advertising Expense
The Company expenses marketing, promotions and advertising costs as incurred. For the six months ended June 30, 2022 and twelve months ended December 31,2021 and December 31, 2020, such costs were considered insignificant.
Loss Per Share
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, which is the case for the years ended December 31, 2021 and 2020 presented in these consolidated financial statements, the weighted-average number of common shares outstanding excludes common stock equivalents because their inclusion would be anti-dilutive.
F-10
The Company had the following common stock equivalents at June 30, 2022 and 2021:
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Series A Preferred Stock | 2,553,708,397 | - | ||||||
| Series B Preferred Stock | 300,436,282 | - | ||||||
| Series C Preferred Stock | - | - | ||||||
| Convertible notes | 159,779,672 | - | ||||||
| Warrants | 145,000,000 | - | ||||||
| Totals | 3,158,924,351 | - | ||||||
Recently Adopted Accounting Guidance
In May 2021, the FASB issued authoritative guidance intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. (ASU 2021-04), “Derivatives and Hedging Contracts in Entity’s Own Equity (Topic 815). This guidance’s amendments provide measurement, recognition, and disclosure guidance for an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange. The updated guidance, which became effective for fiscal years beginning after December 15, 2021, did not have a material impact on the Company’s condensed consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU-2016-13”). ASU 2016-13 affects loans, debt securities, trade receivables, and any other financial assets that have the contractual right to receive cash. The ASU requires an entity to recognize expected credit losses rather than incurred losses for financial assets. On October 16, 2019, FASB approved a final ASU delaying the effective date of ASU 2016-13 for small reporting companies to interim and annual periods beginning after December 15, 2022. The Company is currently evaluating the impact of these amendments to the Company’s financial position and results of operations and currently does not know or cannot reasonably quantify the impact of the adoption of the amendments as a result of the complexity and extensive changes from the amendments. The Company does not believe the adoption will have a material impact on the Company’s condensed consolidated financial statements. The adoption of the guidance will affect disclosers and estimates around accounts receivable.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity, and also improves and amends the related EPS guidance for both Subtopics. ASU 2020-06 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.
In July 2021, the FASB issued ASU No. 2021-05, Lessors—Certain Leases with Variable Lease Payments (Topic 842), Which requires a lessor to classify a lease with variable lease payments that do not depend on an index or rate (hereafter referred to as “variable payments”) as an operating lease on the commencement date of the lease if specified criteria are met. ASU 2021-05 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations — Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Topic 805), Which aims to improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in recognition and payment terms that effect subsequent revenue recognition. ASU 2021-08 is effective for the fiscal year beginning after December 15, 2022, including interim periods within that fiscal year. The Company expects that there would be no material impact on the Company’s condensed consolidated financial statements upon the adoption of this ASU.
Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements.
Note 3 - Going Concern
The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.
F-11
As reflected in the condensed consolidated financial statements, as of June 30, 2022, the Company had an accumulated deficit of $12.4 million and a net loss of $2.8 million. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of one year from the issuance of these financial statements.
On January 30, 2020, the World Health Organization declared the COVID-19 novel coronavirus outbreak a “Public Health Emergency of International Concern” and on March 10, 2020, declared it to be a pandemic. Actions taken around the world to help mitigate the spread of the coronavirus include restrictions on travel, and quarantines in certain areas, and forced closures for certain types of public places and businesses. The COVID-19 coronavirus and actions taken to mitigate it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical area in which the Company operates. While it is unknown how long these conditions will last and what the complete financial impact will be to the Company, capital raising efforts and our operations may be negatively affected.
The Company is attempting to further implement its business plan and generate sufficient revenues; however, its cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient revenues and in its ability to raise additional funds by way of a public or private offering of its debt or equity securities, there can be no assurance that it will be able to do so on reasonable terms, or at all. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenues and its ability to raise additional funds by way of a public or private offering.
The condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Note 4 - Notes Payable
The Company’s subsidiary, Tekumo LLC, has outstanding promissory notes with a principal of $337,787 and accrued interest of $129,458 as of June 30, 2022. The notes were issued with an original issue discount of 20%, carry an interest rate of 10% per annum, and have a maturity of October 18, 2022, carry an interest rate of 10% per annum. They may be converted into equity securities of a Qualified financing of $500,000 upon the same terms in the financing.
SBA EIDL Loan: On June 6, 2020, Tekumo borrowed $104,200.00 with a maturity of 30 years at 3.75% interest from the Small Business Administration (“SBA”) through an Economic Injury and Disaster Loan A second advance of $16,000 was borrowed on 6/30/2022 with a maturity of 30 years at 3.75% interest. The SBA has a continuing security interest in all assets.
Note 5 - Line of Credit
Tekumo has a $3 million Accounts Receivable Financing Agreement with eCapital (previously Flexible Funding) under which it may borrow 90% of eligible outstanding receivables. The funding rate is 0.5% of the borrowed amount plus an interest rate equal to prime plus 7%. eCapital has a senior lien on all Receivables. As of June 30, that balance was $265,145.10.
Tekumo also had a line of credit with one of its vendors of $33,232. This carries no interest rate and was paid off post June 30, 2022.
Note 6 - Convertible Notes
On June 14, 2022, the Company entered into $797,500 in Secured Convertible Promissory Notes. The Notes were issued with an original issue discount of $72,500 and the Company received $725,000 in cash. The Notes have a maturity of one-year, carry an interest rate of 4% per annum, and may be converted into common shares at a conversion price of $0.005. In the event of a Qualified Offering in which the Company raises at least $5,000,000, $0.50 of every dollar after the initial $2,500,000 shall be utilized to repay the principal and interest due on the Notes.
As additional consideration for entering in the convertible notes, the Company issued a seven-year warrant to purchase 145,000,000 shares of the Company’s common stock at a purchase price of $0.0055 per share. The Company recorded a $361,909 of debt discount relating to 145,000,000 warrants issued to investors based on the relative fair value of each equity instrument on the dates of issuance and $72,500 from the original issue discount. The debt discount is being accreted over the life of the note to accretion of debt discount and issuance cost.
F-12
Note 7 - Derivative Liabilities
The Company has identified derivative instruments arising from the anti-dilution feature in the Company’s Preferred Stock during the six months ended June 30, 2022. For the terms of the anti-dilution features see Note 8. The Company had no derivative assets or liabilities measured at fair value on a recurring basis as of December 31, 2021.
The Company utilizes a discounted cashflow model for the anti-dilution feature. The Company records the change in the fair value of the derivative as other income or expense in the consolidated statements of operations.
The following are the changes in the derivative liabilities during the six months ended June 30, 2022.
| Six Months Ended June 30, 2022 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Derivative liabilities as January 1, 2022 | $ | - | $ | - | $ | - | ||||||
| Addition | - | - | 9,430,936 | |||||||||
| Changes in fair value | - | - | - | |||||||||
| Extinguishment | - | - | - | |||||||||
| Derivative liabilities as June 30, 2022 | $ | - | $ | - | $ | 9,430,936 | ||||||
Note 8 - Stockholders’ Equity
Preferred Stock
The Company is authorized to issue 15,000,000 shares of Preferred Stock par value of $0.001 per share. Total issued Preferred Stock is eleven million (11,000,000) shares – ten million (10,000,000) designated as Series A Preferred and one million (1,000,000) Series B Preferred.
Series A
Pursuant to the Contribution Agreement dated June 14, 2022, ten million (10,000,000) new shares of Series A Preferred Stock were issued to the members of Tekumo LLC in consideration for 100% of Tekumo’s membership interests.
The Series A (a) ranks senior, with respect to dividends and liquidation, winding up or dissolution to all other classes of stock; and (b) senior to any future designation of preferred stock (c) controls 85% of the voting interest of the Company on an if-converted to common shares basis (d) holders of Series A will be entitled to receive dividends on each outstanding share of Series A, which will accrue in at a rate equal to 4% per annum from the issuance date; (e) liquidation value of $0.6779 per share; and (e) the Series A Preferred Stock may convert into 85% of the fully diluted shares of the Company, non-dilutable for a period of 18 months from the date of Issuance.
The conversion of 38,000 Series A Preferred shares resulted in the issuance of 96,900,000 common shares being issued.
Series B
Pursuant to a Consulting Agreement dated June 14, 2022, one million (1,000,000) new shares of Series B Preferred Stock were issued to Trillium Partners LP, for services rendered.
The Series B (a) ranks senior, with respect to dividends and liquidation, winding up or dissolution to all other classes of stock, except the Series A Preferred Stock; and (b) senior to any future designation of preferred stock (c) is non-voting (d) holders of Series B will be entitled to receive dividends on each outstanding share of Series B, which will accrue in at a rate equal to 4% per annum from the issuance date; (e) liquidation value of $0.7975 per share; and (e) the Series B Preferred Stock may convert into 10% of the fully diluted shares of the Company, non-dilutable for a period of 18 months from the date of Issuance.
Common Stock
The Company is authorized to issue 1,500,000,000 shares of common stock with par value of $0.001 per share. There is a total of 150,218,141 common shares issued and currently outstanding.
Warrants
The Company applied fair value accounting for all share-based payments awards. The fair value of each warrant granted is estimated on the date of grant using the Black-Scholes option-pricing model.
F-13
The assumptions used for warrants granted during the six months ended June 30, 2022 are as follows:
| June 30, 2022 | ||||
| Exercise price | $ | 0.0055 | ||
| Expected dividends | 0 | |||
| Expected volatility | 219.33 | % | ||
| Risk free interest rate | 3.60 | % | ||
| Expected life of warrant | 7.00 years | |||
Warrant Activities
The following is a summary of the Company’s warrant activity:
| Warrant | Weighted Average Exercise Price | ||||||||
| Balance – January 1, 2022 – outstanding | - | - | |||||||
| Granted | 145,000,000 | 0.0055 | |||||||
| Exercised | - | - | |||||||
| Forfeited/Cancelled | - | - | |||||||
| Balance – June 30, 2021 – outstanding | 145,000,000 | 0.0055 | |||||||
| Balance – June 30, 2021 – exercisable | 145,000,000 | $ | 0.0055 | ||||||
During the six months ended June 30, 2022, a total of 145,000,000 warrants were issued with convertible notes (See Note 6 above). The warrants have a grant date relative fair value of $361,909 using a Black-Scholes option-pricing model and the above assumptions.
As of June 30, 2022, the weighted average term of the notes is 7 years.
Note 9 - Commitments and Contingencies
Legal
In the normal course of business, the Company may become involved in various legal proceedings. The Company knows of no pending or threatened legal proceeding to which the Company is or will be a party that, if successful, might result in material adverse change in the Company’s business, properties or financial condition.
Note 10 - Subsequent Events
The Company has evaluated subsequent events after the balance sheet date and based upon its evaluation, management has determined that no subsequent events have occurred that would require recognition in the accompanying condensed consolidated financial statements or disclosure in the notes thereto other than as disclosed in the accompanying notes.
F-14
Exhibit 2.1
Exhibit 2.2
RESTATED BYLAWS
OF
Balincan USA, Inc. (“Corporation”)
ARTICLE I: OFFICES
Section 1.1. REGISTERED AGENT AND OFFICE. The registered agent of the Corporation shall be as set forth in the Corporation’s articles of incorporation, as amended or restated (the “Articles of Incorporation”) and the registered office of the Corporation shall be the street office of that agent. The board of directors of the Corporation (the “Board of Directors”) may at any time change the Corporation’s registered agent or office by making the appropriate filing with the Delaware Division of Corporations (“DDOC”).
Section 1.2. PRINCIPAL OFFICE. The principal office of the Corporation shall be at such place within or without the State of Delaware as shall be fixed from time to time by the Board of Directors.
Section 1.3. OTHER OFFICES. The Corporation may also have other offices, within or without the State of Delaware, as the Board of Directors may designate, as the business of the Corporation may require, or as may be desirable.
Section 1.4. BOOKS AND RECORDS. The Corporation shall keep complete books and records of accounts and minutes of the proceedings of its stockholders and/or the Board of Directors. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be maintained on any information storage device or method that can be converted into clearly legible paper form within a reasonable time. The Corporation shall convert any records so kept on the request of any person entitled to inspect such records pursuant to applicable law. Any person dealing with the Corporation may rely upon a copy of any of the records of the proceedings, resolutions, or votes of the Board of Directors or stockholders when such copy is certified by the President or Secretary.
ARTICLE II: STOCKHOLDERS
Section 2.1. PLACE OF MEETING. Meetings of the stockholders shall be held either at the principal office of the Corporation or at any other place, within or without the State of Delaware, as shall be fixed by the Board of Directors and designated in the notice of the meeting or executed waiver of notice. The Board of Directors may determine, in its discretion, that any meeting of the stockholders may be held solely by means of electronic communication in accordance with Section 2.2.
Section 2.2. PARTICIPATION BY ELECTRONIC COMMUNICATION. Stockholders not physically present at a meeting of the stockholders may participate in the meeting by electronic communication, videoconference, teleconference, or other available technology if the Corporation implements reasonable measures to:
(a) Verify the identity of each stockholder participating by electronic communication.
(b) Provide the stockholders a reasonable opportunity to participate and vote, including an opportunity to communicate and read or hear the proceedings in a substantially concurrent manner with the proceedings.
Stockholders participating by electronic communication shall be considered present in person at the meeting.
Section 2.3. ANNUAL MEETING. An annual meeting of stockholders, for the purpose of electing directors and transacting any other business as may be brought before the meeting, shall be held on such date, at such time, and at such place (if any) within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the corporation’s notice of the meeting. At the annual meeting, directors shall be elected and any other proper business may be transacted.
Failure to hold the annual meeting of stockholders at the designated time shall not affect the validity of any action taken by the Corporation.
Section 2.4. SPECIAL MEETINGS. Special meetings of stockholders may be called at any time by (A) the Board of Directors, (B) the Chairperson of the Board of Directors, (C) the President of the Corporation. The only business which may be conducted at a special meeting of stockholders shall be the matter or matters set forth in the notice of such meeting (as required by Section 2.7 below). Nothing contained in this Section 2.4 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.
Section 2.5. STOCKHOLDER NOMINATIONS AND PROPOSALS. For business (including, but not limited to, director nominations) to be properly brought before an annual meeting by a stockholder, the stockholder or stockholders of record intending to propose the business (the “proposing stockholder”) must have given written notice of the proposing stockholder’s nomination or proposal, either by personal delivery or by United States mail to the Secretary no earlier than 60 calendar days and no later than 30 calendar days prior to the date such annual meeting is to be held. If the current year’s meeting is called for a date that is not within 30 days of the anniversary of the previous year’s annual meeting, notice must be received no later than ten calendar days following the day on which public announcement of the date of the annual meeting is first made. In no event will an adjournment or postponement of an annual meeting of stockholders begin a new time period for giving a proposing stockholder’s notice as provided above.
For business to be properly brought before a special meeting of stockholders, the notice of the meeting sent by or at the direction of the person calling the meeting must set forth the nature of the business to be considered. A person or persons who have made a written request for a special meeting pursuant to Section 2.4 may provide the information required for notice of a stockholder proposal under this section simultaneously with the written request for the meeting submitted to the Secretary or within ten calendar days after delivery of the written request for the meeting to the Secretary.
A proposing stockholder’s notice shall include as to each matter the proposing stockholder proposes to bring before either an annual or special meeting:
(a) The name and address of the proposing stockholder.
(b) The class and number of shares of capital stock of the Corporation held by the proposing stockholder.
(c) If the notice regards a nomination of a candidate for election as director: (i) the name, age, and business and residence address of the candidate; (ii) the principal occupation or employment of the candidate; and (iii) the class and number of shares of the Corporation beneficially owned by the candidate.
(d) If the notice regards a proposal other than a nomination of a candidate for election as director, a brief description of the business desired to be brought before the meeting and the material interest of the proposing stockholder in such proposal.
Section 2.6. FIXING THE RECORD DATE. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the record date shall be the date specified by the Board of Directors in the notice of the meeting. If no date is specified, the record date shall be the close of business on the day before the day the first notice of the meeting is given or, if notice is waived, the close of business on the day before the day the meeting is held.
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A record date fixed under this Section may not be more than 60, or less than 10, days before the meeting of stockholders. A determination of stockholders entitled to notice of or to vote at a meeting of stockholders is effective for any adjournment or postponement of the meeting unless the Board of Directors fixes a new record date for the adjourned or postponed meeting. The Board of Directors must fix a new record date if the meeting is adjourned or postponed more than 60 days after the original meeting of stockholders.
Section 2.7. NOTICE OF STOCKHOLDERS’ MEETING. Written notice stating the place (if any), date, and time of the meeting, the means of any electronic communication by which stockholders may participate in the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10, and not more than 60, days before the date of the meeting.
Notice to each stockholder entitled to vote at the meeting shall be given personally, by mail, or by electronic transmission if consented to by a stockholder, by or at the direction of the Secretary or the officer or person calling the meeting. If mailed, the notice shall be deemed to be given when deposited in the United States mail addressed to the stockholder at the stockholder’s address as it appears on the share transfer records of the Corporation, with postage thereon prepaid.
Any stockholder entitled to notice of a meeting may sign a written waiver of notice delivered to the Corporation either before or after the meeting. A stockholder’s participation or attendance at a meeting shall constitute a waiver of notice, except where the stockholder attends for the specific purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened.
Section 2.8. VOTING LISTS. The Corporation shall prepare, as of the record date fixed for a meeting of stockholders, an alphabetical list of all stockholders entitled to vote at the meeting (or any adjournment thereof). The list shall be available for inspection by any stockholder beginning two business days after notice of the meeting is given, electronically, during regular business hours at the Corporation’s principal office, or another place identified in the meeting notice in the city where the meeting will be held. The list shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting (or any adjournment thereof).
Section 2.9. QUORUM OF STOCKHOLDERS. At each meeting of stockholders for the transaction of any business, a quorum must be present to organize such meeting. The presence in person, by means of electronic communication, or by proxy of a majority of the voting power constitutes a quorum for the transaction of business at a meeting of stockholders, except as otherwise required by the Articles of Incorporation, these Bylaws, or Delaware Law. If any class or series of shares is permitted or required to vote separately on any action, the presence in person, by means of electronic communication, or by proxy of a majority of the voting power of such class or series constitutes a quorum for the transaction of business.
The holders of a majority of the voting power represented in person, by means of electronic communication, or by proxy at a meeting, even if less than a quorum, may adjourn or postpone the meeting from time to time.
Section 2.10. CONDUCT OF MEETINGS. The Board of Directors, as it shall deem appropriate, may adopt by resolution rules and regulations for the conduct of meetings of the stockholders. At every meeting of the stockholders, the Chairperson of the Board of Directors, or in his or her absence or inability to act, a director or officer designated by the Board of Directors, shall serve as chair of the meeting. The Secretary or, in his or her absence or inability to act, the person whom the chair of the meeting shall appoint, shall act as secretary of the meeting and keep the minutes thereof.
The chair of the meeting shall determine the order of business and, in the absence of a rule adopted by the Board of Directors, shall establish rules for the conduct of the meeting. The chair of the meeting shall announce the close of the polls for each matter voted upon at the meeting, after which no ballots, proxies, votes, changes, or revocations will be accepted. Polls for all matters before the meeting will be deemed to be closed upon final adjournment of the meeting.
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Section 2.11. VOTING OF STOCK. Each outstanding share of stock, regardless of class or series, shall be entitled to one vote on each matter submitted to a vote at a meeting of stockholders, except as otherwise provided by these Bylaws and to the extent that the Articles of Incorporation or the certificate of designation establishing the class or series of stock provides for more or less than one vote per share or limits or denies voting rights to the holders of the shares of any class or series of stock.
Unless a different proportion is required by the Articles of Incorporation, these Bylaws, or Delaware Law:
(a) If a quorum exists, action other than the election of directors is approved if the votes cast in favor of the action exceed the votes cast against the action.
(b) If a quorum exists of any class or series of stock that is permitted or required to vote separately on any matter, action is approved by the class or series if a majority of the voting power of a quorum of that class or series votes in favor of the action.
Stockholders are prohibited from cumulating their votes in any election of directors of the Corporation.
Directors are elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present.
Section 2.12. VOTING BY PROXY. A stockholder may vote either in person or by proxy executed in writing by the stockholder or the stockholder’s attorney-in-fact. Any copy, communication by electronic transmission, or other reliable written reproduction may be substituted for the stockholder’s original written proxy for any purpose for which the original proxy could have been used if such copy, communication by electronic transmission, or other reproduction is a complete reproduction of the entire original written proxy.
No proxy shall be valid after six months from the date of its creation unless the proxy specifies its duration, which may not exceed seven years from the date of its creation. A proxy shall be revocable unless the proxy states that the proxy is irrevocable and the proxy is coupled with an interest sufficient to support an irrevocable power.
A properly created proxy or proxies continues in full force and effect until either of the following occurs:
(a) One of the following 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 the stockholders and determine the validity of proxies and ballots: (i) another instrument or transmission properly revoking the proxy; or (ii) a properly created proxy or proxies bearing a later date.
(b) The stockholder executing the original written proxy revokes the proxy by attending a stockholders’ meeting and voting its shares in person, in which case any votes cast by that stockholder’s previously designated proxy or proxies shall be disregarded by the Corporation when the votes are counted.
Section 2.13. ACTION BY STOCKHOLDERS WITHOUT A MEETING. Any action required or permitted by Delaware Law to be taken at a meeting of stockholders may be taken without a meeting if, before or after the action, a written consent to the action is signed by stockholders holding a majority of the voting power of the Corporation or, if different, the proportion of voting power required to take the action at a meeting of stockholders.
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Section 2.14. NOTICE BY ELECTRONIC TRANSMISSION. Without limiting the manner by which notice otherwise may be given effectively to stockholders pursuant to Delaware Law, the Articles of Incorporation, or these Bylaws, any notice to stockholders given by the Corporation under any provision of Delaware Law, the Articles of Incorporation, or these Bylaws shall be effective if given by a form of electronic transmission to the stockholders. Notwithstanding the foregoing, a notice may not be given by an electronic transmission from and after the time that:
| (i) | the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation; and such inability becomes known to the Secretary or an assistants secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice. However, the inadvertent failure to discover such inability shall not invalidate any meeting or other action; or |
| (ii) | the Corporation receives notice from the stockholder by written notice or electronic transmission of the stockholder’s refusal to accept notice by electronic transmission. |
Any notice given pursuant to this Section 2.14 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 a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (a) such posting and (b) the giving of such separate notice. |
| (C) | If by any other form of electronic transmission, when directed to the stockholder. |
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.
ARTICLE III: DIRECTORS
Section 3.1. POWERS. The business and affairs of the Corporation shall be managed under the direction of the Board of Directors. Directors must be natural persons at least 18 years of age and need not be stockholders of the Corporation or residents of the State of Delaware.
Section 3.2. NUMBER OF DIRECTORS. The number of directors shall be at least 1 and not more than 9, provided that the minimum or maximum number may be increased or decreased from time to time by an amendment to these Bylaws. Subject to any provision in the Articles of Incorporation fixing the number of directors, the exact number of directors shall be fixed, within such range, by the Board of Directors. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director.
Section 3.3. TERM OF OFFICE. Except as provided in Sections 3.4 and 3.5 of these bylaws, each director, including a director elected to fill a vacancy, shall hold office until the next annual meeting of stockholders. Despite the expiration of a director’s term, the director shall continue to serve until his or her successor is elected and qualified.
Section 3.4. REMOVAL. Any or all of the directors, or a class of directors, may be removed at any time, with or without cause, at a special meeting of stockholders called for that purpose by a vote of the holders of two-thirds of the voting power of the issued and outstanding stock entitled to vote in the election of directors.
Section 3.5. RESIGNATION. A director may resign at any time by giving written notice to the Board of Directors, its chair, or to the Secretary of the Corporation. A resignation is effective when the notice is given unless a later effective date is stated in the notice. Acceptance of the resignation shall not be required to make the resignation effective. The pending vacancy may be filled before the effective date, but the successor shall not take office until the effective date.
Section 3.6. VACANCIES. Unless otherwise provided in the Articles of Incorporation, vacancies and newly created directorships, whether resulting from an increase in the size of the Board of Directors or due to the death, resignation, disqualification, or removal of a director or otherwise, may be filled by the affirmative vote of a majority of the remaining directors, even if less than a quorum. A director elected to fill a vacancy shall hold office for the unexpired term of his or her predecessor in office and until his or her successor is duly elected and qualified.
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Section 3.7. REGULAR MEETINGS OF DIRECTORS. A regular meeting of the newly-elected Board of Directors shall be held, without other notice, immediately after and at the place of the annual meeting of stockholders, provided a quorum is present. Other regular meetings of the Board of Directors may be held at such times and places, within or without the State of Delaware, as the Board of Directors may determine.
Section 3.8. SPECIAL MEETINGS OF DIRECTORS. Special meetings of the Board of Directors may be called by the entire Board of Directors, any two directors, or the President of the Corporation.
Section 3.9. PARTICIPATION BY ELECTRONIC COMMUNICATION. Directors not physically present at a meeting of the Board of Directors may participate in the meeting by electronic communication, videoconference, teleconference, or other available technology if the Corporation implements reasonable measures to:
(a) Verify the identity of each director participating by electronic communication.
(b) Provide the directors a reasonable opportunity to participate and vote, including an opportunity to communicate and read or hear the proceedings in a substantially concurrent manner.
Directors participating by electronic communication shall be considered present in person at the meeting.
Section 3.10. NOTICE OF DIRECTORS’ MEETINGS. Regular meetings of the Board of Directors may be held without notice of the date, time, place, or purpose of the meeting. All special meetings of the Board of Directors shall be held upon not less than 2 days’ written notice stating the purpose or purposes of the meeting, the date, place (if any), and time of the meeting, and the means of any electronic communication by which directors may participate in the meeting. Notice may be given to each director personally, by mail, by electronic transmission, or by any other means of communication authorized by the director.
A director entitled to notice of a meeting may sign a written waiver of notice delivered to the Corporation either before or after the time of the meeting. A director’s participation or attendance at a meeting shall constitute a waiver of notice, except where the director attends for the specific purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened.
Section 3.11. QUORUM AND ACTION BY DIRECTORS. A majority of the Board of Directors then in office shall constitute a quorum for the transaction of business. The directors at a meeting for which a quorum is not present may adjourn the meeting until a time and place as may be determined by a vote of the directors present at that meeting.
The act of the directors holding a majority of the voting power of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act requires approval by a greater proportion under the Articles of Incorporation or these Bylaws.
Section 3.12. CHAIRMAN OF THE BOARD OF DIRECTORS. The directors shall elect, by the vote of a majority of the entire Board of Directors, one of the members of the Board of Directors to be Chairman of the Board of Directors. The Chairman of the Board of Directors shall perform such duties as are specified in these Bylaws and any such additional duties that may from time to time be assigned by the Board of Directors. The Chairman of the Board of Directors may, but need not be, an officer of the Corporation. The Chairman of the Board of Directors may be removed from such position by the Board of Directors at any time by the vote of a majority of the entire Board of Directors.
Section 3.13. COMPENSATION. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors. A director shall not be precluded from serving the Corporation in any other capacity and receiving compensation for services in that capacity.
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Section 3.14. ACTION BY DIRECTORS WITHOUT MEETING. Any action required or permitted by Delaware Law to be taken at a meeting of the Board of Directors or any committee thereof may be taken without a meeting if, before or after the action, all of the members of the Board of Directors or committee sign a written consent describing the action and deliver it to the Corporation.
Section 3.15. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors, by resolution adopted by the Board of Directors, may establish one or more committees, each consisting of one or more directors, to exercise the authority of the Board of Directors to the extent provided in the resolution establishing the committee and allowed under Delaware Law.
Notwithstanding the foregoing, a committee of the Board of Directors shall not have the authority to:
| (a) | Fill vacancies on the Board of Directors or any committee thereof. |
| (b) | Amend the Articles of Incorporation. |
| (c) | Adopt, amend, or repeal these Bylaws. |
| (d) | Authorize the issuance of shares of the Corporation’s stock. |
| (e) | Authorize a distribution. |
| (f) | Approve any action that requires stockholder approval. |
The designation of a committee of the Board of Directors and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law.
Section 3.16 CORPORATE GOVERNANCE COMPLIANCE. Without otherwise limiting the powers of the Board set forth in these Bylaws, and provided that shares of capital stock of the corporation are listed for trading on either the NASDAQ Stock Market (“NASDAQ”) or the New York Stock Exchange (“NYSE”), the Corporation shall comply with the corporate governance rules and requirements of the NASDAQ or the NYSE, as applicable.
ARTICLE IV: OFFICERS
Section 4.1. POSITIONS AND ELECTION. The officers of the Corporation shall be elected by the Board of Directors and shall be, at minimum, a President, a Secretary, a Treasurer, and any other officers, including assistant officers and agents, as may be deemed necessary by the Board of Directors. Any two or more offices may be held by the same person.
Officers shall be elected annually at the meeting of the Board of Directors held after each annual meeting of stockholders. Each officer shall serve until a successor is elected and qualified or until the earlier death, resignation, disqualification, or removal of that officer. Vacancies or new offices shall be filled at the next regular or special meeting of the Board of Directors. Election or appointment of an officer or agent shall not of itself create contract rights.
Section 4.2. REMOVAL AND RESIGNATION. Any officer elected by the Board of Directors may be removed, with or without cause, at any regular or special meeting of the Board of Directors by the affirmative vote of the majority of the entire Board of Directors. Removal shall be without prejudice to the contract rights, if any, of the officer so removed.
Any officer may resign at any time by delivering written notice to the Secretary of the Corporation. Resignation is effective when the notice is delivered unless the notice provides a later effective date. Any vacancies may be filled in accordance with Section 4.1 of these Bylaws.
Section 4.3. POWERS AND DUTIES OF OFFICERS. The powers and duties of the officers of the Corporation shall be as provided from time to time by resolution of the Board of Directors or by direction of an officer authorized by the Board of Directors to prescribe the duties of other officers. In the absence of such resolution, the respective officers shall have the powers and shall discharge the duties customarily and usually held and performed by like officers of corporations similar in organization and business purposes to the Corporation, subject to the control of the Board of Directors.
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Section 4.4. AUTHORITY TO EXECUTE AGREEMENTS. All agreements of the Corporation shall be executed on behalf of the Corporation by any of the following:
| (a) | The President |
| (b) | Such other officer or employee of the Corporation authorized in writing by the President, with such limitations or restrictions on such authority as the President deems appropriate. |
| (c) | Such other person as may be authorized by the Board of Directors. |
Section 4.5. SALARIES. The salaries of the officers of the Corporation shall be fixed by the Board of Directors.
ARTICLE V: INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND AGENTS
Section 5.1. INDEMNIFICATION IN ACTIONS BY THIRD PARTIES. The Corporation shall, to the extent permitted by Delaware Law, indemnify any person who is or was a director, officer, employee, or agent of the Corporation or is or was serving at the Corporation’s request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other entity (each such person, an “Indemnitee”) against expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by the Indemnitee in connection with any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, other than a proceeding by or in the right of the Corporation, to which the Indemnitee is, was, or is threatened to be made a party by reason of being an Indemnitee, if the Indemnitee either:
(a) Did not breach, through intentional misconduct, fraud, or a knowing violation of law, the Indemnitee’s fiduciary duties as a director or officer to act in good faith and in the interests of the Corporation.
(b) Acted in good faith and in a manner the Indemnitee 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 the Indemnitee’s conduct was unlawful.
Section 5.2. INDEMNIFICATION IN ACTIONS BY OR ON BEHALF OF THE CORPORATION. The Corporation shall, to the extent permitted by Delaware Law, indemnify any Indemnitee against expenses, including attorneys’ fees and amounts paid in settlement, actually and reasonably incurred by the Indemnitee in connection with any threatened, pending, or completed suit or action by or in the right of the Corporation to which the Indemnitee is, was, or is threatened to be made a party by reason of being an Indemnitee, if the Indemnitee either:
(a) Did not breach, through intentional misconduct, fraud, or a knowing violation of law, the Indemnitee’s fiduciary duties as a director or officer to act in good faith and in the interests of the Corporation.
(b) Acted in good faith and in a manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation.
Section 5.3. INDEMNIFICATION AGAINST EXPENSES. The Corporation shall, to the extent permitted by Delaware Law, indemnify any Indemnitee who was successful, on the merits or otherwise, in the defense of any action, suit, proceeding, or claim described in Sections 5.1 and 5.2, against expenses (including attorneys’ fees) actually and reasonably incurred by the Indemnitee in connection with the defense.
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Section 5.4. NON-EXCLUSIVITY OF INDEMNIFICATION RIGHTS. The rights of indemnification set out in this Article V shall be in addition to and not exclusive of any other rights to which any Indemnitee may be entitled under the Articles of Incorporation, Bylaws, any other agreement with the Corporation, any action taken by the directors or stockholders of the Corporation, or otherwise. The indemnification provided under this Article V shall inure to the benefit of the heirs, executors, and administrators of an Indemnitee.
ARTICLE VI: SHARE CERTIFICATES AND TRANSFER
Section 6.1. CERTIFICATES REPRESENTING SHARES; UNCERTIFICATED SHARES. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any class or series of stock shall be uncertificated shares. The Corporation shall, within a reasonable time after the issuance or transfer of any uncertificated shares, send to the registered owner of the shares a written notice containing the information required to be set forth or stated on certificates pursuant to Delaware Law. Shares represented by certificates shall be signed by officers or agents designated by the Corporation for such purpose and shall state:
| (a) | The name of the Corporation and that it is organized under the laws of Delaware. |
| (b) | The name of the person to whom the certificate is issued. |
| (c) | The number of shares represented by the certificate. |
| (d) | Any restrictions on the transfer of the shares, such statement to be conspicuous. |
Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing shares of the same class and series shall be identical.
No share shall be issued until the consideration therefor, fixed as provided by law, has been fully paid.
Section 6.2. TRANSFERS OF SHARES. Shares of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of shares of the Corporation shall be made on the books of the Corporation only by the holder of record thereof or by such person’s attorney lawfully constituted in writing and, in the case of certificated shares, upon the surrender of the certificate thereof, which shall be cancelled before a new certificate or uncertificated shares shall be issued. No transfer of shares shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred.
Section 6.3. REGISTERED STOCKHOLDERS. The Corporation may treat the holder of record of any shares issued by the Corporation as the holder in fact thereof, for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares, exercising or waiving any preemptive right with respect to those shares, entering into agreements with respect to those shares in accordance with the laws of the State of Delaware, or giving proxies with respect to those shares.
Neither the Corporation nor any of its officers, directors, employees, or agents shall be liable for regarding that person as the owner of those shares at that time for those purposes, regardless of whether that person possesses a certificate for those shares 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 notice thereof, except as otherwise provided by law.
Section 6.4. LOST, STOLEN, OR DESTROYED CERTIFICATES. The Board of Directors may direct a new certificate or certificates to 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 owner of the allegedly lost, stolen, or destroyed certificate. When authorizing the issue of a new certificate or certificates, the Board of Directors, in its discretion and as a condition precedent to the issuance thereof, may require the owner of the allegedly lost, stolen, or destroyed certificate, or the owner’s legal representative, to give the Corporation a bond or other security sufficient to indemnify it against any claim that may be made against the Corporation or other obliges with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate or certificates.
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ARTICLE VII: DISTRIBUTIONS
Section 7.1. DECLARATION. The Board of Directors may authorize, and the Corporation may make, distributions to its stockholders in cash, property (other than shares of the Corporation), or a dividend of shares of the Corporation to the extent permitted by the Articles of Incorporation and Delaware Law.
Section 7.2. FIXING RECORD DATES FOR DISTRIBUTIONS AND SHARE DIVIDENDS. For the purpose of determining stockholders entitled to receive a distribution by the Corporation (other than a distribution involving a purchase or redemption by the Corporation of any of its own shares) or a share dividend, the Board of Directors may, at the time of declaring the distribution or share dividend, set a date no more than 60 days prior to the date of the distribution or share dividend. If no record date is fixed for such distribution or share dividend, the record date shall be the date on which the resolution of the Board of Directors authorizing the distribution or share dividend is adopted.
ARTICLE VIII: MISCELLANEOUS
Section 8.1. CHECKS, DRAFTS, ETC. All checks, drafts, or other instruments for payment of money or notes of the Corporation shall be signed by an officer or officers or any other person or persons as shall be determined from time to time by resolution of the Board of Directors.
Section 8.2. FISCAL YEAR. The fiscal year of the Corporation shall be as determined by the Board of Directors.
Section 8.3. CONFLICT WITH APPLICABLE LAW OR ARTICLES OF INCORPORATION. Unless the context requires otherwise, the general provisions, rules of construction, and definitions of Delaware Law shall govern the construction of these Bylaws. These Bylaws are adopted subject to any applicable law and the Articles of Incorporation. Whenever these Bylaws may conflict with any applicable law or the Articles of Incorporation, such conflict shall be resolved in favor of such law or the Articles of Incorporation.
Section 8.4. INVALID PROVISIONS. If any one or more of the provisions of these Bylaws, or the applicability of any provision to a specific situation, shall be held invalid or unenforceable, the provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and the validity and enforceability of all other provisions of these Bylaws and all other applications of any provision shall not be affected thereby.
ARTICLE IX: AMENDMENT OF BYLAWS
Bylaws may be adopted, amended, or repealed by the stockholders if notice of the proposed alteration or amendment is contained in the notice of the meeting. These Bylaws may be amended, altered, or repealed by the affirmative vote of a majority of the entire Board of Directors at any regular or special meeting of the Board of Directors, except as prohibited by a Bylaw adopted by the stockholders.
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Exhibit 3.1
Exhibit 3.2
Exhibit 3.3
Exhibit 4.1
BALINCAN USA, INC. CORPORATION
SUBSCRIPTION AGREEMENT
Regulation A SHARES
THIS SUBSCRIPTION AGREEMENT made as of the ____ day of , 2022 between BALINCAN USA, INC. CORPORATION, a corporation organized under the laws of the State of Delaware, (the “Company”), and the undersigned (the “Subscriber” and together with each of the other subscribers in the Offering (defined below), the “Subscribers”).
WHEREAS, the Company desires to sell registered Regulation A shares of Common Stock (collectively, the “Shares”), at a purchase price of $[*] per Share and per the terms set forth in the Company’s Form 1-A (as amended) which was originally filed on September 19, 2022, and declared Effective by the SEC on [*] (the “Offering”).
NOW, THEREFORE, for and in consideration of the promises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows:
1.1. Subscription for Shares. Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such aggregate amount of Shares as is set forth upon the signature page hereof; and the Company agrees to sell such Shares to the Subscriber for said purchase price subject to the Company’s right to sell to the Subscriber such lesser number of Shares as the Company may, in its sole discretion, deem necessary or desirable. The purchase price is payable by wire transfer, or certified or bank checks made payable to “BALINCAN USA, INC. CORPORATION” and delivered contemporaneously with the execution and delivery of this Subscription Agreement to the Company’s address set forth in the FORM 1-A.
1.2. Form 1-A Registered Shares. The Subscriber acknowledges that the Shares being purchased herein are shares of Common Stock qualified in the Company’s Form 1-A (as amended) which was originally filed on September 19, 2022.
1.3. Investment Purpose. The Subscriber represents that the Shares (the “Securities”) are being purchased for his or her or its own account, for investment purposes only and not for distribution or resale to others in contravention of the registration requirements of the 1933 Act. The Subscriber agrees that it will not sell or otherwise transfer the Securities unless they are registered under the 1933 Act or unless an exemption from such registration is available.
1.4. Accredited Investor. The Subscriber represents and warrants that he, she, or it is an “accredited investor” as such term is defined in Rule 501 of Regulation D promulgated under the 1933 Act, and that it can bear the economic risk of any investment in the Shares.
1.5. RISK OF INVESTMENT. THE SUBSCRIBER RECOGNIZES THAT THE PURCHASE OF THE SHARES INVOLVES A HIGH DEGREE OF RISK INCLUDING, WITHOUT LIMITATION, ANY AND ALL RISKS DISCUSSED IN THIS SUBSCRIPTION AGREEMENT. AN INVESTMENT IN THE COMPANY AND THE SHARES MAY RESULT IN THE LOSS OF A SUBSCRIBER’S ENTIRE INVESTMENT.
(a) Risk of Loss of Investment. An investment in the Company and the Shares offered hereby involve a high degree of risk. An investment in the Shares is suitable only for investors who can bear a loss of their entire investment.
(b) Value of Shares is Speculative. The terms of this offering have been determined arbitrarily by the Company. There is no relationship between such terms and the Company’s assets, earnings, book value and/or any other objective criteria of value.
(c) Dependence on Net Proceeds; No Minimum Offering. The Company is dependent upon the net proceeds of this Offering to fund its operations, as more specifically described elsewhere in this Subscription Agreement. There is no commitment by any person to purchase Shares and there is no assurance that any number of Shares will be sold. Additionally, there is no minimum amount of funds that are required to be raised in order for the Company to accept subscriptions received from investors and the Company’s may terminate this Offering prior to the expiration of the Offering Period. There is no assurance that the Company will sell a sufficient number of Shares in this Offering on a timely basis or that the net proceeds after payment of debts and other obligations will be adequate for the Company’s needs.
(d) Need for Additional Capital; Additional Private Placement. The net proceeds raised by the Company from this Offering will be used immediately to fund the Company’s current operations. The Company will therefore require significant additional financing shortly after this Offering, regardless of the net proceeds received, in order to satisfy its cash requirements. The Company may seek to raise additional funds in private placement transactions. However, there is no assurance that it will be able to do so in a timely manner or on terms that will enable it to enter its proposed business on a reasonable basis.
1.6 Reserved.
1.7 Information. The Subscriber acknowledges receipt and full and careful review and understanding of this Subscription Agreement and of the Form 1-A (as amended) which was originally filed on October 18, 2022.
1.8 No Representations or Warranties. The Subscriber hereby represents that, except as expressly set forth in the Form 1-A, no representations or warranties have been made to the Subscriber by the Company or any agent, employee, or affiliate of the Company and in entering into this transaction the Subscriber is not relying on any information other than that contained in the Form 1-A and the results of independent investigation by the Subscriber.
1.9 Tax Consequences. The Subscriber acknowledges that this Offering of the Shares may involve tax consequences and that the contents of the Form 1-A does not contain tax advice or information. The Subscriber acknowledges that it must retain its own professional advisors to evaluate the tax and other consequences of an investment in the Shares.
1.10 Transfer or Resale. The Subscriber understands that the Shares purchased herein were qualified in the Form 1-A under the Securities Act of 1933 Act, but that Subscriber will be required by the transfer agent or Subscriber’s brokerage firm to obtain a legal opinion from securities counsel to deposit and sell the Shares.
2.1 Organization and Registration. The Company and its “Subsidiaries” (which for purposes of this Subscription Agreement means any entity in which the Company, directly or indirectly, owns capital stock and holds a majority or similar interest) are duly organized and validly existing in good standing under the laws of the jurisdiction in which they were organized, and have the requisite power and authorization to own their properties and to carry on their business as now being conducted.
2.2 Authorization; Enforcement; Validity. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Subscription Agreement and to issue the Securities in accordance with the terms of the Form 1-A.
3.1 Closing and Termination of Offering. Provided that the required conditions to closing set forth herein have been satisfied or waived, a closing (the “Initial Closing”) shall take place at the offices of the Company as set forth herein or at such place as may otherwise be agreed to by the Company within 30 days of the receipt of the first cleared subscriber’s funds. The Company may consummate subsequent closings of the Offering, upon mutual agreement only, each of which shall be subject to satisfaction or waiver of the conditions to closing set forth herein, and each of which shall be deemed a “Closing” hereunder.
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4.1 The obligation of the Company hereunder to issue and sell Shares to the Subscriber at the Closing is subject to the satisfaction, at or before the Closing, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion by providing the Subscriber with prior written notice thereof:
4.2 Execution and Delivery. The Subscriber shall have executed this Subscription Agreement and delivered the same to the Company.
4.3 Purchase Price. The Subscriber shall have paid the purchase price for the Shares being purchased by the Subscriber at the Closing in the manner set forth in Section 1.1.
4.4 Representations and Warranties. The representations and warranties of the Subscriber shall be true and correct in all material respects as of the date when made and as of the Closing as though made at that time, and the Subscriber shall have performed, satisfied, and complied in all material respects with the covenants, agreements and conditions required by this Subscription Agreement to be performed, satisfied, or complied with by the Subscriber at or prior to the Closing.
4.5 Other Matters. All opinions, certificates and documents and all proceedings related to this Offering shall be in form and content reasonably satisfactory to the Company and its legal counsel.
4.6 Notice. Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Subscription Agreement must be in writing and will be deemed to have been delivered: (a) upon receipt, when delivered personally, (b) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party), or (c) one (1) business day after deposit with an overnight courier service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be:
If to the Company at the address set forth in the Form 1-A, Attn. Strings D.E. Kozisek, CEO.
If to the Subscriber, to its address and email or facsimile number set forth at the end of this Subscription Agreement, or to such other address and/or facsimile number and/or to the attention of such other person as specified by written notice given to the Company five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (a) given by the recipient of such notice, consent, waiver or other communication, (b) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission, or (c) provided by an overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from an overnight courier service in accordance with clauses (a), (b) or (c) above, respectively.
4.7 Entire Agreement; Amendment. This Subscription Agreement supersedes all other prior oral or written agreements between the Subscriber, the Company, their affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Subscription Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Subscriber makes any representation, warranty, covenant or undertaking with respect to such matters.
4.8 Severability. If any provision of this Subscription Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Subscription Agreement in that jurisdiction or the validity or enforceability of any provision of this Subscription Agreement in any other jurisdiction.
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4.9 Governing Law; Jurisdiction. This Agreement shall be governed by and construed solely in accordance with the internal laws of the State of Delaware with respect to contracts executed, delivered and to be fully performed therein, without regard to the conflicts of laws principles thereof. The parties hereto hereby expressly and irrevocably agree that any suit or proceeding arising under this Agreement or the consummation of the transactions contemplated hereby, shall be brought solely in a federal or state court located in the State of Delaware. By its execution hereof, Company and Subscriber hereby expressly and irrevocably submits to the in personam jurisdiction of the federal and state courts located in the State of Delaware and agree that any process in any such action may be served upon him or her personally, or by certified mail or registered mail upon such party or such agent, return receipt requested, with the same full force and effect as if personally served upon such party in Delaware. The parties hereto each waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto. In the event of any such action or proceeding, the party prevailing therein shall be entitled to payment from the other party hereto of its reasonable counsel fees and disbursements.
4.10 Headings. The headings of this Subscription Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Subscription Agreement.
4.11 Successors and Assigns. This Subscription Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, including any purchasers of the Shares. The Company shall not assign this Subscription Agreement or any rights or obligations hereunder. Subscriber may assign some or all of its rights hereunder without the consent of the Company, provided, however, that any such assignment shall not release the Subscriber from its obligations hereunder unless such obligations are assumed by such assignee and the Company has consented to such assignment and assumption, which consent shall not be unreasonably withheld.
4.12 No Third-Party Beneficiaries. This Subscription Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.
4.13 Survival. The representations and warranties of the Company and the Subscriber contained in herein shall survive the Closing for a period of twelve (12) months.
4.14 Legal Representation. The Subscriber acknowledges that: (a) it has read this Subscription Agreement and the exhibits hereto; (b) it understands that the Company has been represented in the preparation, negotiation, and execution of this Subscription Agreement by counsel to the Company; (c) it has either been represented in the preparation, negotiation, and execution of this Subscription Agreement by legal counsel of its own choice, or has chosen to forego such representation by legal counsel after being advised to seek such legal representation; and (d) it understands the terms and consequences of this Subscription Agreement and is fully aware of its legal and binding effect.
4.15 Confidentiality. The Subscriber agrees that it shall keep confidential and not divulge, furnish, or make accessible to anyone, the confidential information concerning or relating to the business or financial affairs of the Company contained in the Form 1-A to which it has become privy by reason of this Subscription Agreement.
4.16 Counterparts. This Subscription Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party; provided that a facsimile signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile signature.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned Subscriber(s) have executed this Balincan USA, Inc. Corporation Subscription Agreement for Regulation A Shares as of the date first written above. The Company’s acceptance of such subscription is as of the date shown below.
* Please provide the exact names that you wish to see on the certificates
| (1) | For individuals, print full name of subscriber. |
| (2) | For joint, print full name of subscriber and all co-subscribers. |
| (3) | For corporations, partnerships, LLC, print full name of entity, including “&,” “Co.,” “Inc.,” “etc.,” “LLC,” “LP,“etc. |
| (4) | For Trusts, print trust name (please contact your trustee for the exact name that should appear on the certificates.) |
| Dollar Amount of Shares Subscribed For (Number of Shares): $ | ( | ) |
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
| Dollar Amount of | ||
| Subscription Accepted: | ||
| SUBSCRIPTION ACCEPTED BY THE COMPANY BALINCAN USA, INC. CORPORATION | ||||
| Date: | By: | |||
| Strings D.E. Kozisek, CEO | ||||
**If Subscriber is a Registered Representative with an FINRA member firm or an affiliated person of an FINRA member firm, have the acknowledgment to the right signed by the appropriate party:
The undersigned FINRA Member firm acknowledges receipt of the notice required by Rule 3040 of the FINRA Conduct Rules.
Name of FINRA Member Firm
| By: | ||
| Authorized Officer | ||
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Exhibit 6.1
CONTRIBUTION AGREEMENT
among
TEKUMO LLC,
THE MEMBERS OF TEKUMO LLC
and
BALINCAN USA, INC.
dated as of
June 14, 2022
CONTRIBUTION AGREEMENT
This Contribution Agreement (this “Agreement”), dated as of June 14, 2022, is entered into by and among Tekumo LLC, a Colorado limited liability company (“Tekumo”), all of the members of Tekumo (the “Members”), and Balincan USA, Inc., a Delaware corporation (“BCNN”).
Recitals
WHEREAS, the Members own in the aggregate all of the issued and outstanding membership interest units in Tekumo (the “Units”); and
WHEREAS, the Members wish to contribute to BCNN, and BCNN wishes to acquire from the Members, all of the Units in exchange for shares of a newly created class of BCNN’s Series A Preferred Stock, $0.001 par value per share (the “Series A Preferred Stock”), subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following terms have the meanings specified or referred to in this ARTICLE I:
“Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
“Agreement” has the meaning set forth in the preamble.
“Annual Financial Statements” has the meaning set forth in Section 3.05.
“Balance Sheet” has the meaning set forth in Section 3.05.
“Balance Sheet Date” has the meaning set forth in Section 3.05.
“Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in Colorado are authorized or required by Law to be closed for business.
“BCNN” has the meaning set forth in the preamble.
“Closing” has the meaning set forth in Section 2.03.
“Closing Date” has the meaning set forth in Section 2.03.
“Code” means the Internal Revenue Code of 1986, as amended.
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“Common Stock” has the meaning set forth in Section 3.02(a).
“Company” has the meaning set forth in the recitals.
“Disclosure Schedules” means the Disclosure Schedules delivered by Tekumo and BCNN concurrently with the execution and delivery of this Agreement.
“Dollars or $” means the lawful currency of the United States.
“Employees” means those Persons employed by Tekumo immediately prior to the Closing.
“Encumbrance” means any lien, pledge, mortgage, deed of trust, security interest, charge, claim, easement, encroachment or other similar encumbrance.
“Financial Statements” has the meaning set forth in Section 3.05.
“GAAP” means United States generally accepted accounting principles in effect from time to time.
“Governmental Authority” means any federal, state, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.
“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.
“Insurance Policies” has the meaning set forth in Section 3.08.
“Interim Balance Sheet” has the meaning set forth in Section 3.05 and 4.06.
“Interim Balance Sheet Date” has the meaning set forth in Section 3.05 and 4.06.
“Interim Financial Statements” has the meaning set forth in Section 3.05 and 4.06.
“Knowledge of BCNN or BCNN’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of Lu, Zi Chin (Paul) and Nick Coscia after reasonable investigation.
“Knowledge of Tekumo or Tekumo’s Knowledge” or any other similar knowledge qualification, means the actual knowledge of means the actual knowledge of Strings Kozisek, Chis Nichols and Phillip Dignan after reasonable investigation.
“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.
“Material Adverse Effect” means any event, occurrence, fact, condition or change that is materially adverse to (a) the business, results of operations, financial condition or assets of Tekumo or BCNN, as applicable, or (b) the ability of Tekumo or BCNN, respectively, to consummate the transactions contemplated hereby.
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“Permits” means all permits, licenses, franchises, approvals, authorizations and consents required to be obtained from Governmental Authorities.
“Permitted Encumbrances” has the meaning set forth in Error! Reference source not found..
“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.
“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.
“Tekumo” has the meaning set forth in the preamble.
“Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatsoever, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.
“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document required to be filed with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.
ARTICLE II
CONTRIBUTION
Section 2.01 Contribution. Subject to the terms and conditions set forth herein, at the Closing, each Member shall contribute the Units it holds as set forth opposite its name on Exhibit A to BCNN, and BCNN shall, in exchange and consideration therefor, issue shares of Series A Preferred Stock to each Member in the amount set forth opposite its name on Exhibit A (the “Contribution”). Following the Contribution, Tekumo shall be a wholly owned Subsidiary of BCNN, and the Members shall hold at least 85% of the combined voting power of BCNN.
Section 2.02 Transactions to be Effected at the Closing.
(a) At the Closing, BCNN shall deliver to the Members and Tekumo, as applicable:
(i) stock certificates evidencing the Series A Preferred Stock, free and clear of all Encumbrances; and
(ii) all other agreements, documents, instruments or certificates required to be delivered by BCNN at or prior to the Closing pursuant to Section 7.03 of this Agreement.
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(b) At the Closing, the Members shall deliver to BCNN instruments of transfer evidencing the contribution and transfer of all of the Units to BCNN, free and clear of all Encumbrances.
(c) At the Closing, Tekumo shall deliver to BCNN all agreements, documents, instruments or certificates required to be delivered by Tekumo at or prior to the Closing pursuant Section 7.02 of this Agreement.
Section 2.03 Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Shares contemplated hereby shall take place at a closing (the “Closing”) to be held at 11:00 a.m., Eastern time on the date hereof or such later date or time after the last of the conditions to Closing set forth in ARTICLE VII have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date), remotely by exchange of documents and signatures (or their electronic counterparts), or at such other time or on such other date or at such other place as Tekumo and BCNN may mutually agree upon in writing (the day on which the Closing takes place being the “Closing Date”).
ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF TEKUMO
Except as set forth in the Disclosure Schedules, Tekumo represents and warrants to BCNN that the statements contained in this ARTICLE III are true and correct as of the date hereof.
Section 3.01 Organization and Authority of Tekumo. Tekumo is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Colorado. Tekumo has all necessary limited liability company power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by Tekumo of this Agreement, the performance by Tekumo of its obligations hereunder and the consummation by Tekumo of the transactions contemplated hereby have been duly authorized by all requisite action on the part of Tekumo. This Agreement has been duly executed and delivered by Tekumo, and (assuming due authorization, execution and delivery by BCNN) this Agreement constitutes a legal, valid and binding obligation of Tekumo, enforceable against Tekumo in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 3.02 Capitalization.
(a) The outstanding equity of Tekumo is as set forth on Exhibit A attached hereto. All of the Units have been duly authorized, are validly issued, and non-assessable, and are owned of record by the persons listed on Exhibit A in the respective amounts set forth next to each such Person’s name.
(b) Except as set forth on Exhibit A, there are no outstanding or authorized options, warrants, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the equity securities of Tekumo or obligating Tekumo to issue or sell any shares of equity securities of, or any other interest in, Tekumo. Tekumo does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Shares.
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Section 3.03 No Subsidiaries. Tekumo does not own, or have any interest in any shares or have an ownership interest in, any other Person.
Section 3.04 No Conflicts; Consents. The execution, delivery and performance by Tekumo of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of incorporation or by-laws of Tekumo; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Tekumo; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any Material Contract, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a Material Adverse Effect. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Tekumo in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices which, in the aggregate, would not have a Material Adverse Effect.
Section 3.05 Financial Statements. Copies of Tekumo’s unaudited financial statements consisting of the balance sheet of Tekumo as at December 31, 2021, and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “Annual Financial Statements”), and unaudited financial statements consisting of the balance sheet of Tekumo as at March 31, 2022 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the three-month period then ended (the “Interim Financial Statements” and together with the Annual Financial Statements, the “Financial Statements”) have been made available to BCNN. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes. The Financial Statements fairly present in all material respects the financial condition of Tekumo as of the respective dates they were prepared and the results of the operations of Tekumo for the periods indicated. The balance sheet of Tekumo as of December 31, 2021, is referred to herein as the “Balance Sheet” and the date thereof as the “Balance Sheet Date” and the balance sheet of Tekumo as of March 31, 2022, is referred to herein as the “Interim Balance Sheet” and the date thereof as the “Interim Balance Sheet Date”.
Section 3.06 Undisclosed Liabilities. Tekumo has no liabilities, obligations or commitments of a type required to be reflected on a balance sheet prepared in accordance with GAAP, except (i) those which are adequately reflected or reserved against in the Balance Sheet as of the Balance Sheet Date; and (ii) those which have been incurred in the ordinary course of business since the Balance Sheet Date and which are not material in amount.
Section 3.07 Absence of Certain Changes, Events and Conditions. Except as contemplated by the Agreement and the transactions contemplated hereby, from the Interim Balance Sheet Date until the date of this Agreement, Tekumo has operated in the ordinary course of business in all material respects and there has not been, with respect to Tekumo, any event, occurrence or development that has had a Material Adverse Effect.
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Section 3.08 Insurance. Section 3.08 of the Disclosure Schedules sets forth a list, as of the date hereof, of all material insurance policies maintained by Tekumo or with respect to which Tekumo is a named insured or otherwise the beneficiary of coverage (collectively, the “Insurance Policies”). Such Insurance Policies are in full force and effect on the date of this Agreement and all premiums due on such Insurance Policies have been paid, except as would not have a Material Adverse Effect.
Section 3.09 Legal Proceedings; Governmental Orders.
(a) There are no actions, suits, claims, investigations or other legal proceedings pending or, to Tekumo’s Knowledge, threatened against or by Tekumo affecting any of its properties or assets, which if determined adversely to Tekumo would result in a Material Adverse Effect.
(b) There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting Tekumo or any of its properties or assets which would have a Material Adverse Effect.
Section 3.10 Compliance With Laws; Permits.
(a) Tekumo is in compliance with all Laws applicable to it or its business, properties or assets, except where the failure to be in compliance would not have a Material Adverse Effect.
(b) All Permits required for Tekumo to conduct its business have been obtained by it and are valid and in full force and effect, except where the failure to obtain such Permits would not have a Material Adverse Effect.
(c) None of the representations and warranties contained in Section 3.10 shall not be deemed to relate to tax matters (which are governed by Section 3.11).
Section 3.11 Taxes.
(a) Tekumo has filed (taking into account any valid extensions) all material Tax Returns required to be filed by Tekumo. Such Tax Returns are true, complete and correct in all material respects. Tekumo is not currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business. All material Taxes due and owing by Tekumo have been paid or accrued.
(b) No extensions or waivers of statutes of limitations have been given or requested with respect to any material Taxes of Tekumo.
(c) There are no ongoing actions, suits, claims, investigations or other legal proceedings by any taxing authority against Tekumo.
(d) Tekumo is not a party to any Tax-sharing agreement.
(e) All material Taxes which Tekumo is obligated to withhold from amounts owing to any employee, creditor or third party have been paid or accrued.
(f) The representations and warranties set forth in this Section 3.11 are Tekumo’s sole and exclusive representations and warranties regarding Tax matters.
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Section 3.12 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Tekumo.
Section 3.13 No Other Representations and Warranties. Except for the representations and warranties contained in this ARTICLE III (including the related portions of the Disclosure Schedules), none of Tekumo or any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Tekumo, including any representation or warranty as to the accuracy or completeness of any information regarding Tekumo furnished or made available to BCNN and its Representatives and any other information, documents or material made available to BCNN or in any other form in expectation of the transactions contemplated hereby) or as to the future revenue, profitability or success of Tekumo, or any representation or warranty arising from statute or otherwise in law.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF BCNN
Except as set forth in the Disclosure Schedules, BCNN represents and warrants to Tekumo that the statements contained in this ARTICLE IV are true and correct as of the date hereof.
Section 4.01 Organization and Authority of BCNN. BCNN is a corporation duly organized, validly existing and in good standing under the Laws of the state of Delaware. BCNN has all necessary corporate power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by BCNN of this Agreement, the performance by BCNN of its obligations hereunder and the consummation by BCNN of the transactions contemplated hereby have been duly authorized by all requisite corporate action on the part of BCNN. This Agreement has been duly executed and delivered by BCNN, and (assuming due authorization, execution and delivery by Tekumo) this Agreement constitutes a legal, valid and binding obligation of BCNN, enforceable against BCNN in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 4.02 No Conflicts; Consents. The execution, delivery and performance by BCNN of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of incorporation or by-laws of BCNN; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to BCNN; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which BCNN is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse effect on BCNN’s ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to BCNN in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
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Section 4.03 Charter Documents. The copies of the certificate of incorporation and by-laws of BCNN provided to Tekumo are true, correct, and complete copies of such documents as in effect as of the date of this Agreement. BCNN is not in violation of any of the provisions of its certificate of incorporation or by-laws.
Section 4.04 Regulatory Compliance.
(a) BCNN has timely filed with or furnished to, as applicable, the SEC all registration statements, prospectuses, reports, schedules, forms, statements, and other documents (including exhibits and all other information incorporated by reference) required to be filed or furnished by it with the SEC since inception (the “BCNN SEC Documents”). None of the Parent SEC Documents is the subject of ongoing SEC review or outstanding SEC investigation and there are no outstanding or unresolved comments received from the SEC with respect to any of the BCNN SEC Documents.
(b) BCNN is in compliance with all of the applicable listing, reporting and corporate governance rules of OTC Markets Group, including those of Pink Markets.
Section 4.05 Capitalization.
(a) Immediately prior to the Closing, the authorized capital stock of BCNN consists of: (i) 40,000,000shares of Common Stock, par value $0.001 per share; (ii) 10,000,000shares of Series A Preferred Stock; and (iii) 1,000,000 shares of Series B Preferred Stock, par value $0.001 per share (“Series B Preferred Stock,” and, together with the Series A, the “Preferred Stock”). As of the date of this Agreement: (A) 23,431,141 shares of Common Stock were issued and outstanding (not including shares held in treasury); (B) no shares of Series A Preferred Stock were issued and outstanding; and (C) no shares of Series B Preferred Stock were issued and outstanding . All of the outstanding shares of capital stock of BCNN are, and all shares of capital stock of BCNN which may be issued as contemplated or permitted by this Agreement, including the shares of Series A Preferred Stock issued to the Members will be, when issued, duly authorized, validly issued, fully paid, and non-assessable, and not subject to any pre-emptive rights.
(b) There are no outstanding or authorized options, warrants, preferred stock, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the capital stock of BCNN or obligating BCNN to issue or sell any shares of capital stock of, or any other interest in, BCNN. BCNN does not have outstanding or authorized any stock appreciation, phantom stock, profit participation or similar rights. There are no voting trusts, stockholder agreements, proxies or other agreements or understandings in effect, including any of the foregoing with respect to the voting or transfer of any of BCNN’s securities.
(c) Immediately following the Closing and consummation of the transaction contemplated hereby and by the Transaction Documents, the Series A Preferred Stock issued pursuant to this Agreement shall represent 85% of the outstanding voting power of Balincan’s equity securities on an as-converted to common stock basis and the Members shall have the right and ability to elect all the members of BCNN’s Board of Directors.
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Section 4.06 Financial Statements.
(a) Copies of BCNN’s unaudited financial statements consisting of the balance sheet of BCNN as at December 31, 2021, and the related statements of income and retained earnings, stockholders’ equity and cash flow for the years then ended (the “BCNN Annual Financial Statements”), and unaudited financial statements consisting of the balance sheet of Tekumo as at March 31, 2022 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the three-month period then ended (the “BCNN Interim Financial Statements” and together with the BCNN Annual Financial Statements, the “BCNN Financial Statements”) have been made available to Tekumo. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments and the absence of notes. The Financial Statements fairly present in all material respects the financial condition of BCNN as of the respective dates they were prepared and the results of the operations of BCNN for the periods indicated. The balance sheet of BCNN as of December 31, 2021, is referred to herein as the “BCNN Balance Sheet” and the date thereof as the “BCNN Balance Sheet Date” and the balance sheet of BCNN as of March 31, 2022, is referred to herein as the “BCNN Interim Balance Sheet” and the date thereof as the “BCNN Interim Balance Sheet Date”.
(b) The amount of the BCNN debt and accounts payable on the Closing Date shall be no greater than $50,000.
Section 4.07 No Subsidiaries. BCNN does not own, or have any interest in any shares or have an ownership interest in any other Person.
Section 4.08 Employees. BCNN does not have and has never had any Employees.
Section 4.09 Investment Purpose. BCNN is acquiring the Units solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. BCNN acknowledges that the Units are not registered under the Securities Act of 1933, as amended, or any state securities laws, and that the Units may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to state securities laws and regulations, as applicable. BCNN is able to bear the economic risk of holding the Units for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment.
Section 4.10 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of BCNN.
Section 4.11 Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to BCNN’s knowledge, threatened against or by BCNN or any Affiliate of BCNN that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
Section 4.12 Undisclosed Liabilities. BCNN has no liabilities, obligations or commitments of a type required to be reflected on a balance sheet prepared in accordance with GAAP, except (i) those which are adequately reflected or reserved against in BCNN’s balance sheet as of March 31, 2022; and (ii) those which have been incurred in the ordinary course of business since such date and are listed on Section 4.12 of the Disclosure Schedules, none of which are material in amount.
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Section 4.13 Absence of Certain Changes, Events and Conditions. Except as contemplated by the Agreement and the transactions contemplated hereby, from the Interim Balance Sheet Date until the date of this Agreement, BCNN has operated in the ordinary course of business in all material respects and there has not been, with respect to BCNN, any event, occurrence or development that has had a Material Adverse Effect.
Section 4.14 Insurance. 4 of the Disclosure Schedules sets forth a list, as of the date hereof, of all material insurance policies maintained by BCNN or with respect to which BCNN is a named insured or otherwise the beneficiary of coverage (collectively, the “Insurance Policies”). Such Insurance Policies are in full force and effect on the date of this Agreement and all premiums due on such Insurance Policies have been paid, except as would not have a Material Adverse Effect.
Section 4.15 Litigation; Governmental Orders.
(a) There are no actions, suits, claims, investigations or other legal proceedings pending or, to BCNN’s Knowledge, threatened against or by BCNN affecting it or any of its properties or assets.
(b) There are no outstanding Governmental Orders and no unsatisfied judgments, penalties or awards against or affecting BCNN or any of its properties or assets which would have a Material Adverse Effect.
Section 4.16 Compliance With Laws; Permits.
(a) BCNN is in compliance with all Laws applicable to it or its business, properties or assets, except where the failure to be in compliance would not have a Material Adverse Effect.
(b) All Permits required for BCNN to conduct its business have been obtained by it and are valid and in full force and effect, except where the failure to obtain such Permits would not have a Material Adverse Effect.
(c) None of the representations and warranties contained in Section 4.16 shall not be deemed to relate to tax matters (which are governed by Section 4.17).
Section 4.17 Taxes.
(a) BCNN has filed (taking into account any valid extensions) all material Tax Returns required to be filed by BCNN. Such Tax Returns are true, complete and correct in all material respects. BCNN is not currently the beneficiary of any extension of time within which to file any material Tax Return other than extensions of time to file Tax Returns obtained in the ordinary course of business. All material Taxes due and owing by BCNN have been paid or accrued.
(b) No extensions or waivers of statutes of limitations have been given or requested with respect to any material Taxes of BCNN.
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(c) There are no ongoing actions, suits, claims, investigations or other legal proceedings by any taxing authority against BCNN.
(d) BCNN is not a party to any Tax-sharing agreement.
(e) All material Taxes which BCNN is obligated to withhold from amounts owing to any employee, creditor or third party have been paid or accrued.
(f) The representations and warranties set forth in this Section 4.16 are BCNN’s sole and exclusive representations and warranties regarding Tax matters.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE MEMBERS
Each Member severally only as to itself and not jointly represents and warrants to BCNN and Tekumo that the statements contained in this ARTICLE V are true and correct as of the date of this Agreement.
Section 5.01 Authority. The Member has all necessary power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Member of this Agreement, the performance by the Member of its obligations hereunder and the consummation by the Member of the transactions contemplated hereby have been duly authorized by all requisite action on the part of the Member. This Agreement has been duly executed and delivered by the Member, and (assuming due authorization, execution and delivery by the other parties hereto) this Agreement constitutes a legal, valid and binding obligation of the Member, enforceable against the Member in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity).
Section 5.02 No Conflicts; Consents. The execution, delivery and performance by the Member of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the Member’s Governing Documents; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to the Member; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which the Member is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse effect on the Member’s ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to the Member in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
Section 5.03 Ownership. The Member is the sole record and beneficial owner of all of the Units set forth across from such Member’s name on Exhibit A, free and clear of all Encumbrances. The Member has the full power and authority to contribute, exchange, assign, transfer and deliver to BCNN the Units owned by such Member, free and clear of all Encumbrances. Except for Tekumo’s Operating Agreement, the Member is not a party to any voting trust, proxy, or other agreement or understanding between or among any Persons that affects or relates to the voting or giving of written consent, or restrictions on transfer, with respect to the Units. At the Closing, such Member will have transferred and contributed to BCNN the entire right, title and interest in and to all of the Units owned by the Member.
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Section 5.04 Legal Proceedings. There are no actions, suits, claims, investigations or other legal proceedings pending or, to the Member’s knowledge, threatened against or by the Member or any Affiliate of the Member that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.
Section 5.05 Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Member.
ARTICLE VI
COVENANTS OF
THE PARTIES
Section 6.01 Resignations. BCNN shall deliver to Tekumo written resignations, effective as of the Closing Date, of the officers and directors of BCNN.
Section 6.02 Governmental Approvals and Other Third-party Consents.
(a) Each of Tekumo and BCNN shall, as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this Agreement. Each such party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.
(b) Tekumo and BCNN shall use commercially reasonable efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 3.04 and Section 4.02 of the Disclosure Schedules; provided, however, that Tekumo shall not be obligated to pay any consideration therefor to any third party from whom consent or approval is requested.
Section 6.03 Public Announcements. Unless otherwise required by applicable Law or stock exchange requirements (based upon the reasonable advice of counsel), no party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (which consent shall not be unreasonably withheld, conditioned or delayed), and the parties shall cooperate as to the timing and contents of any such announcement.
Section 6.04 Further Assurances. Following the Closing, each of the parties hereto shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances, and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement.
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ARTICLE VII
CONDITIONS
TO CLOSING
Section 7.01 Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:
(a) No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.
(b) Tekumo shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 3.04 and BCNN shall have received all consents, authorizations, orders and approvals from the Governmental Authorities referred to in Section 4.02, in each case, in form and substance reasonably satisfactory to BCNN and Tekumo, and no such consent, authorization, order and approval shall have been revoked.
Section 7.02 Conditions to Obligations of BCNN. The obligations of BCNN to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or BCNN’s waiver, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of Tekumo contained in ARTICLE III shall be true and correct in all respects as of the Closing Date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date). This Closing condition will not be deemed waived or modified by any investigation made by or on behalf of BCNN or its Affiliates, or the knowledge of BCNN’s (or its Affiliates’) officers, directors, stockholders, managers, members, partners, employees or agents, with respect to the accuracy or inaccuracy of, or compliance or non-compliance with, any such representation or warranty at any time prior to or following BCNN’s entrance into this Agreement.
(b) Tekumo shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.
(c) BCNN shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Tekumo, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied.
(d) BCNN shall have received a certificate of an authorized officer of Tekumo certifying that attached thereto are true and complete copies of all resolutions adopted by the managers and/or members of Tekumo as may be required by its Operating Agreement authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby.
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(e) Certificates of Designation creating the Series A Preferred Stock and Series B Preferred Stock substantially in the forms attached hereto as Exhibit B and Exhibit C, respectively, shall have been duly authorized by BCNN’s Board of Directors and shall have been filed and become effective in the state of Delaware.
(f) BCNN shall have entered into a Securities Purchase Agreement and related convertible promissory note, stock purchase warrant and security agreement with Trillium Partners L.P., and other investors reasonably satisfactory to BCNN and Tekumo providing for financing pursuant to such convertible promissory note in the aggregate principal amount of at least $1,320,000, such documents to be in form and substance satisfactory to BCNN.
(g) BCNN shall have entered into a Consulting Services Agreement with Southridge Capital Management or one of its affiliates in the form attached hereto as Exhibit D.
(h) Tekumo shall have delivered, or caused to be delivered, to BCNN instruments of transfer duly executed by each Member effecting the transfer and contribution of the Units held by each Member.
Section 7.03 Conditions to Obligations of Tekumo. The obligations of Tekumo to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Tekumo’s waiver, at or prior to the Closing, of each of the following conditions:
(a) The representations and warranties of BCNN contained in ARTICLE IV shall be true and correct in all respects as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date). This Closing condition will not be deemed waived or modified by any investigation made by or on behalf of Tekumo or its Affiliates, or the knowledge of Tekumo’s (or its Affiliates’) officers, directors, stockholders, managers, members, partners, employees or agents, with respect to the accuracy or inaccuracy of, or compliance or non-compliance with, any such representation or warranty at any time prior to or following Tekumo’s entrance into this Agreement.
(b) BCNN shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.
(c) Tekumo shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of BCNN, that each of the conditions set forth in 7.03(a) and Section 7.03(b) have been satisfied.
(d) Tekumo shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of BCNN certifying that attached thereto are true and complete copies of all resolutions adopted by the board of directors of BCNN authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby.
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(e) Certificates of Designation creating the Series A Preferred Stock and Series B Preferred Stock substantially in the forms attached hereto as Exhibit B and Exhibit C, respectively, shall have been duly authorized by BCNN’s Board of Directors and shall have been filed and become effective in the state of Delaware.
(f) BCNN shall have entered into one or more Securities Purchase Agreement and related convertible promissory note, stock purchase warrant and security agreement with Trillium Partners L.P., and other investors reasonably satisfactory to BCNN and Tekumo providing for financing pursuant to such convertible promissory note in the aggregate principal amount of at least $1,320,000, such documents to be in form and substance satisfactory to BCNN.
(g) BCNN shall have entered into a Consulting Services Agreement with Southridge Capital Management or one of its affiliates in the form attached hereto as Exhibit D.
(h) BCNN shall have delivered to each of the Members a certificate or certificates representing the number of shares of Series A Preferred Stock to which each Member is entitled as set forth on Exhibit A.
(i) Immediately following the Closing, the Board of Directors of BCNN shall consist of Strings Kozisek, Chris Nichols, and Phillip Dignan, and the officers of BCNN shall consist of Stings Kozisek, Chris Nichols and Phillip Dignan.
ARTICLE VIII
INDEMNIFICATION
Section 8.01 Indemnification. BCNN shall indemnify the Members and Tekumo’s officers, directors, , managers, Employees, attorneys, accountants and agents as they existed immediately prior to the Closing Date (the “Tekumo Indemnitees”) and shall hold the Tekumo Indemnitees harmless against and in respect of any and all losses, liabilities, damages, obligations, claims, encumbrances, liens, costs and expenses (including, without limitation, reasonable attorneys’ fees) incurred by any Tekumo Indemnitees resulting from any breach of any representation, warranty, covenant or agreement made by BCNN herein or in any instrument or document delivered to Tekumo Indemnitees pursuant hereto, including advancement of expenses as they are incurred (“Losses”).
Section 8.02 Payment. Payments to the Tekumo Indemnitees for Losses shall be made promptly, and, in any event, within five business days, after demand by written notice made from any Tekumo Indemnitee in accordance with Section 9.02 (a “Demand Notice”), by wire transfer to an account designated by the Members’ Representative; provided, however, at the request of the Members’ Representative, payment shall be made in shares of Common Stock, valued at the average of the closing prices for the Common Stock for the 30 trading days prior to a Demand Notice. The Demand Notice shall describe in reasonable detail the events, facts, and circumstances giving rise to the claim, the date of such occurrence (to the extent known by the Tekumo Indemnitees), the nature of the basis for indemnification or reimbursement therefor, and the amount of the claim (or, if it is not practicable to determine such amount, the amount proposed in good faith to be reserved with respect to such claim, which may be subsequently increased).
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Section 8.03 Effect of Investigation. The representations, warranties and covenants of the BCNN, and the Tekumo Indemnitees’ right to indemnification with respect thereto, shall not be affected or deemed waived by reason of any investigation made by or on behalf of the Tekumo Indemnitees (including by any of their representatives) or by reason of the fact that any Tekumo Indemnity or any of its representatives knew or should have known that any such representation or warranty is, was or might be inaccurate or by reason of the Tekumo’s waiver of any condition set forth in Section 7.03.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Expenses. Except as otherwise expressly provided herein, all costs and expenses, including, without limitation, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses.
Section 9.02 Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.02):
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Section 9.03 Interpretation. For purposes of this Agreement: (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof; and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.
Section 9.04 Disclosure Schedules. All section headings in the Disclosure Schedules correspond to the sections of this Agreement, but information provided in any section of the Disclosure Schedules shall constitute disclosure for purposes of each section of this Agreement where such information is relevant. Unless the context otherwise requires, all capitalized terms used in the Disclosure Schedules shall have the respective meanings assigned to such terms in this Agreement. Certain information set forth in the Disclosure Schedules is included solely for informational purposes, and may not be required to be disclosed pursuant to this Agreement. No reference to or disclosure of any item or other matter in the Disclosure Schedules shall be construed as an admission or indication that such item or other matter is required to be referred to or disclosed in the Disclosure Schedules. No disclosure in the Disclosure Schedules relating to any possible breach or violation of any agreement or Law shall be construed as an admission or indication that any such breach or violation exists or has actually occurred. The inclusion of any information in the Disclosure Schedules shall not be deemed to be an admission or acknowledgment by Tekumo, on the one hand, or BCNN, on the other hand, that in and of itself, such information is material to or outside the ordinary course of the business or is required to be disclosed on the Disclosure Schedules. No disclosure in the Disclosure Schedules shall be deemed to create any rights in any third party.
Section 9.05 Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.
Section 9.06 Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.
Section 9.07 Entire Agreement. This Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.
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Section 9.08 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.
Section 9.09 No Third-Party Beneficiaries. Except as provided in Article XIII, This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
Section 9.10 Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each party hereto. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.
Section 9.11 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction).
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER TRANSACTION DOCUMENTSOR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.11(b).
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Section 9.12 Specific Performance. The parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.
Section 9.13 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
Section 9.14 Members’ Representative.
(a) Each Member hereby appoints Philip Dignan as the “Members’ Representative” to act as the agent of Members with the full power (i) to execute and enter into, on behalf of Members, and to take all actions thereunder for and on their behalf, (ii) to negotiate and/or settle all claims under this Agreement, (iii) to receive from BCNN the certificates for the Series A Preferred issuable to Members in accordance with the provisions of this Agreement, (iv) to otherwise take such actions (or refrain from taking actions) and execute such documents (including any modifications, waivers or amendments thereto) on Members’ behalf in connection with this Agreement as the Members’ Representative, in its sole discretion, deems proper, (v) to perform all of the functions of the Members’ Representative under this Agreement. BCNN is entitled to rely on the acts and agreements of the Members’ Representative as the acts and agreements of Members. The Members’ Representative shall be entitled to retain counsel and to incur such reasonable expenses (including court costs and reasonable attorney’s fees and expenses) as the Members’ Representative deems to be reasonably necessary or appropriate in connection with its performance of its obligations under this Agreement, and all such fees and expenses incurred by the Members’ Representative shall be borne by Members based upon their respective pro rata ownership of Units (each such Member’s “Pro Rata Share”).
(b) Members hereby agree, on a several and not joint basis in accordance with their respective Pro Rata Share, to indemnify the Members’ Representative (in its capacity as such), against, and to hold the Members’ Representative (in its capacity as such) harmless from (and the Members’ Representative shall have the right to seek payment directly from Members for the amount of), any and all reasonable, out-of-pocket losses, damages, costs or expenses incurred by the Members’ Representative in such capacity arising out of its action or failure to take action pursuant to this Agreement or in connection herewith in such capacity, in each case except to the extent resulting from or arising out of the Members’ Representative’s fraud, gross negligence, or willful misconduct. The Members’ Representative may from time to time submit invoices to Members covering such expenses and/or liabilities and, upon the request of any Member, shall provide such Member with an accounting of all expenses paid. In addition to any other rights or remedies, the Members’ Representative may, upon prior or contemporaneous written notice, offset any amounts determined by it to be owed to the Members’ Representative against any amounts to be paid to Members hereunder.
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(c) BCNN shall be fully protected in dealing with the Members’ Representative under this Agreement and may rely upon the authority of the Members’ Representative to act on behalf of Members for all purposes under this Agreement and under each Ancillary Agreement and shall have no liability for or in connection with or resulting from any such reliance. To the extent authorized under this Agreement, any deliverable by BCNN to the Members’ Representative shall be considered a deliverable by BCNN to Members. The appointment of the Members’ Representative is coupled with an interest and shall be irrevocable by any Member in any manner or for any reason. This power of attorney shall not be affected by the death, illness, dissolution, disability, incapacity or other inability to act of the principal pursuant to any applicable law.
(d) The Members’ Representative may resign from its capacity as Members’ Representative at any time by written notice delivered to BCNN and Members. If there is a vacancy at any time in the position of Members’ Representative for any reason, such vacancy shall be filled by a Members’ vote in the form of a writing executed by Members entitled to a majority of the number of votes referred to in the next sentence. In such event, each Member shall have a number of votes equal to such Member’s Pro Rata Share and the authorization of a majority of such number of votes shall be binding on all of Members and shall constitute the authorization of Members.
(e) The Members’ Representative shall not be liable to BCNN or Members in its capacity as the Members’ Representative for any liability of a Member or for any error of judgment, or any act done or step taken or omitted by it believed by it to be in good faith or for any mistake in fact or law, or for anything which it may do or refrain from doing in connection with this Agreement except in the case of Members’ Representative’s fraud, gross negligence or willful misconduct. The Members’ Representative may seek the advice of reputable legal counsel in the event of any dispute or question as to the construction of any of the provisions of this Agreement or its duties hereunder, and it shall incur no liability in its capacity as Members’ Representative to BCNN or Members and shall be fully protected with respect to any action taken, omitted or suffered by it in good faith in accordance with the advice of such counsel.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
| TEKUMO: | ||
| Tekumo LLC | ||
| By | /s/ Strings D.E. Kozisek | |
| Name: | ||
| Title: | ||
| BCNN: | ||
| Balincan USA, Inc. | ||
| By | /s/ Lu, Zi Chin (Paul) | |
| Name: | ||
| Title: | ||
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| MEMBERS: | ||
| /s/ Strings D.E. Kozisek | ||
| Strings D.E. Kozisek | ||
| /s/ Chris Nichols | ||
| Chris Nichols | ||
| /s/ Phillip Dignan | ||
| Phillip Dignan | ||
| 7Nvest LLC | ||
| By: | /s/ Phillip Dignan | |
| Name: | ||
| Title: | ||
| Intelletive Ventures Tekumo LLC | ||
| By: | /s/ Kimiko Leong | |
| Name: | ||
| Title: | ||
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| Mano Enterprises LLC | ||
| By: |  | |
| Name: | ||
| Title: | ||
| Ascension Ventures LLC | ||
| By: | /s/ Kimiko Leong | |
| Name: | ||
| Title: | ||
| Tekumo Equity Holdings LLC | ||
| By: | /s/ Phillip Dignan | |
| Name: | ||
| Title: | ||
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Exhibit A
Tekumo Members
| Member | Units | Series A Preferred Shares | ||||||
| 7Nvest LLC | 500,001 | 3,333,340 | ||||||
| Strings D.E. Kozisek | 100,000 | 666,667 | ||||||
| Chris Nichols | 100,000 | 666,667 | ||||||
| Phillip Dignan | 100,000 | 666,667 | ||||||
| Intelletive Ventures LLC | 100,000 | 666,667 | ||||||
| Mano Enterprises | 37,500 | 250,000 | ||||||
| Ascension Ventures | 37,500 | 250,000 | ||||||
| Ascension Ventures | 2,000 | 0 | * | |||||
| Front Four Management | 37,500 | 0 | * | |||||
| Krystal Montez | 20,000 | 0 | * | |||||
| Stephen Briscoe | 15,000 | 0 | * | |||||
| Graham King | 15,000 | 0 | * | |||||
| MJ Torrez | 15,000 | 0 | * | |||||
| Corali Huffman | 1,000 | 0 | * | |||||
| Stephanie Lovelace | 1,000 | 0 | * | |||||
| Donna Byers | 1,000 | 0 | * | |||||
| Randha Kaapuni | 1,000 | 0 | * | |||||
| Stephen Briscoe | 50,000 | 0 | * | |||||
| Others | 5,000 | 0 | * | |||||
| Tekumo Equity Holdings, LLC | 361,499 | 3,500,000 | ||||||
| Total | 1,500,000 | 10,000,000 | ||||||
| * | Units will be exchanged for units in Tekumo Equity Holdings. |
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Exhibit B
Series A Certificate of Designation
[See Attached]
26
Exhibit C
Series B Certificate of Designation
[See Attached]
27
Exhibit D
Form of Consulting Agreement
[See Attached]
28
TAB 15
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Exhibit 6.2
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of _____________, by and between Balincan USA, Inc., a Delaware corporation, with its address at Room 1404, No. 205, Dun Hua S. Road, Sec. 1, Taipei 99999 Taiwan (the “Company”), and ___________________________ (the “Buyer”).
WHEREAS:
A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”); and
B. Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement a secured convertible note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $_____________ (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note; and a Warrant to purchase Common Stock of the Company in favor of Buyer exercisable into _____________ shares of Common Stock (the “Warrant”); and
C. The Company is simultaneously entering into a series of substantially similar Securities Purchase Agreements pursuant to which it is issuing secured convertible notes (collectively with this Note, the “Notes”) and Warrants of like kind and tenor, and which such Notes have an aggregate principal amount of up to $1,320,000.
NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:
1. Purchase and Sale of Note.
a. Purchase of Note. On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.
b. Form of Payment. On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto (and the Warrant), and (ii) the Company shall deliver such duly executed Note on behalf of the Company (and the Warrant; and the Security Agreement), to the Buyer, against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or written waiver) of the conditions thereto set forth in Section 7 and Section 8 below, the date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be 12:00 noon, Eastern Standard Time on or about June 10, 2022, or such other mutually agreed upon time. The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.
2. Buyer’s Representations and Warranties. The Buyer represents and warrants to the Company that:
a. Investment Purpose. As of the date hereof, the Buyer is purchasing the Note, the Warrant and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note and/or Warrant (such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note and the Warrant, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act.
b. Accredited Investor Status. The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).
c. Reliance on Exemptions. The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.
d. Information. The Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.
e. Legends. The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act; or may be sold pursuant to an applicable exemption from registration, the Conversion Shares may bear a restrictive legend in substantially the following form:
“THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR UNDER ANY STATE SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR (2) THE ISSUER OF SUCH SECURITIES RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE REASONABLY ACCEPTABLE TO THE ISSUER’S TRANSFER AGENT, THAT SUCH SECURITIES MAY BE PLEDGED, SOLD, ASSIGNED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.”
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The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to an exemption from registration without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected. The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
f. Authorization; Enforcement. This Agreement has been duly and validly authorized. This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.
3. Representations and Warranties of the Company. The Company represents and warrants to the Buyer that:
a. Organization and Qualification. The Company and each of its Subsidiaries (as defined below), if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted. “Subsidiaries” means any corporation or other organization, whether incorporated or unincorporated, in which the Company owns, directly or indirectly, any equity or other ownership interest.
b. Authorization; Enforcement. (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note, the Warrant and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note, the Warrant and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.
c. Capitalization. As of the date hereof, the authorized common stock of the Company consists of 40,000,000 authorized shares of Common Stock, $0.001 par value per share, of which 23,431,141 shares are issued and outstanding. All of such outstanding shares of capital stock are, or upon issuance will be, duly authorized, validly issued, fully paid and non-assessable.
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d. Issuance of Shares. The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note and the Warrant in accordance with their respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.
e. Absence of Certain Changes. Except as set forth in the Company’s disclosure on OTCMarkets (“OTC Documents”), there has been no material adverse change and no material adverse development in the assets, liabilities, business, properties, operations, financial condition, results of operations, prospects or 1934 Act reporting status of the Company or any of its Subsidiaries.
f. Absence of Litigation. To the Company’s knowledge, except as set forth in the OTC Documents, there is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its Subsidiaries, threatened against or affecting the Company or any of its Subsidiaries, or their officers or directors in their capacity as such, that could have a Material Adverse Effect. The Company and its Subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.
g. No Conflicts. The execution, delivery and performance of this Agreement, the Note, the Warrant by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self- regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The businesses of the Company and its Subsidiaries, if any, are not being conducted, and shall not be conducted so long as the Buyer owns any of the Securities, in violation of any law, ordinance or regulation of any governmental entity. “Material Adverse Effect” means any material adverse effect on the business, operations, assets, financial condition or prospects of the Company or its Subsidiaries, if any, taken as a whole, or on the transactions contemplated hereby or by the agreements or instruments to be entered into in connection herewith.
h. Failure to Comply with the Disclosure Requirements. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the OTC Markets and maintain the current information disclosure designation. The posting by OTCMarkets of any information disclosure designation other than the Pink current information that is not remedied within thirty (30) days shall be an Event of Default of the Note.
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i. No Integrated Offering. To the Company’s knowledge, neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer. The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.
j. No Brokers. The Company has taken no action which would give rise to any claim by any person for brokerage commissions, transaction fees or similar payments relating to this Agreement or the transactions contemplated hereby.
k. No Investment Company. The Company is not, and upon the issuance and sale of the Securities as contemplated by this Agreement will not be an “investment company” required to be registered under the Investment Company Act of 1940 (an “Investment Company”). The Company is not controlled by an Investment Company.
4. COVENANTS.
a. Best Efforts. The Company shall use its commercial best efforts to satisfy timely each of the conditions described in Section 8 of this Agreement.
b. Form D; Blue Sky Laws. The Company agrees to timely make any filings required by federal and state laws as a result of the closing of the transactions contemplated by this Agreement.
c. Use of Proceeds. The Company shall use the proceeds for general working capital purposes.
d. Corporate Existence. So long as the Buyer beneficially owns any Note and/or the Warrant, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, in a transaction or series of transactions that would render it a “shell company” as defined in the Securities Exchange Act of 1934, as amended, except with the prior written consent of the Buyer.
e. Breach of Covenants. If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under Section 3.4 of the Note.
f. Failure to Comply with the Disclosure Requirements. So long as the Buyer beneficially owns the Note, the Company shall comply with the reporting requirements of the OTC Markets and maintain the current information disclosure designation.
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g. Trading Activities. Neither the Buyer nor its affiliates has an open short position in the common stock of the Company and the Buyer agrees that it shall not, and that it will cause its affiliates not to, engage in any short sales of or hedging transactions with respect to the common stock of the Company.
h. Regulation A Registration Statement. The Company represents that within sixty (60) days of the date hereof, the Company will file an offering statement with the SEC pursuant to Regulation A in an amount of at least 10 times the amount of the Note and use its best efforts to cause the SEC to qualify the offering statement. Any failure to file such Offering Statement and/or use its best efforts is a material event of default pursuant to the Note.
i. Right of First Refusal. Unless it shall have first delivered to the Buyer, at least forty eight (48) hours prior to the closing of such Future Offering (as defined herein), written notice describing the proposed Future Offering (“ROFR Notice”), including the terms and conditions thereof, identity of the proposed purchaser and proposed definitive documentation to be entered into in connection therewith, and providing the Buyer an option during the forty eight (48) hour period following delivery of such notice to purchase the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering (the limitations referred to in this sentence and the preceding sentence are collectively referred to as the “Right of First Refusal”), the Company will not conduct any equity (or debt with an equity component) financing in an amount less than $1,000,000.00 (“Future Offering(s)”) during the period beginning on the Closing Date and ending twelve (12) months following the Closing Date. In the event the terms and conditions of a proposed Future Offering are amended in any respect after delivery of the notice to the Buyer concerning the proposed Future Offering, the Company shall deliver a new notice to the Buyer describing the amended terms and conditions of the proposed Future Offering and the Buyer thereafter shall have an option during the forty eight (48) hour period following delivery of such new notice to purchase the securities being offered on the same terms as contemplated by such proposed Future Offering, as amended.
j. The Buyer is Not a “Dealer”. The Buyer and the Company hereby acknowledge and agree that the Buyer has not: (i) acted as an underwriter; (ii) acted as a market maker or specialist; (iii) acted as “de facto” market maker; or (iv) conducted any other professional market activities such as providing investment advice, extending credit and lending securities in connection; and thus that the Buyer is not a “Dealer” as such term is defined in the 1934 Act.
5. Registration Rights. The Company covenants and agrees as follows
a. Piggyback Registration. If at any time the Company proposes to file with the Securities and Exchange Commission a registration statement relating to an offering for its own account or the account of others of any its Common Stock (a “Registration Statement”) (other than on Form S-4 or Form S-8 or their then-equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee benefit plans), the Company shall, at such time, promptly give each Buyer notice of such registration. Unless objected to in writing by any Buyer by written notice delivered to the Company within five (5) days after the date of such notice from the Company, which objection shall apply only to such Buyer, the Company shall include in such Registration Statement all shares issuable upon conversion of the Notes (“Registrable Securities”) held by the Buyers who did not so object. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 5(a) before the effective date of such registration, whether or not any Buyer has elected to include Registrable Securities in such registration.
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b. Demand Registration. If at any time after one hundred eighty (180) days after the filing of the offering statement with the SEC pursuant to Regulation A referenced in Section 4.h above, if the attorneys for Buyers holding a majority of the outstanding principal amount of the Notes (the “Majority Buyers”) shall reasonably determine that Rule 144, as amended, is not available with respect to issuance of shares to be issued upon conversion of the Notes without any restrictive legend, the Majority Buyers may, at their option, demand in writing that the Company file with the Securities and Exchange Commission a Registration Statement (on Form S-3 if available to the Company) which shall include in such Registration Statement all Registrable Securities (“Demand Registration”). Whenever the Majority Buyers shall have requested Demand Registration, the Company shall use its commercial best efforts to effect the registration and the sale of all Registrable Securities in accordance with the intended method of disposition thereof, and, pursuant thereto, the Company shall, as soon as practicable, and, in any event, (i) within sixty (60) days after the date such request is given by the Majority Buyers, file with the Securities and Exchange Commission a registration statement under the Securities Act with respect to such Registrable Securities; (ii) use its commercial best efforts to cause such registration statement to become effective and remain effective until the Notes have been fully converted; and (iii) use its commercial best efforts to provide assistance to Buyer in connection with the issuance of registered shares in conversion of the Note and removal of any restrictive legend, in each case, on and subject to the conditions of this Section 5. The Majority Buyers may only request a Demand Registration once in any twelve-month period.
The Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to Section 5(b), (i) during the period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective and the company provided the Buyers with the Piggyback Registration rights as provided is Section 5(a) hereof, or (ii) after the Company has effected two registrations pursuant to this Section 5(b). A registration shall not be counted as “effected” for purposes of this Section 5(b) until such time as the applicable registration statement has been declared effective by the SEC, unless the Buyers withdraw their request for such registration, elect not to pay the registration expenses therefor, and forfeit their right to one demand registration statement pursuant to Section 5(b) in which case such withdrawn registration statement shall be counted as “effected” for purposes of this Section 5(b).
c. Underwriting Requirements. In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant Section 5(a), the Company shall not be required to include any of the Buyers’ Registrable Securities in such underwriting unless the Buyers accept the reasonable terms of the underwriting as agreed upon between the Company and its underwriters, and then only in such quantity as the underwriters in their reasonable discretion determine will not jeopardize the success of the offering by the Company. For purposes of Section 5(b), a registration shall not be counted as “effected” if, as a result of an exercise of the underwriter’s cutback provisions in Section 5(b), fewer than fifty percent (50%) of the total number of Registrable Securities that Buyers have requested to be included in such registration statement are actually included.
d. Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 5 with respect to the Registrable Securities of any selling Buyer that such Buyer shall furnish to the Company such information regarding itself, the Registrable Securities held by it, the intended method of disposition of such securities, and such other information as is reasonably required to effect the registration of such Buyer’s Registrable Securities.
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e. Expenses of Registration. All expenses (other than Selling Expenses) incurred in connection with registrations, filings, or qualifications pursuant to Section 5(a) including all registration, filing, and qualification fees; printers’ and accounting fees; and fees and disbursements of counsel for the Company; shall be borne and paid by the Company. All expenses incurred in connection with registrations, filings, or qualifications pursuant to Section 5(b) including all registration, filing, and qualification fees; printers’ and accounting fees; and fees and disbursements of counsel for the Company; shall be borne and paid by the Buyers pro rata on the basis of the number of Registrable Securities registered on their behalf. All Selling Expenses shall be borne and paid by the Buyers pro rata on the basis of the number of Registrable Securities registered on their behalf.
f. Delay of Registration. No Buyer shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 5.
g. “Market Stand-off” Agreement. The Buyer shall not sell, dispose of, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any Common Stock or other securities of the Company held by the Buyer (other than those included in the registration), including Registrable Securities, during the 180-day period following the effective date of any firm commitment underwritten public offering of the Company’s Common Stock (or such shorter period as the underwriters or the Company shall request in order to facilitate compliance with FINRA Rule 2241 or any successor or similar rule or regulation); provided, that, the foregoing shall be applicable to the Buyer only if all officers and directors are subject to the same restrictions. In such event, the Buyer agrees to execute and deliver such other agreements as may be reasonably requested by the Company and/or the managing underwriters that are consistent with the foregoing or that are necessary to give further effect to the foregoing provision. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Buyer’s Registrable Securities until the end of such period. The underwriters of the Company’s stock are intended third party beneficiaries of this Section 5.g. and shall have the right, power and authority to enforce the provisions hereof as though they were a party to this Agreement.
h. Termination of Registration Rights. The right of any Buyer to request registration or inclusion of Registrable Securities in any registration pursuant to Section 5(a) or 5(b) shall terminate upon the earliest to occur of: (i) the closing of a Deemed Liquidation Event, as such term is defined in the Company’s Amended and Restated Certificate of Incorporation, as hereafter amended; (ii) such time as Rule 144 or another similar exemption under the Securities Act is available for the sale of all of such Buyer’s shares without limitation, during a three (3)-month period without registration (and without the requirement for the Company to be in compliance with the current public information required under subsection (c)(1) of Rule 144); and (iii) the third (3rd) anniversary of the date hereof (or such later date that is one hundred eighty (180) days following the expiration of all deferrals of the Company’s obligations pursuant to Section 5(b) that remain in effect as of the third (3rd) anniversary of the date hereof).
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6. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Conversion Shares in such amounts as specified from time to time by the Buyer to the Company upon conversion of the Note (and the Warrant) in accordance with the terms thereof (the “Irrevocable Transfer Agent Instructions”). In the event that the Company proposes to replace its transfer agent, the Company shall provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to this Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount as such term is defined in the Note) signed by the successor transfer agent to Company and the Company. Prior to registration of the Conversion Shares under the 1933 Act or the date on which the Conversion Shares may be sold pursuant to an exemption from registration, all such certificates shall bear the restrictive legend specified in Section 2(e) of this Agreement. The Company warrants that: (i) no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 6, will be given by the Company to its transfer agent and that the Securities shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Warrant and the Note; (ii) it will not direct its transfer agent not to transfer or delay, impair, and/or hinder its transfer agent in transferring (or issuing)(electronically or in certificated form) any certificate for Conversion Shares to be issued to the Buyer upon conversion of or otherwise pursuant to the Note as and when required by the Note and this Agreement; and (iii) it will not fail to remove (or direct its transfer agent not to remove or impair, delay, and/or hinder its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any Conversion Shares issued to the Buyer upon conversion of or otherwise pursuant to the Note (and the Warrant) as and when required by the Note, the Warrant and/or this Agreement. If the Buyer provides the Company and the Company’s transfer agent, at the cost of the Buyer, with an opinion of counsel in form, substance and scope customary for opinions in comparable transactions, to the effect that a public sale or transfer of such Securities may be made without registration under the 1933 Act, the Company shall permit the transfer, and, in the case of the Conversion Shares, promptly instruct its transfer agent to issue one or more certificates, free from restrictive legend, in such name and in such denominations as specified by the Buyer. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer, by vitiating the intent and purpose of the transactions contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 6 may be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section, that the Buyer shall be entitled, in addition to all other available remedies, to an injunction restraining any breach and requiring immediate transfer, without the necessity of showing economic loss and without any bond or other security being required.
7. Conditions to the Company’s Obligation to Sell. The obligation of the Company hereunder to issue and sell the Note to the Buyer at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions thereto, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and delivered the same to
the Company.
b. The Buyer shall have delivered the Purchase Price in accordance with
Section 1(b) above.
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c. The representations and warranties of the Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date.
d. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
8. Conditions to The Buyer’s Obligation to Purchase. The obligation of the Buyer hereunder to purchase the Note at the Closing is subject to the satisfaction, at or before the Closing Date of each of the following conditions, provided that these conditions are for the Buyer’s sole benefit and may be waived by the Buyer at any time in its sole discretion:
a. The Buyer shall have completed its due diligence investigation of the Company; and the Buyer shall have received such financial and other information regarding the Company as the Investors may reasonably request.
b. The Company shall have executed this Agreement and delivered the
same to the Buyer.
c. The Company shall have delivered to the Buyer the duly executed Note (in such denominations as the Buyer shall request) and the Warrant in accordance with Section 1(b) above.
d. The Company shall have delivered to the Buyer duly executed security agreement as set forth in the Note; and the Buyer shall have been granted a first priority perfected lien on identified Collateral as such term is defined in the Security Agreement.
e. The Irrevocable Transfer Agent Instructions, in form and substance satisfactory to the Buyer, shall have been delivered to and acknowledged in writing by the Company’s Transfer Agent.
f. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at such time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate or certificates, executed by the chief executive officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer including, but not limited to certificates with respect to the Board of Directors’ resolutions relating to the transactions contemplated hereby.
g. No litigation, statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by or in any court or governmental authority of competent jurisdiction or any self-regulatory organization having authority over the matters contemplated hereby which prohibits the consummation of any of the transactions contemplated by this Agreement.
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h. The Buyer shall have received an officer’s certificate described in Section 3(d) above, dated as of the Closing Date.
i. No Material Adverse Effect with respect to the Company shall have
occurred.
j. There shall exist no claim, action, suit, investigation, litigation or proceeding, pending or threatened in any court or before any arbitrator or governmental instrumentality which relates to Company or the Collateral which (in the reasonable business judgment of the Buyer), has any reasonable likelihood of having a Material Adverse Effect on the condition (financial or otherwise), operations, performance, properties, assets, liabilities, business or prospects of the Company.
9. Governing Law; Miscellaneous.
a. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of Delaware or in the federal courts located in the state of Delaware. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Buyers waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement, the Note or any related document or agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
b. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.
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d. Severability. In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.
e. Entire Agreement; Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.
f. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be as set forth in the heading of this Agreement. Each party shall provide notice to the other party of any change in address.
g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other. Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.
h. Survival. The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer. The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.
i. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
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j. No Strict Construction. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.
k. Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.
| Balincan USA, Inc. |
| By: | |||
| Lu, Zi Chin (Paul) | |||
| Chief Executive Officer | |||
| Buyer | ||
| By: | ||
| AGGREGATE SUBSCRIPTION AMOUNT: | ||
| Aggregate Principal Amount of Note: | $ | |
| Original Issue Discount: | $ | |
| Aggregate Purchase Price: | $ | |
| Warrants: | shares | |
| Exercise Price: | $0.0055 per share | |
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Exhibit 6.3
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.
THE ISSUE PRICE OF THIS NOTE
IS $____________
THE ORIGINAL ISSUE DISCOUNT IS $_________
| Principal Amount: $_____________ | Issue Date: ________ |
| Purchase Price: $_____________ |
SECURED CONVERTIBLE PROMISSORY NOTE
FOR VALUE RECEIVED, Balincan USA, Inc., a Delaware corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of __________________ (the “Holder”) the sum of $_____________ together with any interest as set forth herein, on the first anniversary of the Issue Date above (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of four percent (4%) (the “Interest Rate”) per annum from the date hereof (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. Notwithstanding anything contained herein to contrary, in the event of a Qualified Offering prior to the Maturity Date, the Company shall pay to the Holder, $0.20 of each dollar received in the Qualified Offering after the initial $2,500,000.00 of proceeds (in the aggregate) which shall be utilized to pay the principal, interest and any other amounts due pursuant to this Note, and such payment shall not be subject to any prepayment premium pursuant to Section 1.7 or otherwise. A “Qualified Offering” shall mean any offering of the common stock of the Company following the date of this Note in an aggregate amount of at least $5,000,000.00 pursuant to Regulation A of the Securities Act of 1933, as amended (the “Act”), Regulation D of the Act; or pursuant to a Registration Statement filed with the Securities and Exchange Commission pursuant to the Act. This Note may not be prepaid in whole or in part except as otherwise explicitly set forth herein pursuant to Section 1.7. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twelve percent (12%) per annum (or the highest amount of interest allowed by law if such amount is lower) from the due date thereof until the same is paid (“Default Interest”). Interest shall be computed on the basis of a 365-day year and the actual number of days elapsed. Interest shall commence accruing on the Issue Date but shall not be payable until the Note becomes payable (whether at Maturity Date or upon acceleration or by prepayment). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Each capitalized term used herein, and not otherwise defined, shall have the meaning ascribed thereto in that certain Securities Purchase Agreement dated the date hereof, pursuant to which this Note was originally issued (the “Purchase Agreement”).
This Note is free from all liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.
This Note is one of a series Convertible Secured Promissory Notes of like kind and tenor issued by the Borrower pursuant to the Purchase Agreement (collectively with this Note, the “Notes”), and having an aggregate principal amount of up to $1,320,000 and issued to certain persons and entities (collectively, the “Holders”). The Company shall maintain a ledger of all Holders. The following terms shall apply to this Note:
ARTICLE I. CONVERSION RIGHTS
1.1 Conversion Right. The Holder shall have the right from time to time during the conversion period specified in Section1.4(a), and at any time during the period wherein this Note remains outstanding, each in respect of the remaining outstanding principal amount of this Note to convert all or any part of the outstanding and unpaid principal, interest and default (if any) amount of this Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the conversion price (the “Conversion Price”) determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso. The beneficial ownership limitations on conversion as set forth in the section may NOT be waived by the Holder. The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., Eastern time on such conversion date(the “Conversion Date”); however, if the Notice of Conversion is sent after 6:00 pm, Eastern time the Conversion Date shall be the next business day. The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus (2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus (3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus (4) at the Holder’s option, any amounts owed to the Holder pursuant to Sections 1.4 hereof.
1.2 Conversion Price. Notwithstanding anything contained herein to the contrary, the Conversion Price shall be the Fixed Conversion Price (as defined herein) (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The “Fixed Conversion Price” shall mean $0.005.
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1.3 Authorized Shares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note and Warrant to purchase common stock of the Borrower issued pursuant to the Purchase Agreement. The Borrower is required at all times that this Note is convertible and the Warrant is exercisable to have authorized and reserved the number of shares that is actually issuable upon full conversion of this Note and Warrant (the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations hereunder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Note. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note.
If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.1(b) of the Note.
1.4 Method of Conversion.
(a) Mechanics of Conversion. From time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this Note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the Default Amount, this Note may be converted by the Holder in whole or in part at any time from time to time after the Issue Date, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., Eastern time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower (upon payment in full of any amounts owed hereunder).
(b) Surrender of Note Upon Conversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the absence of fraud or manifest error, the Borrower’s records shall be binding on the Holder and the Borrower.
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(c) Delivery of Common Stock Upon Conversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof and the Purchase Agreement. Upon receipt by the Borrower of a Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations hereunder, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion.
(d) Delivery of Common Stock by Electronic Transfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions set forth herein, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit and Withdrawal at Custodian (“DWAC”) system.
(e) Failure to Deliver Common Stock Prior to Deadline. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline due to action and/or inaction of the Borrower, the Borrower shall pay to the Holder $1,000 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock (the “Fail to Deliver Fee”); provided; however that the Fail to Deliver Fee shall not be due if the failure is a result of a third party (i.e., transfer agent; and not the result of any failure to pay such transfer agent) despite the best efforts of the Borrower to effect delivery of such Common Stock. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, or interference with such conversion right are difficult if not impossible to qualify. Accordingly, the parties acknowledge that the liquidated damages provision contained in this Section 1.4(e) are justified.
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1.5 Concerning the Shares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless: (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration (such as Rule 144 or a successor rule) (“Rule 144”); or (iii) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor (as defined in the Purchase Agreement). Any restrictive legend on certificates representing shares of Common Stock issuable upon conversion of this Note shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if the Borrower or its transfer agent shall have received an opinion of counsel from Holder’s counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that (i) a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Company so that the sale or transfer is effected; or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act; or otherwise may be sold pursuant to an exemption from registration. In the event that the Company does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration (such as Rule 144), at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of the Note.
1.6 Effect of Certain Events.
(a) Effect of Merger, Consolidation, Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III). “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.
(b) Adjustment Due to Merger, Consolidation, Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Note, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (i) it first gives, to the extent practicable, ten (10) days prior written notice (but in any event at least five (5) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (ii) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Note. The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.
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(a) Adjustment Due to Distribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.
1.7 Prepayment. Notwithstanding anything to the contrary contained in this Note, at any time during the periods set forth on the table immediately following this paragraph (the “Prepayment Periods”), the Borrower shall have the right, exercisable on not more than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.7. Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to Holder, or upon the direction of the Holder as specified by the Holder in a writing to the Borrower (which shall direction to be sent to Borrower by the Holder at least one (1) business day prior to the Optional Prepayment Date). If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder of an amount in cash equal to the percentage (“Prepayment Percentage”) as set forth in the table immediately following this paragraph opposite the applicable Prepayment Period, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus (z) any amounts owed to the Holder pursuant to Section 1.4 hereof (the “Optional Prepayment Amount”). If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.7 without the Holder’s prior written consent.
| Prepayment Period | Prepayment Percentage | |
| The period beginning on the Issue Date and ending on the date which is one hundred eighty (180) days following the Issue Date. | 150% |
After the expiration of the Prepayment Period, the Borrower shall have no right of prepayment. Notwithstanding anything contained herein to the contrary, the Holder’s conversion rights herein shall not be affected in any way until the Note is fully paid (funds received by the Holder) pursuant to an Optional Prepayment Notice.
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ARTICLE II. CERTAIN COVENANTS
2.1 Sale of Assets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of all or substantially all of its assets outside the ordinary course of business, unless this Note is being repaid or converted in connection with such transaction. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.
2.2 Security Interest.
(a) The indebtedness evidenced by this Note and the payment of the Principal Amount and Interest is and shall be Junior (as hereinafter defined) to all Senior indebtedness, but shall have priority in right of payment over, all non-Senior indebtedness of Borrower now outstanding. “Junior,” as used herein, shall be deemed to mean that, in the event of any default in the payment of the obligations represented by this Note (after giving effect to “cure” provisions, if any) or of any liquidation, insolvency, bankruptcy, reorganization or similar proceedings relating to the Borrower, all sums payable on or under this Note are and shall be subordinated in right of payment to any Senior indebtedness, but shall first be paid in full, with Interest, if any, before any payment is made upon any other non-Senior indebtedness, now outstanding or hereinafter incurred, and, in any such event, any payment or distribution of any character which shall be made in respect of any other non-Senior indebtedness of Borrower shall be paid over to Holder for application to the payment hereof, unless and until the obligations under this Note (which shall mean the Principal Amount, Interest and any costs and expenses payable under this Note) shall have been paid and satisfied in full. “Senior indebtedness” shall mean an existing accounts receivable line of credit of Tekumo LLC, SBA EIDL loans of $200,000 of Tekumo LLC, and all other Senior Indebtedness as defined in the Security Agreement referenced in Section 2.2(b) below.
(b) This Note shall be secured by a perfected lien and security interest in all of the assets of the Borrower pursuant to the terms of a certain Security Agreement dated as of the date hereof (the “Security Agreement”), by and between the Borrower and the Collateral Agent named therein.
(c) Holder agrees to cooperate with Borrower and any holder of Senior indebtedness to execute any documents reasonably requested by Borrower or any such holder of Senior indebtedness in order to further document and evidence the purpose and intent of this Section 2.2.
ARTICLE III. EVENTS OF DEFAULT
3.1 Events of Default. If any of the following events of default (each, an “Event of Default”) shall occur:
(a) Failure to Pay Principal and Interest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity or upon acceleration and such breach continues for a period of five (5) days after written notice from the Holder.
(b) Conversion and the Shares. The Borrower refuses to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty-eight (48) hours of a demand from the Holder.
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(c) Breach of Covenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents including but not limited to the Purchase Agreement, the Warrant, the Security Agreement and such breach continues for a period of ten (10) days after written notice thereof to the Borrower from the Holder.
(d) Breach of Representations and Warranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith (including, without limitation, the Purchase Agreement and the Security Agreement), shall be false or misleading in any material respect when made and the breach of which has(or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this Note, the Purchase Agreement or the Security Agreement.
(e) Receiver or Trustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.
(f) Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower.
(g) Delisting of Common Stock. The Borrower shall fail to maintain the listing of the Common Stock on at least one of the OTC (which specifically includes the quotation platforms maintained by the OTC Markets Group) or an equivalent replacement exchange.
(h) Failure to Comply with the Disclosure Requirements. The Borrower shall fail to comply with the reporting requirements of the OTC Markets and fail to maintain the Pink check mark, current information, disclosure status.
(i) Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.
(j) Cessation of Operations. Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.
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(k) Financial Statement Restatement. The restatement of any financial statements filed by the Borrower with the SEC at any time after 180 days after the Issuance Date for any date or period until this Note is no longer outstanding, if the result of such restatement would, by comparison to the un-restated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note or the Purchase Agreement.
(l) Replacement of Transfer Agent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions in a form as initially delivered pursuant to the Purchase Agreement (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower.
(m) Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.
3.2 Remedies.
(a) Upon the occurrence and during the continuation of any Event of Default specified in this Article III (other than Section 3.1(a) exercisable through the delivery of written notice to the Borrower by such Holders (the “Default Notice”), and upon the occurrence of an Event of Default specified the remaining sections of Section 3.1 (other than failure to pay the principal hereof or interest thereon at the Maturity Date specified in Section 3.1(a) hereof),the Note shall become immediately due and payable and the Borrower shall pay to the Holder, in full satisfaction of its obligations hereunder, an amount equal to: 135% times the sum of (w) the then outstanding principal amount of this Note plus (x) accrued and unpaid interest on the unpaid principal amount of this Note to the date of payment plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and/or (x) plus (z) any amounts owed to the Holder pursuant to Sections 1.3 and 1.4(e) hereof (the “Default Amount”), and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity.
(b) If the Borrower fails to pay the Default Amount within ten (10) business days of written notice that such amount is due and payable, then the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect.
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ARTICLE IV. MISCELLANEOUS
4.1 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.
4.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally delivered, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by email, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon delivery or transmission by email, , at the addressor number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of deposit with express a courier service, fully prepaid, addressed to such address, or upon actual receipt of such delivery, whichever shall first occur. The addresses for such communications shall be:
| If to the Borrower, to: | |
| Balincan USA, Inc. | |
| Room 1404, No. 205, Dun Hua S. Road, Sec. 1 | |
| Taipei 99999 Taiwan | |
| Attn: Lu, Zi Chin (Paul), Chief Executive Officer | |
| Email: PaulLuUSA@gmail.com | |
| If to the Holder: | |
| _________________________ | |
| _________________________ | |
| _________________________ | |
| Attn: ____________________ | |
| email: ___________________ |
4.3 Amendments. This Note and any provision hereof may only be waived or amended by an instrument in writing signed by the Borrower and the Holders of Notes holding a majority of the outstanding principal amount of the Notes. Any waiver or amendment of this Agreement effected pursuant to the foregoing sentence shall be binding on the Borrower and all Holders. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument (and the other Notes issued pursuant to the Purchase Agreement) as originally executed, or if later amended or supplemented, then as so amended or supplemented.
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4.4 Most Favored Nation. During the period where any monies are owed to the Holder pursuant to this Note, if the Borrower engages in any future financing transactions with a third party investor, the Borrower will provide the Holder with written notice (the “MFN Notice”) thereof promptly but in no event less than 10 days prior to closing any financing transactions. Included with the MFN Notice shall be a copy of all documentation relating to such financing transaction and shall include, upon written request of the Holder, any additional information related to such subsequent investment as may be reasonably requested by the Holder. In the event the Holder determines that the terms of the subsequent investment are preferable to the terms of the securities of the Borrower issued to the Holder pursuant to the terms of the Purchase Agreement, the Holder will notify the Borrower in writing. Promptly after receipt of such written notice from the Holder, the Borrower agrees to amend and restate the Securities (which may include the conversion terms of this Note), to be identical to the instruments evidencing the subsequent investment. Notwithstanding the foregoing, this Section 4.4 shall not apply in respect of (i) an Exempt Issuance, or (ii) an underwritten public offering of Common Stock. “Exempt Issuance” means the issuance of: (a) shares of Common Stock or options to employees, officers, consultants, advisors or directors of the Borrower pursuant to any stock or option plan duly adopted for such purpose by a majority of the members of the Board of Directors or a majority of the members of a committee of directors established for such purpose, (b) securities upon the exercise or exchange of or conversion of this Note and/or other securities exercisable or exchangeable for or convertible into shares of Common Stock issued and outstanding on the date hereof, and (c) securities issued pursuant to acquisitions or strategic transactions approved by a majority of the disinterested directors of the Borrower, provided that any such issuance shall only be to a Person which is, itself or through its subsidiaries, an operating company in a business synergistic with the business of the Borrower and in which the Borrower receives benefits in addition to the investment of funds, but shall not include a transaction in which the Borrower is issuing securities primarily for the purpose of raising capital or to an entity whose primary business is investing in securities.
4.5 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the Securities and Exchange Commission). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement; and may be assigned by the Holder without the consent of the Borrower.
4.6 Cost of Collection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.
4.7 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Note shall be brought only in the state courts of Delaware or in the federal courts located in Delaware. The parties to this Note hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Borrower and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Note, any agreement or any other document delivered in connection with this Note by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
4.8 Purchase Agreement. By its acceptance of this Note, each party agrees to be bound by the applicable terms of the Purchase Agreement and the Security Agreement.
4.9 Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
[Signature Page Follows]
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IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer on the date first written above.
| Balincan USA, Inc. | ||
| By: | ||
| Lu, Zi Chin (Paul) | ||
| Chief Executive Officer | ||
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EXHIBIT A NOTICE OF CONVERSION
The undersigned hereby elects to convert $__________principal amount of the Note (defined below) into that number of shares of Common Stock to be issued pursuant to the conversion of the Note (“Common Stock”) as set forth below, of Balincan USA, Inc., a Delaware corporation (the “Borrower”) according to the conditions of the convertible note of the Borrower dated as of __________ (the “Note”), as of the date written below. No fee will be charged to the Holder for any conversion, except for transfer taxes, if any.
Box Checked as to applicable instructions:
☐ The Borrower shall electronically transmit the Common Stock issuable pursuant to this Notice of Conversion to the account of the undersigned or its nominee with DTC through its Deposit Withdrawal Agent Commission system (“DWAC Transfer”).
Name of DTC Prime Broker:
Account Number:
☐ The undersigned hereby requests that the Borrower issue a certificate or certificates for the number of shares of Common Stock set forth below (which numbers are based on the Holder’s calculation attached hereto) in the name(s) specified immediately below or, if additional space is necessary, on an attachment hereto:
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Exhibit 6.4
NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.
Right
to Purchase _____________ shares of Common Stock
of Balincan USA, Inc. (subject to adjustment as provided herein)
No. _1
Issue Date: _____________
COMMON STOCK PURCHASE WARRANT
THIS CERTIFIES THAT, for value received, _________________________, is entitled to purchase from Balincan USA, Inc., a Delaware corporation (the “Company”), at any time or from time to time during the period specified in Paragraph 2 hereof, _____________ fully paid and nonassessable shares of the Company’s Common Stock, par value $0.001 per share (the “Common Stock”), at an exercise price per share equal to $0.0055 (the “Exercise Price”). The term “Warrant Shares,” as used herein, refers to the shares of Common Stock purchasable hereunder. The Warrant Shares and the Exercise Price are subject to adjustment as provided in Paragraph 5 hereof. The term “Warrants” means this Warrant and the other warrants issued pursuant to that certain Securities Purchase Agreement, dated the date hereof, by and among the Company and the Buyer (the “Securities Purchase Agreement”).
This Warrant is subject to the following terms, provisions, and conditions:
1. Manner of Exercise; Issuance of Certificates; Payment for Shares. Subject to the provisions hereof, this Warrant may be exercised by the holder hereof, in whole or in part, by the surrender of this Warrant, together with a completed exercise agreement in the form attached hereto (the “Exercise Agreement”), to the Company during normal business hours on any business day at the Company’s principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), and upon payment to the Company in cash, by certified or official bank check or by wire transfer for the account of the Company of the Exercise Price for the Warrant Shares specified in the Exercise Agreement. The Warrant Shares so purchased shall be deemed to be issued to the holder hereof or such holder’s designee, as the record owner of such shares, as of the close of business on the date on which this Warrant shall have been surrendered, the completed Exercise Agreement shall have been delivered, and payment shall have been made for such shares as set forth above. Certificates for the Warrant Shares so purchased, representing the aggregate number of shares specified in the Exercise Agreement, shall be delivered to the holder hereof within a reasonable time, not exceeding three (3) business days, after this Warrant shall have been so exercised. The certificates so delivered shall be in such denominations as may be requested by the holder hereof and shall be registered in the name of such holder or such other name as shall be designated by such holder. If this Warrant shall have been exercised only in part, then, unless this Warrant has expired, the Company shall, at its expense, at the time of delivery of such certificates, deliver to the holder a new Warrant representing the number of shares with respect to which this Warrant shall not then have been exercised. In addition to all other available remedies at law or in equity, if the Company fails to deliver certificates for the Warrant Shares within three (3) business days after this Warrant is exercised, then the Company shall pay to the holder in cash a penalty (the “Penalty”) equal to 2% of the number of Warrant Shares that the holder is entitled to multiplied by the Market Price (as hereinafter defined) for each day that the Company fails to deliver certificates for the Warrant Shares.
1. Period of Exercise. This Warrant is exercisable at any time or from time to time on or after the date on which this Warrant is issued and delivered pursuant to the terms of the Securities Purchase Agreement and before 6:00 p.m., Eastern time on the seventh (7th) anniversary of the date of issuance or as otherwise provided herein (the “Exercise Period”).
2. Certain Agreements of the Company. The Company hereby covenants and agrees as follows:
(a) Shares to be Fully Paid. All Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be validly issued, fully paid, and nonassessable and free from all taxes, liens, and charges with respect to the issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company shall at all times have authorized, and reserved for the purpose of issuance upon exercise of this Warrant, a sufficient number of shares of Common Stock to provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company will not, by amendment of its charter or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed by it hereunder, but will at all times in good faith assist in the carrying out of all the provisions of this Warrant and in the taking of all such action as may reasonably be requested by the holder of this Warrant in order to protect the exercise privilege of the holder of this Warrant against dilution or other impairment, consistent with the tenor and purpose of this Warrant. Without limiting the generality of the foregoing, the Company (i) will not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, and (ii) will take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant will be binding upon any entity succeeding to the Company by merger, consolidation, or acquisition of all or substantially all the Company’s assets.
3. Market Price. Market Price of a share of Common Stock as of a particular date (the “Determination Date”) shall mean:
(a) If the Company’s Common Stock is traded on an exchange or is quoted on the NASDAQ or the New York Stock Exchange, then the average of the lowest two closing bid prices for the Common Stock during the ten (10) trading day period ending one trading day prior to the Determination Date;
(b) If the Company’s Common Stock is not traded on an exchange or on the NASDAQ or the New York Stock Exchange, but is traded on the OTC Bulletin Board or in the over-the-counter market or Pink Sheets, then the average of the two lowest closing bid prices for the Common Stock during the ten (10) trading day period ending one trading day prior to the Determination Date;
(c) Except as provided in clause (d) below, if the Company’s Common Stock is not publicly traded, then as the Holder and the Company agree, or in the absence of such an agreement, by arbitration in accordance with the rules then standing of the American Arbitration Association, before a single arbitrator to be chosen from a panel of persons qualified by education and training to pass on the matter to be decided; or
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(d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the event of such liquidation, dissolution or winding up, plus all other amounts to be payable per share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of this clause (d) that all of the shares of Common Stock then issuable upon exercise of all of the Warrants are outstanding at the Determination Date.
4. Anti-dilution Provisions. During the Exercise Period, the Exercise Price and the number of Warrant Shares shall be subject to adjustment from time to time as provided in this Paragraph 5.
In the event that any adjustment of the Exercise Price as required herein results in a fraction of a cent, such Exercise Price shall be rounded up to the nearest cent.
(a) Adjustment of Exercise Price and Number of Shares upon Issuance of Common Stock. Except as otherwise provided in Paragraphs 5(c) and 5(e) hereof, if and whenever on or after the date of issuance of this Warrant, the Company issues or sells, or in accordance with Paragraph 5(b) hereof is deemed to have issued or sold, any shares of Common Stock for no consideration or for a consideration per share (before deduction of reasonable expenses or commissions or underwriting discounts or allowances in connection therewith) less than the Market Price on the date of issuance (a “Dilutive Issuance”), then immediately upon the Dilutive Issuance, the Exercise Price will be reduced to the lower of: (A) the price per share paid in the Dilutive Issuance; or (ii) a price determined by multiplying the Exercise Price in effect immediately prior to the Dilutive Issuance by a fraction, (i) the numerator of which is an amount equal to the sum of (x) the number of shares of Common Stock actually outstanding immediately prior to the Dilutive Issuance, plus (y) the quotient of the aggregate consideration, calculated as set forth in Paragraph 5(b) hereof, received by the Company upon such Dilutive Issuance divided by the Market Price in effect immediately prior to the Dilutive Issuance, and (ii) the denominator of which is the total number of shares of Common Stock Deemed Outstanding (as defined below) immediately after the Dilutive Issuance.
(b) Effect on Exercise Price of Certain Events. For purposes of determining the adjusted Exercise Price under Paragraph 5(a) hereof, the following will be applicable:
(i) Issuance of Rights or Options. If the Company in any manner issues or grants any warrants, rights or options, whether or not immediately exercisable, to subscribe for or to purchase Common Stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) (such warrants, rights and options to purchase Common Stock or Convertible Securities are hereinafter referred to as “Options”) and the price per share for which Common Stock is issuable upon the exercise of such Options is less than the Market Price on the date of issuance or grant of such Options, then the maximum total number of shares of Common Stock issuable upon the exercise of all such Options will, as of the date of the issuance or grant of such Options, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon the exercise of such Options” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or granting of all such Options, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the exercise of all such Options, plus, in the case of Convertible Securities issuable upon the exercise of such Options, the minimum aggregate amount of additional consideration payable upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the exercise of all such Options (assuming full conversion of Convertible Securities, if applicable). No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon the exercise of such Options or upon the conversion or exchange of Convertible Securities issuable upon exercise of such Options.
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(ii) Issuance of Convertible Securities. If the Company in any manner issues or sells any Convertible Securities, whether or not immediately convertible (other than where the same are issuable upon the exercise of Options) and the price per share for which Common Stock is issuable upon such conversion or exchange is less than the Market Price on the date of issuance, then the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities will, as of the date of the issuance of such Convertible Securities, be deemed to be outstanding and to have been issued and sold by the Company for such price per share. For the purposes of the preceding sentence, the “price per share for which Common Stock is issuable upon such conversion or exchange” is determined by dividing (i) the total amount, if any, received or receivable by the Company as consideration for the issuance or sale of all such Convertible Securities, plus the minimum aggregate amount of additional consideration, if any, payable to the Company upon the conversion or exchange thereof at the time such Convertible Securities first become convertible or exchangeable, by (ii) the maximum total number of shares of Common Stock issuable upon the conversion or exchange of all such Convertible Securities. No further adjustment to the Exercise Price will be made upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities.
(iii) Change in Option Price or Conversion Rate. If there is a change at any time in (i) the amount of additional consideration payable to the Company upon the exercise of any Options; (ii) the amount of additional consideration, if any, payable to the Company upon the conversion or exchange of any Convertible Securities; or (iii) the rate at which any Convertible Securities are convertible into or exchangeable for Common Stock (other than under or by reason of provisions designed to protect against dilution), the Exercise Price in effect at the time of such change will be readjusted to the Exercise Price which would have been in effect at such time had such Options or Convertible Securities still outstanding provided for such changed additional consideration or changed conversion rate, as the case may be, at the time initially granted, issued or sold.
(iv) Treatment of Expired Options and Unexercised Convertible Securities. If, in any case, the total number of shares of Common Stock issuable upon exercise of any Option or upon conversion or exchange of any Convertible Securities is not, in fact, issued and the rights to exercise such Option or to convert or exchange such Convertible Securities shall have expired or terminated, the Exercise Price then in effect will be readjusted to the Exercise Price which would have been in effect at the time of such expiration or termination had such Option or Convertible Securities, to the extent outstanding immediately prior to such expiration or termination (other than in respect of the actual number of shares of Common Stock issued upon exercise or conversion thereof), never been issued.
(v) Calculation of Consideration Received. If any Common Stock, Options or Convertible Securities are issued, granted or sold for cash, the consideration received therefor for purposes of this Warrant will be the amount received by the Company therefor, before deduction of reasonable commissions, underwriting discounts or allowances or other reasonable expenses paid or incurred by the Company in connection with such issuance, grant or sale. In case any Common Stock, Options or Convertible Securities are issued or sold for a consideration part or all of which shall be other than cash, the amount of the consideration other than cash received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Market Price thereof as of the date of receipt. In case any Common Stock, Options or Convertible Securities are issued in connection with any acquisition, merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving corporation as is attributable to such Common Stock, Options or Convertible Securities, as the case may be. The fair value of any consideration other than cash or securities will be determined in good faith by the Board of Directors of the Company.
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(vi) Exceptions to Adjustments of Exercise. No adjustment to the Exercise Price will be made (i) upon the exercise of any warrants, options or convertible securities granted, issued and outstanding on the date of issuance of this Warrant; (ii) upon the grant or exercise of any stock or options which may hereafter be granted or exercised to officers, directors, employees, consultants, vendors and other service providers of the Company, so long as the issuance of such stock or options is approved by a majority of the independent members of the Board of Directors of the Company or a majority of the members of a committee of independent directors established for such purpose; or (iii) upon the exercise of the Warrants.
(c) Subdivision or Combination of Common Stock. If the Company at any time subdivides (by any stock split, stock dividend, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a greater number of shares, then, after the date of record for effecting such subdivision, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced. If the Company at any time combines (by reverse stock split, recapitalization, reorganization, reclassification or otherwise) the shares of Common Stock acquirable hereunder into a smaller number of shares, then, after the date of record for effecting such combination, the Exercise Price in effect immediately prior to such combination will be proportionately increased.
(d) Adjustment in Number of Shares. Upon each adjustment of the Exercise Price pursuant to the provisions of this Paragraph 5, the number of shares of Common Stock issuable upon exercise of this Warrant shall be adjusted by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.
(e) Consolidation, Merger, or Sale. In case of any consolidation of the Company with, or merger of the Company into any other entity, or in case of any sale or conveyance of all or substantially all of the assets of the Company other than in connection with a plan of complete liquidation of the Company, then as a condition of such consolidation, merger or sale or conveyance, adequate provision will be made whereby the holder of this Warrant will have the right to acquire and receive upon exercise of this Warrant in lieu of the shares of Common Stock immediately theretofore acquirable upon the exercise of this Warrant, such shares of stock, securities or assets as may be issued or payable with respect to or in exchange for the number of shares of Common Stock immediately theretofore acquirable and receivable upon exercise of this Warrant had such consolidation, merger or sale or conveyance not taken place. In any such case, the Company will make appropriate provision to insure that the provisions of this Paragraph 5 hereof will be applicable as nearly as may be in relation to any shares of stock or securities thereafter deliverable upon the exercise of this Warrant in connection with such consolidation, merger or sale or conveyance. The Company will not effect any consolidation, merger or sale or conveyance unless prior to the consummation thereof, the successor corporation (if other than the Company) delivers to the holder of this Warrant such shares of stock, securities or assets as, in accordance with the foregoing provisions, the holder may be entitled to acquire.
(f) Distribution of Assets. In case the Company shall declare or make any distribution of its assets (including cash) to holders of Common Stock as a partial liquidating dividend, by way of return of capital or otherwise, then, after the date of record for determining shareholders entitled to such distribution, but prior to the date of distribution, the holder of this Warrant shall be entitled upon exercise of this Warrant for the purchase of any or all of the shares of Common Stock subject hereto, to receive the amount of such assets which would have been payable to the holder had such holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such distribution.
(g) Upon the occurrence of any event which requires any adjustment of the Exercise Price, then, and in each such case, the Company shall give notice thereof to the holder of this Warrant, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease in the number of Warrant Shares purchasable at such price upon exercise, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Such calculation shall be certified by the Chief Financial Officer of the Company.
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(h) No Fractional Shares. No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but the Company shall pay a cash adjustment in respect of any fractional share which would otherwise be issuable in an amount equal to the same fraction of the Market Price of a share of Common Stock on the date of such exercise.
(i) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common Stock payable in shares of stock of any class or make any other distribution (including dividends or distributions payable in cash out of retained earnings) to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the holders of the Common Stock any additional shares of stock of any class or other rights;
(iii) there shall be any capital reorganization of the Company, or reclassification of the Common Stock, or consolidation or merger of the Company with or into, or sale of all or substantially all its assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company; then, in each such case, the Company shall give to the holder of this Warrant (a) notice of the date on which the books of the Company shall close or a record shall be taken for determining the holders of Common Stock entitled to receive any such dividend, distribution, or subscription rights or for determining the holders of Common Stock entitled to vote in respect of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up and (b) in the case of any such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, notice of the date (or, if not then known, a reasonable approximation thereof by the Company) when the same shall take place. Such notice shall also specify the date on which the holders of Common Stock shall be entitled to receive such dividend, distribution, or subscription rights or to exchange their Common Stock for stock or other securities or property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, or winding-up, as the case may be. Such notice shall be given at least 30 days prior to the record date or the date on which the Company’s books are closed in respect thereto. Failure to give any such notice or any defect therein shall not affect the validity of the proceedings referred to in clauses (i), (ii), (iii) and (iv) above.
(j) Certain Events. If any event occurs of the type contemplated by the adjustment provisions of this Paragraph 5 but not expressly provided for by such provisions, the Company will give notice of such event as provided in Paragraph 5(g) hereof, and the Company’s Board of Directors will make an appropriate adjustment in the Exercise Price and the number of shares of Common Stock acquirable upon exercise of this Warrant so that the rights of the holder shall be neither enhanced nor diminished by such event.
(k) Certain Definitions.
(i) “Common Stock Deemed Outstanding” shall mean the number of shares of Common Stock actually outstanding (not including shares of Common Stock held in the treasury of the Company), plus (x) pursuant to Paragraph 5(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon the exercise of Options, as of the date of such issuance or grant of such Options, if any,and (y) pursuant to Paragraph 5(b)(ii) hereof, the maximum total number of shares of Common Stock issuable upon conversion or exchange of Convertible Securities, as of the date of issuance of such Convertible Securities, if any.
(ii) “Common Stock,” for purposes of this Paragraph 5, includes the Common Stock and any additional class of stock of the Company having no preference as to dividends or distributions on liquidation, provided that the shares purchasable pursuant to this Warrant shall include only shares of Common Stock in respect of which this Warrant is exercisable, or shares resulting from any subdivision or combination of such Common Stock, or in the case of any reorganization, reclassification, consolidation, merger, or sale of the character referred to in Paragraph 5(e) hereof, the stock or other securities or property provided for in such Paragraph.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the exercise of this Warrant shall be made without charge to the holder of this Warrant or such shares for any issuance tax or other costs in respect thereof, provided that the Company shall not be required to pay any tax which may be payable in respect of any exercise or transfer involved in the issuance and delivery of any certificate in a name other than the holder of this Warrant.
6. No Rights or Liabilities as a Shareholder. This Warrant shall not entitle the holder hereof to any voting rights or other rights as a shareholder of the Company. No provision of this Warrant, in the absence of affirmative action by the holder hereof to purchase Warrant Shares, and no mere enumeration herein of the rights or privileges of the holder hereof, shall give rise to any liability of such holder for the Exercise Price or as a shareholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
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7. Transfer, Exchange, and Replacement of Warrant.
(a) This Warrant and the rights granted to the holder hereof are transferable, in whole or in part, upon surrender of this Warrant, together with a properly executed assignment in the form attached hereto, at the office or agency of the Company referred to in Paragraph 8(e) below, provided, however, that any transfer or assignment shall be subject to the conditions set forth in Paragraph 8(f) hereof and to the applicable provisions of the Securities Purchase Agreement. Until due presentment for registration of transfer on the books of the Company, the Company may treat the registered holder hereof as the owner and holder hereof for all purposes, and the Company shall not be affected by any notice to the contrary.
(b) Warrant Exchangeable for Different Denominations. This Warrant is exchangeable, upon the surrender hereof by the holder hereof at the office or agency of the Company referred to in Paragraph 8(e) below, for new Warrants of like tenor representing in the aggregate the right to purchase the number of shares of Common Stock which may be purchased hereunder, each of such new Warrants to represent the right to purchase such number of shares as shall be designated by the holder hereof at the time of such surrender.
(c) Replacement of Warrant. Upon receipt of evidence reasonably satisfactory to the Company of the loss, theft, destruction, or mutilation of this Warrant and, in the case of any such loss, theft, or destruction, upon delivery of an indemnity agreement reasonably satisfactory in form and amount to the Company, or, in the case of any such mutilation, upon surrender and cancellation of this Warrant, the Company, at its expense, will execute and deliver, in lieu thereof, a new Warrant of like tenor.
(d) Cancellation; Payment of Expenses. Upon the surrender of this Warrant in connection with any transfer, exchange, or replacement as provided in this Paragraph 8, this Warrant shall be promptly canceled by the Company. The Company shall pay all taxes (other than securities transfer taxes) and all other expenses (other than legal expenses, if any, incurred by the holder or transferees) and charges payable in connection with the preparation, execution, and delivery of Warrants pursuant to this Paragraph 8.
(e) Register. The Company shall maintain, at its principal executive offices (or such other office or agency of the Company as it may designate by notice to the holder hereof), a register for this Warrant, in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each transferee and each prior owner of this Warrant.
(f) Exercise or Transfer Without Registration. If, at the time of the surrender of this Warrant in connection with any exercise, transfer, or exchange of this Warrant, this Warrant (or, in the case of any exercise, the Warrant Shares issuable hereunder), shall not be registered under the Securities Act of 1933, as amended (the “Securities Act”) and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such exercise, transfer, or exchange, (i) that the holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel, which opinion and counsel are acceptable to the Company, to the effect that such exercise, transfer, or exchange may be made without registration under said Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act; provided that no such opinion, letter or status as an “accredited investor” shall be required in connection with a transfer pursuant to Rule 144 under the Securities Act. The first holder of this Warrant, by taking and holding the same, represents to the Company that such holder is acquiring this Warrant for investment and not with a view to the distribution thereof.
8. Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, electronic mail, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:
If to the Company, to: Balincan USA, Inc.
Room 1404, No. 205, Dun Hua S. Road, Sec. 1 Taipei 99999 Taiwan
Attn: Lu, Zi Chin (Paul), Chief Executive Officer PaulLuUSA@gmail.com
| If to the Holder: | ||
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9. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflicts of laws. Any action brought by either party against the other concerning the transactions contemplated by this Warrant shall be brought only in the state courts of Delaware or in the federal courts located in the state of Delaware. The parties to this Warrant hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The Company and Holder waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Warrant or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement. Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement or any other Transaction Document by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.
10. Miscellaneous.
(a) Amendments. This Warrant and any provision hereof may only be amended by an instrument in writing signed by the Company and the holder hereof.
(b) Descriptive Headings. The descriptive headings of the several paragraphs of this Warrant are inserted for purposes of reference only, and shall not affect the meaning or construction of any of the provisions hereof.
(c) Cashless Exercise. Notwithstanding anything to the contrary contained in this Warrant, this Warrant may be exercised by presentation and surrender of this Warrant to the Company at its principal executive offices with a written notice of the holder’s intention to effect a cashless exercise, including a calculation of the number of shares of Common Stock to be issued upon such exercise in accordance with the terms hereof (a “Cashless Exercise”). In the event of a Cashless Exercise, in lieu of paying the Exercise Price in cash, the holder shall surrender this Warrant for that number of shares of Common Stock determined by multiplying the number of Warrant Shares to which it would otherwise be entitled by a fraction, the numerator of which shall be the difference between the then current Market Price per share of the Common Stock and the Exercise Price, and the denominator of which shall be the then current Market Price per share of Common Stock. For example, if the holder is exercising 100,000 Warrants with a per Warrant exercise price of $0.75 per share through a cashless exercise when the Common Stock’s current Market Price per share is $2.00 per share, then upon such Cashless Exercise the holder will receive 62,500 shares of Common Stock.
(d) Remedies. The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Warrant will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Warrant, that the holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Warrant and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.
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[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has executed this Warrant as of the date first written above.
Balincan USA, Inc.
| By: | ||
| Chief Executive Officer | ||
| Lu, Zi Chin (Paul) |
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Exhibit 6.5
CONVERTIBLE PROMISSORY NOTE
| Issue Date: April 18, 2022 | Colorado Springs, CO |
| Principal Amount: | $33,000.00 | |
| Purchase Price: | $27,500.00 |
FOR VALUE RECEIVED, Tekumo LLC, a Colorado limited liability company (the “Borrower”), hereby promises to pay to the order of Todd Sherman, or its successors or assigns (the “Lender”), the principal amount of Thirty-Three Thousand United States Dollars (US$33,000.00) on the date that is Six Months following the date hereof (the “Maturity Date”). and to pay interest at the rate of ten percent (10%) per annaum in accordance with the terms hereof. This Convertible Promissory Note, as may be amended or supplemented from time to time, shall be referred to herein as the “Note”. This Note replaces the Convertible Promissory Notes of $27,500.00 dated December 23, 2021 between the Parties.
1. Payments of Principal and Interest.
(a) Payment of Principal. The principal amount of this Note shall be paid to the Lender on the Maturity Date.
(b) Payment of Interest. Interest on the unpaid principal balance of this Note shall accrue at a rate of 10 percent (10%) per annum commencing on the Issuance Date. Interest shall be paid on the Maturity Date. This Note also carries an original issue discount of $5,500.00 (the “OID”), thus, the purchase price of this Note shall be $27,500.00.
(c) Payment of Default Interest. Any amount of principal or interest on this Note which is not paid when due shall bear interest until such past due amount is paid at eighteen percent (18%) per annum (the “Default Rate”).
(d) General Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Lender may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Colorado are authorized or required by law or executive order to remain closed.
(e) Optional Redemption. At any time prior to the maturity date, the company may choose to redeem any portion of the principal amount and accrued interest of this Note. If the company exercises its right to redeem this Note, it shall make payment of all interest on the principal amount plus one hundred and twenty five percent (125%) of principal on the redeemed portion of the Note.
2. Conversion. If and at any time the Company consummates a Qualified equity financing or a Change of Control, the lender has the option of converting all or part of the Note into equity securities solely at the lenders option and cannot be forced by the Company.
2.1 Conversion upon a Qualified Financing. If and at such time as the Company consummates an equity financing of at least five hundred thousand dollars ($500,000), a “Qualified equity financing”, the lender has the option of converting all or part of the Note into the same class and series of shares of the Company’s equity securities that are issued in the financing at a conversion price equal to the price per share paid by the other investors in the financing.
2.2. Conversion upon a Change in Control. If a Change of Control occurs during the term of the Note that involves the Company merging into a public company with its capital stock trading on an exchange, the lender may elect to convert all or part of the Note into common shares in the public company. The Public company shall issue to the Lender the number of common shares equal to the converted principal and interest of the Note at price equal to the Reg A offering price on file with the SEC at the time of conversion.
3. Defaults and Remedies.
(a) Events of Default. An “Event of Default” means: (i) a default for five (5) days in payment of principal or interest on this Note; (ii) failure by the Borrower to comply with any material provision of this Note; (iii) the Borrower, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Borrower in an involuntary case; (B) appoints a Custodian of the Borrower for all or substantially all of its property; or (C) orders the liquidation of the Borrower, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing, the Lender, may declare all of this Note to be due and payable immediately. The Lender shall have all rights available to it at law or in equity. Upon the occurrence of an Event of Default, the interest on this Note shall immediately accrue at the Default Rate. The Lender, may assess reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred or anticipated by the Lender in collecting or enforcing payment hereof (whether such fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and together with all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws, and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Lender at law, in equity, or under this Note. In connection with the Lender’s rights hereunder upon an Event of Default, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender, may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it in equity or under applicable law.
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4. Negative Covenants. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender create, incur or assume indebtedness for borrowed money or sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s except for trade debt incurred in the normal course of business.
5. Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Lender to the Borrower in a form reasonably acceptable to the Borrower and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Borrower shall not be obligated to re-issue a Note if the Lender contemporaneously requests the Borrower to convert such remaining principal amount and interest into Common Stock.
6. Cancellation. After all principal and interest at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued.
7. Waiver of Notice. To the extent permitted by law, the Borrower hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Colorado, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Denver in the State of Colorado for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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9. Indemnity and Expenses. The Borrower agrees:
(a) To indemnify and hold harmless the Lender and each of its partners, employees, agent and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and
(b) To pay and reimburse the Lender upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Lender may reasonably incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Borrower to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note.
10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity.
11. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Lender and shall not be construed against any person as the drafter hereof.
12. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
13. Notice. Notice shall be given to each party at the address indicated in the preamble or at such other address as provided to the other party in writing.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Note to be executed on and as of the Issuance Date.
| BORROWER: | ||
| Tekumo LLC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| LENDER: | ||
| Todd Sherman | ||
| By: | ||
| Name: | ||
| Title: | ||
[ signature page to Convertible Promissory Note]
5
Exhibit 6.6
CONVERTIBLE PROMISSORY NOTE
| Issue Date: April 18, 2022 | Colorado Springs, CO |
Principal Amount: $189,060.00
Purchase Price: $157,550.00
FOR VALUE RECEIVED, Tekumo LLC, a Colorado limited liability company (the “Borrower”), hereby promises to pay to the order of Stephen Sherman, or its successors or assigns (the “Lender”), the principal amount of One Hundred and Eighty-Nine Thousand, and United States Dollars (US$222,871.00) on the date that is Six Months following the date hereof (the “Maturity Date”). and to pay interest at the rate of ten percent (10%) per annaum in accordance with the terms hereof. This Convertible Promissory Note, as may be amended or supplemented from time to time, shall be referred to herein as the “Note”. This Note replaces the Convertible Promissory Notes of $128,800.00 and $28,750.00 dated October 18, 2021 between the Parties.
1. Payments of Principal and Interest.
(a) Payment of Principal. The principal amount of this Note shall be paid to the Lender on the Maturity Date.
(b) Payment of Interest. Interest on the unpaid principal balance of this Note shall accrue at a rate of 10 percent (10%) per annum commencing on the Issuance Date. Interest shall be paid on the Maturity Date. This Note also carries an original issue discount of $31,510 (the “OID”), thus, the purchase price of this Note shall be $157,550.00.
(c) Payment of Default Interest. Any amount of principal or interest on this Note which is not paid when due shall bear interest until such past due amount is paid at eighteen percent (18%) per annum (the “Default Rate”).
(d) General Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Lender may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Colorado are authorized or required by law or executive order to remain closed.
(e) Optional Redemption. At any time prior to the maturity date, the company may choose to redeem any portion of the principal amount and accrued interest of this Note. If the company exercises its right to redeem this Note, it shall make payment of all interest on the principal amount plus one hundred and twenty five percent (125%) of principal on the redeemed portion of the Note.
2. Conversion. If and at any time the Company consummates a Qualified equity financing or a Change of Control, the lender has the option of converting all or part of the Note into equity securities solely at the lenders option and cannot be forced by the Company.
2.1 Conversion upon a Qualified Financing. If and at such time as the Company consummates an equity financing of at least five hundred thousand dollars ($500,000), a “Qualified equity financing”, the lender has the option of converting all or part of the Note into the same class and series of shares of the Company’s equity securities that are issued in the financing at a conversion price equal to the price per share paid by the other investors in the financing.
2.2. Conversion upon a Change in Control. If a Change of Control occurs during the term of the Note that involves the Company merging into a public company with its capital stock trading on an exchange, the lender may elect to convert all or part of the Note into common shares in the public company. The Public company shall issue to the Lender the number of common shares equal to the converted principal and interest of the Note at price equal to the Reg A offering price on file with the SEC at the time of conversion.
3. Defaults and Remedies.
(a) Events of Default. An “Event of Default” means: (i) a default for five (5) days in payment of principal or interest on this Note; (ii) failure by the Borrower to comply with any material provision of this Note; (iii) the Borrower, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Borrower in an involuntary case; (B) appoints a Custodian of the Borrower for all or substantially all of its property; or (C) orders the liquidation of the Borrower, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing, the Lender, may declare all of this Note to be due and payable immediately. The Lender shall have all rights available to it at law or in equity. Upon the occurrence of an Event of Default, the interest on this Note shall immediately accrue at the Default Rate. The Lender, may assess reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred or anticipated by the Lender in collecting or enforcing payment hereof (whether such fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and together with all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws, and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Lender at law, in equity, or under this Note. In connection with the Lender’s rights hereunder upon an Event of Default, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender, may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it in equity or under applicable law.
4. Negative Covenants. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender create, incur or assume indebtedness for borrowed money or sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s except for trade debt incurred in the normal course of business.
5. Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Lender to the Borrower in a form reasonably acceptable to the Borrower and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Borrower shall not be obligated to re-issue a Note if the Lender contemporaneously requests the Borrower to convert such remaining principal amount and interest into Common Stock.
6. Cancellation. After all principal and interest at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued.
7. Waiver of Notice. To the extent permitted by law, the Borrower hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Colorado, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Denver in the State of Colorado for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
9. Indemnity and Expenses. The Borrower agrees:
(a) To indemnify and hold harmless the Lender and each of its partners, employees, agent and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and
(b) To pay and reimburse the Lender upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Lender may reasonably incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Borrower to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note.
10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity.
11. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Lender and shall not be construed against any person as the drafter hereof.
12. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
13. Notice. Notice shall be given to each party at the address indicated in the preamble or at such other address as provided to the other party in writing.
[signature page follows]
IN WITNESS WHEREOF, the parties have caused this Note to be executed on and as of the Issuance Date.
| BORROWER: | ||
| Tekumo LLC. | ||
| By: | ||
| Name: | ||
| Title: | ||
| LENDER: | ||
| Stephen Sherman | ||
| By: | ||
| Name: | ||
| Title: | ||
[signature page to Convertible Promissory Note]
5
Exhibit 6.7
CONVERTIBLE PROMISSORY NOTE
| Issue Date: April 18, 2022 | Colorado Springs, CO |
Principal Amount: $67,475.66
Purchase Price: $58,674.49
FOR VALUE RECEIVED, Tekumo LLC, a Colorado limited liability company (the “Borrower”), hereby promises to pay to the order of Ascension Ventures LLC, or its successors or assigns (the “Lender”), the principal amount of Sixty-Seven Thousand, Four Hundred and Seventy-Five and 66/100 United States Dollars (US$67,475.66) on October 18, 2022 (the “Maturity Date”) and to pay interest at the rate of ten percent (10%) per annum in accordance with the terms hereof. This Convertible Promissory Note, as may be amended or supplemented from time to time, shall be referred to herein as the “Note”.
1. Payments of Principal and Interest.
(a) Payment of Principal. The principal amount of this Note shall be paid to the Lender on the Maturity Date.
(b) Payment of Interest. Interest on the unpaid principal balance of this Note shall accrue at a rate of 10 percent (10%) per annum commencing on the Issuance Date. Interest shall be paid on the Maturity Date. This Note also carries an original issue discount of $8,801.17 (the “OID”), thus, the purchase price of this Note shall be $58,674.49.
(c) Payment of Default Interest. Any amount of principal or interest on this Note which is not paid when due shall bear interest until such past due amount is paid at eighteen percent (18%) per annum (the “Default Rate”).
(d) General Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Lender may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Colorado are authorized or required by law or executive order to remain closed.
(e) Optional Redemption. At any time prior to the maturity date, the company may choose to redeem any portion of the principal amount and accrued interest of this Note. If the company exercises its right to redeem this Note, it shall make payment of all interest on the principal amount plus one hundred and twenty five percent (125%) of principal on the redeemed portion of the Note.
2. Conversion. If and at any time the Company consummates a Qualified equity financing or a Change of Control, the lender has the option of converting all or part of the Note into equity securities solely at the lenders option and cannot be forced by the Company.
2.1 Conversion upon a Qualified Financing. If and at such time as the Company consummates an equity financing of at least five hundred thousand dollars ($500,000), a “Qualified equity financing”, the lender has the option of converting all or part of the Note into the same class and series of shares of the Company’s equity securities that are issued in the financing at a conversion price equal to the price per share paid by the other investors in the financing.
2.2. Conversion upon a Change in Control. If a Change of Control occurs during the term of the Note that involves the Company merging into a public company with its capital stock trading on an exchange, the lender may elect to convert all or part of the Note into common shares in the public company. The Public company shall issue to the Lender the number of common shares equal to the converted principal and interest of the Note at price equal to the Reg A offering price on file with the SEC at the time of conversion.
3. Defaults and Remedies.
(a) Events of Default. An “Event of Default” means: (i) a default for five (5) days in payment of principal or interest on this Note; (ii) failure by the Borrower to comply with any material provision of this Note; (iii) the Borrower, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Borrower in an involuntary case; (B) appoints a Custodian of the Borrower for all or substantially all of its property; or (C) orders the liquidation of the Borrower, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing, the Lender, may declare all of this Note to be due and payable immediately. The Lender shall have all rights available to it at law or in equity. Upon the occurrence of an Event of Default, the interest on this Note shall immediately accrue at the Default Rate. The Lender, may assess reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred or anticipated by the Lender in collecting or enforcing payment hereof (whether such fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and together with all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws, and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Lender at law, in equity, or under this Note. In connection with the Lender’s rights hereunder upon an Event of Default, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender, may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it in equity or under applicable law.
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4. Negative Covenants. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender create, incur or assume indebtedness for borrowed money or sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s except for trade debt incurred in the normal course of business.
5. Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Lender to the Borrower in a form reasonably acceptable to the Borrower and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Borrower shall not be obligated to re-issue a Note if the Lender contemporaneously requests the Borrower to convert such remaining principal amount and interest into Common Stock.
6. Cancellation. After all principal and interest at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued.
7. Waiver of Notice. To the extent permitted by law, the Borrower hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Colorado, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Denver in the State of Colorado for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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9. Indemnity and Expenses. The Borrower agrees:
(a) To indemnify and hold harmless the Lender and each of its partners, employees, agent and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and
(b) To pay and reimburse the Lender upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Lender may reasonably incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Borrower to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note.
10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity.
11. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Lender and shall not be construed against any person as the drafter hereof.
12. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
13. Notice. Notice shall be given to each party at the address indicated in the preamble or at such other address as provided to the other party in writing.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Note to be executed on and as of the Issuance Date.
| BORROWER: | ||
| Tekumo LLC. | ||
| By: | ||
| Name: | Strings Kozisek | |
| Title: | CEO | |
| LENDER: | ||
| Ascension Ventures LLC | ||
| By: | ||
| Name: | Kimiko Leong | |
| Title: | Manager | |
[signature page to Convertible Promissory Note ]
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Exhibit 6.8
CONVERTIBLE PROMISSORY NOTE
| Issue Date: April 27, 2022 | Colorado Springs, CO |
Principal Amount: $172,500.00
Purchase Price: $150,000.00
FOR VALUE RECEIVED, Tekumo LLC, a Colorado limited liability company (the “Borrower”), hereby promises to pay to the order of Ascension Ventures LLC, or its successors or assigns (the “Lender”), the principal amount of One Hundred and Seventy-Two Thousand Five Hundred and No/100 United States Dollars (US$172,500.00) on October 18, 2022 (the “Maturity Date”) and to pay interest at the rate of ten percent (10%) per annum in accordance with the terms hereof. This Convertible Promissory Note, as may be amended or supplemented from time to time, shall be referred to herein as the “Note”.
1. Payments of Principal and Interest.
(a) Payment of Principal. The principal amount of this Note shall be paid to the Lender on the Maturity Date.
(b) Payment of Interest. Interest on the unpaid principal balance of this Note shall accrue at a rate of 10 percent (10%) per annum commencing on the Issuance Date. Interest shall be paid on the Maturity Date. This Note also carries an original issue discount of $22,500.00 (the “OID”), thus, the purchase price of this Note shall be $150,000.00
(c) Payment of Default Interest. Any amount of principal or interest on this Note which is not paid when due shall bear interest until such past due amount is paid at eighteen percent (18%) per annum (the “Default Rate”).
(d) General Payment Provisions. All payments of principal and interest on this Note shall be made in lawful money of the United States of America by certified bank check or wire transfer to such account as the Lender may designate by written notice to the Borrower in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding Business Day. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Colorado are authorized or required by law or executive order to remain closed.
(e) Optional Redemption. At any time prior to the maturity date, the company may choose to redeem any portion of the principal amount and accrued interest of this Note. If the company exercises its right to redeem this Note, it shall make payment of all interest on the principal amount plus one hundred and twenty five percent (125%) of principal on the redeemed portion of the Note.
2. Conversion. If and at any time the Company consummates a Qualified equity financing or a Change of Control, the lender has the option of converting all or part of the Note into equity securities solely at the lenders option and cannot be forced by the Company.
2.1 Conversion upon a Qualified Financing. If and at such time as the Company consummates an equity financing of at least five hundred thousand dollars ($500,000), a “Qualified equity financing”, the lender has the option of converting all or part of the Note into the same class and series of shares of the Company’s equity securities that are issued in the financing at a conversion price equal to the price per share paid by the other investors in the financing.
2.2. Conversion upon a Change in Control. If a Change of Control occurs during the term of the Note that involves the Company merging into a public company with its capital stock trading on an exchange, the lender may elect to convert all or part of the Note into common shares in the public company. The Public company shall issue to the Lender the number of common shares equal to the converted principal and interest of the Note at price equal to the Reg A offering price on file with the SEC at the time of conversion.
3. Defaults and Remedies.
(a) Events of Default. An “Event of Default” means: (i) a default for five (5) days in payment of principal or interest on this Note; (ii) failure by the Borrower to comply with any material provision of this Note; (iii) the Borrower, pursuant to or within the meaning of any Bankruptcy Law (as defined herein): (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian (as defined herein) of it or for all or substantially all of its property; (D) makes a general assignment for the benefit of its creditors; or (E) admits in writing that it is generally unable to pay its debts as the same become due; or (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Borrower in an involuntary case; (B) appoints a Custodian of the Borrower for all or substantially all of its property; or (C) orders the liquidation of the Borrower, and the order or decree remains unstayed and in effect for sixty (60) days. “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.
(b) Remedies. If an Event of Default occurs and is continuing, the Lender, may declare all of this Note to be due and payable immediately. The Lender shall have all rights available to it at law or in equity. Upon the occurrence of an Event of Default, the interest on this Note shall immediately accrue at the Default Rate. The Lender, may assess reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred or anticipated by the Lender in collecting or enforcing payment hereof (whether such fees, costs or expenses are incurred in negotiations, all trial and appellate levels, administrative proceedings, bankruptcy proceedings or otherwise), and together with all other sums due by the Borrower hereunder, all without any relief whatsoever from any valuation or appraisement laws, and payment thereof may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to the Lender at law, in equity, or under this Note. In connection with the Lender’s rights hereunder upon an Event of Default, the Lender need not provide, and the Borrower hereby waives, any presentment, demand, protest or other notice of any kind, and the Lender, may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it in equity or under applicable law.
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4. Negative Covenants. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior written consent of Lender create, incur or assume indebtedness for borrowed money or sell, transfer, mortgage, assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s except for trade debt incurred in the normal course of business.
5. Lost or Stolen Note. Upon notice to the Borrower of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Lender to the Borrower in a form reasonably acceptable to the Borrower and, in the case of mutilation, upon surrender and cancellation of the Note, the Borrower shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Borrower shall not be obligated to re-issue a Note if the Lender contemporaneously requests the Borrower to convert such remaining principal amount and interest into Common Stock.
6. Cancellation. After all principal and interest at any time owed on this Note has been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Borrower for cancellation and shall not be re-issued.
7. Waiver of Notice. To the extent permitted by law, the Borrower hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.
8. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Colorado, without giving effect to provisions thereof regarding conflict of laws. Each party hereto hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Denver in the State of Colorado for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending by certified mail or overnight courier a copy thereof to such party at the address indicated in the preamble hereto and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
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9. Indemnity and Expenses. The Borrower agrees:
(a) To indemnify and hold harmless the Lender and each of its partners, employees, agent and affiliates from and against any and all claims, damages, demands, losses, obligations, judgments and liabilities (including, without limitation, attorneys’ fees and expenses) in any way arising out of or in connection with this Note; and
(b) To pay and reimburse the Lender upon demand for all costs and expenses (including, without limitation, attorneys’ fees and expenses) that the Lender may reasonably incur in connection with (i) the exercise or enforcement of any rights or remedies (including, but not limited to, collection) granted hereunder or otherwise available to it (whether at law, in equity or otherwise), or (ii) the failure by the Borrower to perform or observe any of the provisions hereof. The provisions of this Section shall survive the execution and delivery of this Note, the repayment of any or all of the principal or interest owed pursuant hereto, and the termination of this Note.
10. Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity.
11. Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Borrower and the Lender and shall not be construed against any person as the drafter hereof.
12. Failure or Indulgence Not Waiver. No failure or delay on the part of this Note in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
13. Notice. Notice shall be given to each party at the address indicated in the preamble or at such other address as provided to the other party in writing.
[signature page follows]
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IN WITNESS WHEREOF, the parties have caused this Note to be executed on and as of the Issuance Date.
| BORROWER: | ||
| Tekumo LLC. | ||
| By: | ||
| Name: | Strings Kozisek | |
| Title: | CEO | |
| LENDER: | ||
| Ascension Ventures LLC | ||
| By: | ||
| Name: | Kimiko Leong | |
| Title: | Manager | |
[signature page to Convertible Promissory Note ]
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Exhibit 12.1
Jeffrey Turner – Attorney at Law
897 Baxter Drive
So. Jordan, Utah 84095
(801) 810-4465
Admitted in the State of Utah
September 23, 2022
Strings D.E. Kozisek
Chief Executive Officer
Balincan USA, Inc.
555 Middle Creek Parkway
Suite 100
Colorado Springs, CO 80921
Dear Mr. Kozisek:
I have acted, at your request, as special counsel to Balincan USA, Inc., a Delaware corporation (the “Company”), for the purpose of rendering an opinion as to the legality of 100,000,000 shares of Company common stock, par value $0.001, offered by the Company at a price range of $0.01-$0.20 per share of Company common stock to be offered and distributed by Company (the “Shares”), pursuant to a Tier 1 Offering Statement filed under Regulation A of the Securities Act of 1933, as amended, by Company with the U.S. Securities and Exchange Commission (the “SEC”) on Form 1-A, for the purpose of registering the offer and sale of the Shares (“Offering Statement”).
In rendering this opinion, I have reviewed (a) statutes of the State of Delaware, to the extent I deem relevant to the matter opined upon herein; (b) true copies of the Articles of Incorporation of Company and all amendments thereto; (c) the By-Laws of Company; (d) selected proceedings of the board of directors of Company authorizing the issuance of the Shares; (e) certificates of officers of Company and of public officials; (f) and such other documents of Company and of public officials as I have deemed necessary and relevant to the matter opined upon herein.
I have assumed (a) the Offering Statement filed on Form 1-A and all corresponding exhibits (collectively, the “Documents”) have been duly authorized and executed (except as it relates to the Company in which case the Documents have in fact been duly authorized and executed); (b) the persons who executed the Documents had the legal capacity to do so; and (c) the persons identified as officers are actually serving as such and that any shares issued under and pursuant to the Offering Statement will be properly authorized by one or more such persons.
Based upon my review described herein, it is my opinion the Shares are duly authorized and when/if issued and delivered by Company against payment therefore, as described in the offering statement, will be validly issued, fully paid, and non-assessable.
I have not been engaged to examine, nor have I examined, the Offering Statement for the purpose of determining the accuracy or completeness of the information included therein or the compliance and conformity thereof with the rules and regulations of the SEC or the requirements of Form 1-A, and I express no opinion with respect thereto. The forgoing opinion is strictly limited to matters of Delaware corporation law; and, I do not express an opinion on the federal law of the United States of America or the law of any state or jurisdiction therein other than Delaware, as specified herein.
I hereby consent to the filing of this opinion as Exhibit 12.1 to the Offering Statement and to the reference to our firm under the caption “Legal Matters” in the Offering Circular constituting a part of the Offering Statement. We assume no obligation to update or supplement any of the opinion set forth herein to reflect any changes of law or fact that may occur following the date hereof.
| Sincerely, | |
| JDT Legal, PLLC | |
| /s/ Jeffrey Turner | |
| Jeffrey Turner |