UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): June 29, 2015

 

First American Group Inc.  

(Exact name of registrant as specified in its charter) 

  

Nevada

(State or other jurisdiction of incorporation)

 

000-54768

(Commission File Number)

 

27-2094706

(IRS Employer Identification No.)

 

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

(Address of principal executive offices)(Zip Code)

 

(781) 821-6600

Registrant’s telephone number, including area code

 

11037 Warner Ave., Suite 132 

Fountain Valley, California 92708

 (Former name or former address, if changed since last report.)

 

Copies to:

Thomas E. Puzzo, Esq.

Law Offices of Thomas E. Puzzo, PLLC

3823 44th Ave. NE

Seattle, Washington 98105 

Telephone No.: (206) 522-2256

Facsimile No.: (206) 260-0111

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

   

 

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Current Report on Form 8-K contains forward looking statements that involve risks and uncertainties, principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” All statements other than statements of historical fact contained in this Form 8-K, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this Form 8-K, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assumes no obligation to update any such forward-looking statements.

 

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Form 8-K. Before you invest in our securities, you should be aware that the occurrence of the events described in the section entitled “Risk Factors” and elsewhere in this Form 8-K could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Form 8-K to conform our statements to actual results or changed expectations.

   

Item 1.01 Entry into a Material Definitive Agreement

 

On June 29, 2015, First American Group Inc., a Nevada corporation (the “Company”), entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Loop Holdings, Inc., a Nevada corporation (“Loop Holdings”), and the holders of common stock of Loop Holdings, which consisted of 40 stockholders.

 

Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 93,030,000 shares of common stock of the Company in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance is that former Loop Holdings shareholders now hold approximately 78.1% of the issued and outstanding shares of common stock of the Company, and Loop Holdings is now a wholly-owned subsidiary of the Company. 

 

Daniel Solomita, the Company’s new President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, is the holder of 68,000,000 shares of common stock of the Company. Mr. Solomita, therefore, controls 57.1%, of the outstanding common stock of the Company, on a fully diluted basis.

 

Loop Holdings was incorporated on October 23, 2014, in Nevada. The business of Loop Holdings is now our principal business. Loop Holdings is in the business of depolymerizing waste plastics and converting them into valuable chemicals. We are development stage company and have never generated any revenues. The commercialization of our depolymerization technology is in its incipient stages must be scaled-up before we can commercialize the technology and generate any revenues.

 

Our depolymerization of polyethylene terephthalate (PET) process is completed through a series of chemical reactions. The resulting monomers of the depolymerization is purified terephthalic acid and ethylene glycol.

 

 
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Our depolymerization process is summarized as follows:

 

 

·

PET bottles are shredded into 5 mm size pieces;

 

·

Shredded PET is put into a large reactor, where certain chemicals are added;

 

·

Purified terephthalic acid (solid) and ethylene glycol (liquid) and mother liquor are separated using a combination of centrifugation and distillation;

 

·

The mother liquor is returned to the reactor to be reused in the process; and

 

·

Purified terephthalic acid and Ethylene Glycol are processed and packaged.

  

Loop Holdings’s executive offices are located at 1999 Avenue of the Stars, Suite 2520, Los Angeles, California 90067.

 

Pursuant to a Stock Redemption Agreement dated June 29, 2015, the Company redeemed from Mazen Kouta, who served as President, Treasurer and a director from April 27, 2010 until June 29, 2015, 56,250,000 shares of common stock of the Company for an aggregate redemption price of $9,000 and a mutual release of claims with the Company, the effect of which is that Mr. Kouta no longer holds any shares of common stock or any other securities of the Company immediately following the redemption. Pursuant to a Stock Redemption Agreement dated June 29, 2015, the Company redeemed from Zeeshan Sajid, who served as Secretary and director from April 27, 2010 until June 29, 2015, 43,750,000 shares of common stock of the Company for an aggregate redemption price of $7,000 and a mutual release of claims with the Company, the effect of which is that Mr. Sajid no longer holds any shares of common stock or any other securities of the Company immediately following the redemption. Neither the Company nor Mr. Sajid had any known claims against the other and released each other from any claims in order to mitigate the likelihood of claims being made in the future by any of the parties against the other.

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

The information disclosed in Item 1.01 of this Form 8-K is hereby incorporated by reference into this Item 2.01.

 

As described in Item 1.01 above, on we completed the acquisition of Loop Holdings pursuant to the Share Exchange Agreement. The disclosures in Item 1.01 of this Form 8-K regarding the transactions contemplated by the Share Exchange Agreement are incorporated herein by reference in its entirety.

 

FORM 10 DISCLOSURE

 

The Company was a “shell company” (as such term is defined in Rule 12b-2 under the Exchange Act) immediately before the completion of the transactions contemplated by the Share Exchange Agreement. Accordingly, pursuant to the requirements of Item 2.01(f) of Form 8-K, set forth below is the information that would be required if the Company was required to file a general form for registration of securities on Form 10 under the Exchange Act with respect to its common stock, which is the only class of the Company’s securities subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act upon consummation of the transactions contemplated by the Share Exchange Agreement. The information provided below relates to the combined operations of the Company after the acquisition of Loop Holdings, except that information relating to periods prior to the date of the reverse acquisition only relate to Loop Holdings and its consolidated subsidiaries unless otherwise specifically indicated.

 

 
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DESCRIPTION OF BUSINESS

 

Our Corporate History and Background

 

First American Group Inc. was incorporated on March 11, 2010 under the laws of the State of Nevada, under the name “Radikal Phones Inc.” We changed our name to “First American Group Inc.” on October 7, 2010. From our formation on March 11, 2010 until June 29, 2015, we were engaged in the development, sales and marketing of VoIP telephone services to enable end-users to place free phone calls over the Internet in return for viewing and listening to advertising. Mazen Kouta has served as President, Treasurer and a director, and Zeeshan Sajid has served as Secretary and s director of our company from April 27, 2010 until their resignation on June 29, 2015. Concurrent with their resignation, Messrs. Kouta and Sajid appointed Daniel Solomita, the President, Secretary, Treasurer and Chairman of the Board Directors of Loop Holdings. Upon his appointment as a director on June 29, 2015, Mr. Solomita appointed himself as President and Chief Executive Officer, Secretary and Treasurer, and appointed Donald Danks as a director.

 

From inception until we completed our reverse acquisition of Loop Holdings, the principal business of the Company was the development and operation of online games for social networking websites. We partially developed our first game, titled “Curse of the Pharaohs.” We have never had any revenues and have had a limited operating history.

 

Reverse Acquisition of Loop Holdings

 

On June 29, 2015, First American Group Inc., a Nevada corporation (the “Company”), entered into a Share Exchange Agreement, 2015 (the “Share Exchange Agreement”), by and among the Company, Loop Holdings, Inc., a Nevada corporation (“Loop Holdings”), and the holders of common stock of Loop Holdings. The holders of the common stock of Loop Holdings consisted of 40 stockholders.

 

Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 93,030,000 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance is that Loop Holdings shareholders now hold approximately 78.1% of the issued and outstanding shares of common stock of the Company. 

 

As of June 29, 2015, Daniel Solomita, the Company’s new President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, is the holder of 68,000,000 shares of common stock of the Company, or 57.1% of the outstanding common stock of the Company, on a fully diluted basis. Donald Danks, also a director of the Company, is a beneficial holder of 4,000,000 shares of common stock of the Company.

 

As a result of the share exchange, Loop Holdings is now a wholly-owned subsidiary of the Company. 

 

The share exchange transaction with Loop Holdings was treated as a reverse acquisition, with Loop Holdings as the acquiror and the Company as the acquired party. Unless the context suggests otherwise, when we refer in this Form 8-K to business and financial information for periods prior to the consummation of the reverse acquisition, we are referring to the business and financial information of Loop Holdings.

 

Organization & Subsidiaries

 

We have one operating subsidiary, Loop Holdings, Inc., a Nevada corporation.

 

Overview of Loop Holdings

 

Our wholly owned subsidiary, Loop Holdings was incorporated on October 23, 2014, in Nevada.

 

The business of Loop Holdings is now the principal business of the Company. Loop Holdings is in the business of depolymerizing waste plastics and converting them into valuable chemicals. We are development stage company and have never generated any revenues. The commercialization of our depolymerization technology is in its incipient stages must be scaled-up before we can commercialize the technology and generate any revenues. The depolymerization technology underlying the business of Loop Holdings was originally developed by Hatem Essaddam, who sold the depolymerization technology to Loop Holdings for a purchase price of up to $1,300,000 pursuant to an Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essadam, Loop Holdings, and Daniel Solomita, our President and Chief Executive Officer, Secretary, Treasurer and a director.

 

 
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Our depolymerization of polyethylene terephthalate (“PET”) process is completed through a series of chemical reactions. The resulting monomers of the depolymerization is purified terephthalic acid and ethylene glycol.

 

Our depolymerization process is summarized as follows:

 

 

·

PET bottles are shredded into 5 mm size pieces;

 

·

Shredded PET is put into a large reactor, where certain chemicals are added;

 

·

The PET molecular chain begins to be broken down in 20 minutes;

 

·

Purified terephthalic acid (solid) and ethylene glycol (liquid) and mother liquor are separated using a combination of centrifugation and distillation;

 

·

The mother liquor is returned to the reactor to be reused in the process; and

 

·

Purified terephthalic acid and Ethylene Glycol are processed and packaged.

  

Loop Holdings principal administrative offices are located at 1999 Avenue of the Stars, Suite 2520, Los Angeles, California 90067. Loop Holdings’s website is www.loopindustries.com.

 

Summary Financial Information

 

The tables and information below are derived from our audited financial statements for the period from October 23, 2014 (Inception) through February 28, 2015.

 

    February 28, 2015  

Financial Summary

   

Cash and Deposits

 

$

182,492

 

Total Assets

   

188,442

 

Total Liabilities

   

214,010

 

Total Stockholders' Equity

 

$

409,590

 

 

Depolymerization of Plastics and Breaking Down Polymers into Monomers

 

We believe that the problem of waste generated from manufactured materials is now widely recognized a global one.

 

Perhaps the most prevalent manufactured materials in society today are plastics, which are commercial polymers derived from natural or chemical synthetic materials. Plastics are made from limited resources, such as petroleum; therefore, large advances are being made in the development of technologies to recycle plastic waste.

  

The methods of managing waste plastics are land filling, composting, incineration, recycling, and sewage. Recycling is the most economic method of managing petrochemical plastic waste because, in addition to preventing plastic litter, recycling reduces the exploitation of non-renewable petroleum-plastic raw materials, limits the quantity of plastics sent to landfills and provides a cheaper route to plastic production. For us, most notably, it is a significant revenue and profits generator.

 

 
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Summary

 

Loop Holdings Inc. focuses on depolymerizing waste plastics and converting them into valuable chemicals, ready to be reintroduced into the manufacturing of virgin plastics. Our proprietary technology breaks down polyethylene yerephthalate (“PET”) into its base chemicals, purified terephthalic acid (“PTA”) and ethylene glycol (“EG”), at a recovery rate of 100%.

 

Loop Holdings’ technology uses waste PET plastics such as water bottles, soda bottles, consumer packaging, carpets and industrial waste as feedstock to process. These feedstock are readily available through municipal triage centers, industrial recycling and landfill reclamation projects.

 

Purified terephthalic acid is a high-value chemical currently selling at approximately $1,000 per metric ton, used mainly in the production of PET plastic and polyester fiber. PTA is typically produced by oxidation of p -xylene, a petroleum by-product, using acetic acid and catalysts. The resulting product appears as a crystalline substance, which is then filtered, purified, dried and stored. We believe that the demand for terephthalic acid is expected to hit an all-time high of 60 million metric tons (132 billion pounds) in 2015 and 72 million metric tons (158.4 billion pounds) by 2020.

 

Ethylene glycol is an organic compound primarily used as a raw material in the manufacture of polyester fibers and polyethylene terephthalate resins (PET) used in bottling. A small percentage is also used in industrial applications like antifreeze formulations and other industrial products. It is an odorless, colorless, syrupy, sweet-tasting liquid. Current selling price of EG is approximately $1,050 per metric ton. The global market volume for ethylene glycols was 16.5 million metric tons (36 billion pounds) in 2013 and is expected to reach 22.8 million metric tons (45 billion pounds) by 2020, growing at a CAGR of 4.7% from 2014 to 2020.

  

Raw Material

 

PET Plastic is our source of feedstock. PET is a semi-crystalline thermoplastic polyester showing excellent tensile and impact strength, chemical resistance, clarity, process ability and reasonable thermal stability. Although its main application by far is in the textile industry, tremendous quantities of this material are consumed in the manufacturing of soft-drink and water bottles, as well as in food packaging.

 

PET does not create a direct hazard to the environment, but due to its substantial fraction volume in the plastic waste stream and its high resistance to atmospheric and biological agents, it could be considered as a noxious material. PET accounts for 8% by weight and 12% by volume of the world’s solid waste.

 

PET recycling represents one of the most successful and widespread examples of polymer recycling. The main driving force responsible for this extreme increase in recycling of post-consumer PET is its widespread use, particularly in the beverage and food industry.

 

PET bottles are characterized by high strength, low weight and permeability of gases (mainly CO 2 ), as well as by their aesthetic appearance (good light transmittance, smooth surface). They do not have any side effect on the human organism. Many attempts are currently directed toward recycling of PET waste, because of the interests in environmental protection, energy preservation and economic benefits.

 

Among the different recycling techniques (primary, mechanical, chemical and energy recovery), the acceptable one according to the principles of “sustainable development” is chemical recycling, since it leads to the formation of the raw materials from which the polymer is made, as well as of other secondary value-added products. Chemical recycling has been defined as the process leading to total Depolymerization of PET into monomers, or partial Depolymerization into oligomers and other chemical substances.

 

 
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According to NAPCOR (National Association for PET Container Resources), in 2012 in the US:

 

 

·

PET bottles represented a total of 5.6 Billion lbs. of PET available to be recycled;

 

·

Only 1.72 Billion lbs. were collected; and

 

·

There was only a 30.8% PET bottle recycling rate.

  

The NAPCOR United Kingdom Statistics for 2011 PET Recycling include:

 

 

·

6.7 Billion plastic bottles were recycled in 2011;

 

·

52% of household plastic bottles were recycled; and

 

·

Only 24% of plastic is recycled or recovered.

  

Among the various methods of PET recycling the most common is mechanical recycling, which refers to operations that aim to recover plastics waste via mechanical processes (grinding, washing, separating, drying, re-granulating and compounding), thus producing recycled plastic that can be converted into new plastics products, often substituting for virgin plastics.

 

The disadvantages to mechanical recycling of PET are that sorting is very labor intensive, and high energy costs are associated with the processing of material. Mechanical PET recycling is also limited to single stream PET with no contamination. Other challenges include quality degradation and color of the feedstock.

 

Depolymerization

 

Depolymerization presents two unique advantages in recycling resin-based products: (i) the ability to return a recovered resin to virgin-resin-like quality, and (ii) the potential to recover a valuable feedstock from products that are economically challenging to recycle. When plastic is mechanically recycled, even small levels of contamination can compromise the performance of the resin. However, because Depolymerization breaks down plastics into monomer form, that contamination is removed.

 

The resulting monomers, terephthalic acid and ethylene glycol, can be recovered and be remade into what is essentially comparable to virgin resins, free from impurities, and possessing virgin-resin-like properties. Depolymerization is not widely practiced due to economics. The process usually needs to be performed under extremely high temperatures and pressure, making the system economically unviable.

 

Current PTA production methods utilize p-xylene (PX) as a feedstock. At high temperatures and pressures, PX reacts with oxygen in the presence of an appropriate solvent, promoter complex, and catalyst system to form PTA. Around 74 percent of PTA produced utilizes acetic acid as the solvent, cobalt and manganese salts as catalysts, and a form of bromine, such as HBr, as the promoter complex. In this process, 91.6 percent of the feedstock PX is converted to PTA. Several side reactions, unfortunately, take place in the process, generating undesired compounds such as p-toluic acid, 4-carboxybenzaldehyde (4-CBA), and other heavy molecular weight impurities.

 

Without further purification, the main product is referred to as “crude PTA”. To achieve polymer-grade PTA that is pure enough to utilize in PET production, additional purification steps are required to remove unwanted by-products. The largest disadvantage to producing PTA via chemical synthesis arises in the use of a bromide promoter that is highly corrosive, and requires equipment to be lined with expensive metalloid alloys and to be replaced often; this inextricably generates high capital infrastructure costs to the producer.

 

We have developed a proprietary process that enables us to depolymerize PET into its purest form of purified terephthalic acid (“PTA”) and ethylene glycol (“EG”), under normal atmospheric pressure and at room temperature. Our unique Depolymerization process can bring even degraded, colored or heavily contaminated PET that is not recyclable back to life in the form of its base monomers, terephthalic acid and ethylene glycol. The resulting monomers (PTA & EG) will be sold to virgin PET manufacturers such as DuPont and Invista.

 

We have tested the procedure in laboratory settings and we have concluded that the purified terephthalic acid and ethylene glycol are of industrial grade purity. We are currently building a prototype model of our depolymerization plant.

 

The demand for terephthalic acid is expected to hit an all-time high of 60 million metric tons (132 Billion Pounds) in 2015 and 72 million metric tons (158.4 billion pounds) by 2020.

 

 
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The global market volume for ethylene glycols was 16.5 million metric tons (36 billion pounds) in 2013 and is expected to reach 22.8 million metric tons (45 billion pounds) by 2020, growing at a CAGR of 4.7% from 2014 to 2020.

 

Prospective Future growth

 

We believe that PET depolymerization expansion will drive near-term growth for Loop Holdings by opening strategically depolymerization plants close to large supplies of raw PET plastic. The largest cities in the world produce the most waste. By opening depolymerization plants close to municipal triage centers where plastic sorting and recycling occurs, Loop Holdings ensures a large supply of feed material to transform. Acquisitions in the plastic sorting sector are also possibilities to control the feedstock of raw material.

 

Medium-term growth will occur with the production of virgin PET resin manufactured using our feedstock of recycled PTA and glycol. We will attempt to be the first company with the ability to market virgin PET resin made from 100% recycled material.

 

Our long-term growth is tied to our ability to depolymerize other plastics, such as Nylon 6, Nylon 6/6, HIPS and PE  We are also currently working on the depolymerization of nylon, which will enable us to economically recycle billions of pounds of nylon waste (mostly carpet waste) that is buried in landfills across the globe.

 

Intellectual Property

 

We rely on a combination of trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect our proprietary rights, which are primarily our brand names, product designs and marks. We do not own patents, though we expect to file patents related to our technology within the next 8 months.

 

Government Regulation and Approvals

 

We are not aware of any governmental regulations or approvals for any of our products.

 

Employees

 

As of the date hereof, we have 1 employee, our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors Daniel Solomita, who works full-time for the Company. Donald Danks, also a director of the Company, is a non-employee director of the Company.

 

DESCRIPTION OF PROPERTIES

 

Our executive offices are located at 1999 Avenue of the Stars, Suite 2520, Los Angeles, California 90067.

 

We do not own any real estate or other physical properties.

 

 
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RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this Form 8-K before making an investment decision with regard to our securities. The statements contained in or incorporated herein that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, you may lose all or part of your investment.

 

RISKS RELATING TO OUR COMPANY

 

Our auditors have expressed substantial doubt about our ability to continue as a going concern.

 

Our audited financial statements for the period from October 23, 2014 (inception) through February 28, 2015 were prepared assuming that we will continue our operations as a going concern. Our wholly-owned subsidiary, Loop Holdings, Inc., was incorporated on October 23, 2014, and does not have a history of earnings. As a result, our independent accountants in their audit report have expressed substantial doubt about our ability to continue as a going concern. Continued operations are dependent on our ability to complete equity or debt financings or generate profitable operations. Such financings may not be available or may not be available on reasonable terms. Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

We may not be able to execute our business plan or stay in business without additional funding.

 

We require approximately $2,000,000 in funding to conduct our operations for one year, and we currently have no plan as to who we will raise those funds. Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. As widely reported, the global and domestic financial markets have been extremely volatile in recent months. If such conditions and constraints continue or if there is no investor appetite to finance our specific business, we may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.

 

If our estimates related to future expenditures are erroneous or inaccurate, our business will fail and you could lose your entire investment.

 

Our success is dependent in part upon the accuracy of our management’s estimates of our future cost expenditures for legal and accounting services (including those we expect to incur as a publicly reporting company), for website marketing and development expenses, and for administrative expenses, which management estimates to be approximately $500,000 over the next twelve months. If such estimates are erroneous or inaccurate, or if we encounter unforeseen costs, we may not be able to carry out our business plan, which could result in the failure of our business and the loss of your entire investment.

 

There is uncertainty regarding our ability to continue as a going concern, indicating the possibility that we may be required to curtail or discontinue our operations in the future. If we discontinue our operations, you may lose all of your investment.

 

We have incurred a net loss of $789,600 for the period from October 23, 2014 (inception) through February 28, 2015 and have completed only the preliminary stages of our business plan. We anticipate incurring additional losses before realizing any revenues and will depend on additional financing in order to meet our continuing obligations and ultimately, to attain profitability. The financial statements do not include any adjustments that might result from the uncertainty about our ability to continue our business. If we are unable to obtain additional financing from outside sources and eventually produce enough revenues, we may be forced to sell our assets, or curtail or discontinue our operations. If this happens, you could lose all or part of your investment.

 

 
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We are in an early stage of development. If we are not able to develop out business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your investment.

 

We were incorporated on October 23, 2014. We have no customers, and we have not earned any revenues to date. Our business prospects are difficult to predict because of our limited operating history, early stage of development, and unproven business strategy. Our primary business activities will be focused on the commercialization of our PET depolymerization technology. Although we believe that our business plan has significant profit potential, we may not attain profitable operations and our management may not succeed in realizing our business objectives. If we are not able to develop out business as anticipated, we may not be able to generate revenues or achieve profitability and you may lose your investment.

 

We may not be able to successfully commercialize our PET depolymerization technology because of the risk of unanticipated problems related scaling-up the technology. If we do not successfully develop our technology on a large, commercial scale, you will lose your entire investment.

 

We have relied heavily upon our own test results and preliminary conclusions that our PET depolymerization technology can be developed and operated on a large, commercial scale. It is possible that our understanding of our own preliminary conclusions regarding the scaling up our technology are and simply not technically feasible. Our inability to successfully develop our PET depolymerization technology on a commercial scale, either alone or in a business arrangement with another company, will result in the complete loss of an investor’s investment in the Company.

 

We expect to suffer losses in the immediate future that may cause us to curtail or discontinue our operations.

 

We expect to incur operating losses in future periods. These losses will occur because we do not yet have any revenues to offset the expenses associated with the development of our PET deploymerization business and our business operations, generally. We cannot guarantee that we will ever be successful in generating revenues in the future. We recognize that if we are unable to generate revenues, we will not be able to earn profits or continue operations. There is no history upon which to base any assumption as to the likelihood that we will prove successful, and we can provide investors with no assurance that we will generate any operating revenues or ever achieve profitable operations. If we are unsuccessful in addressing these risks, our business will almost certainly fail.

 

We may not be able to execute our business plan or stay in business without additional funding.

 

Our ability to generate future operating revenues depends in part on whether we can obtain the financing necessary to implement our business plan. We will likely require additional financing through the issuance of debt and/or equity in order to establish profitable operations, and such financing may not be forthcoming. As widely reported, the global and domestic financial markets have been extremely volatile in recent months. If such conditions and constraints continue or if there is no investor appetite to finance our specific business, we may not be able to acquire additional financing through credit markets or equity markets. Even if additional financing is available, it may not be available on terms favorable to us. At this time, we have not identified or secured sources of additional financing. Our failure to secure additional financing when it becomes required will have an adverse effect on our ability to remain in business.

 

 
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The recycling materials industry is extremely competitive, and if we are not able to compete successfully against other companies that engage in the PET materials depolymerization business, both large and small, we will not be able operate our business and investors will lose their entire investment.

 

The PET materials depolymerization business is extremely competitive and rapidly changing. We currently and in the future face competitive pressures from numerous actual and potential competitors. Many of our current and potential competitors in the PET deploymerization business have substantial competitive advantages than we have, including:

 

 

·

longer operating histories;

 

·

significantly greater financial, technical and marketing resources;

 

·

greater brand name recognition;

 

·

better distribution channels;

 

·

existing customer bases; and

 

·

commercially accepted products.

  

Our competitors may be able to respond more quickly to new or emerging technologies and changes in the PET deploymerization industry and devote greater resources to identify, develop and market new products, and distribute and sell their products than we can.

 

The loss of the services of Daniel Solomita, our President and Chairman, or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our website and sell our services.

 

The development of our PET materials depolymerization business and the marketing of our prospective products will continue to place a significant strain on our limited personnel, management, and other resources. Our future success depends upon the continued services of our executive officers who are developing our business, and on our ability to identify and retain competent consultants and employees with the skills required to execute our business objectives. The loss of the services of Daniel Solomita or our failure to timely identify and retain competent personnel could negatively impact our ability to develop our website and sell our services, which could adversely affect our financial results and impair our growth.

 

We are a development stage, independent PET materials depolymerization company, with no experience in the market, and failure to successfully compensate for this inexperience may adversely impact our operations and financial position.

 

We operate as development stage, PET materials depolymerization business, with few substantial tangible assets in a highly competitive industry. We have little operating history, no customer base and little revenue to date. This makes it difficult to evaluate our future performance and prospects. Our business must be considered in light of the risks, expenses, delays and difficulties frequently encountered in establishing a new business in an emerging and evolving industry characterized by intense competition, including:

 

 

·

our business model and strategy are still evolving and are continually being reviewed and revised;

 

·

we may not be able to raise the capital required to develop our initial customer base and reputation;

 

·

we may not be able to successfully implement our business model and strategy; and

 

·

our management consists of one person, Daniel Solomita, our President and Chairman.

  

We cannot be sure that we will be successful in meeting these challenges and addressing these risks and uncertainties. If we are unable to do so, our business will not be successful and the value of your investment in our company will decline.

 

Our failure to protect our intellectual property and proprietary technology may significantly impair our competitive advantage.

 

Our success and ability to compete depends in large part upon protecting our proprietary technology. We rely on a combination of patent, trademark and trade secret protection, nondisclosure and nonuse agreements to protect our proprietary rights. The steps we have taken may not be sufficient to prevent the misappropriation of our intellectual property, particularly in foreign countries where the laws may not protect our proprietary rights as fully as in the United States. The patent and trademark law and trade secret protection may not be adequate to deter third party infringement or misappropriation of our patents, trademarks and similar proprietary rights.

 

 
11

  

In addition, patents issued to us may be challenged, invalidated or circumvented. Our rights granted under those patents may not provide competitive advantages to us, and the claims under our patent applications may not be allowed. We may be subject to or may initiate interference proceedings in the United States Patent and Trademark Office, which can demand significant financial and management resources. The process of seeking patent protection can be time consuming and expensive and patents may not be issued from currently pending or future applications. Moreover, our existing patents or any new patents that may be issued may not be sufficient in scope or strength to provide meaningful protection or any commercial advantage to us.

 

We may in the future initiate claims or litigation against third parties for infringement of our proprietary rights in order to determine the scope and validity of our proprietary rights or the proprietary rights of our competitors. These claims could result in costly litigation and the diversion of our technical and management personnel.

 

We may face costly intellectual property infringement claims, the result of which would decrease the amount of cash we would anticipate to operate and complete our business plan.

 

We anticipate that from time to time we will receive communications from third parties asserting that we are infringing certain patents and other intellectual property rights of others or seeking indemnification against alleged infringement. If anticipated claims arise, we will evaluate their merits. Any claims of infringement brought of third parties could result in protracted and costly litigation, damages for infringement, and the necessity of obtaining a license relating to one or more of our products or current or future technologies, which may not be available on commercially reasonable terms or at all. Litigation, which could result in substantial cost to us and diversion of our resources, may be necessary to enforce our patents or other intellectual property rights or to defend us against claimed infringement of the rights of others. Any intellectual property litigation and the failure to obtain necessary licenses or other rights could have a material adverse effect on our business, financial condition and results of operations.

 

The failure to obtain export licenses could harm our business.

 

We must comply with U.S. Department of Commerce regulations in shipping exporting technologies outside the United States. Any significant future difficulty in complying with such regulations could harm our business, financial condition and results of operations.

 

We are dependent on Daniel Solomita, our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, without whose services company business operations could cease.

 

At this time, Daniel Solomita, is primarily responsible for the development and execution of our business plan. While Mr. Solomita has an employment agreement with and has no present intention to leave us, he is under no obligation to remain employed by us. If he should choose to leave us for any reason before we have hired additional personnel our operations may fail. Even if we are able to find additional personnel, it is uncertain whether we could find qualified management who could develop our business as described herein or would be willing to work for compensation the Company could afford. Without such management, the Company could be forced to cease operations and investors in our common stock or other securities could lose their entire investment.

 

We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we will rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

 

 
12

  

Under the Jumpstart Our Business Startups Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

 

We incur costs associated with SEC reporting compliance, which may significantly affect our financial condition.

 

The Company made the decision to become an SEC “reporting company” in order to comply with applicable laws and regulations. We incur certain costs of compliance with applicable SEC reporting rules and regulations including, but not limited to attorneys’ fees, accounting and auditing fees, other professional fees, financial printing costs and Sarbanes-Oxley compliance costs in an amount estimated at approximately $25,000 per year. On balance, the Company determined that the incurrence of such costs and expenses was preferable to the Company being in a position where it had very limited access to additional capital funding. 

 

However, for as long as we remain an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We intend to take advantage of these reporting exemptions until we are no longer an “emerging growth company.”

 

We will remain an “emerging growth company” for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following August 31.

 

After, and if ever, we are no longer an “emerging growth company,” we expect to incur significant additional expenses and devote substantial management effort toward ensuring compliance with those requirements applicable to companies that are not “emerging growth companies,” including Section 404 of the Sarbanes-Oxley Act.

  

We may be required to incur significant costs and require significant management resources to evaluate our internal control over financial reporting as required under Section 404 of the Sarbanes-Oxley Act, and any failure to comply or any adverse result from such evaluation may have an adverse effect on our stock price.

 

As a smaller reporting company as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, we are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”). Section 404 requires us to include an internal control report with our Annual Report on Form 10-K. This report must include management’s assessment of the effectiveness of our internal control over financial reporting as of the end of the fiscal year. This report must also include disclosure of any material weaknesses in internal control over financial reporting that we have identified. Failure to comply, or any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price of our equity securities. Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant time and management resources. No assurance can be given that we will be able to fully comply with Section 404 or that we and our independent registered public accounting firm would be able to conclude that our internal control over financial reporting is effective at fiscal year-end. As a result, investors could lose confidence in our reported financial information, which could have an adverse effect on the trading price of our securities, as well as subject us to civil or criminal investigations and penalties. In addition, our independent registered public accounting firm may not agree with our management’s assessment or conclude that our internal control over financial reporting is operating effectively.

 

 
13

  

We may not be able to meet the internal control reporting requirements imposed by the SEC resulting in a possible decline in the price of our common stock and our inability to obtain future financing.

 

As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring each public company to include a report of management on the company’s internal controls over financial reporting in its annual reports. Although the Dodd-Frank Wall Street Reform and Consumer Protection Act exempts companies with a public float of less than $75 million from the requirement that our independent registered public accounting firm attest to our financial controls, this exemption does not affect the requirement that we include a report of management on our internal control over financial reporting and does not affect the requirement to include the independent registered public accounting firm’s attestation if our public float exceeds $75 million.

 

While we expect to expend significant resources in developing the necessary documentation and testing procedures required by Section 404 of the Sarbanes-Oxley Act, there is a risk that we may not be able to comply timely with all of the requirements imposed by this rule. Regardless of whether we are required to receive a positive attestation from our independent registered public accounting firm with respect to our internal controls, if we are unable to do so, investors and others may lose confidence in the reliability of our financial statements and our stock price and ability to obtain equity or debt financing as needed could suffer.

 

In addition, in the event that our independent registered public accounting firm is unable to rely on our internal controls in connection with its audit of our financial statements, and in the further event that it is unable to devise alternative procedures in order to satisfy itself as to the material accuracy of our financial statements and related disclosures, it is possible that we would be unable to file our Annual Report on Form 10-K with the SEC, which could also adversely affect the market for and the market price of our common stock and our ability to secure additional financing as needed.

 

RISKS ASSOCIATED WITH OUR SECURITIES

 

Our shares of common stock do not presently trade, and the price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock either now or in the future.

 

Although our common stock is quoted on the OTCQX, our shares of common stock do not trade and the price of our common stock, if traded, may not reflect our value. There can be no assurance that there will be an active market for our shares of common stock either now or in the future. Market liquidity will depend on the perception of our operating business and any steps that our management might take to bring us to the awareness of investors. There can be no assurance given that there will be any awareness generated. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business. As a result holders of our securities may not find purchasers our securities should they to sell securities held by them. Consequently, our securities should be purchased only by investors having no need for liquidity in their investment and who can hold our securities for an indefinite period of time.

 

If a more active market should develop, the price of our shares of common stock may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be willing to effect transactions in our securities. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of such shares of common stock as collateral for any loans.

 

 
14

  

Our common stock is subject to the “penny stock” rules of the sec and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

 

Under U.S. federal securities legislation, our common stock will constitute “penny stock”. Penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a potential investor’s account for transactions in penny stocks, and the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve an investor’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person, and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form sets forth the basis on which the broker or dealer made the suitability determination. Brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

 

We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

 

Our Articles of Incorporation authorize the issuance of 250,000,000 shares of common stock. As of June 29, 2015, the Company had 119,093,200 shares of common stock issued and outstanding. Accordingly, we may issue up to an additional 130,906,800 shares of common stock. The future issuance of common stock and/or preferred stock will result in substantial dilution in the percentage of our common stock held by our then existing shareholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.

 

Our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, Daniel Solomita, beneficially owns a majority of our stock, and accordingly, has control over stockholder matters, our business and management.

 

As of June 29, 2015, Daniel Solomita, our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, beneficially owns 68,000,000 shares of common stock, or 57.1% of our issued and outstanding shares of common stock. As a result, Mr. Solomita will have the discretion to:

 

 

·

Elect or defeat the election of our directors;

 

·

Amend or prevent amendment of our Articles of Incorporation or Bylaws;

 

·

Effect or prevent a merger, sale of assets or other corporate transaction; and

 

·

Affect the outcome of any other matter submitted to the stockholders for vote.

  

Moreover, because of the significant ownership position held by our insiders, new investors may not be able to effect a change in our business or management, and therefore, shareholders would have no recourse as a result of decisions made by management.

 

In addition, sales of significant amounts of shares held by our sole officer and two directors, or the prospect of these sales, could adversely affect the market price of our common stock. Management’s stock ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.

 

 
15

  

State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell the shares offered by this prospectus.

 

Secondary trading in common stock sold in this offering will not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock could not be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted thus causing you to realize a loss on your investment.

 

The Company does not intend to seek registration or qualification of its shares of common stock the subject of this offering in any State or territory of the United States. Aside from a “secondary trading” exemption, other exemptions under state law and the laws of US territories may be available to purchasers of the shares of common stock sold in this offering,

 

Anti-takeover effects of certain provisions of Nevada state law hinder a potential takeover of us.

 

Though not now, we may be or in the future we may become subject to Nevada’s control share law. A corporation is subject to Nevada’s control share law if it has more than 200 stockholders, at least 100 of whom are stockholders of record and residents of Nevada, and it does business in Nevada or through an affiliated corporation. The law focuses on the acquisition of a “controlling interest” which means the ownership of outstanding voting shares sufficient, but for the control share law, to enable the acquiring person to exercise the following proportions of the voting power of the corporation in the election of directors:

 

(i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more. The ability to exercise such voting power may be direct or indirect, as well as individual or in association with others.

 

The effect of the control share law is that the acquiring person, and those acting in association with it, obtains only such voting rights in the control shares as are conferred by a resolution of the stockholders of the corporation, approved at a special or annual meeting of stockholders. The control share law contemplates that voting rights will be considered only once by the other stockholders. Thus, there is no authority to strip voting rights from the control shares of an acquiring person once those rights have been approved. If the stockholders do not grant voting rights to the control shares acquired by an acquiring person, those shares do not become permanent non-voting shares. The acquiring person is free to sell its shares to others. If the buyers of those shares themselves do not acquire a controlling interest, their shares do not become governed by the control share law.

 

If control shares are accorded full voting rights and the acquiring person has acquired control shares with a majority or more of the voting power, any stockholder of record, other than an acquiring person, who has not voted in favor of approval of voting rights is entitled to demand fair value for such stockholder’s shares.

 

Nevada’s control share law may have the effect of discouraging takeovers of the corporation.

 

In addition to the control share law, Nevada has a business combination law which prohibits certain business combinations between Nevada corporations and “interested stockholders” for three years after the “interested stockholder” first becomes an “interested stockholder,” unless the corporation’s board of directors approves the combination in advance. For purposes of Nevada law, an “interested stockholder” is any person who is (i) the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the outstanding voting shares of the corporation, or (ii) an affiliate or associate of the corporation and at any time within the three previous years was the beneficial owner, directly or indirectly, of ten percent or more of the voting power of the then outstanding shares of the corporation. The definition of the term “business combination” is sufficiently broad to cover virtually any kind of transaction that would allow a potential acquiror to use the corporation’s assets to finance the acquisition or otherwise to benefit its own interests rather than the interests of the corporation and its other stockholders.

 

The effect of Nevada’s business combination law is to potentially discourage parties interested in taking control of us from doing so if it cannot obtain the approval of our board of directors.

 

 
16

  

Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

 

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. Stockholders may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks. You should consider carefully these risk factors, together with all of the other information included in this annual report before you decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial condition or results of operations could be materially adversely affected.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of the results of operations and financial condition for the period from October 23, 2014 (inception) through February 28, 2015 should be read in conjunction with our financial statements, and the notes to those financial statements that are included elsewhere in this Form 8-K. References in this section to “we,” “us,” “our” or “Loop Holdings” are to the consolidated business of Loop Holdings.

 

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Form 8-K. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

 

Recent Developments

 

Reverse Acquisition of Loop Holdings

 

On June 29, 2015, we completed a reverse acquisition transaction through a share exchange with Loop Holdings whereby we acquired all of the issued and outstanding shares of Loop Holdings in exchange for 93,030,000 shares of our common stock.

 

Under the terms and conditions of the Share Exchange Agreement, the Company sold 93,030,000 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance is that Loop Holdings shareholders now hold approximately 78.1% of the issued and outstanding shares of common stock of the Company. 

 

Daniel Solomita, the Company’s new President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, is the holder of 68,000,000 shares of common stock of the Company, or 57.1%, of the issued and outstanding common stock of the Company, on a fully diluted basis.

 

As a result of the reverse acquisition, Loop Holdings became our wholly owned subsidiary and the former shareholders of Loop Holdings became our controlling stockholders. The share exchange transaction with Loop Holdings was treated as a reverse acquisition, with Loop Holdings deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse merger is deemed a capital transaction and the net assets of Loop Holdings, Inc. (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination. The acquisition process utilizes the capital structure of the Company and the assets and liabilities of Loop Holdings, Inc. which are recorded at historical cost. The equity of the combined entity is the historical equity of Loop Holdings, Inc. retroactively restated to reflect the number of shares issued by the Company in the transaction.

 

Loop Holdings was incorporated on October 23, 2014, in Nevada. We are development stage company and have never generated any revenues. The commercialization of our depolymerization technology is in its incipient stages and must be scaled-up before we can commercialize the technology and generate any revenues. The depolymerization technology underlying the business of Loop Holdings was originally developed by Hatem Essaddam, who sold the depolymerization technology to Loop Holdings for a purchase price of up to $1,300,000 pursuant to an Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essadam, Loop Holdings, and Daniel Solomita, our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors.

 

 
17

  

Our depolymerization of polyethylene terephthalate (PET) process is completed through a series of chemical reactions is completed at room temperature and under normal atmospheric pressure. The resulting monomers of the depolymerization is purified terephthalic acid and ethylene glycol.

 

Our depolymerization process is summarized as follows:

 

 

·

PET bottles are shredded into 5 mm size pieces;

 

·

Shredded PET is put into a large reactor, where certain chemicals are added;

 

·

The PET molecular chain begins to be broken down in 20 minutes;

 

·

Purified terephthalic acid (solid) and ethylene glycol (liquid) and mother liquor are separated using a combination of centrifugation and distillation;

 

·

The mother liquor is returned to the reactor to be reused in the process; and

 

·

Purified terephthalic acid and Ethylene Glycol are processed and packaged.

  

12-MONTH PLAN OF OPERATION

 

We are a development stage corporation and have not yet generated or realized any revenues from our business. We are aiming to become an environmentally friendly manufacturer of Purified Terephthalic Acid (PTA) and Ethelyne Glycol (EG), these high purity specialty chemicals are mainly used in the production of Polyethylene terephthalate.  We are currently building our first large scale pilot plant facility to gather empirical data to confirm whether our manufacturing technology performs as we have demonstrated on our small scale pilot plant. We estimate that the Company will expend approximately $700,000 in constructing the pilot plant, including the cost of construction, labor, equipment we will lease and/or purchase, permitting and analyzing the pilot plant data. Then, if the results of our manufacturing technology at the planned pilot plant facility are as predicted, and prospective purchasers of our resulting products have indicated that our products meet their quality standards, we plan to build a full scale commercial manufacturing facility.  We anticipate that this facility will have the initial capacity to process approximately 10 metric tons an hour of PET plastic.  Estimated costs for this facility are approximately $15 million dollars. 

  

Results of Operations

 

The Period from October 23, 2014 (Inception) through February 28, 2015.

 

We did not earn revenues for the period from October 23, 2014 (Inception) through February 28, 2015.

 

For the period from October 23, 2014 (Inception) through February 28, 2015, we incurred total operating expenses of $831,012, consisting of $712,000 of consulting fees, $50,000 of consulting fees-related party, $42,050 of professional fees, and $26,962 of general and administrative expenses.

 

For the period from October 23, 2014 (Inception) through February 28, 2015, we had foreign currency transaction gain of $41,412.

 

For the period from October 23, 2014 (Inception) through February 28, 2015, we incurred a net loss before income taxes of $789,600.

 

 
18

  

Limited Business History; Need for Additional Capital

 

There is no historical financial information about the Company upon which to base an evaluation of our performance. We are a development stage corporation and have not generated any revenues from our business. We cannot guarantee we will be successful in our business plans. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the exploration and/or development, and possible cost overruns due to price and cost increases in services. We have no intention of entering into a merger or acquisition within the next twelve months and we have a specific business plan and timetable to complete our 12-month plan of operation based on the success of the primary offering.

 

We anticipate that additional funding, if required, will be in the form of equity financing from the sale of our common stock. However, we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of shares to fund additional expenditures. We do not currently have any arrangements in place for any future equity financing. Our limited operating history and our lack of significant tangible capital assets makes it unlikely that we will be able to obtain significant debt financing in the near future. If such financing is not available on satisfactory terms, we may be unable to continue or expand our business. Equity financing could result in additional dilution to existing shareholders.

 

Liquidity and Capital Resources

 

At June 15, 2015, we had a cash balance of approximately $1,950,000, which was not  sufficient to commence our 12-month plan of operation. We will need to raise funds to commence our 12-month plan of operation and fund our ongoing operational expenses. Additional funding will likely come from equity financing from the sale of our common stock. If we are successful in completing equity financing, existing shareholders will experience dilution of their interest in our Company. We do not have any financing arranged and we cannot provide investors with any assurance that we will be able to raise sufficient funding from the sale of our common stock to fund our 12-month plan of operation and ongoing operational expenses. In the absence of such financing, our business will likely fail. There are no assurances that we will be able to achieve further sales of our common stock or any other form of additional financing. If we are unable to achieve the financing necessary to continue our plan of operations, then we will not be able to continue our 12-month plan of operation and our business will fail.

 

Emerging Growth Company

 

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period is irrevocable.

 

Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of E stimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

 

 
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Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

 

 

(i)

Assumption as a going concern : Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

 

 
 

(ii)

Fair value of long-lived assets : Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

 

 
 

(iii)

Valuation allowance for deferred tax assets : Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

 

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.

 

Actual results could differ from those estimates.

 

 
20

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1

 

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

     

Level 2

 

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

     

Level 3

 

Pricing inputs that are generally observable inputs and not corroborated by market data.

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepayments, accounts payable and intellectual property acquisition obligation approximate their fair values because of the short maturity of these instruments.

 

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

 

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

 

 
21

 

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses.

 

Intangible Assets Other Than Goodwill

 

The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill. Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over the estimated useful lives of the respective assets as follows:

 

    Estimated Useful Life (Years)  
         

Intellectual property (*)

   

15

 

______________

(*) Amortized on a straight-line basis over the terms of the exclusive licenses and/or agreements, or the terms of legal lives of the patents, whichever is shorter.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

 
22

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Foreign Currency Transactions

 

The Company applies the guidelines as set out in Section 830-20-35 of the FASB Accounting Standards Codification (“Section 830-20-35”) for foreign currency transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards Codification, foreign currency transactions are transactions denominated in currencies other than U.S. Dollar, the Company’s reporting currency or Canadian Dollar, the Company’s operating functional currency. Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction generally shall be included in determining net income for the period in which the transaction is settled. The exceptions to this requirement for inclusion in net income of transaction gains and losses pertain to certain intercompany transactions and to transactions that are designated as, and effective as, economic hedges of net investments and foreign currency commitments. Pursuant to Section 830-20-25 of the FASB Accounting Standards Codification, the following shall apply to all foreign currency transactions of an enterprise and its investees: (a) at the date the transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction shall be measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date as defined in section 830-10-20 of the FASB Accounting Standards Codification; and (b) at each balance sheet date, recorded balances that are denominated in currencies other than the functional currency or reporting currency of the recording entity shall be adjusted to reflect the current exchange rate.

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

 
23

 

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

  

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company is a newly formed corporation, or the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company is a newly formed corporation or the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

 

a.

The exercise price of the option.

 

 

 
 

b.

The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: The expected life of options and similar instruments represents the period of time the option and/or warrant are expected to be outstanding. Pursuant to paragraph 718-10-S99-1, it may be appropriate to use the simplified method, i.e., expected term = ((vesting term + original contractual term) / 2), if (i) A company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term due to the limited period of time its equity shares have been publicly traded; (ii) A company significantly changes the terms of its share option grants or the types of employees that receive share option grants such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term; or (iii) A company has or expects to have significant structural changes in its business such that its historical exercise data may no longer provide a reasonable basis upon which to estimate expected term. The Company uses the simplified method to calculate expected term of share options and similar instruments as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

 

 
 

c.

The current price of the underlying share.

 

 
24

 

 

d.

The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

 

 

 
 

e.

The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

 

 

 
 

f.

The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

 

Recently Issued Accounting Pronouncements

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

  

 
25

  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information as of the date hereof with respect to the holdings of: (1) each person known to us to be the beneficial owner of more than 5% of our common stock; (2) each of our directors, nominees for director and named executive officers; and (3) all directors and executive officers as a group. To the best of our knowledge, each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated. Unless otherwise specified, the address of each of the persons set forth below is in care of the Company, at the address of: 1999 Avenue of the Stars, Suite 2520, Los Angeles, California 90067.

 

Title of Class

 

Name and Address of

Beneficial Owner

  Amount and Nature of Beneficial Ownership   Percent of
Common Stock
(1)

         

Common Stock

 

Daniel Solomita (2)

68,000,000

   

57.1

%

Common Stock

 

Donald Danks (3)

 

4,000,000

     

3.3

%

All directors and executive officers as a group (1 person)

 

   

72,000,000

     

60.5

%

 

(1) As of June 29, 2015 immediately after the closing of acquisition of Loop Holdings, we have 119,093,200 shares of common stock outstanding.

 

(2) Appointed President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors on June 29, 2015.

 

(3) Appointed director on June 29, 2015.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The following table sets forth the names, ages, and positions of our executive officers and directors as of the date of this Form 8-K.

 

Name

 

Age

 

Positions

         

Daniel Solomita

 

39

 

President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors

 

 

 

Donald Danks

 

58

 

Director

 

Daniel Solomita, age 39  

President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors

 

Daniel Solomita has served as our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, since June 29, 2015. Daniel has been involved in the plastic recycling business since 2009, focusing on developing landfill remediation projects across North America, working with companies such as Invista, Dupont, and Ascend Performance Materials. Mr. Solomita has also served as the President, Secretary, Treasurer and sole Director of Loop Holdings, Inc., our wholly-owned subsidiary since November 4, 2014. From 2010 until 2014, Mr. Solomita served as President of Dragon Polymers. Since 2012, Mr. Solomita has owned and operated SMH Recycling, a plastics trading business, working with companies from Vietnam, Hong Kong, Germany and China. From 1999 until 2011, Mr. Solomita was a senior infrastructure manager for Bell Canada. From 1977 until 1998, Mr. Solomita attended PPI Montreal, where became a Microsoft Certified System Engineer. From 1993 until 1995 Mr. Solomita attended Dawson College, in Quebec, Canada, where he studied [and obtained a degree in?] Business Administration and 1996, he attended Concordia University, where he studied Management Information Systems and obtained a degree in Microsoft System Engineering and Veritas Backup Architecture. Mr. Solomita’s knowledge of and career at Loop Holdings led to our conclusion that he should serve as a director in light of our business and structure.

 

 
26

  

Donald Danks, age 58  

Director

 

Donald L. Danks, 58, a 1979 graduate of UCLA, has devoted his entire career to creating, developing, funding, managing and growing startup and early-stage companies. From 1986 through 1994, he was the founder, and held various management positions, including chairman and CEO, of Advantage Life Products, a NASDAQ small-cap company.

 

From 1995 through 1997, he was the co-founder and president of Prosoft Training, Inc., a NASDAQ listed company involved in Internet technology training, education and certification.

 

From January 2001 through November 2008, he was the co-founder and served as the CEO of iMergent, Inc., an ecommerce software company listed on the AMEX. During his time at iMergent, he helped build annual revenues from start up to more than $180MM and grew the company’s market capitalization from under $3MM to nearly $400MM.

 

Between 1997 and 2004, he was involved in the creation, funding and business development of Auxilio, Inc., a successful company in the managed print services business for the healthcare industry.

 

In 1998, he co-led the restructuring and recapitalization of Headwaters, Inc., now an NYSE company with a current market cap over $1.5 billion.

 

Employment Agreement

 

In connection with the Company’s June 29, 2015 share exchange with Loop Holdings, the Company entered into an Employment Agreement, which has no term, with its President and Chief Executive Officer, Daniel Solomita.

 

The Employment Agreement dated June 29, 2015, provides for an initial annual base salary, commencing June 29, 2015 of $180,000. The agreement also provides for (i) a bonus of 4,000,000 shares of common stock, (ii) the Company to pay for Mr. Solomita’s costs related to executive’s reasonable monthly cell phone and other mobile Internet costs, home office Internet costs, (iii) the Company to pay for executive’s car and commuting costs, not to exceed $1,000 per month, and club membership costs, payable not later than 10 days after the end of each month, and (iv) a severance payment for Mr. Solomita equal to his then current annual base salary rate plus one month of salary for each year of employment, not to exceed 24 months of severance, upon the termination of his employment by the Company without cause or by Mr. Solomita for good reason or in the event of a change in control. The employment agreement defines the term “cause” as “any grounds entitling the Company’s Board to summarily dismiss” Mr. Solomita.

 

The bonus of 4,000,000 shares of common stock is payable to Mr. Solomita as follows:

 

(i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTCMarkets;

 

(ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of PTA/EG or a PET;

 

(iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first fill-scale production facility is in commercial operation; and

 

(iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation.

 

The employment agreement also requires that Mr. Solomita participate in our employee benefit programs and provide for other customary benefits. In addition, each employment agreement provides compensation pursuant periodic grants of stock options thereafter as recommended by our board of directors (no options have been granted to any executive as of the date of this Form 8-K). Finally, the employment agreement prohibits Mr. Solomita from engaging in certain activities which compete with the Company, seek to recruit its employees or disclose any of its trade secrets or otherwise confidential information.

   

Indemnification Agreements

 

Each of Mr. Solomita and Mr. Danks have entered into an Indemnification Agreement dated June 29, 2015, with the Company, pursuant to which the Company agreed to indemnify Mr. Solomita and Mr. Danks for claims against each of them that may arise in connection with the performance of their respective duties as an officer or director for the Company.

 

Family Relationships

 

No family relationships exist between our President and Chief Executive Officer, Daniel Solomita and any person who is an affiliate of the Company.

 

No family relationships exist between Donald Danks, a director, and any person who is an affiliate of the Company.

 

 
27

  

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, none of our directors or executive officers have been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.

 

Code of Ethics

 

We have not adopted a Code of Ethics but expect to adopt a Code of Ethics and will require that each employee abide by the terms of such Code of Ethics.

 

EXECUTIVE COMPENSATION

 

The following table sets forth information regarding each element of compensation that we paid or awarded to our named executive officers for fiscal 2014 and 2013.

 

Summary Compensation Table

 

Name and Principal Position

  Year     Salary
($)
    Bonus
($)
    Stock Awards
($)*
    Option Awards
($)*
    Non-Equity Incentive Plan Compensation ($)     Nonqualified Deferred Compensation ($)     All Other Compensation($)     Total
($)
 
                                     

Mazen Kouta (1)

 

2014

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

 
  2013       -0-       -0-       -0-       -0-       -0-       -0-       -0-       -0-  

Zeeshan Sajid (2)

 

2014

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 
 

2013

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

 

 

 

 

 

 

 

 

 

Daniel Solomita; (3)

2014

-0-

-0-

-0-

-0-

-0-

-0-

50,000

(5)

50,000

(5)
 

2013

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

 

 

 

 

 

 

 

 

 

Donald Danks; (4)

 

2014

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

 

2013

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

______________ 

(1) Appointed President, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(2) Appointed Secretary, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(3) Appointed President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors on June 29, 2015.

 

(4) Appointed a director on June 29, 2015.

 

(5) Paid to 8198381 Canada Inc., which is beneficially owned and controlled by Daniel Solomita.

 

There has been no compensation awarded to, earned by, or paid to the executive officers by any person for services rendered in all capacities to us for the fiscal period ended September 30, 2014, and through the date of filing of this Form 8-K.

 

 
28

  

Option Grants

 

The following table sets forth stock option grants and compensation for the fiscal year ended September 30, 2014:

 

    Option Awards   Stock Awards  

Name

  Number of Securities Underlying Unexercised Options (#) Exercisable     Number of Securities Underlying Unexercised Options (#) Unexercisable    

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options
(#)

    Option Exercise Price
($)
 

Option

Expiration

Date

  Number of Shares or Units of Stock That Have Not Vested
(#)
    Market Value of Shares or Units of Stock That Have Not Vested
($)
    Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
    Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
 

Mazen Kouta (1)

 

-0-

   

-0-

   

-0-

   

$

-0-

 

N/A

 

-0-

   

-0-

   

-0-

   

-0-

 
                                                                 

Zeeshan Zajid (2)

   

-0-

     

-0-

     

-0-

   

$

-0-

 

N/A

   

-0-

     

-0-

     

-0-

     

-0-

 
                                                                 

Daniel Solomita (3)

   

-0-

     

-0-

     

-0-

   

$

-0-

 

N/A

   

-0-

     

-0-

     

-0-

     

-0-

 
                                                                 

Donald Danks (4)

   

-0-

     

-0-

     

-0-

   

$

-0-

 

N/A

   

-0-

     

-0-

     

-0-

     

-0-

 

______________ 

(1) Appointed President, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(2) Appointed Secretary, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(3) Appointed President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors on June 29, 2015.

 

(4) Appointed a director on June 29, 2015.

 

Option Exercises and Fiscal Year-End Option Value Table.

 

There were no stock options exercised by the named executive officers as of the end of the fiscal period ended September 30, 2014 and through the date of filing of this Form 8-K.

 

Long-Term Incentive Plans and Awards

 

There were no awards made to a named executive officer, under any long-term incentive plan, as of the end of the fiscal period ended September 30, 2014 and through the date of filing of this Form 8-K.

 

 
29

  

DIRECTOR COMPENSATION

 

The following table sets forth director compensation as of September 30, 2014, and as the date of filing of this Form 8-K:

 

Name

  Fees Earned or Paid in Cash
($)
    Stock Awards
($)
    Option Awards
($)
    Non-Equity Incentive Plan Compensation($)     Nonqualified Deferred Compensation Earnings
($)
    All Other Compensation($)     Total
($)
 
                             

Mazen Kouta (1)

 

-0-

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

   

-0-

 

Zeeshan Sajid (2)

   

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

Daniel Solomita (3)

   

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

Donald Danks (4)

   

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

     

-0-

 

______________ 

(1) Appointed President, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(2) Appointed Secretary, Treasurer and Director on April 27, 2010, and resigned from all such offices and positions on June 29, 2015.

 

(3) Appointed President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors on June 29, 2015.

 

(4) Appointed a director on June 29, 2015.

 

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

On June 29, 2015, the Company, entered into a Share Exchange Agreement (the “Share Exchange Agreement”), by and among the Company, Loop Holdings, and the holders of common stock of Loop Holdings. The holders of the common stock of Loop Holdings consisted of 39 stockholders.

 

Under the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 93,030,000 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. As a result of the Share Exchange Agreement, Daniel Solomita, the Company’s new Chief Executive Officer and Chairman of the Board of Directors, is the holder of 68,000,000 shares of common stock, or 57.1%, of the outstanding common stock of the Company, on a fully diluted basis.

 

As a result of the share exchange, Loop Holdings is now a wholly-owned subsidiary of the Company.

 

8198381 Canada Inc., a corporation duly formed and existing under the laws of Canada, (“8198381 Canada Inc.”), is beneficially owned and controlled by our President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, Daniel Solomita. We paid $50,000 to 8198381 Canada Inc. to perform certain services related to the development of PET depolymerization technology, including but not limited to, the design and engineering of production facilities, equipment testing, cost reduction assessment of chemical processes, product purity testing and research and development related to PET plastic production facilities for the period from October 23,2014 (inception) through February 28, 2015.

 

On June 23, 2015, 22 Loop Holdings, Inc. entered into a Technology Transfer Agreement with 8198381 Canada Inc. whereby 8198381 Canada Inc. and the Company memorialized the transfer of technology and information from 8198381 Canada Inc. to the Company under the 8198381 Canada Inc. Oral Contract.

 

 
30

 

On June 29, 2015, we entered into an Indemnification Agreement, with Daniel Solomita, whereby the Company agreed to indemnify Mr. Solomita for claims against him that may arise in connection with the performance of his duties as an officer or director for the Company.

 

On June 29, 2015, we entered into an Indemnification Agreement, with Donald Danks, whereby the Company agreed to indemnify Mr. Solomita for claims against him that may arise in connection with the performance of his duties as a director for the Company.

 

On June 29, 2015, the Company entered into an Employment Agreement with Daniel Solomita. The Employment Agreement provides for an initial annual base salary, commencing June 29, 2015 of $180,000. The agreement also provides for (i) a bonus of 4,000,000 shares of common stock, (ii) the Company to pay for Mr. Solomita’s costs related to executive’s reasonable monthly cell phone and other mobile Internet costs, home office Internet costs, (iii) the Company to pay for executive’s car and commuting costs, not to exceed $1,000 per month, and club membership costs, payable not later than 10 days after the end of each month, and (iv) a severance payment for Mr. Solomita equal to his then current annual base salary rate plus one month of salary for each year of employment, not to exceed 24 months of severance, upon the termination of his employment by the Company without cause or by Mr. Solomita for good reason or in the event of a change in control. The employment agreement defines the term “cause” as “any grounds entitling the Company’s Board to summarily dismiss” Mr. Solomita. 

 

The bonus of 4,000,000 shares of common stock is payable to Mr. Solomita as follows:

 

(i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed on an exchange or the OTCQX tier of the OTCMarkets; 

 

(ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of PTA/EG or a PET; 

 

(iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first fill-scale production facility is in commercial operation; and 

 

(iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation. 

 

The employment agreement also requires that Mr. Solomita participate in our employee benefit programs and provide for other customary benefits. In addition, each employment agreement provides compensation pursuant periodic grants of stock options thereafter as recommended by our board of directors (no options have been granted to any executive as of the date of this Form 8-K). Finally, the employment agreement prohibits Mr. Solomita from engaging in certain activities which compete with the Company, seek to recruit its employees or disclose any of its trade secrets or otherwise confidential information. 

 

DIRECTOR INDEPENDENCE

 

Our board of directors is currently composed of two members, neither of whom qualifies as an independent director in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that a director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to us and our management.

 

LEGAL PROCEEDINGS

 

We are not currently involved in any legal proceedings. From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

 
31

  

MARKET PRICE OF AND DIVIDENDS ON OUR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

Market Information

 

Since September 26, 2012, our shares of common stock have been quoted on the OTCQB tier of the OTC Markets Group, Inc., under the stock symbol “FAMG”. The following table shows the reported high and low closing bid prices per share for our common stock based on information provided by the OTCQB. The over-the-counter market quotations set forth for our common stock reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

 

   

Common Stock

Market Price

 

Financial Quarter Ended

 

High ($)

   

Low ($)

 
             

March 31, 2015

   

999,999.00

     

0.265

 

December 31, 2014

   

999,999.00

     

0.265

 

September 30, 2014

   

999,999.00

     

0.265

 

June 30, 2014

   

0.00

     

0.00

 

March 31, 2014

   

0.00

     

0.00

 

December 31, 2013

   

0.00

     

0.00

 

September 30, 2013

   

0.00

     

0.00

 

June 30, 2013

   

0.00

     

0.00

 

 

As of June 29, 2015, approximately 119,093,200 shares of our common stock were issued and outstanding.

 

Holders

 

As of June 29, 2015, there were approximately 50 holders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

 

Dividends

 

We have never declared or paid a cash dividend. Any future decisions regarding dividends will be made by our Board of Directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our Board of Directors has complete discretion on whether to pay dividends. Even if our Board of Directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the Board of Directors may deem relevant.

 

Securities Authorized for Issuance under Equity Compensation Plans

 

We do not have in effect any compensation plans under which our equity securities are authorized for issuance.

 

Penny Stock Regulations

 

The Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our common stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

 

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our common stock and may affect the ability of investors to sell their common stock in the secondary market.

 

 
32

  

RECENT SALES OF UNREGISTERED SECURITIES

 

Reference is made to the disclosure set forth under Item 3.02 of this report, which disclosure is incorporated by reference into this section.

 

DESCRIPTION OF OUR SECURITIES

 

Introduction

 

In the discussion that follows, we have summarized selected provisions of our articles of incorporation relating to our capital stock. This summary is not complete. This discussion is subject to the relevant provisions of Nevada law and is qualified in its entirety by reference to our articles of incorporation and our bylaws. You should read our articles of incorporation and our bylaws as currently in effect for provisions that may be important to you.

 

Authorized Capital Stock

 

Our authorized share capital consists of 250,000,000 shares of common stock, par value $0.0001 per share. As of June 29, 2015, there were 119,093,200 shares of our common stock issued and outstanding.

 

Common Stock

 

Each share of our common stock entitles its holder to one vote in the election of each director and on all other matters voted on generally by our stockholders, other than any matter that (1) solely relates to the terms of any outstanding series of preferred stock or the number of shares of that series and (2) does not affect the number of authorized shares of preferred stock or the powers, privileges and rights pertaining to the common stock. No share of our common stock affords any cumulative voting rights. This means that the holders of a majority of the voting power of the shares voting for the election of directors can elect all directors to be elected if they choose to do so.

 

Holders of our common stock will be entitled to dividends in such amounts and at such times as our Board of Directors in its discretion may declare out of funds legally available for the payment of dividends. We currently intend to retain our entire available discretionary cash flow to finance the growth, development and expansion of our business and do not anticipate paying any cash dividends on the common stock in the foreseeable future. Any future dividends will be paid at the discretion of our Board of Directors after taking into account various factors, including:

 

 

·

general business conditions;

 

·

industry practice;

 

·

our financial condition and performance;

 

·

our future prospects;

 

·

our cash needs and capital investment plans;

 

·

income tax consequences; and

 

·

the restrictions Nevada and other applicable laws and our credit arrangements then impose.

  

If we liquidate or dissolve our business, the holders of our common stock will share ratably in all our assets that are available for distribution to our stockholders after our creditors are paid in full.

 

Our common stock has no preemptive rights and is not convertible or redeemable or entitled to the benefits of any sinking or repurchase fund.

 

 
33

  

Transfer Agent and Registrar

 

The transfer agent for our common stock is Empire Stock Transfer of Henderson, Nevada. Their address is 1859 Whitney Mesa Drive, Henderson, Nevada 89014, and their telephone number is (702) 818-5898.

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

Subsection 7 of Section 78.138 of the Nevada Revised Statutes (the “Nevada Law”) provides that, subject to certain very limited statutory exceptions, a director or officer is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director or officer, unless it is proven that the act or failure to act constituted a breach of his or her fiduciary duties as a director or officer and such breach of those duties involved intentional misconduct, fraud or a knowing violation of law. The statutory standard of liability established by Section 78.138 controls even if there is a provision in the corporation’s articles of incorporation unless a provision in the Company’s Articles of Incorporation provides for greater individual liability.

 

Subsection 1 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (any such person, a “Covered Person”), against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Covered Person in connection with such action, suit or proceeding if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceedings, had no reasonable cause to believe the Covered Person’s conduct was unlawful.

 

Subsection 2 of Section 78.7502 of the Nevada Law empowers a corporation to indemnify any Covered Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in the capacity of a Covered Person against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by the Covered Person in connection with the defense or settlement of such action or suit, if the Covered Person is not liable pursuant to Section 78.138 of the Nevada Law or the Covered Person acted in good faith and in a manner the Covered Person reasonably believed to be in or not opposed to the best interests of the Corporation. However, no indemnification may be made in respect of any claim, issue or matter as to which the Covered Person shall have been adjudged by a court of competent jurisdiction (after exhaustion of all appeals) to be liable to the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances the Covered Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

 

Section 78.7502 of the Nevada Law further provides that to the extent a Covered Person has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in Subsection 1 or 2, as described above, or in the defense of any claim, issue or matter therein, the corporation shall indemnify the Covered Person against expenses (including attorneys’ fees) actually and reasonably incurred by the Covered Person in connection with the defense.

 

Subsection 1 of Section 78.751 of the Nevada Law provides that any discretionary indemnification pursuant to Section 78.7502 of the Nevada Law, unless ordered by a court or advanced pursuant to Subsection 2 of Section 78.751, may be made by a corporation only as authorized in the specific case upon a determination that indemnification of the Covered Person is proper in the circumstances. Such determination must be made (a) by the stockholders, (b) by the board of directors of the corporation by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding, (c) if a majority vote of a quorum of such non-party directors so orders, by independent legal counsel in a written opinion, or (d) by independent legal counsel in a written opinion if a quorum of such non-party directors cannot be obtained.

 

 
34

  

Subsection 2 of Section 78.751 of the Nevada Law provides that a corporation’s articles of incorporation or bylaws or an agreement made by the corporation may require the corporation to pay as incurred and in advance of the final disposition of a criminal or civil action, suit or proceeding, the expenses of officers and directors in defending such action, suit or proceeding upon receipt by the corporation of an undertaking by or on behalf of the officer or director to repay the amount if it is ultimately determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the corporation. Subsection 2 of Section 78.751 further provides that its provisions do not affect any rights to advancement of expenses to which corporate personnel other than officers and directors may be entitled under contract or otherwise by law.

 

Subsection 3 of Section 78.751 of the Nevada Law provides that indemnification pursuant to Section 78.7502 of the Nevada Law and advancement of expenses authorized in or ordered by a court pursuant to Section 78.751 does not exclude any other rights to which the Covered Person may be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either an action in his or her official capacity or in another capacity while holding his or her office. However, indemnification, unless ordered by a court pursuant to Section 78.7502 or for the advancement of expenses under Subsection 2 of Section 78.751 of the Nevada Law, may not be made to or on behalf of any director or officer of the corporation if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action. Additionally, the scope of such indemnification and advancement of expenses shall continue for a Covered Person who has ceased to be a director, officer, employee or agent of the corporation, and shall inure to the benefit of his or her heirs, executors and administrators.

 

Section 78.752 of the Nevada Law empowers a corporation to purchase and maintain insurance or make other financial arrangements on behalf of a Covered Person for any liability asserted against such person and liabilities and expenses incurred by such person in his or her capacity as a Covered Person or arising out of such person’s status as a Covered Person whether or not the corporation has the authority to indemnify such person against such liability and expenses.

 

The Bylaws of the Company provide for indemnification of Covered Persons substantially identical in scope to that permitted under the Nevada Law. Such Bylaws provide that the expenses of directors and officers of the Company incurred in defending any action, suit or proceeding, whether civil, criminal, administrative or investigative, must be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it is ultimately determined by a court of competent jurisdiction that the director or officer is not entitled to be indemnified by the Company.

 

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have had no other changes to our independent registered public accountants within the past two fiscal years.

 

Item 3.02 Unregistered Sales of Equity Securities.

  

On June 29, 2015, pursuant to the terms and conditions of the Share Exchange Agreement, the Company offered, sold and issued 93,030,000 shares of common stock in consideration for all the issued and outstanding shares in Loop Holdings. The effect of the issuance is that Loop Holdings shareholders now hold approximately 78.1% of the issued and outstanding shares of common stock of the Company. 

  

The Company offered and sold the shares in reliance on the exemptions from registration provided by Rule 506 and Section 4(a)(2) of Securities Act of 1933, as amended (the “Securities Act”), and Rule 903(b)(3) of Regulation S, promulgated under the Securities Act.

 

 
35

   

Item 5.01 Changes in Control of Registrant.

 

Pursuant to the term and conditions of the Share Exchange Agreement, on June 29, 2015, Daniel Solomita, was appointed to the Board of Directors. On June 29, 2015, Daniel Solomita was appointed President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors. The effect of the issuance of shares of common stock under the Share Exchange Agreement is that Loop Holdings shareholders now hold approximately 78.1% of the issued and outstanding shares of common stock of the Company. Additionally, on June 29, 2015, Donald Danks was appointed a director.

 

Daniel Solomita, the Company’s new President and Chief Executive Officer, Secretary, Treasurer and Chairman of the Board of Directors, is the holder of 68,000,000 shares of common stock of the Company, or 57.1%, of the outstanding common stock of the Company, on a fully diluted basis.

 

Item 5.03 Amendment to Articles of Incorporation or Bylaws; Change in Fiscal Year

 

On June 22, 2015, the board of directors of the Company approved a change in the fiscal year end date of the Company from September 30 to last day of February. 

  

Item 5.06 Change in Shell Company Status

 

Reference is made to the disclosure set forth under Items 1.01 and 2.01 of this Form 8-K, which disclosure is incorporated herein by reference. On June 29, 2015, the Company entered into the Share Exchange Agreement, dated June 29, 2015, by and among the Company, Loop Holdings, Inc., a Nevada corporation (“Loop Holdings”), and the holders of common stock of Loop Holdings. The holders of the common stock of Loop Holdings consisted of 39 persons. As a result of the share, Loop Holdings is now a wholly-owned subsidiary of the Company. As a result of the consummation of the transactions contemplated by the Share Exchange Agreement, Loop Holdings became our wholly-owned operating subsidiary and we are no longer a shell company as that term is defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended.

 

 
36

  

Item 9.01 Financial Statements and Exhibits

 

(a) Financial Statements of Business Acquired.

 

Filed herewith as Exhibit 99.1 to this Form 8-K and incorporated herein by reference are Audited Financial Statements for Loop Holdings, Inc., a Nevada corporation, for the period from October 23, 2014 (inception) through February 28, 2015.

 

(b) Pro Forma Financial Information.

 

Filed herewith as Exhibit 99.2 to this Form 8-K and incorporated herein by reference is unaudited pro forma combined financial information of the Company, and its wholly owned subsidiary, Loop Holdings, Inc., a Nevada corporation.

 

(c) Shell Company Transactions.

 

Reference is made to Items 9.01(a) and 9.01(b) and the exhibits referred to therein which are incorporated herein by reference.

 

(d) Exhibits:

 

Exhibit

 

Description

     

2.1

 

Share Exchange Agreement, dated June 29, 2015, by and among the First American Group Inc., Loop Holdings, Inc., a Nevada corporation, and the holders of common stock of Loop Holdings, Inc.

10.1

 

Intellectual Property Assignment Agreement dated October 27, 2014, by and among Hatem Essadam, Loop Holdings, and Daniel Solomita.

10.2

 

Employment Agreement dated June 29, 2015, by and between Loop Holdings, Inc. and Daniel Solomita.

10.3

 

Indemnification Agreement dated June 29, 2015, by and between Loop Holdings, Inc. and Daniel Solomita.

10.4

 

Indemnification Agreement dated June 29, 2015, by and between Loop Holdings, Inc. and Donald Danks.

10.5

 

Stock Redemption Agreement dated June 29, 2015 by and between the Registrant and Mazen Kouta.

10.6

 

Stock Redemption Agreement dated June 29, 2015 by and between the Registrant and Zeeshan Sajid.

10.7

 

Technology Transfer Agreement dated June 22, 2015 by and between 8198381 Canada Inc. and Loop Holdings, Inc.

99.1

 

Audited Financial Statements for Loop Holdings, Inc., a Nevada corporation, for the period from October 23, 2014 (inception) through February 28, 2015.

99.2

 

Unaudited Pro Forma Combined Financial Information of First American Group Inc. and its Wholly-Owned Subsidiary, Loop Holdings, Inc., a Nevada corporation.

 

 
37

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

First American Group Inc.

 
 

(Registrant)

 
     

Date: June 30, 2015

By:

/s/ Daniel Solomita

 
 

Name: 

Daniel Solomita

 
 

Title:

President and Chief Executive Officer (principal executive officer, principal financial officer and principal accounting officer)

 

 

 

 

38


EXHIBIT 2.1

SHARE EXCHANGE AGREEMENT

THIS SHARE EXCHANGE AGREEMENT (the “Agreement”) dated as of June 29, 2015, is entered into by and among First American Group Inc., a Nevada corporation (“First American Group”), Loop Holdings, Inc., a Nevada corporation (“Loop Holdings”), and the shareholders of Loop Holdings listed on Annex A  to this Agreement (each, a “Shareholder” and, collectively, the “Shareholders”).

 

RECITALS

 

A. The Shareholders own the number of shares of capital stock of Loop Holdings (the “Shares”) set forth opposite each Shareholder’s name on Annex A , which Shares collectively constitute all of the issued and outstanding shares of capital stock in Loop Holdings.

 

B. First American Group desires to purchase from the Shareholders, and the Shareholders desire to sell to First American Group, the Shares in exchange for shares of First American Group Common Stock, all on the terms and subject to the conditions set forth in this Agreement (the “Exchange”).

 

D. As a result of the Exchange, First American Group will become the sole shareholder of Loop Holdings.

 

E. Certain capitalized terms used in this Agreement are defined on Exhibit A  hereto.

 

AGREEMENT

 

In consideration of the agreements, provisions and covenants set forth below, First American Group, Loop Holdings and the Shareholders, hereby agree as follows:

 

ARTICLE I.

 

EXCHANGE OF SHARES

 

1.1 Agreement to Sell .

 

Upon the terms and subject to all of the conditions contained herein, each of the Shareholders hereby agrees to sell, assign, transfer and deliver to First American Group, and First American Group hereby agrees to purchase and accept from each of the Shareholders, on the Closing Date, the Shares.

 

 
1

 

1.2 Purchase Price .

 

As full consideration for the sale, assignment, transfer and delivery of the Shares by the Shareholders to First American Group, and upon the terms and subject to all of the conditions contained herein, First American Group shall issue to the Shareholders an aggregate of 93,030,000 shares of First American Group common stock (the “Acquisition Shares”) on a pro rata basis based upon their respective beneficial ownership interest in Loop Holdings, as certified by the President of Loop Holdings, at the Closing.

 

1.3 Mechanics of Exchange .

 

(a) At the Closing, each Shareholder shall be entitled to surrender the certificate or certificates that immediately prior to the Closing represented the Loop Holdings Shares of Common Stock (the “Certificates”) to the exchange agent designated by First American Group in exchange for the Acquisition Shares.

 

(b) Promptly after the Closing, First American Group or its designated exchange agent shall make available to each Shareholder a letter of transmittal and instructions for use in effecting the surrender of Certificates in exchange for the Acquisition Shares. Upon surrender of a Certificate to such exchange agent together with the letter of transmittal, duly executed, the Shareholder shall be entitled to receive in exchange therefore such number of Acquisition Shares as such Shareholder has the right to receive in respect of the Certificate so surrendered pursuant to the provisions of this Article I.

 

1.4 No Fractional Shares .

 

No fraction of a share of First American Group Common Stock shall be issued in the Exchange. In lieu of fractional shares, the Shareholders upon surrender of their Certificates as set forth in Section 1.3 shall be issued that number of shares of common stock resulting by rounding up to the nearest whole number of shares of Acquisition Shares that each such Shareholder shall receive as a result of the Exchange.

 

1.5 Closing .

 

The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at 9:00 a.m., Pacific Standard Time, at the principal administrative offices of First American Group, or at a location mutually agreement upon by First American Group and Loop Holdings, on or before June 15, 2015 (the “Closing Date”); provided, however, that if all of the other conditions set forth in articles VI and VII hereof are not satisfied or waived, unless this agreement has been terminated under Section 9 hereof, or at such date, the Closing Date shall be the business day following the day on which all such conditions have been satisfied or waived, or at such other date, time and place as First American Group, Loop Holdings and the Shareholders shall agree.

 

ARTICLE II.

 

REPRESENTATIONS AND WARRANTIES OF LOOP HOLDINGS

 

Except as set forth in the Disclosure Schedule, consisting of information about Loop Holdings provided by Loop Holdings to First American Group in connection with this Agreement (the “Loop Holdings Disclosure Schedule”), each of Loop Holdings and the Shareholders represents and warrants jointly and severally to First American Group as follows:

 

 
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2.1 Organization and Qualification .

 

Loop Holdings is duly incorporated, validly and in good standing existing under the laws of Nevada, has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business as presently conducted and as contemplated to be conducted, to own, hold and operate its properties and assets as now owned, held and operated by it, to enter into this Agreement, to carry out the provisions hereof except where the failure to be in good standing or to have such governmental licenses, authorizations, consents and approvals will not, in the aggregate, either (i) have a Material Adverse Effect on the business, assets or financial condition of Loop Holdings, or (ii) impair the ability of Loop Holdings to perform its material obligations under this Agreement. Loop Holdings is duly qualified, licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased requires such qualification, licensing or domestication, except where the failure to be so qualified, licensed or domesticated will not have a Material Adverse Effect. Set forth as part of the Loop Holdings Disclosure Schedule is a list of those jurisdictions in which each of Loop Holdings presently conducts its business, owns, holds and operates its properties and assets.

 

2.2 Subsidiaries .

 

Loop Holdings does not own directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. Loop Holdings does not have any direct or indirect interests of stock ownership or otherwise in any corporation, partnership, joint venture, firm, association or business enterprise, and is not party to any agreement to acquire such an interest.

 

2.3 Articles of Incorporation and Bylaws .

 

The copies of the charter document and corporate governance document of Loop Holdings (collectively, the “Organizational Documents”) that have been delivered to First American Group prior to the execution of this Agreement are true and complete and have not been amended or repealed. Loop Holdings is not in violation or breach of any of the provisions of the Organizational Documents, except for such violations or breaches which, in the aggregate, will not have a Material Adverse Effect on Loop Holdings.

 

2.4 Authorization and Validity of this Agreement .

 

This Agreement and each of the Transaction Agreements constitute the legal, valid and binding obligation of each person or entity who is a party thereto (other than First American Group), enforceable against each such person or entity in accordance with its terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally. Each Loop Holdings shareholder has all requisite legal capacity to execute and deliver this Agreement and the Transaction Agreements to which he or she is a party, and to perform its, his or her obligations hereunder and thereunder. The execution and delivery by each of Loop Holdings and each of the Shareholders of this Agreement and the Transaction Agreements (to the extent either is a party thereto), and the consummation of the transactions contemplated herein and therein (the “Transactions”) have been authorized by all necessary corporate or other action on the part of Loop Holdings and each of the Shareholders. This Agreement and the Transaction Agreements have been duly executed and delivered by the parties thereto (other than First American Group).

 

 
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2.5 No Violation .

 

Neither the execution nor delivery of this Agreement or the Transaction Agreements, nor the consummation or performance of any of the Transactions by Loop Holdings or the Shareholders will directly or indirectly:

 

(i) violate or conflict with any provision of the Organizational Documents of Loop Holdings; (B) result in (with or without notice or lapse of time) a violation or breach of, or conflict with or constitute a default or result in the termination or in a right of termination or cancellation of, or accelerate the performance required by, or require notice under, any agreement, promissory note, lease, instrument or arrangement to which Loop Holdings or any of its assets are bound or result in the creation of any Liens upon Loop Holdings or any of its assets; (C) violate any order, writ, judgment, injunction, ruling, award or decree of any Governmental Body; (“Governmental Body”); (D) violate any statute, law or regulation of any jurisdiction as such statute, law or regulation that relates to the Shareholders or Loop Holdings or any of the assets of Loop Holdings; or (E) result in cancellation, modification, revocation or suspension of any permits, licenses, registrations, consents, approvals, authorizations or certificates issued or granted by any Governmental Body which are held by or granted to the Shareholders or Loop Holdings or which are necessary for the conduct of Loop Holdings’s business; or

 

(ii) to the knowledge of Loop Holdings or any of the Shareholders, cause Loop Holdings to become subject to, or to become liable for the payment of, any Tax (as hereinafter defined) or cause any of the assets owned by Loop Holdings to be reassessed or revalued by any taxing authority or other Governmental Body.

 

None of Loop Holdings or the Shareholders is or will be required to give any notice to or obtain any approval, consent, ratification, waiver or other authorization (a “Consent”) from any person or entity (including, without limitation, any Governmental Body) in connection with (i) the execution and delivery of this Agreement or any of the Transaction Agreements, or (ii) the consummation or performance of any of the Transactions.

 

2.6 Capitalization and Related Matters .

 

(a) Capitalization . Loop Holdings has issued and outstanding twenty-three million twenty-nine thousand five hundred (23,029,500) shares of common stock. Except as set forth in the preceding sentence, no other class of capital stock or other security of Loop Holdings is authorized, issued, reserved for issuance or outstanding. The Shareholders, as of the Closing Date, are the lawful, record and beneficial owners of the number of Loop Holdings Shares of Common Stock set forth opposite each Seller’s name on Annex A  attached hereto. The Shareholders have, as of the date hereof and as of the Closing Date, valid and marketable title to their respective Shares, free and clear of all Liens (including, without limitation, any claims of spouses under applicable community property laws) and are the lawful, record and beneficial owners of all of the Shares. Except as is issued to and held by the Shareholders or Loop Holdings, no other class of capital stock or other security of Loop Holdings, as applicable, is authorized, issued, reserved for issuance or outstanding. At the Closing, First American Group will be vested with good and marketable title to the Shares, free and clear of all Liens (including, without limitation, any claims of spouses under applicable community property laws). No legend or other reference to any purported Lien appears upon any certificate representing the Shares. Each of the Shares has been duly authorized and validly issued and is fully paid and nonassessable. None of the outstanding capital or other securities of Loop Holdings was issued, redeemed or repurchased in violation of the Securities Act of 1933, as amended (the “Securities Act”), or any other securities or “blue sky” laws.

 

 
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(b) No Redemption Requirements . There are no authorized or outstanding options, warrants, equity securities, calls, rights, commitments or agreements of any character by which Loop Holdings or any of the Shareholders is obligated to issue, deliver or sell, or cause to be issued, delivered or sold, any shares of capital stock or other securities of Loop Holdings. There are no outstanding contractual obligations (contingent or otherwise) of Loop Holdings to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, Loop Holdings or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other entity.

 

2.7 Compliance with Laws and Other Instruments .

 

Except as would not have a Material Adverse Effect, the business and operations of Loop Holdings has been and are being conducted in accordance with all applicable foreign, federal, provincial and local laws, rules and regulations and all applicable orders, injunctions, decrees, writs, judgments, determinations and awards of all courts and governmental agencies and instrumentalities. There are no permits, bonuses, registrations, consents, approvals, authorizations, certificates, or any waiver of the foregoing, which are required to be issued or granted by a Governmental Body for the conduct of the Business as presently conducted or the ownership of the assets of Loop Holdings. Except as would not have a Material Adverse Effect, Loop Holdings is not, and has not received notice alleging that it is, in violation of, or (with or without notice or lapse of time or both) in default under, or in breach of, any term or provision of the Organizational Documents or of any indenture, loan or credit agreement, note, deed of trust, mortgage, security agreement or other material agreement, lease, license or other instrument, commitment, obligation or arrangement to which Loop Holdings is a party or by which any of Loop Holdings’s properties, assets or rights are bound or affected. To the knowledge of Loop Holdings, no other party to any material contract, agreement, lease, license, commitment, instrument or other obligation to which Loop Holdings is a party is (with or without notice or lapse of time or both) in default thereunder or in breach of any term thereof. Loop Holdings is not subject to any obligation or restriction of any kind or character, nor is there, to the knowledge of Loop Holdings, any event or circumstance relating to Loop Holdings that materially and adversely affects in any way its business, properties, assets or prospects or that prohibits Loop Holdings from entering into this Agreement and the Transaction Agreements or would prevent or make burdensome its performance of or compliance with all or any part of this Agreement, the Transaction Agreements or the consummation of the Transactions contemplated hereby or thereby.

  

2.8 Certain Proceedings .

 

There are no outstanding or pending preceding that has been commenced against or involving Loop Holdings or any of its assets and, to the knowledge of Loop Holdings and the Shareholders, no matters of the foregoing nature are contemplated or threatened. None of Loop Holdings or the Shareholders have been charged with, and is not threatened with, or under any investigation with respect to, any allegation concerning any violation of any provision of any federal, provincial, local or foreign law, regulation, ordinance, order or administrative ruling, and is not in default with respect to any order, writ, injunction or decree of any Governmental Body.

 

 
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2.9 No Brokers or Finders .

 

None of Loop Holdings, the Shareholders, or any officer, director, independent contractor, consultant, agent or employee of Loop Holdings has agreed to pay, or has taken any action that will result in any person or entity becoming obligated to pay or entitled to receive, any investment banking, brokerage, finder’s or similar fee or commission in connection with this Agreement or the Transactions. Loop Holdings and the Shareholders shall jointly and severally indemnify and hold First American Group harmless against any liability or expense arising out of, or in connection with, any such claim.

 

2.10 Title to and Condition of Properties .

 

Loop Holdings has good, valid and marketable title to all of its properties and assets (whether real, personal or mixed, and whether tangible or intangible) reflected as owned in its books and records, free and clear of all Liens. Loop Holdings owns or holds under valid leases or other rights to use all real property, plants, machinery, equipment and all assets necessary for the conduct of its business as presently conducted, except where the failure to own or hold such property, plants, machinery, equipment and assets would not have a Material Adverse Effect on Loop Holdings. No Person other than Loop Holdings owns or has any right to the use or possession of the assets used in Loop Holdings’s business. The material buildings, plants, machinery and equipment necessary for the conduct of the business of Loop Holdings as presently conducted are structurally sound, are in good operating condition and repair and are adequate for the uses to which they are being put or would be put in the Ordinary Course of Business, in each case, taken as a whole, and none of such buildings, plants, machinery or equipment is in need of maintenance or repairs, except for ordinary, routine maintenance and repairs that are not material in nature or cost.

 

2.11 Absence of Undisclosed Liabilities .

 

Loop Holdings has no debt, obligation or liability (whether accrued, absolute, contingent, liquidated or otherwise, whether asserted or unasserted, whether due or to become due, whether or not known to Loop Holdings) arising out of any transaction entered into prior to the Closing Date or any act or omission prior to the Closing Date which individually or taken together would constitute a Material Adverse Effect on Loop Holdings and have no debt, obligation or liability to each other or any of the Shareholders or their affiliates, except to the extent specifically set forth on or reserved against on the Balance Sheet of Loop Holdings.

 

The financial statements are consistent with the books and records of Loop Holdings and fairly present in all material respects the financial condition, assets and liabilities of Loop Holdings, as applicable, taken as a whole, as of the dates and periods indicated, and were prepared in accordance with GAAP (except as otherwise indicated therein or in the notes thereto).

 

 
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2.12 Changes .

 

Loop Holdings has not, since June 6, 2015:

 

(a) Ordinary Course of Business . Conducted its business or entered into any transaction other than in the Ordinary Course of Business, except for this Agreement.

 

(b) Adverse Changes . Suffered or experienced any change in, or affecting, its condition (financial or otherwise), properties, assets, liabilities, business, operations, results of operations or prospects which would have a Material Adverse Effect;

 

(c) Loans . Made any loans or advances to any Person other than travel advances and reimbursement of expenses made to employees, officers and directors in the Ordinary Course of Business;

 

(d) Compensation and Bonuses . Made any payments of any bonuses or compensation other than regular salary payments, or increase in the salaries, or payment on any of its debts in the Ordinary Course of Business, to any of its shareholders, directors, officers, employees, independent contractors or consultants or entry into by it of any employment, severance, or similar contract with any director, officer, or employee, independent contractor or consultant; Adopted, or increased in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any of its employees;

 

(e) Liens . Created or permitted to exist any Lien on any of its properties or assets other than Permitted Liens;

 

(f) Capital Stock . Issued, sold, disposed of or encumbered, or authorized the issuance, sale, disposition or encumbrance of, or granted or issued any option to acquire any shares of its capital stock or any other of its securities or any Equity Security, or altered the term of any of its outstanding securities or made any change in its outstanding shares of capital stock or its capitalization, whether by reason of reclassification, recapitalization, stock split, combination, exchange or readjustment of shares, stock dividend or otherwise; changed its authorized or issued capital stock; granted any stock option or right to purchase shares of its capital stock; issued any security convertible into any of its capital stock; granted any registration rights with respect to shares of its capital stock; purchased, redeemed, retired, or otherwise acquired any shares of its capital stock; declared or paid any dividend or other distribution or payment in respect of shares of capital stock of any other entity;

 

 
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(g) Dividends . Declared, set aside, made or paid any dividend or other distribution to any of its shareholders;

 

(h) Material Contracts . Terminated or modified any of its Material Contract except for termination upon expiration in accordance with the terms of such agreements, a description of which is included in the Loop Holdings’s Disclosure Schedule;

 

(i) Claims . Released, waived or cancelled any claims or rights relating to or affecting Loop Holdings in excess of $1,000 in the aggregate or instituted or settled any Proceeding involving in excess of $10,000 in the aggregate;

 

(j) Discharged Liabilities . Paid, discharged, cancelled, waived or satisfied any claim, obligation or liability in excess of $1,000 in the aggregate, except for liabilities incurred prior to the date of this Agreement in the Ordinary Course of Business;

 

(k) Indebtedness . Created, incurred, assumed or otherwise become liable for any Indebtedness or commit to any endeavor involving a commitment in excess of $1,000 in the aggregate, other than contractual obligations incurred in the Ordinary Course of Business;

 

(l) Guarantees . Guaranteed or endorsed in a material amount any obligation or net worth of any Person;

 

(m) Acquisitions . Acquired the capital stock or other securities or any ownership interest in, or substantially all of the assets of, any other Person;

 

(n) Accounting . Changed its method of accounting or the accounting principles or practices utilized in the preparation of its financial statements, other than as required by GAAP;

 

(o) Agreements . Entered into any agreement, or otherwise obligated itself, to do any of the foregoing.

 

2.13 Material Contracts .

 

Loop Holdings has delivered to First American Group, prior to the date of this Agreement, true, correct and complete copies of each of its Material Contracts.

 

(a) No Defaults . The Material Contracts of Loop Holdings are valid and binding agreements of Loop Holdings, as applicable, and are in full force and effect and are enforceable in accordance with their terms. Except as would not have a Material Adverse Effect, Loop Holdings is not in breach or default of any of its Material Contracts to which it is a party and, to the knowledge of Loop Holdings, no other party to any of its Material Contracts is in breach or default thereof. Except as would not have a Material Adverse Effect, no event has occurred or circumstance has existed that (with or without notice or lapse of time) would (a) contravene, conflict with or result in a violation or breach of, or become a default or event of default under, any provision of any of its Material Contracts or (b) permit Loop Holdings or any other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate or modify any of its Material Contracts. Loop Holdings has not received any notice and has no knowledge of any pending or threatened cancellation, revocation or termination of any of its Material Contracts to which it is a party, and there are no renegotiations of, or attempts to renegotiate.

 

 
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2.14 Tax Returns and Audits .

 

(a) Tax Returns . (a) All material Tax Returns required to be filed by or on behalf of Loop Holdings have been timely filed and all such Tax Returns were (at the time they were filed) and are true, correct and complete in all material respects; (b) all Taxes of Loop Holdings required to have been paid (whether or not reflected on any Tax Return) have been fully and timely paid, except those Taxes which are presently being contested in good faith or for which an adequate reserve for the payment of such Taxes has been established on Loop Holdings’s balance sheet; (c) no waivers of statutes of limitation have been given or requested with respect to Loop Holdings in connection with any Tax Returns covering Loop Holdings or with respect to any Taxes payable by it; (d) no Governmental Body in a jurisdiction where Loop Holdings does not file Tax Returns has made a claim, assertion or threat to Loop Holdings that Loop Holdings is or may be subject to taxation by such jurisdiction; (e) Loop Holdings has duly and timely collected or withheld, paid over and reported to the appropriate Governmental Body all amounts required to be so collected or withheld for all periods under all applicable laws; (f) there are no Liens with respect to Taxes on the property or assets of Loop Holdings other than Permitted Liens; (g) there are no Tax rulings, requests for rulings, or closing agreements relating to Loop Holdings for any period (or portion of a period) that would affect any period after the date hereof; and (h) any adjustment of Taxes of Loop Holdings made by a Governmental Body in any examination that Loop Holdings is required to report to the appropriate provincial, local or foreign taxing authorities has been reported, and any additional Taxes due with respect thereto have been paid. No state of fact exists or has existed which would constitute ground for the assessment of any tax liability by any Governmental Body. All Tax Returns filed by Loop Holdings are true, correct and complete.

 

(b) No Adjustments, Changes . Neither Loop Holdings nor any other Person on behalf of Loop Holdings (a) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of provincial, local or foreign law; or (b) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of provincial, local or foreign law.

 

(c) No Disputes . There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes of or Tax Return filed or required to be filed by Loop Holdings, nor is any such claim or dispute pending or contemplated. Loop Holdings has made available to First American Group true, correct and complete copies of all Tax Returns, examination reports and statements of deficiencies assessed or asserted against or agreed to by Loop Holdings since October 23, 2014 and any and all correspondence with respect to the foregoing. Loop Holdings does not have any outstanding closing agreement, ruling request, request for consent to change a method of accounting, subpoena or request for information to or from a Governmental Body in connection with any Tax matter.

 

(d) No Tax Allocation, Sharing . Loop Holdings is not a party to any Tax allocation or sharing agreement. Loop Holdings (a) has not been a member of a Tax Group filing a consolidated income Tax Return under Section 1501 of the Code (or any similar provision of provincial, local or foreign law), and (b) does not have any liability for Taxes for any Person under Treasury Regulations Section 1.1502-6 (or any similar provision of provincial, local or foreign law) as a transferee or successor, by contract or otherwise.

 

 
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2.15 Material Assets .

 

The financial statements of Loop Holdings reflect the material properties and assets (real and personal) owned or leased by them.

 

2.16 Insurance Coverage .

 

Loop Holdings has no insurance or general liability policies maintained by Loop Holdings on its properties and assets.

 

2.17 Litigation; Orders .

 

There is no Proceeding (whether federal, provincial, local or foreign) pending or, to the knowledge of Loop Holdings, threatened or appealable against or affecting Loop Holdings or any of its properties, assets, business or employees. To the knowledge of Loop Holdings, there is no fact that might result in or form the basis for any such Proceeding. Loop Holdings is not subject to any Orders and has not received any written opinion or memorandum or legal advice from their legal counsel to the effect that Loop Holdings is exposed, from a legal standpoint, to any liability which would be material to its business. Loop Holdings is not engaged in any legal action to recover monies due it or for damages sustained by any of them.

 

2.18 Licenses .

 

Except as would not have a Material Adverse Effect, Loop Holdings possesses from the appropriate Governmental Body all licenses, permits, authorizations, approvals, franchises and rights that are necessary for it to engage in its business as currently conducted and to permit it to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets (collectively, “PERMITS”). Except as would not have a Material Adverse Effect, Loop Holdings has not received any written notice from any Governmental Body or other Person that there is lacking any license, permit, authorization, approval, franchise or right necessary for Loop Holdings to engage in its business as currently conducted and to permit Loop Holdings to own and use its properties and assets in the manner in which it currently owns and uses such properties and assets. Except as would not have a Material Adverse Effect, the Permits are valid and in full force and effect. Except as would not have a Material Adverse Effect, no event has occurred or circumstance exists that may (with or without notice or lapse of time): (a) constitute or result, directly or indirectly, in a violation of or a failure to comply with any Permit; or (b) result, directly or indirectly, in the revocation, withdrawal, suspension, cancellation or termination of, or any modification to, any Permit. Loop Holdings has not received any written notice from any Governmental Body or any other Person regarding: (a) any actual, alleged, possible or potential contravention of any Permit; or (b) any actual, proposed, possible or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to, any Permit. All applications required to have been filed for the renewal of such Permits have been duly filed on a timely basis with the appropriate Persons, and all other filings required to have been made with respect to such Permits have been duly made on a timely basis with the appropriate Persons. All Permits are renewable by their terms or in the Ordinary Course of Business without the need to comply with any special qualification procedures or to pay any amounts other than routine fees or similar charges, all of which have, to the extent due, been duly paid.

 

 
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2.19 Interested party Transactions .

 

No officer, director or shareholder of Loop Holdings or any Affiliate, Related Person or “associate” (as such term is defined in Rule 405 of the Commission under the Securities Act) of any such Person, either directly or indirectly, (1) has an interest in any Person which (a) furnishes or sells services or products which are furnished or sold or are proposed to be furnished or sold by Loop Holdings, or (b) purchases from or sells or furnishes to, or proposes to purchase from, sell to or furnish Loop Holdings any goods or services; (2) has a beneficial interest in any contract or agreement to which Loop Holdings is a party or by which it may be bound or affected; or (3) is a party to any material agreements, contracts or commitments in effect as of the date hereof with Loop Holdings. “Related Person” means: (i) with respect to a particular individual, the individual’s immediate family which shall include the individual’s spouse, parents, children, siblings, mothers and fathers-in-law, sons and daughters-in-law, and brothers and sisters-in-law; and (ii) with respect to a specified individual or entity, any entity or individual that, directly or indirectly, controls, is controlled by, or is under common control with such specified entity or individual.

 

2.20 Governmental Inquiries .

 

Loop Holdings has made available to First American Group a copy of each material written inspection report, questionnaire, inquiry, demand or request for information received by Loop Holdings from (and the response of Loop Holdings thereto), and each material written statement, report or other document filed by Loop Holdings with, any Governmental Body since October 23, 2014.

 

2.21 Bank Accounts and Safe Deposit Boxes .

 

The Loop Holdings Disclosure Schedule discloses the title and number of each bank or other deposit or financial account, and each lock box and safety deposit box used by Loop Holdings, the financial institution at which that account or box is maintained and the names of the persons authorized to draw against the account or otherwise have access to the account or box, as the case may be.

 

2.22 Intellectual Property .

 

Any Intellectual Property Loop Holdings uses in its business as presently conducted is owned by Loop Holdings or properly licensed.

 

2.23 Stock Option Plans; Employee Benefits .

 

(a) Loop Holdings does not have any employee benefit plans or arrangements covering their present and former employees or providing benefits to such persons in respect of services provided to Loop Holdings. Loop Holdings has no commitment, whether formal or informal and whether legally binding or not, to create any additional plan, arrangement or practice similar to the Approved Plans.

 

 
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2.24 Employee Matters .

 

(a) No former or current employee of Loop Holdings is a party to, or is otherwise bound by, any agreement or arrangement (including, without limitation, any confidentiality, non-competition or proprietary rights agreement) that in any way adversely affected, affects, or will affect (i) the performance of his, her or its duties to Loop Holdings, or (ii) the ability of Loop Holdings to conduct its business.

 

(b) Loop Holdings has no employees, directors, officers, consultants, independent contractors, representatives or agents whose contract of employment or engagement cannot be terminated by three months’ notice. (c) Loop Holdings is not required or obligated to pay, and since June 6, 2015, have not paid any moneys to or for the benefit of, any director, officer, employee, consultant, independent contractor, representative or agent of Loop Holdings. (d) Loop Holdings is in compliance with all applicable laws respecting employment and employment practices, terms and conditions or employment and wages and hours, and is not engaged in any unfair labor practice. There is no labor strike, dispute, shutdown or stoppage actually pending or, to the knowledge of Loop Holdings or the Shareholders, threatened against or affecting Loop Holdings.

 

2.25 Environmental and Safety Matters .

 

Except as would not have a Material Adverse Effect:

 

(a) Loop Holdings has at all times been and is in compliance with all Environmental Laws and Orders applicable to Loop Holdings, as applicable.

 

(b) There are no Proceedings pending or, to the knowledge of Loop Holdings, threatened against Loop Holdings alleging the violation of any Environmental Law or Environmental Permit applicable to Loop Holdings or alleging that Loop Holdings is a potentially responsible party for any environmental site contamination. None of Loop Holdings or the Shareholders are aware of, or has ever received notice of, any past, present or future events, conditions, circumstances, activities, practices, incidents, actions or plans which may interfere with or prevent continued compliance, or which may give rise to any common law or legal liability, or otherwise form the basis of any claim, action, suit, proceeding, hearing or investigation, based on or related to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling, or the emission, discharge, release or threatened release into the environment, of any pollutant, contaminant, or hazardous or toxic material or waste.

 

 
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(c) Neither this Agreement nor the consummation of the transactions contemplated by this Agreement shall impose any obligations to notify or obtain the consent of any Governmental Body or third Persons under any Environmental Laws applicable to Loop Holdings.

 

2.26 Material Customers .

 

Since June 6, 2015, none of the Material Customers (as hereinafter defined) of Loop Holdings has notified any of Loop Holdings or the Shareholders of their intent to terminate their business with Loop Holdings business because of any dissatisfaction on the part of any such person or entity. The Transactions have not caused any of the Material Customers of Loop Holdings to terminate or provide notice of their intent or threaten to terminate their business with Loop Holdings or to notify Loop Holdings or the Shareholders of their intent not to continue to do such business with Loop Holdings after the Closing. As used herein, “Material Customers” means those customers from whom Loop Holdings derives annual revenues in excess of US $5,000.

 

2.27 Inventories .

 

All inventories of Loop Holdings are of good, usable and merchantable quality in all material respects, and, except as set forth in the Loop Holdings Disclosure Schedule, do not include a material amount of obsolete or discontinued items. Except as set forth in the Loop Holdings Disclosure Schedule, (a) all such inventories are of such quality as to meet in all material respects the quality control standards of Loop Holdings, (b) all such inventories are recorded on the books at the lower of cost or market value determined in accordance with GAAP, and (c) no write-down in inventory has been made or should have been made pursuant to GAAP during the past two years.

 

2.28 Money Laundering Laws .

 

The operations of Loop Holdings are and have been conducted at all times in compliance with applicable financial record-keeping and reporting requirements of the money laundering statutes of all U.S. and non-U.S. jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Body (collectively, the “Money Laundering Laws”) and no Proceeding involving Loop Holdings with respect to the Money Laundering Laws is pending or, to the knowledge of Loop Holdings, threatened.

 

 
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2.29 Disclosure .

 

(a) Any information set forth in this Agreement, the Loop Holdings Disclosure Schedule, or the Transaction Agreements shall be true, correct and complete in all material respects.

 

(b) No statement, representation or warranty of Loop Holdings or the Shareholders in this Agreement (taken with the Schedules) or the Transaction Agreements or any exhibits or schedules thereto contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements herein or therein, taken as a whole, in light of the circumstances in which they were made, not misleading.

 

(c) Except as set forth in the Loop Holdings Disclosure Schedule, the Shareholders and Loop Holdings have no knowledge of any fact that has specific application to Loop Holdings (other than general economic or industry conditions) and that adversely affects the assets or the business, prospects, financial condition, or results of operations of Loop Holdings.

 

(d) In the event of any inconsistency between the statements in the body of this Agreement and those in the Schedules (other than an exception expressly set forth as such in the Schedules with respect to a specifically identified representation or warranty), the statements in the Schedules shall control.

 

(e) The books of account, minute books and stock record books of Loop Holdings, all of which have been made available to First American Group, are complete and accurate and have been maintained in accordance with sound business practices. Without limiting the generality of the foregoing, the minute books of Loop Holdings contain complete and accurate records of all meetings held, and corporate action taken, by the shareholders, the boards of directors, and committees of the boards of directors of Loop Holdings, as applicable, and no meeting of any such shareholders, board of directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books.

 

2.30 Finders and Brokers .

 

(a) None of Loop Holdings or the Shareholders or any Person acting on behalf of Loop Holdings or the Shareholders has engaged any finder, broker, intermediary or any similar Person in connection with the Exchange.

 

(b) None of Loop Holdings the Shareholders nor any Person acting on behalf of Loop Holdings or the Shareholders has entered into a contract or other agreement that provides that a fee shall be paid to any Person or Entity if the Exchange is consummated.

 

 
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ARTICLE III.

 

REPRESENTATIONS AND WARRANTIES OF FIRST AMERICAN GROUP

 

First American Group hereby represents and warrants to the Shareholders as of the date hereof:

 

3.1 Organization; Good Standing .

 

First American Group is duly incorporated, validly and in good standing existing under the laws of Nevada, has all requisite authority and power (corporate and other), governmental licenses, authorizations, consents and approvals to carry on its business as presently conducted and as contemplated to be conducted, to own, hold and operate its properties and assets as now owned, held and operated by it, to enter into this Agreement, to carry out the provisions hereof except where the failure to be in good standing or to have such governmental licenses, authorizations, consents and approvals will not, in the aggregate, either (i) have a Material Adverse Effect on the business, assets or financial condition of First American Group, or (ii) impair the ability of First American Group to perform its material obligations under this Agreement. First American Group is duly qualified, licensed or domesticated as a foreign corporation in good standing in each jurisdiction wherein the nature of its activities or its properties owned or leased requires such qualification, licensing or domestication, except where the failure to be so qualified, licensed or domesticated will not have a Material Adverse Effect.

 

3.2 First American Group Common Stock .

 

As of June 6, 2015, there were 126,063,200 shares of First American Group’s common stock issued and outstanding. The Acquisition Shares, when issued in connection with this Agreement and the other Transactional Agreements, will be duly authorized, validly issued, fully paid and nonassessable.

 

3.3 Authority; Binding Nature of Agreements .

 

(a) The execution, delivery and performance of this Agreement, the Transactional Agreements, and all other agreements and instruments contemplated to be executed and delivered by First American Group in connection herewith have been duly authorized by all necessary corporate action on the part of First American Group and its board of directors.

 

(b) This Agreement, the Transactional Agreements, and all other agreements and instruments contemplated to be executed and delivered by First American Group constitute the legal, valid and binding obligation of First American Group, enforceable against First American Group in accordance with their terms, except to the extent that enforceability may be limited by applicable bankruptcy, Exchange, insolvency, moratorium or other laws affecting the enforcement of creditors’ rights generally and by general principles of equity regardless of whether such enforceability is considered in a proceeding in law or equity.

 

(c) There is no pending Proceeding, and, to First American Group’s knowledge, no Person has threatened to commence any Proceeding that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Exchange or First American Group’s ability to comply with or perform its obligations and covenants under the Transactional Agreements, and, to the knowledge of First American Group, no event has occurred, and no claim, dispute or other condition or circumstance exists, that might directly or indirectly give rise to or serve as a basis for the commencement of any such Proceeding.

 

 
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3.4 Non-contravention; Consents .

 

The execution and delivery of this Agreement and the other Transactional Agreements, and the consummation of the Exchange, by First American Group will not, directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a material violation of (i) First American Group’s Certificate of Incorporation or Bylaws, or (ii) any resolution adopted by First American Group Board or any committee thereof or the stockholders of First American Group;

 

(b) to the knowledge of First American Group, contravene, conflict with or result in a material violation of, or give any Governmental Body the right to challenge the Exchange or to exercise any remedy or obtain any relief under, any legal requirement or any Order to which First American Group or any material assets owned or used by it are subject;

 

(c) to the knowledge of First American Group, cause any material assets owned or used by First American Group to be reassessed or revalued by any taxing authority or other Governmental Body;

 

(d) to the knowledge of First American Group, contravene, conflict with or result in a material violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any Governmental Authorization that is held by First American Group or that otherwise relates to First American Group’s business or to any of the material assets owned or used by First American Group, where such contraventions, conflict, violation, revocation, withdrawal, suspension, cancellation, termination or modification would have a Material Adverse Effect on First American Group;

 

(e) contravene, conflict with or result in a material violation or material breach of, or material default under, any Contract to which First American Group is a party;

 

(f) give any Person the right to any payment by First American Group or give rise to any acceleration or change in the award, grant, vesting or determination of options, warrants, rights, severance payments or other contingent obligations of any nature whatsoever of First American Group in favor of any Person, in any such case as a result of the Exchange; or

 

(g) result in the imposition or creation of any material Lien upon or with respect to any material asset owned or used by First American Group.

 

Except for Consents, filings or notices required under the state and federal securities laws or any other laws or regulations or as otherwise contemplated in this Agreement and the other Transactional Agreements, First American Group will not be required to make any filing with or give any notice to, or obtain any Consent from, any Person in connection with the execution and delivery of this Agreement and the other Transactional Agreements or the consummation or performance of the Exchange.

 

 
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3.5 Finders and Brokers .

 

(a) Neither First American Group nor any Person acting on behalf of First American Group has engaged any finder, broker, intermediary or any similar Person in connection with the Exchange.

 

(b) First American Group has not entered into a contract or other agreement that provides that a fee shall be paid to any Person or Entity if the Exchange is consummated.

 

3.6 Reports and Financial Statements; Absence of Certain Changes .

 

(a) First American Group has filed all reports required to be filed with the SEC pursuant to the Exchange Act since March 25, 2011 (all such reports, including those to be filed prior to the Closing Date and all registration statements and prospectuses filed by First American Group with the SEC, are collectively referred to as the “First American Group SEC Reports). All of the First American Group SEC Reports, as of their respective dates of filing (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) complied in all material respects as to form with the applicable requirements of the Securities Act or Exchange Act and the rules and regulations thereunder, as the case may be, and (ii) did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited financial statements of First American Group included in the First American Group SEC Reports comply in all material respects with the published rules and regulations of the SEC with respect thereto, and such audited financial statements (i) were prepared from the books and records of First American Group, (ii) were prepared in accordance with GAAP applied on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and (iii) present fairly the financial position of First American Group as of the dates thereof and the results of operations and cash flows for the periods then ended. The unaudited financial statements included in the First American Group SEC Reports comply in all material respects with the published rules and regulations of the SEC with respect thereto; and such unaudited financial statements (i) were prepared from the books and records of First American Group, (ii) were prepared in accordance with GAAP, except as otherwise permitted under the Exchange Act and the rules and regulations thereunder, on a consistent basis (except as may be indicated therein or in the notes or schedules thereto) and (iii) present fairly the financial position of First American Group as of the dates thereof and the results of operations and cash flows (or changes in financial condition) for the periods then ended, subject to normal year-end adjustments and any other adjustments described therein or in the notes or schedules thereto.

 

(b) Except as specifically contemplated by this Agreement or reflected in the First American Group SEC Reports, since March 25, 2011 there has not been (i) any material adverse change in First American Group’s business, assets, liabilities, operations, and, to the knowledge of First American Group, no event has occurred that is likely to have a material adverse effect on First American Group’s business, assets, liabilities or operations, (ii) any declarations setting aside or payment of any dividend or distribution with respect to the First American Group Common Stock other than consistent with past practices, (iii) any material change in First American Group’s accounting principles, procedures or methods, (iv) cancellation in writing of any material customer contract or (v) the loss of any customer relationship which would have a material adverse effect on First American Group’s business, assets, liabilities or operations.

 

 
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3.7 Compliance with Applicable Law .

 

Except as disclosed in the First American Group SEC Reports filed prior to the date of this Agreement and except to the extent that the failure or violation would not in the aggregate have a Material Adverse Effect on the business, results of operations or financial condition of First American Group, to First American Group’s knowledge First American Group holds all Governmental Authorizations necessary for the lawful conduct of its business under and pursuant to, and the business of First American Group is not being conducted in violation of, any Governmental Authorization applicable to First American Group.

 

3.8 Complete Copies of Requested Reports .

 

First American Group has delivered or made available true and complete copies of each document that has been reasonably requested by Loop Holdings or the Shareholders.

 

3.9 Full Disclosure .

 

(a) Neither this Agreement (including all Schedules and exhibits hereto) nor any of the Transactional Agreements contemplated to be executed and delivered by First American Group in connection with this Agreement contains any untrue statement of material fact; and none of such documents omits to state any material fact necessary to make any of the representations, warranties or other statements or information contained therein not misleading.

 

(b) All of the information set forth in the prospectus and all other information regarding First American Group and the business, condition, assets, liabilities, operations, financial performance, net income and prospects of either that has been furnished to Loop Holdings or the Shareholders by or on behalf of First American Group or any of the First American Group’s Representatives, is accurate and complete in all material respects.

 

ARTICLE IV.

 

COVENANTS OF LOOP HOLDINGS

 

4.1 Access and Investigation .

 

Loop Holdings shall ensure that, at all times during the Pre-Closing Period:

 

(a) Loop Holdings and their Representatives provide First American Group and its Representatives access, at reasonable times and with twenty-four (24) hours’ notice from First American Group to Loop Holdings, to all of the premises and assets of Loop Holdings, to all existing books, records, Tax Returns, work papers and other documents and information relating to Loop Holdings, and to responsible officers and employees of Loop Holdings, and Loop Holdings and its Representatives provide First American Group and its Representatives with copies of such existing books, records, Tax Returns, work papers and other documents and information relating to Loop Holdings as First American Group may request in good faith;

 

 
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(b) Each of Loop Holdings and its Representatives confer regularly with First American Group upon its request, concerning operational matters and otherwise report regularly (not less than semi-monthly and as First American Group may otherwise request) to First American Group and discuss with First American Group and its Representatives concerning the status of the business, condition, assets, liabilities, operations, and financial performance of Loop Holdings, and promptly notify First American Group of any material change in the business, condition, assets, liabilities, operations, and financial performance of Loop Holdings, or any event reasonably likely to lead to any such change.

 

4.2 Operation of the Business .

 

Loop Holdings shall ensure that, during the Pre-Closing Period:

 

(a) It conducts its operations in the Ordinary Course of Business and in the same manner as such operations have been conducted prior to the date of this Agreement;

 

(b) It uses its commercially reasonable efforts to preserve intact its current business organization, keep available and not terminate the services of its current officers and employees and maintain its relations and goodwill with all suppliers, customers, landlords, creditors, licensors, licensees, employees and other Persons having business relationships with Loop Holdings;

 

(c) It does not declare, accrue, set aside or pay any dividend or make any other distribution in respect of any shares of its capital stock, and does not repurchase, redeem or otherwise reacquire any shares of its capital stock or other securities, except with respect to the repurchase of shares of Loop Holdings Common Stock upon termination of employees at the original purchase price pursuant to agreements existing at the date hereof;

 

(d) It does not sell or otherwise issue (or grant any warrants, options or other rights to purchase) any shares of capital stock or any other securities, except the issuance of Loop Holdings Shares of Common Stock pursuant to option grants to employees made under the Option Plan in the Ordinary Course of Business;

 

(e) It does not amend its charter document, corporate governance document or other Organizational Documents, and does not affect or become a party to any recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

 

(f) It does not form any subsidiary or acquire any equity interest or other interest in any other Entity;

 

(g) It does not establish or adopt any Employee Benefit Plan, and does not pay any bonus or make any profit sharing or similar payment to, or increase the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or employees;

 

 
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(h) It does not change any of its methods of accounting or accounting practices in any respect;

 

(i) It does not make any Tax election;

 

(j) It does not commence or take any action or fail to take any action which would result in the commencement of any Proceeding;

 

(k) It does not (i) acquire, dispose of, transfer, lease, license, mortgage, pledge or encumber any fixed or other assets, other than in the Ordinary Course of Business; (ii) incur, assume or prepay any indebtedness, Indebtedness or obligation or any other liabilities or issue any debt securities, other than in the Ordinary Course of Business; (iii) assume, guarantee, endorse for the obligations of any other person, other than in the Ordinary Course of Business; (iv) make any loans, advances or capital contributions to, or investments in, any other Person, other than in the Ordinary Course of Business; or (v) fail to maintain insurance consistent with past practices for its business and property;

 

(l) It pays all debts and Taxes, files all of its Tax Returns (as provided herein) and pays or performs all other obligations, when due;

 

(m) It does not enter into or amend any agreements pursuant to which any other Person is granted distribution, marketing or other rights of any type or scope with respect to any of its services, products or technology;

 

(n) It does not hire any new officer-level employee;

 

(o) It does not revalue any of its assets, including, without limitation, writing down the value of inventory or writing off notes or accounts receivable, except as required under GAAP and in the Ordinary Course of Business;

 

(p) Except as otherwise contemplated hereunder, it does not enter into any transaction or take any other action outside the Ordinary Course of Business; and

 

(q) It does not enter into any transaction or take any other action that likely would cause or constitute a Breach of any representation or warranty made by it in this Agreement.

 

4.3 Filings and Consents; Cooperation .

 

Loop Holdings shall ensure that:

 

(a) Each filing or notice required to be made or given (pursuant to any applicable Law, Order or contract, or otherwise) by Loop Holdings or the Shareholders in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is made or given as soon as possible after the date of this Agreement;

 

 
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(b) Each Consent required to be obtained (pursuant to any applicable Law, Order or contract, or otherwise) by Loop Holdings or the Shareholders in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is obtained as soon as possible after the date of this Agreement and remains in full force and effect through the Closing Date;

 

(c) It promptly delivers to First American Group a copy of each filing made, each notice given and each Consent obtained by Loop Holdings during the Pre-Closing Period; and

 

(d) During the Pre-Closing Period, it and its Representatives cooperate with First American Group and First American Group’s Representatives, and prepare and make available such documents and take such other actions as First American Group may request in good faith, in connection with any filing, notice or Consent that First American Group is required or elects to make, give or obtain.

 

4.4 Notification; Updates to Disclosure Schedules .

 

(a) During the Pre-Closing Period, Loop Holdings shall promptly notify First American Group in writing of:

 

(i) the discovery by it of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement which is contrary to any representation or warranty made by it in this Agreement or in any of the other Transactional Agreements, or that would upon the giving of notice or lapse of time, result in any of its representations and warranties set forth in this agreement to become untrue or otherwise cause any of the conditions of Closing set forth in Article VI or Article VII not to be satisfied;

 

(ii) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement (except as a result of actions taken pursuant to the express written consent of First American Group) and that is contrary to any representation or warranty made by it in this Agreement, or that would upon the giving of notice or lapse of time, result in any of its representations and warranties set forth in this agreement to become untrue or otherwise cause any of the conditions of Closing set forth in Article VI or Article VII not to be satisfied;

 

(b) If any event, condition, fact or circumstances that is required to be disclosed pursuant to Section 4.4(a) requires any material change in the Loop Holdings Disclosure Schedule, or if any such event, condition, fact or circumstance would require such a change assuming the Loop Holdings Disclosure Schedule were dated as of the date of the occurrence, existence or discovery of such event, condition, fact or circumstances, then Loop Holdings, as applicable, shall promptly deliver to First American Group an update to the Loop Holdings Disclosure Schedule specifying such change (a “Disclosure Schedule Update”).

 

(c) It will promptly update any relevant and material information provided to First American Group after the date hereof pursuant to the terms of this Agreement.

 

 
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4.5 Commercially Reasonable Efforts .

 

During the Pre-Closing Period, Loop Holdings shall use its commercially reasonable efforts to cause the conditions set forth in Article VI and Article VII to be satisfied on a timely basis and so that the Closing can take place on or before June 15, 2015, in accordance with Section 1.5, and shall not take any action or omit to take any action, the taking or omission of which would or could reasonably be expected to result in any of the representations and warranties of Loop Holdings set forth in this Agreement becoming untrue, or in any of the conditions of Closing set forth in Article VI or Article VII not being satisfied.

 

4.6 Confidentiality; Publicity .

 

Loop Holdings shall ensure that:

 

(a) It and its Representatives keep strictly confidential the existence and terms of this Agreement prior to the issuance or dissemination of any mutually agreed upon press release or other disclosure of the Exchange; and

 

(b) neither it nor any of its Representatives issues or disseminates any press release or other publicity or otherwise makes any disclosure of any nature (to any of its suppliers, customers, landlords, creditors or employees or to any other Person) regarding any of the Exchange; except in each case to the extent that it is required by law to make any such disclosure regarding such transactions or as separately agreed by the parties; provided, however, that if it is required by law to make any such disclosure, Loop Holdings advises First American Group, at least five business days before making such disclosure, of the nature and content of the intended disclosure.

 

ARTICLE V.

 

COVENANTS OF FIRST AMERICAN GROUP

 

5.1 Notification .

 

During the Pre-Closing Period, First American Group shall promptly notify Loop Holdings in writing of:

 

(a) the discovery by First American Group of any event, condition, fact or circumstance that occurred or existed on or prior to the date of this Agreement which is contrary to any representation or warranty made by First American Group in this Agreement; and,

 

(b) any event, condition, fact or circumstance that occurs, arises or exists after the date of this Agreement (except as a result of actions taken pursuant to the written consent of Loop Holdings) and that is contrary to any representation or warranty made by First American Group in this Agreement;

 

 
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5.2 Filings and Consents; Cooperation .

 

First American Group shall ensure that:

 

(a) Each filing or notice required to be made or given (pursuant to any applicable Law, Order or contract, or otherwise) by First American Group in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is made or given as soon as possible after the date of this Agreement;

 

(b) Each Consent required to be obtained (pursuant to any applicable Law, Order or contract, or otherwise) by First American Group in connection with the execution and delivery of any of the Transactional Agreements, or in connection with the consummation or performance of the Exchange, is obtained as soon as possible after the date of this Agreement and remains in full force and effect through the Closing Date;

 

(c) First American Group promptly delivers to Loop Holdings and a copy of each filing made, each notice given and each Consent obtained by First American Group during the Pre-Closing Period; and

 

(d) During the Pre-Closing Period, First American Group and its Representatives cooperate with Loop Holdings and their Representatives, and prepare and make available such documents and take such other actions as Loop Holdings may request in good faith, in connection with any filing, notice or Consent that Loop Holdings is required or elects to make, give or obtain.

 

5.3 Commercially Reasonable Efforts .

 

During the Pre-Closing Period, First American Group shall use its commercially reasonable efforts to cause the conditions set forth in Article VI and Article VII to be satisfied on a timely basis and so that the Closing can take place on or before February 15, 2015, or as soon thereafter as is reasonably practical, in accordance with Section 1.5, and shall not take any action or omit to take any action, the taking or omission of which would or could reasonably be expected to result in any of the representations and warranties or First American Group set forth in this Agreement becoming untrue or in any of the conditions of closing set forth in Article VI or Article VII not being satisfied.

 

5.4 Disclosure of Confidential Information .

 

(a) Each of First American Group and the Shareholders acknowledges and agrees that it may receive Confidential Information in connection with this Transaction including without limitation, the Loop Holdings Disclosure Schedule and any information disclosed during the due diligence process, the public disclosure of which will harm the disclosing party’s business. The Receiving Party may use Confidential Information only in connection with the Transaction. The results of the due diligence review may not be used for any other purpose other than in connection with the Transaction. Except as expressly provided in this Agreement, the Receiving Party shall not disclose Confidential Information to anyone without the Disclosing Party’s prior written consent. The Receiving Party shall take all reasonable measures to avoid disclosure, dissemination or unauthorized use of Confidential Information, including, at a minimum, those measures it takes to protect its own confidential information of a similar nature. The Receiving Party shall not export any Confidential Information in any manner contrary to the export regulations of the governmental jurisdiction to which it is subject.

 

 
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(b) The Receiving Party may disclose Confidential Information as required to comply with binding orders of governmental entities that have jurisdiction over it, provided that the Receiving Party (i) gives the Disclosing Party reasonable notice (to the extent permitted by law) to allow the Disclosing Party to seek a protective order or other appropriate remedy, (ii) discloses only such information as is required by the governmental entity, and (iii) uses commercially reasonable efforts to obtain confidential treatment for any Confidential Information so disclosed.

 

(c) All Confidential Information shall remain the exclusive property of the Disclosing Party. The Disclosing Party’s disclosure of Confidential Information shall not constitute an express or implied grant to the Receiving Party of any rights to or under the Disclosing Party’s patents, copyrights, trade secrets, trademarks or other intellectual property rights.

 

(d) The Receiving Party shall notify the Disclosing Party immediately upon discovery of any unauthorized use or disclosure of Confidential Information or any other breach of this Agreement by the Receiving Party. The Receiving Party shall cooperate with the Disclosing Party in every reasonable way to help the Disclosing Party regain possession of such Confidential Information and prevent its further unauthorized use.

 

(e) The Receiving Party shall return or destroy all tangible materials embodying Confidential Information (in any form and including, without limitation, all summaries, copies and excerpts of Confidential Information) promptly following the Disclosing Party’s written request; provided, however, that, subject to the provisions of this Agreement, the Receiving Party may retain one copy of such materials in the confidential, restricted access files of its legal department for use only in the event a dispute arises between the parties related to the Transaction and only in connection with that dispute. At the Disclosing Party’s option, the Receiving Party shall provide written certification of its compliance with this Section.

 

5.5 Indemnification .

 

(a) Each of Loop Holdings and the Shareholders, jointly and severally, each shall defend, indemnify and hold harmless First American Group, and its respective employees, officers, directors, stockholders, controlling persons, affiliates, agents, successors and assigns (collectively, the “First American Group Indemnified Persons”), and shall reimburse the First American Group Indemnified Person, for, from and against any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys’ fees) or diminution of value, whether or not involving a third-party claim (collectively, “Damages”), directly or indirectly, relating to, resulting from or arising out of:

 

(i) any untrue representations, misrepresentations or breach of warranty by or of Loop Holdings or the Shareholders contained in or pursuant to this Agreement, and the Loop Holdings Disclosure Schedule; (ii) any breach or nonfulfillment of any covenant, agreement or other obligation by or of Loop Holdings or the Shareholders (only to the extent made or occurring prior to or at the Closing) contained in or pursuant to this Agreement, the Transaction Agreements executed by Loop Holdings or any of the Shareholders in their individual capacity, the Loop Holdings Disclosure Schedule, or any of the other agreements, documents, schedules or exhibits to be entered into by Loop Holdings or any of the Shareholders in their individual capacity pursuant to or in connection with this Agreement;

 

 
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(iii) all of Pre-Closing liabilities of Loop Holdings or the Shareholders; and

 

(iv) any liability, claim, action or proceeding of any kind whatsoever, whether instituted or commenced prior to or after the Closing Date, which directly or indirectly relates to, arises or results from, or occurs in connection with facts or circumstances relating to the conduct of business of Loop Holdings or the assets of Loop Holdings, or events or circumstances existing on or prior to the Closing Date.

 

(b) First American Group shall defend, indemnify and hold harmless Loop Holdings and its respective affiliates, agents, successors and assigns (collectively, the “Loop Holdings Indemnified Persons”), and shall reimburse the Loop Holdings Indemnified Persons, for, from and against any Damages, directly or indirectly, relating to, resulting from or arising out of:

 

(i) any untrue representation, misrepresentation or breach of warranty by or of First American Group contained in or pursuant to this Agreement;

 

(ii) any breach or nonfulfillment of any covenant, agreement or other obligations by or of First American Group contained in or pursuant to this Agreement, the Transaction Agreements or any other agreements, documents, schedules or exhibits to be entered into or delivered to pursuant to or in connection with this Agreement.

 

(c) Promptly after receipt by an indemnified Party under Section 5.6 of this Agreement of notice of a claim against it (“Claim”), such indemnified Party shall, if a claim is to be made against an indemnifying Party under such Section, give notice to the indemnifying Party of such Claim, but the failure to so notify the indemnifying Party will not relieve the indemnifying Party of any liability that it may have to any indemnified Party, except to the extent that the indemnifying Party demonstrates that the defense of such action is prejudiced by the indemnified Party’s failure to give such notice.

 

(d) A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the Party from whom indemnification is sought.

 

ARTICLE VI.

 

CLOSING CONDITIONS OF FIRST AMERICAN GROUP

 

First American Group’s obligations to affect the Closing and consummate the Exchange are subject to the satisfaction of each of the following conditions:

 

6.1 Accuracy of Representations and Warranties .

 

The representations and warranties of Loop Holdings and the Shareholders in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing. Loop Holdings and the Shareholders shall have performed all obligations in this Agreement required to be performed or observed by them on or prior to the Closing.

 

 
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6.2 Additional Conditions to Closing .

 

(a) All necessary approvals under federal and state securities laws and other authorizations relating to the issuance of the Acquisition Shares and the transfer of the Shares shall have been received.

 

(b) First American Group shall have obtained an opinion stating that the terms of the Exchange are fair, just and equitable to First American Group and its shareholders.

 

(c) No preliminary or permanent injunction or other order by any federal, state or foreign court of competent jurisdiction which prohibits the consummation of the Exchange shall have been issued and remain in effect. No statute, rule, regulation, executive order, stay, decree, or judgment shall have been enacted, entered, issued, promulgated or enforced by any court or governmental authority which prohibits or restricts the consummation of the Exchange. All authorizations, consents, orders or approvals of, or declarations or filings with, and all expirations of waiting periods imposed by, any Governmental Body which are necessary for the consummation of the Exchange, other than those the failure to obtain which would not materially adversely affect the consummation of the Exchange or in the aggregate have a material adverse effect on First American Group and its subsidiaries, taken as a whole, shall have been filed, occurred or been obtained (all such permits, approvals, filings and consents and the lapse of all such waiting periods being referred to as the “Requisite Regulatory Approvals”) and all such Requisite Regulatory Approvals shall be in full force and effect.

 

(d) There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Exchange, by any Governmental Body which, in connection with the grant of a Requisite Regulatory Approval, imposes any material condition or material restriction upon First American Group or its subsidiaries or Loop Holdings, including, without limitation, requirements relating to the disposition of assets, which in any such case would so materially adversely impact the economic or business benefits of the Exchange as to render inadvisable the consummation of the Exchange.

 

6.3 Performance of Agreements .

 

Loop Holdings or the Shareholders, as the case may be, shall have executed and delivered each of the agreements, instruments and documents required to be executed and delivered, and performed all actions required to be performed by Loop Holdings or any of the Shareholders, as the case may be, pursuant to this Agreement, except as First American Group has otherwise consented in writing.

 

6.4 Consents .

 

Each of the Consents identified or required to have been identified in the Loop Holdings Disclosure Schedule shall have been obtained and shall be in full force and effect, other than those Consents, which have been expressly waived by First American Group.

 

 
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6.5 No Material Adverse Change and Satisfactory Due Diligence .

 

There shall not have been any material adverse change in the business, condition, assets, liabilities, operations or financial performance of Loop Holdings since the date of this Agreement as determined by First American Group in its discretion. First American Group shall be satisfied in all respects with the results of its due diligence review of Loop Holdings.

 

6.6 Loop Holdings Closing Certificate .

 

In addition to the documents required to be received under this Agreement, First American Group shall also have received the following documents:

 

(a) copies of resolutions of Loop Holdings, certified by a Secretary, Assistant Secretary or other appropriate officer of Loop Holdings, authorizing the execution, delivery and performance of this Agreement and other Transactional Agreements;

 

(b) good standing certificate of Loop Holdings; and

 

(c) such other documents as First American Group may request in good faith for the purpose of (i) evidencing the accuracy of any representation or warranty made by Loop Holdings, (ii) evidencing the compliance by Loop Holdings, or the performance by Loop Holdings of, any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements, (iii) evidencing the satisfaction of any condition set forth in Article VII or this Article VI, or (iv) otherwise facilitating the consummation or performance of the Exchange.

 

6.7 Transactional Agreements .

 

Each Person (other than First American Group) shall have executed and delivered prior to or on the Closing Date all Transactional Agreements to which it is to be a party.

 

6.8 Resignation of Directors and Officers .

 

First American Group shall have received a written resignation from each of the directors and officers of Loop Holdings effective as of the Closing.

 

6.9 Delivery of Stock Certificates, Minute Book and Corporate Seal .

 

The Shareholders shall have delivered to First American Group the stock books, stock ledgers, minute books and corporate seals of Loop Holdings.

 

 
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ARTICLE VII.

 

CLOSING CONDITIONS OF THE SHAREHOLDERS

 

The Shareholders’ obligations to affect the Closing and consummate the Exchange are subject to the satisfaction of each of the following conditions:

 

7.1 Accuracy of Representations and Warranties .

 

The representations and warranties of First American Group in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct on and as of the Closing and First American Group shall have performed all obligations in this Agreement required to be performed or observed by them on or prior to the Closing.

 

7.2 Additional Conditions to Closing .

 

(a) All necessary approvals under federal and state securities laws and other authorizations relating to the issuance and transfer of the Acquisition Shares by First American Group and the transfer of the Shares by Loop Holdings shall have been received.

 

(b) No preliminary or permanent injunction or other order by any federal, state or foreign court of competent jurisdiction which prohibits the consummation of the Exchange shall have been issued and remain in effect. No statute, rule, regulation, executive order, stay, decree, or judgment shall have been enacted, entered, issued, promulgated or enforced by any court or governmental authority which prohibits or restricts the consummation of the Exchange. All Requisite Regulatory Approvals shall have been filed, occurred or been obtained and all such Requisite Regulatory Approvals shall be in full force and effect.

 

(c) There shall not be any action taken, or any statute, rule, regulation or order enacted, entered, enforced or deemed applicable to the Exchange, by any federal or state Governmental Body which, in connection with the grant of a Requisite Regulatory Approval, imposes any condition or restriction upon the Surviving Corporation or its subsidiaries (or, in the case of any disposition of assets required in connection with such Requisite Regulatory Approval, upon First American Group, its subsidiaries, Loop Holdings or any of their subsidiaries), including, without limitation, requirements relating to the disposition of assets, which in any such case would so materially adversely impact the economic or business benefits of the Exchange as to render inadvisable the consummation of the Exchange.

 

7.3 First American Group Closing Certificates .

 

The Shareholders shall have received the following documents:

 

(a) copies of resolutions of First American Group, certified by a Secretary, Assistant Secretary or other appropriate officer of First American Group, authorizing the execution, delivery and performance of the Transactional Agreements and the Exchange;

 

 
28

 

(b) good standing certificates for the State of Nevada; and

 

(c) such other documents as Loop Holdings may request in good faith for the purpose of (i) evidencing the accuracy of any representation or warranty made by First American Group, (ii) evidencing the compliance by First American Group with, or the performance by First American Group of, any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements, (iii) evidencing the satisfaction of any condition set forth in Article VI or this Article VII, or (iv) otherwise facilitating the consummation or performance of the Exchange.

 

7.4 No Material Adverse Change .

 

There shall not have been any material adverse change in First American Group’s business, condition, assets, liabilities, operations or financial performance since the date of this Agreement.

 

7.5 Performance of Agreements .

 

First American Group shall have executed and delivered each of the agreements, instruments and documents required to be executed and delivered, and performed all actions required by First American Group pursuant to this Agreement, except as Loop Holdings and the Shareholders have otherwise consented in writing.

 

7.6 Consents .

 

Each of the Consents identified or required to have been identified in Section 3.4 shall have been obtained and shall be in full force and effect, other than those Consents the absence of which shall not have a material adverse effect on First American Group.

 

7.7 First American Group Stock .

 

On the Closing Date, shares of First American Group Common Stock shall be eligible for quotation on the OTCMarkets.

 

ARTICLE VIII.

 

FURTHER ASSURANCES

 

Each of the parties hereto agrees that it will, from time to time after the date of the Agreement, execute and deliver such other certificates, documents and instruments and take such other action as may be reasonably requested by the other party to carry out the actions and transactions contemplated by this Agreement, including the closing conditions described in Articles VI and VII. Loop Holdings and the Shareholders shall reasonably cooperate with First American Group in its obtaining of the books and records of Loop Holdings, or in preparing any solicitation materials to be sent to the shareholders of First American Group in connection with the approval of the Exchange and the transactions contemplated by the Transactional Agreements.

 

 
29

 

ARTICLE IX.

 

TERMINATION

 

9.1 Termination .

 

This Agreement may be terminated and the Exchange abandoned at any time prior to the Closing Date:

 

(a) by mutual written consent of First American Group, Loop Holdings and the Shareholders;

 

(b) by First American Group if (i) there is a material Breach of any covenant or obligation of Loop Holdings or the Shareholders; provided however, that if such Breach or Breaches are capable of being cured prior to the Closing Date, such Breach or Breaches shall not have been cured within 10 days of delivery of the written notice of such Breach, or (ii) First American Group reasonably determines that the timely satisfaction of any condition set forth in Article VI has become impossible or impractical (other than as a result of any failure on the part of First American Group to comply with or perform its covenants and obligations under this Agreement or any of the other Transactional Agreements);

 

(b) by Loop Holdings if (i) there is a material Breach of any covenant or obligation of First American Group; provided , however , that if such Breach or Breaches are capable of being cured prior to the Closing Date, such Breach or Breaches shall not have been cured within 10 days of delivery of the written notice of such Breach, or (ii) Loop Holdings reasonably determines that the timely satisfaction of any condition set forth in Article VII has become impossible or impractical (other than as a result of any failure on the part of Loop Holdings or any Shareholder to comply with or perform any covenant or obligation set forth in this Agreement or any of the other Transactional Agreements);

 

(d) by First American Group if the Closing has not taken place on or before February 15, 2015 (except if as a result of any failure on the part of First American Group to comply with or perform its covenants and obligations under this Agreement or in any other Transactional Agreement);

 

(e) by Loop Holdings if the Closing has not taken place on or before February 15, 2015 (except if as a result of the failure on the part of Loop Holdings or the Shareholders to comply with or perform any covenant or obligation set forth in this Agreement or in any other Transactional Agreement);

 

(f) by any of First American Group, on the one hand or Loop Holdings, on the other hand, if any court of competent jurisdiction in the United States or other United States governmental body shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the Exchange and such order, decree, ruling or any other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this clause (f) shall have used all commercially reasonable efforts to remove such order, decree or ruling; or

 

 
30

 

(g) The parties hereby agree and acknowledge that a breach of the provisions of Articles 4.1, 4.2, 4.3, 4.4 and 4.6 are, without limitation, material Breaches of this Agreement.

 

9.2 Termination Procedures .

 

If First American Group wishes to terminate this Agreement pursuant to Section 9.1, First American Group shall deliver to the Shareholders and Loop Holdings a written notice stating that First American Group is terminating this Agreement and setting forth a brief description of the basis on which First American Group is terminating this Agreement. If Loop Holdings wishes to terminate this Agreement pursuant to Section 9.1, Loop Holdings shall deliver to First American Group a written notice stating that Loop Holdings is terminating this Agreement and setting forth a brief description of the basis on which Loop Holdings is terminating this Agreement.

 

9.3 Effect of Termination .

 

In the event of termination of this Agreement as provided above, this Agreement shall forthwith have no further effect. Except for a termination resulting from a Breach by a party to this Agreement, there shall be no liability or obligation on the part of any party hereto. In the event of a breach, the remedies of the non-breaching party shall be to seek damages from the breaching party or to obtain an order for specific performance, in addition to or in lieu of other remedies provided herein. Upon request after termination, each party will redeliver or, at the option of the party receiving such request, destroy all reports, work papers and other material of any other party relating to the Exchange, whether obtained before or after the execution hereof, to the party furnishing same; provided, however, that Loop Holdings and the Shareholders shall, in all events, remain bound by and continue to be subject to Section 4.6 and all parties shall in all events remain bound by and continue to be subject to Section 5.4 and 5.5.

 

Notwithstanding the above, both First American Group, on the one hand, and Loop Holdings and the Shareholders, on the other hand, shall be entitled to announce the termination of this Agreement by means of a mutually acceptable press release.

 

ARTICLE X.

 

MISCELLANEOUS

 

10.1 Survival of Representations and Warranties .

 

All representations and warranties of Loop Holdings and the Shareholders in this Agreement and the Loop Holdings Disclosure Schedule shall survive shall survive indefinitely. The right to indemnification, reimbursement or other remedy based on such representations and warranties will not be affected by any investigation conducted by the parties.

 

 
31

 

10.2 Expenses .

 

Except as otherwise set forth herein, each of the parties to the Exchange shall bear its own expenses incurred in connection with the negotiation and consummation of the transactions contemplated by this Agreement.

 

10.3 Entire Agreement .

 

This Agreement and the other Transactional Agreements contain the entire agreement of the parties hereto, and supersede any prior written or oral agreements between them concerning the subject matter contained herein, or therein. There are no representations, agreements, arrangements or understandings, oral or written, between the parties to this Agreement, relating to the subject matter contained in this Agreement and the other Transaction Agreements, which are not fully expressed herein or therein. The schedules and each exhibit attached to this Agreement or delivered pursuant to this Agreement are incorporated herein by this reference and constitute a part of this Agreement.

 

10.4 Counterparts .

 

This Agreement may be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument.

 

10.5 Descriptive Headings .

 

The Article and Section headings in this Agreement are for convenience only and shall not affect the meanings or construction of any provision of this Agreement.

 

10.6 Notices .

 

Any notices required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficiently given on the earlier to occur of the date of personal delivery, the date of receipt or three (3) days after posting by overnight courier or registered or certified mail, postage prepaid, addressed as follows:

 

If to First American Group:

 

First American Group Inc.

11037 Warner Ave., Suite 132

Fountain Valley, California 92708

 

 
32

 

If to Loop Holdings:

 

Loop Holdings, Inc.

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

If to the Shareholders:

 

c/o Loop Holdings, Inc.

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

To such address or addresses as a party shall have previously designated by notice to the sender given in accordance with this section.

 

10.7 Choice of Law .

 

This Agreement shall be construed in accordance with and governed by the laws of the State of Nevada without regard to choice of law principles. Each of the parties hereto consents to the jurisdiction of the courts of the State of California, County of Los Angeles and to the federal courts located in the County of Los Angeles, State of California.

 

10.8 Binding Effect; Benefits .

 

This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to confer on any Person other than the parties or their respective successors and permitted assigns, the Shareholders and other Persons expressly referred to herein, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

10.9 Assignability .

 

Neither this Agreement nor any of the parties’ rights hereunder shall be assignable by any party without the prior written consent of the other parties and any attempted assignment without such consent shall be void.

 

10.10 Waiver and Amendment .

 

 
33

 

Any term or provision of this Agreement may be waived at any time by the party, which is entitled to the benefits thereof. The waiver by any party of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. The parties may, by mutual agreement in writing, amend this Agreement in any respect. Loop Holdings and the Shareholders hereby acknowledge their intent that this Agreement includes as a party any holder of capital stock in Loop Holdings at the time of Closing. First American Group, Loop Holdings and the Shareholders therefore agree that this Agreement may be amended, without the further consent of any party to this Agreement, (i) to add as a new Shareholder any existing shareholder of Loop Holdings and (ii) to modify Annex A to reflect the addition of such shareholder.

  

10.11 Attorney’ Fees .

 

In the event of any action or proceeding to enforce the terms and conditions of this Agreement, the prevailing party shall be entitled to an award of reasonable attorneys’ and experts’ fees and costs, in addition to such other relief as may be granted.

 

10.12 Severability .

 

If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

10.13 Construction .

 

In executing this Agreement, the parties severally acknowledge and represent that each: (a) has fully and carefully read and considered this Agreement; (b) has or has had the opportunity to consult independent legal counsel regarding the legal effect and meaning of this document and all terms and conditions hereof; (c) has been afforded the opportunity to negotiate as to any and all terms hereof; and (d) is executing this Agreement voluntarily, free from any influence, coercion or duress of any kind. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rule of strict construction will be applied against any party.

 

[signature page follows]

 

 
34

 

IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the day and year first above written.

 

First American Group:

 

 

FIRST AMERICAN GROUP INC.

 
       
 

By:

/s/ Mazen Kouta

 
  Name: 

Mazen Kouta

 
 

Title: 

President

 
   
 

Loop Holdings:

 

 

 

LOOP HOLDINGS, INC.

 
       
 

By:

/s/ Daniel Solomita

 
  Name: 

Daniel Solomita

 
 

Title:

President

 

 

 
35

 

Shareholders:

 

A & C FORTUNE ENTERPRISE

 

 

 

 

By:

/s/ Maggie Liu

 
 

Name: 

Maggie Liu

 
 

Title:

CEO

 

 

 

AME INVESTMENTS, LTD.

 

 

 

By:

/s/ Elie Zeidan

 
 

Name: 

Elie Zeidan

 
 

Title:

President

 
       
  By:

/s/ Blair Brown

 
 

Name: 

Blair Brown

 

 

 

R. HARRELL INVESTMENTS, LTD.

 
       
 

By:

/s/ Robert R. Harrell

 
 

Name: 

Robert R. Harrell

 
 

Title:

Principal

 

 

   

/s/ Chester F. Griffiths

 
 

Name: 

Chester F. Griffiths

 

 

 

CHESTER F. GRIFFITHS MD A MEDICAL CORPORATION DEFINED BENEFIT PENSION

 
       
 

By:

/s/ Chester F. Griffiths

 
 

Name: 

Chester F. Griffiths MD

 
 

Title:

President

 

 

 
36

 

   

/s/ Daniel Solomita

 
 

Name: 

Daniel Solomita

 

 

 

DANKS FAMILY TRUST

 

 

 

By:

/s/ Donald Danks

 
 

Name: 

Donald Danks

 
 

Title:

Trustee

 

 

   

/s/ Danny Berry

 
 

Name: 

Danny Berry

 

 

   

/s/ David Glassett

 
 

Name: 

David Glassett

 

 

   

/s/ David R. Wilmerding

 
 

Name: 

David R. Wilmerding

 

 

   

/s/ Douglas G. Hansen

 
 

Name: 

Douglas G. Hansen

 

 

   

/s/ Edmund Soleymani

 
 

Name: 

Edmund Soleymani

 

 

 
37

 

 

BLUE SANDS HOLDINGS TRUST

 

 

 

 

By:

/s/ Greg Olason

 
 

Name: 

Greg Olason

 
 

Title:

Trustee

 

 

   

/s/ Jim Steinmann

 
 

Name: 

Jim Steinmann

 

 

   

/s/ Jocelyn Proulx

 
 

Name: 

Jocelyn Proulx

 
     
 

CCBB INVESTMENTS LLC

 
       
 

By:

/s/ Xuesong Yu

 
 

Name: 

Xuesong Yu

 
 

Title: 

Manager

 

 

   

/s/ John Denzer

 
 

Name: 

John Denzer

 

 

 
38

 

 

JOHN MEYER FAMILY LLC

 
       
 

By:

/s/ John E. Meyer

 
 

Name: 

John E. Meyer

 
 

Title:

Owner

 

 

   

/s/ John Petrasich

 
 

Name: 

John Petrasich

 
       
   

/s/ Jonathan Bonchick

 
 

Name: 

Jonathan Bonchick

 

 

   

/s/ Lee Karls

 
 

Name: 

Lee Karls

 

 

 

 

/s/ Leon Redensky

 

Name: 

Leon Redensky

 

 

   

/s/ Michael Mckenzie

 
 

Name: 

Michael Mckenzie

 
       
 

91055566 QUEBEC, INC.

 

 

 

 

By:

/s/ Michael Friedlieb

 
 

Name: 

Michael Friedlieb

 
 

Title:

President

 

 

 
39

 

 

PALISADE PRODUCTIONS LLC

 
     
 

By:

/s/ Ralph W. Kettell

 
 

Name: 

Ralph W. Kettell

 
 

Title:

Manager

 
     
 

GOLDIE HOLDINGS, INC.

 
     
 

By:

/s/ Robert Gold

 
 

Name: 

Robert Gold

 
 

Title: 

President

 
       
   

/s/ Robert J. Henry

 
 

Name: 

Robert J. Henry

 

 

   

/s/ Robert Walsh

 
 

Name: 

Robert Walsh

 
     
 

RVCA Partners LLC

 
     
 

By:

/s/ David Hunt

 
 

Name: 

 David Hunt

 
 

Title: 

Manager

 

 

   

/s/ Ryan Walsh

 
 

Name: 

Ryan Walsh

 

 

   

/s/ Steven Mintz

 
 

Name: 

Steven Mintz

 

 

 
40

 

 

SUNIL P. & RAKHEE W. VERMA FAMILY TRUST

 

 

 

 

By:

/s/ Sunil Verma

 
 

Name: 

Sunil Verma

 
 

Title:

Trustee

 
     
 

TOUCHSTONE ADVISORS, INC.

 
       
 

By:

/s/ Jonathan Destler

 
 

Name: 

Jonathan Destler

 
 

Title:

President

 

 

   

/s/ Weiming Zhang

 
 

Name: 

Weiming Zhang

 
     
 

YASH PAL VERMA / ANJANA VERMA

 
       
   

/s/ Yash Verma

 
 

Name: 

Yash Verma

 

 

   

/s/ Anjana Verma

 
 

Name: 

Anjana Verma

 
       
   

/s/ F. Scott Jackson

 
 

Name: 

F. Scott Jackson

 

 

9065-9699 QUEBEC INC.

 

 

   

/s/ Roberto Trombino

 
 

Name: 

Roberto Trombino

 

Title:

President

 

 

 

/s/ Lawrence Yuen

Name:

Lawrence Yuen

 

 

 

/s/ John H. Shaw

Name:

John H. Shaw

 

 
41

 

EXHIBIT A

 

CERTAIN DEFINITIONS

 

For purposes of the Agreement (including this Exhibit A ):

 

Agreement . “Agreement” shall mean the Share Exchange Agreement to which this Exhibit A is attached (including all Disclosure Schedules and all Exhibits), as it may be amended from time to time.

 

Approved Plans . “Approved Plans” shall mean a stock option or similar plan for the benefit of employees or others, which has been approved by the shareholders of Loop Holdings.

 

Loop Holdings Shares of Common Stock . “Loop Holdings Shares of Common Stock” shall mean the shares of common stock of Loop Holdings.

 

Breach . There shall be deemed to be a “Breach” of a representation, warranty, covenant, obligation or other provision if there is or has been any inaccuracy in or breach of, or any failure to comply with or perform, such representation, warranty, covenant, obligation or other provision.

 

Certificates . “Certificates” shall have the meaning specified in Section 1.3 of the Agreement.

 

First American Group . “First American Group” shall have the meaning specified in the first paragraph of the Agreement.

 

First American Group Common Stock . “First American Group Common Stock” shall mean the shares of common stock of First American Group.

 

First American Group SEC Reports . “First American Group SEC Reports” shall have the meaning specified in Section 4.6 of the Agreement.

 

Closing . “Closing” shall have the meaning specified in Section 1.5 of the Agreement.

 

Closing Date . “Closing Date” shall have the meaning specified in Section 1.5 of the Agreement.

 

Code . “Code” shall mean the Internal Revenue Code of 1986 or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code or any successor law.

 

Confidential Information . “Confidential Information” shall mean all nonpublic information disclosed by one party or its agents (the “Disclosing Party”) to the other party or its agents (the “Receiving Party”) that is designated as confidential or that, given the nature of the information or the circumstances surrounding its disclosure, reasonably should be considered as confidential. Confidential Information includes, without limitation (i) nonpublic information relating to the Disclosing Party’s technology, customers, vendors, suppliers, business plans, intellectual property, promotional and marketing activities, finances, agreements, transactions, financial information and other business affairs, and (ii) third-party information that the Disclosing Party is obligated to keep confidential.

 

 
42

 

Confidential Information does not include any information that (i) is or becomes publicly available without breach of this Agreement, (ii) can be shown by documentation to have been known to the Receiving Party at the time of its receipt from the Disclosing Party, (iii) is received from a third party who, to the knowledge of the Receiving Party, did not acquire or disclose such information by a wrongful or tortious act, or (iv) can be shown by documentation to have been independently developed by the Receiving Party without reference to any Confidential Information.

 

Consent . “Consent” shall mean any approval, consent, ratification, permission, waiver or authorization (including any Governmental Authorization).

 

Disclosure Schedule Update . “Disclosure Schedule Update” shall have the meaning specified in Section 4.4 of the Agreement.

 

Loop Holdings Disclosure Schedule . “Loop Holdings Disclosure Schedule” shall have the meaning specified in introduction to Article II of the Agreement.

 

Entity . “Entity” shall mean any corporation (including any nonprofit corporation), general partnership, limited partnership, limited liability partnership, joint venture, estate, trust, cooperative, foundation, society, political party, union, company (including any limited liability company or joint stock company), firm or other enterprise, association, organization or entity.

 

Environmental Laws . “Environmental Laws” shall mean any Law or other requirement relating to the protection of the environment, health, or safety from the release or disposal of hazardous materials.

 

Environmental Permit . “Environmental Permit” means all licenses, permits, authorizations, approvals, franchises and rights required under any applicable Environmental Law or Order.

 

Equity Securities . “Equity Security” shall mean any stock or similar security, including, without limitation, securities containing equity features and securities containing profit participation features, or any security convertible into or exchangeable for, with or without consideration, any stock or similar security, or any security carrying any warrant, right or option to subscribe to or purchase any shares of capital stock, or any such warrant or right.

 

Exchange Act . “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.

 

GAAP . “GAAP” shall mean United States Generally Accepted Accounting Principles, applied on a consistent basis.

 

Governmental Authorization . “Governmental Authorization” shall mean any:

 

 
43

 

(F) permit, license, certificate, franchise, concession, approval, consent, ratification, permission, clearance, confirmation, endorsement, waiver, certification, designation, rating, registration, qualification or authorization that is issued, granted, given or otherwise made available by or under the authority of any Governmental Body or pursuant to any Law; or

 

(b) right under any contract with any Governmental Body.

 

Governmental Body . “Governmental Body” shall mean any:

 

(F) nation, principality, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature;

 

(b) federal, state, local, municipal, foreign or other government;

 

© governmental or quasi-governmental authority of any nature (including any governmental division, subdivision, department, agency, bureau, branch, office, commission, council, board, instrumentality, officer, official, representative, organization, unit, body or Entity and any court or other tribunal); or

 

(d) individual, Entity or body exercising, or entitled to exercise, any executive, legislative, judicial, administrative, regulatory, police, military or taxing authority or power of any nature, including any court, arbitrator, administrative agency or commissioner, or other governmental authority or instrumentality.

 

Indebtedness . “Indebtedness” shall mean any obligation, contingent or otherwise. Any obligation secured by a Lien on, or payable out of the proceeds of, or production from, property of the relevant party will be deemed to be Indebtedness.

 

Intellectual Property . “Intellectual Property” means all industrial and intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists, confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.

 

Knowledge . A corporation shall be deemed to have “knowledge” of a particular fact or matter only if a director or officer of such corporation has, had or should have had knowledge of such fact or matter.

 

 
44

 

Laws . “Laws” means, with respect to any Person, any U.S. or non-U.S. federal, national, state, provincial, local, municipal, international, multinational or other law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.

 

Lien . “Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge, right of first refusal, encumbrance or other adverse claim or interest of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.

 

Material Adverse Effect . “Material Adverse Effect” means any change, effect or circumstance which, individually or in the aggregate, would reasonably be expected to (a) have a material adverse effect on the business, assets, financial condition or results of operations of the affected party, in each case taken as a whole or (b) materially impair the ability of the affected party to perform its obligations under this Agreement and the Transaction Agreements, excluding any change, effect or circumstance resulting from (i) the announcement, pendency or consummation of the transactions contemplated by this Agreement, (ii) changes in the United States securities markets generally, or (iii) changes in general economic, currency exchange rate, political or regulatory conditions in industries in which the affected party operates.

 

Material Contract . “Material Contract” means any and all agreements, contracts, arrangements, understandings, leases, commitments or otherwise, providing for potential payments by or to the company in excess of $1,000, and the amendments, supplements and modifications thereto.

 

Order . “Order” shall mean any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any Governmental Body.

 

Ordinary Course of Business . “Ordinary Course of Business” shall mean an action taken by Loop Holdings if (i) such action is taken in normal operation, consistent with past practices, (ii) such action is not required to be authorized by the Shareholders, Board of Directors or any committee of the Board of the Directors or other governing body of Loop Holdings and (iii) does not require any separate or special authorization or consent of any nature by any Governmental Body or third party.

 

Permitted Liens . “Permitted Liens” shall mean (a) Liens for Taxes not yet payable or in respect of which the validity thereof is being contested in good faith by appropriate proceedings and for the payment of which the relevant party has made adequate reserves; (b) Liens in respect of pledges or deposits under workmen’s compensation laws or similar legislation, carriers, warehousemen, mechanics, laborers and materialmen and similar Liens, if the obligations secured by such Liens are not then delinquent or are being contested in good faith by appropriate proceedings conducted and for the payment of which the relevant party has made adequate reserves; and (c) statutory Liens incidental to the conduct of the business of the relevant party which were not incurred in connection with the borrowing of money or the obtaining of advances or credits and that do not in the aggregate materially detract from the value of its property or materially impair the use thereof in the operation of its business.

 

 
45

 

Person . “Person” shall mean any individual, Entity or Governmental Body.

 

Pre-Closing Period . “Pre-Closing Period” shall mean the period commencing as of the date of the Agreement and ending on the Closing Date.

 

Proceeding . “Proceeding” shall mean any action, suit, litigation, arbitration, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding and any informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination or investigation, commenced, brought, conducted or heard by or before, or otherwise has involved, any Governmental Body or any arbitrator or arbitration panel.

 

Representatives . “Representatives” of a specified party shall mean officers, directors, employees, attorneys, accountants, advisors and representatives of such party, including, without limitation, all subsidiaries of such specified party, and all such Persons with respect to such subsidiaries. The Related Persons of Loop Holdings shall be deemed to be “Representatives” of Loop Holdings, as applicable.

 

SEC . “SEC” shall mean the United States Securities and Exchange Commission.

 

Securities Act . “Securities Act” shall mean the United States Securities Act of 1933, as amended.

 

Taxes . “Taxes” shall mean all foreign, federal, state or local taxes, charges, fees, levies, imposts, duties and other assessments, as applicable, including, but not limited to, any income, alternative minimum or add-on, estimated, gross income, gross receipts, sales, use, transfer, transactions, intangibles, ad valorem, value-added, franchise, registration, title, license, capital, paid-up capital, profits, withholding, payroll, employment, unemployment, excise, severance, stamp, occupation, premium, real property, recording, personal property, federal highway use, commercial rent, environmental (including, but not limited to, taxes under Section 59A of the Code) or windfall profit tax, custom, duty or other tax, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest, penalties or additions to tax with respect to any of the foregoing; and “Tax” means any of the foregoing Taxes.

 

Tax Group . “Tax Group” shall mean any federal, state, local or foreign consolidated, affiliated, combined, unitary or other similar group of which Loop Holdings is now or was formerly a member.

 

Tax Return . “Tax Return” shall mean any return, declaration, report, claim for refund or credit, information return, statement or other similar document filed with any Governmental Body with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

Transaction Agreements . “Transactional Agreements” shall mean this Agreement and any agreement or document to be executed pursuant to this Agreement.

 

 
46

 

ANNEX A

 

Loop Holdings Shareholders

 

Stockholder

  Number of Shares of Common Stock of Loop Holdings Held  

A & C Advisors, Inc.

 

240,000

 

AME Investments, LTD.

   

250,000

 

Blaire Brown

   

35,000

 

Bob Harrell Investments, LTD.

   

25,000

 

Chester Griffiths

   

100,000

 

Chester F. Griffiths MD A Medical Corporation Defined Benefit Pension

   

125,000

 

Chester Griffiths

   

25,000

 

Daniel Solomita

   

17,000,000

 

Danks Family Trust

   

1,000,000

 

Danny T. Berry

   

100,000

 

David Glassett

   

50,000

 

David R. Wilmerding

   

62,500

 

Douglas G. Hansen

   

25,000

 

Edmund Soleymani

   

62,500

 

Blue Sands Holdings Trust

   

50,000

 

Jim Steinmann

   

50,000

 

Jocelyn Proulx

   

250,000

 

CCBB Investments LLC

   

1,500,000

 

John Denzer

   

100,000

 

John Meyer

   

100,000

 

John Petrasich

   

50,000

 

John Petrasich

   

25,000

 

Jonathan Bonchick

   

62,500

 

Lee Karl

   

31,250

 

Leon Redensky

   

62,500

 

Michael Mckenzie

   

100,000

 

91055566 Quebec, Inc.

   

20,000

 

Palisade Productions LLC

   

43,750

 

Goldie Holdings, Inc.

   

162,500

 

Robert J. Henry

   

40,000

 

Robert Walsh

   

20,000

 

RVCA Partners LLC

   

50,000

 

Ryan Walsh

   

15,000

 

Ryan Walsh

   

80,000

 

Steven Mintz

   

30,000

 

Sunil P. & Rakhee W. Verma Family Trust

   

50,000

 

Touchstone Advisors, Inc.

   

1,000,000

 

Weiming Zhang

   

62,500

 

Yash Pal Verma / Anjana Verma

   

25,000

 

F. Scott Jackson

   

50,000

 

9065-9699 Quebec Inc.

   

100,000

 

Lawrence Yuen

   

12,500

 

John H. Shaw

   

15,000

 

TOTAL

   

23,257,500

 

 

 

47


 

EXHIBIT 10.1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

EXHIBIT 10.2

FIRST AMERICAN GROUP, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is dated as of June 29, 2015, by and between Daniel Solomita (“Executive”) and First American Group, Inc., a Nevada corporation (the “Company”).

 

1. Duties .

 

1.1 Position . Executive is employed as President and Chief Executive Officer of the Company, reporting to the Company’s Board of Directors (the “Board”). The duties and responsibilities of Executive shall include the duties and responsibilities for the direct supervision, direction and control of the Company’s operations and activities. The Executive shall perform such duties as from time to time may be prescribed for him by the Board, in all cases to be consistent with Executive’s corporate offices and positions.

 

1.2 Obligations to the Company . Executive agrees to the best of his ability and experience that he will at all times loyally and conscientiously perform all of the duties and obligations required of and from Executive pursuant to the express and implicit terms hereof, and to the reasonable satisfaction of the Company. During the term of Executive’s employment relationship with the Company, Executive further agrees that he will devote all of his business time and attention to the business of the Company, the Company will be entitled to all of the benefits and profits arising from or incident to all such work services and advice, and Executive will not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent of the Board, and will not directly or indirectly engage or participate in any business that is competitive in any manner with the business of the Company. Executive will comply with and be bound by the Company’s operating policies, procedures and practices from time to time in effect during the term of Executive’s employment.

 

2. Term of Employment . The employment of Executive under this Agreement shall be for an for an indefinite term.

 

3. Compensation . For the duties and services to be performed by Executive hereunder, the Company shall pay Executive, and Executive agrees to accept, the salary and other benefits described below in this Section 3.

 

3.1 Salary . During the Term, Executive shall receive a monthly base salary of $15,000, which is equivalent to $180,000 on an annualized basis. Executive’s monthly base salary will be payable pursuant to the Company’s normal payroll practices for payment of salary to executive employees. Executive’s base salary will be reviewed as part of the Company’s normal salary review process.

 

 
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3.2 Bonus and Other Incentive Compensation . Executive shall be entitled to receive an annual bonus pursuant to a unique or general plan that the Company shall make available to Executive. The executive shall also be eligible to receive other benefits, including stock options or restricted stock units. The Company and Executive shall agree upon goals and objectives to be required for Executive to meet to be eligible for payment of a bonus and such goals and objectives shall be set forth in Exhibit A  attached hereto (or to be attached hereto) and incorporated herein by this reference. Exhibit A may be replaced, revised or updated from time to time by agreement of the parties.

 

3.3 Employee Benefit Plans . Executive shall participate in the employee benefit plans, programs and policies maintained by or for the Company for similarly situated employees in accordance with the terms and conditions to participate in such plans, programs and policies as in effect from time to time. The introduction and administration of benefit plans, programs and policies are within the Company’s sole discretion and the introduction, deletion or amendment of any benefit plan, program or policy will not constitute a breach of this Employment Agreement, provided the Executive is provided with substantially similar benefits or compensation in lieu.

 

3.4 Indemnification . Executive has previously entered into the Company’s standard form of Indemnification Agreement, attached hereto as Exhibit B , providing indemnification to Executive to the maximum extent permitted by law, and in accordance therewith, the Company has agreed to advance any expenses for which indemnification is available to the extent allowed by applicable law.

 

3.5 Vacation . Executive shall be eligible for vacation as provided to similarly situated employees under policies set forth in the Company’s, if there is one, or other policies in place, which vacation time shall be taken at such time or times in each year so as not to materially and adversely interfere with the business of the Company. Unused vacation will be paid out and may not be carried over from any one-year period to any other period except as may be required by law.

 

3.6 Other Benefits . The Company shall pay for costs related to Executive’s reasonable monthly cell phone and other mobile Internet costs, home office Internet costs, car and commuting costs and club membership costs, payable not later than 10 days after the end of each month. The Company shall not be liable to pay more than $1,000 per month for car and commuting costs.

 

4. Severance Benefits . Executive shall be entitled to receive severance benefits upon termination of employment as set forth in this Section 4 or as may be required by applicable law. Executive’s entitlement to such severance benefits shall be conditioned upon Executive’s execution and delivery to the Company of (i) a mutual release of all claims and (ii) a resignation from all of Executive’s positions with the Company. Any payment of severance benefits under the terms of this Agreement will be subject to all applicable tax withholding

 

4.1 Voluntary Termination or Termination for Cause . If Executive voluntarily elects to terminate his employment with the Company other than by Executive’s Resignation for Good Reason, as defined in Section 5.3 below, or if the Company or a successor entity terminates Executive’s employment for Cause, as defined in Section 5.2 below, or the Executive dies or becomes incapacitated or otherwise disabled in such a manner that, in the sole determination of the Board, the Executive cannot perform reasonably the duties specified in Section 1 above, then Executive shall not be entitled to receive payment of any severance benefits. Executive will receive payment for all salary and unpaid vacation accrued as of the date of Executive’s termination of employment and Executive’s benefits will be continued solely to the extent of the Company’s then existing benefit plans and policies in accordance with such plans and policies in effect on the date of termination and in accordance with applicable law.

 

 
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4.2 Involuntary Termination Apart From a Change of Control . If Executive’s employment is terminated by the Company or a successor entity without Cause or by Executive’s Resignation for Good Reason prior to or more than twelve (12) months after, a Change of Control (as defined below), Executive will receive payment for all salary and unpaid vacation accrued as of the date of Executive’s termination of employment, and, in addition, Executive will be entitled to receive the following severance benefits:

 

(i) continued payment of his base salary for a period equal to: twenty four (24) months plus an additional month per completed year of service, to a maximum of thirty six (36) months (the “Salary Continuance Period”). Such payments shall be made in accordance with the Company’s normal payroll practices.

 

(ii) continued benefit coverage (including, if applicable reimbursement of his premium cost for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or the California Continuation of Benefits Replacement Act of 1997, as amended, whichever is applicable) for the lesser of the Salary Continuance Period or that number of months until Executive becomes eligible for reasonably comparable benefits under any future employer’s health insurance plan;

 

(iii) payment of 100% of Executive’s current year discretionary cash bonus at target regardless of the Company’s or the Executive’s achievement of the goals referred to in Section 3.2 of this Agreement, plus payment of bonus at target for the Salary Continuance Period;

 

(iv) accelerated vesting as to 50% of Executive’s then unvested option shares, if any; and

 

(v) reimbursement for up to $10,000 of expenses incurred in obtaining new employment, provided Executive submits evidence that is satisfactory to the Company that the amount involved was expended and related to obtaining new employment.

 

4.3 Change of control and Involuntary Termination Following a Change of Control . In the event of a Change of Control, i) all of the Executive’s unvested options, shares or other equity shall immediately vest and ii) the Executive shall be entitled to a one-time, lump sum payment equal to twelve (12)   of his then current base salary.

 

In addition, if Executive’s employment is terminated by the Company or a successor entity without Cause or by Executive’s Resignation for Good Reason in either case within twelve (12) months following a Change of Control, Executive will receive payment for all salary and unpaid vacation accrued as of the date of Executive’s termination of employment, and, in addition, Executive will be entitled to receive the following severance benefits:

 

 
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 (i) continued payment of his base salary for a period equal to: eighteen (18) months plus an additional month per year of service to a maximum of thirty (30) months (the “Extended Salary Continuance Period”), in accordance with the Company’s normal payroll practices;

 

(ii) continued benefit coverage (including, if applicable reimbursement of his premium cost for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or the California Continuation of Benefits Replacement Act of 1997, as amended, whichever is applicable) for the lesser of the Extended Salary Continuance Period or that number of months until Executive becomes eligible for reasonably comparable benefits under any future employer’s health insurance plan;

 

(iii) payment of 150% of Executive’s current year discretionary cash bonus regardless of the Company’s or the Executive’s achievement of the goals referred to in Section 3.3 of this Agreement, plus payment of bonus at target for the Extended Salary Continuance Period;

 

(iv) accelerated vesting of 100% of all the unvested option shares, if any, pursuant to the terms of Section 3.2 of this Agreement; and

 

(v) reimbursement for up to $20,000 of expenses incurred in obtaining new employment, provided Executive submits evidence that is satisfactory to the Company that the amount involved was expended and related to obtaining new employment.

 

5. Definitions . For purposes of this Agreement, the following definitions shall apply:

 

5.1 “ Change of Control ” means a sale of all or substantially all of the Company’s assets, or any merger or consolidation of the Company with or into another corporation other than a merger or consolidation in which the holders of more than 50% of the shares of capital stock of the Company outstanding immediately prior to such transaction continue to hold (either by the voting securities remaining outstanding or by their being converted into voting securities of the surviving entity) more than 50% of the total voting power represented by the voting securities of the Company, or such surviving entity, outstanding immediately after such transaction.

 

5.2 “ Cause ” means any grounds entitling the Company’s Board to summarily dismiss the Executive.

 

5.3 “ Resignation for Good Reason ” means, subject to the right of either party to arbitrate a dispute with respect thereto in accordance with Section 12 below, Executive’s resignation as a result of, and within 30 days following: (i) a change in Executive’s position such that he is not a corporate officer of the Company (or a successor company, in the event of a Change of Control); (ii) a significant and substantial reduction in Executive’s job, duties, or responsibilities in a manner that is substantially and materially inconsistent with the position, duties, or responsibilities held by Executive immediately before such reduction; (iii) any reduction in Executive’s base salary other than in connection with and consistent with a general reduction of all officer base salaries; or (iv) a relocation of the Executive’s work location to a location more than 50 kilometers away from their current location provided such change increases Executive’s commute by 25 kilometers or 30 minutes.

 

 
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6. Confidentiality Agreement . Executive has signed a Proprietary Information and Inventions Agreement (the “Proprietary Agreement”) that is incorporated by reference and made a part of this Agreement and the form of which is attached hereto as Exhibit C . Executive hereby represents and warrants to the Company that Executive has complied with all obligations under the Proprietary Agreement and agrees to continue to abide by the terms of the Proprietary Agreement and further agrees that the provisions of the Proprietary Agreement shall survive any termination of this Agreement or of Executive’s employment relationship with the Company in accordance with the terms of the Proprietary Agreement.

 

7. Confidentiality of Terms . Executive agrees to follow the Company’s strict policy that employees must not disclose, either directly or indirectly, any information, including any of the terms of this Agreement, regarding salary or stock purchase allocations to any person, including other employees of the Company (other than such employees who have a need to know such information); provided, however, that Executive may discuss such terms with members of his immediate family and any legal, tax or accounting specialists who provide Executive with individual legal, tax or accounting advice.

 

8. Covenants . In addition to the obligations to which the Executive agreed by executing the Proprietary Agreement, Executive understands and agrees that during the term of Executive’s employment with the Company, and for the greater of (i) the duration of any payments to Executive of severance benefits pursuant to Section 4 of this Agreement or (ii) one (1) year after the termination of Executive’s employment with the Company, Executive will not do any of the following:

 

8.1 Compete . Without the Company’s prior written consent, Executive will not directly or indirectly be employed or involved with any business developing or exploiting any products or services that are competitive with products or services (i) being commercially developed or exploited by the Company during Executive’s employment and (ii) on which Executive worked or about which Executive learned proprietary information or trade secrets of the Company during Executive’s employment with the Company.

 

8.2 Solicit Business . Solicit or influence or attempt to influence any client, customer or other person either directly or indirectly, to direct his, her or its purchase of the Company’s products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company.

 

8.3 Solicit Personnel . Solicit or influence or attempt to influence any of the Company’s employees, consultants or other service providers to terminate or otherwise cease his, her or its employment, consulting or service relationships with the Company or to become an employee, consultant or service provider of any competitor of the Company.

 

 
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9. Breach of the Agreement . Executive acknowledges that upon his breach of this Agreement or the Proprietary Agreement, the Company would sustain irreparable harm from such breach, and, therefore, Executive agrees that in addition to any other remedies which the Company may have under this Agreement or otherwise, the Company shall be entitled to obtain equitable relief, including specific performance and injunctions, restraining Executive from committing or continuing any such violation of the Agreement or the Proprietary Agreement. Executive acknowledges and agrees that upon Executive’s material or intentional breach of any of the provisions of the Agreement (including Section 8) or the Proprietary Agreement, in addition to any other remedies the Company may have under this Agreement or otherwise, the Company’s obligations to provide benefits to Executive as described in this Agreement, including without limitation those benefits provided in Section 4, shall immediately terminate, except as required by applicable law.

 

10. Entire Agreement . This Agreement, including the Proprietary Agreement that the Executive has signed, sets forth the entire agreement and understanding of the parties relating to the subject matter herein, supersedes any prior agreement, and merges all prior discussions between them.

 

11. Conflicts . Executive represents and warrants that his performance of all the terms of this Agreement will not breach any other agreement or understanding to which Executive is a party. Executive has not, and will not during the term of this Agreement, enter into any oral or written agreement in conflict with any of the provisions of this Agreement.

 

12. Dispute Resolution . In the event of any dispute, controversy or claim arising under or in connection with this Agreement, or the breach hereof (including a dispute as to whether Cause or Resignation for Good Reason exists), the parties hereto shall first submit their dispute to formal mediation. The Company shall select a mediator reasonably acceptable to both parties. In the event that the parties cannot reach resolution through formal mediation, the dispute shall be settled by arbitration in Los Angeles, California, in accordance with the Rules of the American Arbitration Association then in effect. Each party shall pay his, her or its own costs (including attorneys’ fees) in connection with such mediation or arbitration. To the extent such mediation or arbitration requires the submission of any information that either party claims is confidential information, the parties agree that such mediation or arbitration shall be confidential proceeding. Judgment upon the award rendered by the mediator or arbitrator may be entered in any court of competent jurisdiction. If any proceeding is necessary to enforce the mediation or arbitration award, the prevailing party shall be entitled to reasonable attorneys’ fees and costs and disbursements, in addition to any other relief to which such party may be entitled. Notwithstanding the foregoing, the Company shall be entitled to seek equitable relief directly from a court of competent jurisdiction (without prior arbitration) with respect to any alleged breach of the Proprietary Agreement or Section 8, including specific performance and injunctions, restraining Executive from committing or continuing to commit such alleged breach.

 

13. Successors . Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agrees expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. The terms of this Agreement and all of Executive’s rights hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

 
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14. Miscellaneous Provisions .

 

14.1 Amendments and Waivers . Any term of this Agreement may be amended or waived only with the written consent of the parties. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 

14.2 Notices . Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or 48 hours after being deposited in the U.S. or Canadian mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

 

14.3 Choice of Law . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of Quebec, without giving effect to its or any other jurisdiction’s principles of conflict of laws.

 

14.4 Severability . If one or more provisions of this Agreement are held to be unenforceable under applicable law then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Agreement shall be enforceable in accordance with its terms.

 

14.5 Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

 

14.6 Advice of Counsel . Each party to this agreement acknowledges that, in executing this Agreement, such party has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement. This Agreement shall not be construed against any party by reason of the drafting of preparation hereof.

 

 
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The parties have executed this Employment Agreement as of the date first written above.

 

  The Company:  
  
FIRST AMERICAN GROUP, INC.
       
By: /s/ Daniel Solomita  
    Daniel Solomita  
    President and Chief Executive Officer  

  

 

Executive:

 

 

 

By:

/s/ Daniel Solomita

 

Name (Print): Daniel Solomita

 

 

Address:

 

 

 

Tel:

  

 
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EXHIBIT A

 

Pursuant to Section 3.2 of the Employment Agreement, dated June 29, 2015, by and between First American Group, Inc., a Nevada corporation (the “Company”), and Daniel Solomita, the Company shall grant a bonus to Mr. Solomita as follows:

 

(i) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s securities are listed an exchange or the OTCQX tier of the OTCMarkets;

 

(ii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company executes a contract for a minimum quantity of 25,000 M/T of PTA/EG or a PET;

 

(iii) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s first fill-scale production facility is in commercial operation; and

 

(iv) 1,000,000 shares of common stock shall be issued to Mr. Solomita when the Company’s second full-scale production facility is in commercial operation.

 

The term “commercial operation” means a full-scale production facility of the Company produces 10 M/T per hour of PTA and EG combined, for a term of not less than six (6) months.

 

In lieu of an issuance of the shares common stock referenced in this Exhibit A, Daniel Solomita may, in his sole discretion, elect to receive such shares of common stock, in whole or in part, in the form of a restricted stock grant with a future vesting date, or a warrant or an option with no or a nominal exercise price. 

 

 
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EXHIBIT B

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is made as of February ___, 2015, by and between First American Group, Inc., a Nevada corporation (the “Company”), and Daniel Solomita (the “Indemnitee”).

 

RECITALS

 

The Company and Indemnitee recognize the increasing difficulty in obtaining liability insurance for directors, officers and key employees, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers and key employees to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited. Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and agents of the Company may not be willing to continue to serve as agents of the Company without additional protection. The Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as to provide them with the maximum protection permitted by law.

 

AGREEMENT

 

In consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and Indemnitee hereby agree as follows:

 

 1. Indemnification .

 

(a) Third Party Proceedings . The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

 
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(b) Proceedings by or in the right of the Company . The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its stockholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

(c) Mandatory Payment of Expenses . To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.

 

 2. No Employment Rights . Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.

 

 3. Expenses; Indemnification Procedure .

 

(a) Advancement of Expenses . The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referred to in Section l(a) or Section 1(b) hereof (including amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.

 

(b) Notice/Cooperation by Indemnitee . Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 12(d) below. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

 

 
11

 

(c) Procedure . Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than twenty (20) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within twenty (20) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

 

(d) Notice to Insurers . If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(e) Selection of Counsel . In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

 

 
12

 

 4. Additional Indemnification Rights; Nonexclusivity .

 

(a) Scope . Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

 

(b) Nonexclusivity . The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of the Company’s Board of Directors, Chapter 78 of the Nevada Revised Statutes, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in any such capacity at the time of any action, suit or other covered proceeding.

 

5. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

 

6. Mutual Acknowledgment . Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

 

 
13

 

7. Officer and Director Liability Insurance . The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a parent or subsidiary of the Company.

 

8. Severability . Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

 

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

 (a) Claims Initiated By Indemnitee . To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under the Chapter 78 of the Nevada Revised Statutes, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate;

 

 (b) Lack of Good Faith . To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;

 

 
14

 

 (c) Insured Claims . To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company; or

 

 (d) Claims Under Section 16(b) . To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

10. Construction of Certain Phrases .

 

(a) For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

 

(b) For purposes of this Agreement, references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

11. Attorneys’ Fees . In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

 

 
15

 

12. Miscellaneous .

 

(a) Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflict of law.

 

(b) Entire Agreement; Enforcement of Rights . This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 

 (c) Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

(d) Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered via e-mail with receipt acknowledged, personally or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

 

(e) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

 (f) Successors and Assigns . This Agreement shall be binding upon the Company and its successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns.

 

(g) Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company to effectively bring suit to enforce such rights.

 

[signature page follows]

 

 
16

 

The parties hereto have executed this Agreement as of the day and year set forth on the first page of this Agreement.

 

 

  FIRST AMERICAN GROUP, INC.  
       
By:  
  Name:

Daniel Solomita

 
  Title:

President and Chief Executive Officer

 

 

 

Address: 1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

 

AGREED TO AND ACCEPTED:

 

INDEMNITEE:

 

 

(Signature)

 

Print Name: Daniel Solomita

   

Address: ________________________

 

                  ________________________

 

 
17

 

EXHIBIT C

 

PROPRIETARY INFORMATION AND

INVENTIONS AGREEMENT

 

FIRST AMERICAN GROUP, INC.

 

In consideration of my employment or consultancy (as the case may be) by First American Group, Inc., a Nevada corporation (the “Company”, which term includes the Company’s subsidiaries and any of its affiliates), any opportunity for advancement or reassignment that the Company may offer me, the compensation paid to me in connection with such employment and any stock and/or stock options which have been or may be granted to me by the Company, I, ________________, hereby agree as follows:

 

1. Whenever used in this Agreement the following terms will have the following meanings:

 

1.1 “ Invention(s) ” means discoveries, developments, designs, improvements, inventions and/or works of authorship, whether or not patentable, copyrightable or otherwise legally protectable. This includes, but is not limited to, any new machine, article of manufacture, biological material, method, process, technique, use, equipment, device, apparatus, system, compound, formulation, composition of matter, design or configuration of any kind, or any improvement thereon.

 

1.2 “ Proprietary Information ” means information or physical material not generally known or available outside the Company or information or physical material entrusted to the Company by third parties. This includes, but is not limited to, Inventions, confidential knowledge, trade secrets, copyrights, product ideas, techniques, processes, formulas, object codes, biological materials such as nucleic acids, proteins, organisms, strands, cell lines, antibodies or antigen source materials, or fragments thereof, mask works and/or any other information of any type relating to documentation, data, schematics, algorithms, flow charts, mechanisms, research, manufacture, improvements, assembly, installation, marketing, forecasts, pricing, customers, the salaries, duties, qualifications, performance levels and terms of compensation of other employees, and/or cost or other financial data concerning any of the foregoing or the Company and its operations. Proprietary Information may be contained in material such as drawings, samples, procedures, specifications, reports, studies, customer or supplier lists, budgets, cost or price lists, compilations or computer programs, or may be in the nature of unwritten knowledge or know-how.

 

1.3 “ Company Documents ” means documents or other media that contain Proprietary Information or any other information concerning the business, operations or plans of the Company, whether such documents have been prepared by me or by others. “Company Documents” include, but are not limited to, blueprints, drawings, photographs, charts, graphs, notebooks, customer lists, computer disks, tapes or printouts, sound recordings and other printed, typewritten or handwritten documents.

 

 
18

 

2. I understand that the Company is engaged in a continuous program of research, development and production. I also recognize that the Company possesses or has rights to Proprietary Information (including certain information developed by me during my employment or consultancy (as the case may be) by the Company that has commercial value in the Company’s business.

 

3. I understand that the Company possesses Company Documents that are important to its business.

 

4. I understand and agree that my employment or consultancy (as the case may be) creates a relationship of confidence and trust between me and the Company with respect to (i) all Proprietary Information and (ii) the confidential information of another person or entity with which the Company has a business relationship and is required by terms of an agreement with such entity or person to hold such information as confidential. At all times, both during my employment or consultancy (as the case may be) by the Company and after its termination, I will keep in confidence and trust all such information, and I will not use or disclose any such information without the written consent of the Company, except as may be necessary in the ordinary course of performing my duties to the Company.

 

5. In addition, I hereby agree as follows:

 

5.1 All Proprietary Information will be the sole property of the Company and its assigns, and the Company and its assigns will be the sole owner of all trade secrets, patents, copyrights and other rights in connection therewith. I hereby assign to the Company any rights I may presently have or I may acquire in such Proprietary Information.

 

5.2 All Company Documents, apparatus, equipment and other physical property, whether or not pertaining to Proprietary Information, furnished to me by the Company or produced by me or others in connection with my employment or consultancy (as the case may be) will be and remain the sole property of the Company. I will return to the Company all such Company Documents, materials and property as and when requested by the Company, excepting only (i) my personal copies of records relating to my compensation; (ii) my personal copies of any materials previously distributed generally to stockholders of the Company; and (iii) my copy of this Agreement (my “Personal Documents”). Even if the Company does not so request, I will return all such Company Documents, materials and property upon termination of my employment or consultancy (as the case may be) by me or by the Company for any reason, and, except for my Personal Documents, I will not take with me any such Company Documents, material or property or any reproduction thereof upon such termination.

 

5.3 I will promptly disclose to the Company, or any persons designated by it, all Inventions relating to the Field, as defined below, made or conceived, reduced to practice or learned by me, either alone or jointly with others, prior to the term of my employment or consultancy (as the case may be) and for one (1) year thereafter. For purposes of this Agreement, “Field” means research, development, marketing or manufacturing of any products also researched, developed, marketed or manufactured by the Company.

 

 
19

 

5.4 All Inventions that I conceive, reduce to practice, develop or have developed (in whole or in part, either alone or jointly with others) during the term of my employment or consultancy (as the case may be) will be the sole property of the Company and its assigns to the maximum extent permitted by law (and to the fullest extent permitted by law will be deemed “works made for hire”), and the Company and its assigns will be the sole owner of all patents, copyrights and other rights in connection therewith. I hereby assign to the Company my entire right, title and interest, whether possessed now or later acquired, in such Inventions. I agree that any Invention required to be disclosed under paragraph (c) above within one (1) year after the term of my employment or consultancy (as the case may be) will be presumed to have been conceived during my employment or consultancy (as the case may be). I understand that I may overcome the presumption by showing that such Invention was conceived after the termination of my employment or consultancy (as the case may be).

 

NOTICE REQUIRED BY REVISED CODE OF WASHINGTON 49.44.140: ANY ASSIGNMENT OF INVENTIONS REQUIRED BY THIS AGREEMENT DOES NOT APPLY TO AN INVENTION FOR WHICH NO EQUIPMENT, SUPPLIES, FACILITIES OR TRADE SECRET INFORMATION OF THE COMPANY WAS USED AND WHICH WAS DEVELOPED ENTIRELY ON THE EMPLOYEE’S OWN TIME, UNLESS (a) THE INVENTION RELATES (i) DIRECTLY TO THE BUSINESS OF THE COMPANY OR (ii) TO THE COMPANY’S ACTUAL OR DEMONSTRABLY ANTICIPATED RESEARCH OR DEVELOPMENT, OR (b) THE INVENTION RESULTS FROM ANY WORK PERFORMED BY THE EMPLOYEE FOR THE COMPANY.

 

CALIFORNIA

 

I understand that to the extent my relationship with the Company is at any time determined to be that of an employee for purposes of California Labor Code Section 2870, the provisions of this Agreement requiring assignment of Inventions to the Company do not apply to any Invention that qualifies fully under the provisions of California Labor Code Section 2870 (attached hereto as Exhibit B ). I will advise the Company promptly in writing of any inventions that I believe meet such provisions and are not otherwise disclosed on Exhibit A , discussed below in paragraph 6.

 

5.5 During or after my employment, upon the Company’s request and at the company’s expense, I will execute all papers in a timely manner and do all acts necessary to apply for, secure, maintain or enforce patents, copyrights and any other legal rights in the United States and foreign countries in Inventions assigned to the Company under this Agreement, and I will execute all papers and do any and all acts necessary to assign and transfer to the Company or any person or party to whom the Company is obligated to assign its rights, my entire right, title and interest in and to such Inventions. This obligation will survive the termination of my employment or consultancy (as the case may be), but the Company will compensate me at a reasonable rate after such termination for time actually spent by me at the Company’s request on such assistance. In the event that the Company is unable for any reason whatsoever to secure my signature to any document reasonably necessary or appropriate for any of the foregoing purposes, (including renewals, extensions, continuations, divisions or continuations in part), I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agents and attorneys-in-fact to act for and in my behalf and instead of me, but only for the purpose of executing and filing any such document and doing all other lawfully permitted acts to accomplish the foregoing purposes with the same legal force and effect as if executed by me.

 

 
20

 

5.6 So that the Company may be aware of the extent of any other demands upon my time and attention, I will disclose to the Company (such disclosure to be held in confidence by the Company) the nature and scope of any other business activity in which I am or become engaged during the term of my employment or consultancy (as the case may be). During the term of my employment or consultancy (as the case may be), I will not engage in any other business activity that is related to the Company’s business or its actual or demonstrably anticipated research and development.

 

6. As a matter of record I attach hereto as Exhibit B  a complete list of all Inventions (including patent applications and patents) relevant to the Field that have been made, conceived, developed or first reduced to practice by me, alone or jointly with others, prior to my employment or consultancy (as the case may be) with the Company that I desire to remove from the operation of this Agreement, and I covenant that such list is complete. If no such list is attached to this Agreement, I represent that I have no such Inventions at the time of signing this Agreement. If in the course of my employment or consultancy with the Company, I use or incorporate into a product or process an Invention not covered by Paragraph 5(d) of this Agreement in which I have an interest, the Company is hereby granted a nonexclusive, fully paid-up, royalty-free, perpetual, worldwide license of my interest to use and sublicense such Invention without restriction of any kind.

 

7. I represent that my execution of this Agreement, my employment or consultancy (as the case may be) with the Company and my performance of my proposed duties to the Company in the development of its business will not violate any obligations I may have to any former employer, or other person or entity, including any obligations to keep confidential any proprietary or confidential information of any such employer. I have not entered into, and I will not enter into, any agreement that conflicts with or would, if performed by me, cause me to breach this Agreement.

 

8. In the course of performing my duties to the Company, I will not utilize any proprietary or confidential information of any former employer.

 

9. I agree that this Agreement does not constitute an employment or consultancy (as the case may be) agreement for a specific duration and that, unless otherwise provided in a written contract signed by both the Company President or its Chief Operating Officer and me, (i) my employment or consultancy (as the case may be) with the Company is “at will” and (ii) I will have the right to resign my employment or consultancy (as the case may be), and the Company will have the right to terminate my employment or consultancy (as the case may be), at any time and for any reason, with or without cause.

 

10. This Agreement will be effective as of the first day of my employment or consultancy (as the case may be) by the Company and the obligations hereunder will continue beyond the termination of my employment and will be binding on my heirs, assigns and legal representatives. This Agreement is for the benefit of the Company, its successors and assigns (including all subsidiaries, affiliates, joint ventures and associated companies) and is not conditioned on my employment for any period of time or compensation therefor. I agree that the Company is entitled to communicate any obligations under this Agreement to any future employer or potential employer of mine.

 

 
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11. During the term of my employment and for one (1) year thereafter, I will not, without the Company’s written consent, directly or indirectly be employed or involved with any business developing or exploiting any products or services that are competitive with products or services (a) being commercially developed or exploited by the Company during my employment and (b) on which I worked or about which I learned Proprietary Information during my employment with the Company.

 

12. During the term of my employment and for one (1) year thereafter, I will not personally or through others recruit, solicit or induce in any way any employee, advisor or consultant of the Company to terminate his or her relationship with the Company.

 

13. I acknowledge that any violation of this Agreement by me will cause irreparable injury to the Company and I agree that the Company will be entitled to extraordinary relief in court, including, but not limited to, temporary restraining orders, preliminary injunctions and permanent injunctions without the necessity of posting a bond or other security and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.

 

14. I agree that any dispute in the meaning, effect or validity of this Agreement will be resolved in accordance with the laws of the state of Washington without regard to its or any other jurisdiction’s conflict of laws provisions. I further agree that if one or more provisions of this Agreement are held to be unenforceable under applicable Washington law, such provision(s) will be excluded from this Agreement and the balance of the Agreement will be interpreted as if such provision were so excluded and will be enforceable in accordance with its terms.

 

15. I HAVE READ AND UNDERSTOOD THIS AGREEMENT. THIS AGREEMENT MAY ONLY BE MODIFIED BY A SUBSEQUENT WRITTEN AGREEMENT EXECUTED BY THE PRESIDENT OR CHIEF OPERATING OFFICER OF THE COMPANY.

 

Dated: ______________________, 2015.

 

By: ____________________________

 

 Name (Print): ____________________

 

Accepted and Agreed to:

 

FIRST AMERICAN GROUP, INC.

 

By: ____________________________

 

Title: ___________________________

 

 
22

 

EXHIBIT A

TO

PROPRIETARY INFORMATION AND

INVENTIONS AGREEMENT

 

First American Group, Inc.

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

Ladies and Gentlemen:

 

1. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment or consultancy (as the case may be) by First American Group, Inc. (the “Company”) that have been made or conceived or first reduced to practice by me, alone or jointly with others, prior to my employment or consultancy (as the case may be) by the Company that I desire to remove from the operation of the Proprietary Information and Inventions Agreement entered into between the Company and me.

 

________ No inventions or improvements.

 

________ Any and all inventions regarding:

 

________ Additional sheets attached.

 

2. I propose to bring to my employment or consultancy (as the case may be) the following materials and documents of a former employer:

 

________ No materials or documents.

 

________ See below:

 

                                          

(Signature)

Print Name: Daniel Solomita

 

 
23

 

EXHIBIT B

TO

PROPRIETARY INFORMATION AND

INVENTIONS AGREEMENT

 

In accordance with California Labor Code Section 2872, you are hereby notified that your Confidentiality and Invention Assignment Agreement does not require you to assign to the Company any Invention for which no equipment, supplies, facility, or trade secret information of the Company was used and that was developed entirely on your own time, and does not relate to the business of the Company or to the Company’s actual or demonstrably anticipated research or development, or does not result from any work performed by you for the Company.

 

Following is the text of California Labor Code Section 2870:

 

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information, except for those inventions that either:

 

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

 

(2) Result from any work performed by the employee for the employer.

 

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

 

 

24


 

EXHIBIT 10.3

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is made as of June 29, 2015, by and between First American Group, Inc., a Nevada corporation (the “Company”), and Daniel Solomita (the “Indemnitee”).

 

RECITALS

 

The Company and Indemnitee recognize the increasing difficulty in obtaining liability insurance for directors, officers and key employees, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers and key employees to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited. Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and agents of the Company may not be willing to continue to serve as agents of the Company without additional protection. The Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as to provide them with the maximum protection permitted by law.

 

AGREEMENT

 

In consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and Indemnitee hereby agree as follows:

 

1. Indemnification .

 

(a) Third Party Proceedings . The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

 
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(b) Proceedings by or in the right of the Company . The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its stockholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

(c) Mandatory Payment of Expenses . To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.

 

2. No Employment Rights . Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.

 

3. Expenses; Indemnification Procedure .

 

(a) Advancement of Expenses . The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referred to in Section l(a) or Section 1(b) hereof (including amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.

 

 
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(b) Notice/Cooperation by Indemnitee . Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 12(d) below. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

 

(c) Procedure . Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than twenty (20) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within twenty (20) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

 

(d) Notice to Insurers . If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(e) Selection of Counsel . In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

 

 
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4. Additional Indemnification Rights; Nonexclusivity .

 

(a) Scope . Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

 

(b) Nonexclusivity . The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of the Company’s Board of Directors, Chapter 78 of the Nevada Revised Statutes, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in any such capacity at the time of any action, suit or other covered proceeding.

 

5. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

 

6. Mutual Acknowledgment . Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

 

7. Officer and Director Liability Insurance . The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a parent or subsidiary of the Company.

 

 
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8. Severability . Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

 

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

(a) Claims Initiated By Indemnitee . To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under the Chapter 78 of the Nevada Revised Statutes, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate;

 

(b) Lack of Good Faith . To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;

 

(c) Insured Claims . To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company; or

 

(d) Claims Under Section 16(b) . To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

10. Construction of Certain Phrases .

 

(a) For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

 

(b) For purposes of this Agreement, references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

 
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11. Attorneys’ Fees . In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

 

12. Miscellaneous .

 

(a) Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflict of law.

 

(b) Entire Agreement; Enforcement of Rights . This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 

(c) Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

(d) Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered via e-mail with receipt acknowledged, personally or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

 

(e) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

(f) Successors and Assigns . This Agreement shall be binding upon the Company and its successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns.

 

(g) Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company to effectively bring suit to enforce such rights.

 

[signature page follows]

 

 
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The parties hereto have executed this Agreement as of the day and year set forth on the first page of this Agreement.

 

 

FIRST AMERICAN GROUP, INC.  
     
By: /s/ Daniel Solomita  
Name:   Daniel Solomita  
Title:  President and Chief Executive Officer  

 

 

Address: 1999 Avenue of the Stars, Suite 2520 

Los Angeles, California 90067

 

 

AGREED TO AND ACCEPTED:

 

 

INDEMNITEE:

 

 

 

By:

/s/ Daniel Solomita                                                                                       

(Signature)

 

 

Print Name:  

Daniel Solomita

 

 

 

 

Address:  

                                                                                                                  

                                                                                                                  

 

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EXHIBIT 10.4

 

INDEMNIFICATION AGREEMENT

 

This Indemnification Agreement (the “Agreement”) is made as of June 29, 2015, by and between First American Group, Inc., a Nevada corporation (the “Company”), and Donald Danks (the “Indemnitee”).

 

RECITALS

 

The Company and Indemnitee recognize the increasing difficulty in obtaining liability insurance for directors, officers and key employees, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers and key employees to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited. Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and agents of the Company may not be willing to continue to serve as agents of the Company without additional protection. The Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as to provide them with the maximum protection permitted by law.

 

AGREEMENT

 

In consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and Indemnitee hereby agree as follows:

 

1. Indemnification .

 

(a) Third Party Proceedings . The Company shall indemnify Indemnitee if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

 

 
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(b) Proceedings by or in the right of the Company . The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its stockholders unless and only to the extent that the court in which such action or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

 

(c) Mandatory Payment of Expenses . To the extent that Indemnitee has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.

 

2. No Employment Rights . Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment.

 

3. Expenses; Indemnification Procedure .

 

(a) Advancement of Expenses . The Company shall advance all expenses incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referred to in Section l(a) or Section 1(b) hereof (including amounts actually paid in settlement of any such action, suit or proceeding). Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby.

 

(b) Notice/Cooperation by Indemnitee . Indemnitee shall, as a condition precedent to his or her right to be indemnified under this Agreement, give the Company notice in writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 12(d) below. In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee’s power.

 

 
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(c) Procedure . Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than twenty (20) days after receipt of the written request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Articles of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within twenty (20) days after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed, but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct.

 

(d) Notice to Insurers . If, at the time of the receipt of a notice of a claim pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

 

(e) Selection of Counsel . In the event the Company shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at the expense of the Company.

 

 
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4. Additional Indemnification Rights; Nonexclusivity .

 

(a) Scope . Notwithstanding any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company’s Articles of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement. In the event of any change in any applicable law, statute or rule which narrows the right of a Nevada corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall have no effect on this Agreement or the parties’ rights and obligations hereunder.

 

(b) Nonexclusivity . The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s Articles of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of the Company’s Board of Directors, Chapter 78 of the Nevada Revised Statutes, or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though he or she may have ceased to serve in any such capacity at the time of any action, suit or other covered proceeding.

 

5. Partial Indemnification . If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses, judgments, fines or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled.

 

6. Mutual Acknowledgment . Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee.

 

 
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7. Officer and Director Liability Insurance . The Company shall, from time to time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the protection afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by a parent or subsidiary of the Company.

 

8. Severability . Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law. The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms.

 

9. Exceptions . Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement:

 

(a) Claims Initiated By Indemnitee . To indemnify or advance expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under the Chapter 78 of the Nevada Revised Statutes, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate;

 

(b) Lack of Good Faith . To indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous;

 

(c) Insured Claims . To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company; or

 

(d) Claims Under Section 16(b) . To indemnify Indemnitee for expenses or the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute.

 

 
5

 

10. Construction of Certain Phrases .

 

(a) For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

 

(b) For purposes of this Agreement, references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the company” shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Agreement.

 

11. Attorneys’ Fees . In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of Indemnitee’s material defenses to such action were made in bad faith or were frivolous.

 

12. Miscellaneous .

 

(a) Governing Law . This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflict of law.

 

(b) Entire Agreement; Enforcement of Rights . This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party.

 

 
6

 

(c) Construction . This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly, this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto.

 

(d) Notices . Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered via e-mail with receipt acknowledged, personally or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

 

(e) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument.

 

(f) Successors and Assigns . This Agreement shall be binding upon the Company and its successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns.

 

(g) Subrogation . In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company to effectively bring suit to enforce such rights.

 

[signature page follows]

 

 
7

 

The parties hereto have executed this Agreement as of the day and year set forth on the first page of this Agreement.

 

 

FIRST AMERICAN GROUP, INC.  
     
By:

/s/ Daniel Solomita

 
Name:  Daniel Solomita  
Title:  President and Chief Executive Officer  

 

 

Address: 1999 Avenue of the Stars, Suite 2520 

Los Angeles, California 90067

 

 

AGREED TO AND ACCEPTED:

 

 

INDEMNITEE:

 

 

By: /s/ Donald Danks  
  (Signature)  

 

 

Print Name: Donald Danks  
     
     
Address:

 

 

8


EXHIBIT 10.5

 

STOCK REDEMPTION AGREEMENT

 

This Stock Redemption Agreement (this “Agreement”) is made between First American Group, Inc., a Nevada corporation, and Mazen Kouta (the “Selling Shareholder”) this 29th day of February, 2015.

 

RECITALS

 

A. The Selling Shareholder is the owner of 56,250,000 shares of common stock (the “Redemption Shares”), par value $.0001 per share, of the Company.

 

B. The Company desires to redeem the Redemption Shares from the Selling Shareholder, and the Selling Shareholder desires to have the Redemption Shares redeemed by the Company, upon the terms and conditions set forth in this Agreement.

 

ACCORDINGLY , the parties agree as follows:

 

1. Redemption Price . The Company shall redeem the Redemption Shares from the Selling Shareholder for the aggregate redemption price of $9,000, which amount is hereby acknowledged as having been received in cash by the Company from the Selling Shareholder (the “Redemption Price”). Selling Shareholder hereby assigns, separate from certificate, all right, title and interest in and to the Redemption Shares to the Corporation.

 

2. Selling Shareholder’s Representations and Warranties .

 

2.1. The Selling Shareholder represents and warrants to the Company that: (i) the Selling Shareholder owns and holds the Redemption Shares free and clear of all liens, encumbrances and claims of other persons or entities whatsoever and subject to no options, warrants, contracts, agreements, arrangements or understandings of any kind; (ii) the Selling Shareholder has full power and authority to transfer and deliver the Redemption Shares to the Company in accordance with the terms of this Agreement, and (iii) the consummation of the redemption transaction provided for in this Agreement shall not constitute the breach of any term or provision of, or constitute a default under, any agreement or other instrument to which the Selling Shareholder is a party.

 

2.2 The Selling Shareholder further represents and warrants to the Company that the Selling Shareholder has been advised to consult with, and has consulted or chosen not to consult with, independent advisers with respect to the fairness of the Redemption Price and the other terms of this Agreement.

 

 
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3. Mutual Release . Though the Company and the Selling Shareholder presently have no claims against the other as of the date of this Agreement, the Company and the Selling Shareholder hereby release and forever discharge each other from all claims arising prior to the date of this Agreement related to the Redemption Shares.

 

4. Successors and Assigns . This Agreement shall be binding on and shall inure to the benefit of the parties to this Agreement and their respective spouses, successors, assignees, heirs and personal representatives.

 

5. Legal Proceedings . In the event any legal proceeding, including any arbitration, is commenced for the purpose of interpreting or enforcing any provision of this Agreement:

 

(i) venue shall be in Los Angeles, California; and

 

(ii) the prevailing party in the proceeding shall be entitled to recover (a) its attorneys’ fees in the proceeding and/or any related bankruptcy or appeal, in addition to its cost and disbursements, and (b) all other costs of the proceeding, including but no limited to the cost of experts, accountants and consultants and other costs and services reasonably related to the proceeding, from the non-prevailing party.

 

6. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect of the conflict of law principles thereof.

 

7. Entire Agreement . This Agreement supersedes any and all oral or written agreements previously made relating to the subject matter of this Agreement, and constitutes the entire agreement of the parties with respect to such subject matter.

 

8. Amendment . This Agreement may be modified or amended only in writing signed by both parties.

 

9. Further Assurances . Each party shall execute and deliver any and all additional documents and instruments and shall take all actions reasonably requested by the other party in order to carry out the intent of this Agreement.

 

10. Counterparts . This Agreement may be executed in counterparts and by facsimile or scanned e-mail attachment, each of which shall considered an original, but both of which together shall constitute the same document.

 

[signature page follows]

 

 
2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

 

 

  COMPANY:  
 
FIRST AMERICAN GROUP, INC.:
       
By: /s/ Mazen Kouta  
  Name: Mazen Kouta    
  Title:   President  
       
   

SELLING SHAREHOLDER:

   
By:

/s/ Mazen Kouta

Name: Mazen Kouta

 

 

3


EXHIBIT 10.6

 

STOCK REDEMPTION AGREEMENT

 

This Stock Redemption Agreement (this “Agreement”) is made between First American Group, Inc., a Nevada corporation, and Zeeshan Sajid (the “Selling Shareholder”) this 29th day of June, 2015.

 

RECITALS

 

A. The Selling Shareholder is the owner of 43,750,000 shares of common stock (the “Redemption Shares”), par value $.0001 per share, of the Company.

 

B. The Company desires to redeem the Redemption Shares from the Selling Shareholder, and the Selling Shareholder desires to have the Redemption Shares redeemed by the Company, upon the terms and conditions set forth in this Agreement.

 

ACCORDINGLY , the parties agree as follows:

 

1. Redemption Price . The Company shall redeem the Redemption Shares from the Selling Shareholder for the aggregate redemption price of $7,000, which amount is hereby acknowledged as having been received in cash by the Company from the Selling Shareholder (the “Redemption Price”). Selling Shareholder hereby assigns, separate from certificate, all right, title and interest in and to the Redemption Shares to the Corporation.

 

2. Selling Shareholder’s Representations and Warranties .

 

2.1. The Selling Shareholder represents and warrants to the Company that: (i) the Selling Shareholder owns and holds the Redemption Shares free and clear of all liens, encumbrances and claims of other persons or entities whatsoever and subject to no options, warrants, contracts, agreements, arrangements or understandings of any kind; (ii) the Selling Shareholder has full power and authority to transfer and deliver the Redemption Shares to the Company in accordance with the terms of this Agreement, and (iii) the consummation of the redemption transaction provided for in this Agreement shall not constitute the breach of any term or provision of, or constitute a default under, any agreement or other instrument to which the Selling Shareholder is a party.

 

2.2 The Selling Shareholder further represents and warrants to the Company that the Selling Shareholder has been advised to consult with, and has consulted or chosen not to consult with, independent advisers with respect to the fairness of the Redemption Price and the other terms of this Agreement.

 

 
1

 

3. Mutual Release . Though the Company and the Selling Shareholder presently have no claims against the other as of the date of this Agreement, the Company and the Selling Shareholder hereby release and forever discharge each other from all claims arising prior to the date of this Agreement related to the Redemption Shares.

 

4. Successors and Assigns . This Agreement shall be binding on and shall inure to the benefit of the parties to this Agreement and their respective spouses, successors, assignees, heirs and personal representatives.

 

5. Legal Proceedings . In the event any legal proceeding, including any arbitration, is commenced for the purpose of interpreting or enforcing any provision of this Agreement:

 

(i) venue shall be in Los Angeles, California; and

 

(ii) the prevailing party in the proceeding shall be entitled to recover (a) its attorneys’ fees in the proceeding and/or any related bankruptcy or appeal, in addition to its cost and disbursements, and (b) all other costs of the proceeding, including but no limited to the cost of experts, accountants and consultants and other costs and services reasonably related to the proceeding, from the non-prevailing party.

 

6. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California, without giving effect of the conflict of law principles thereof.

 

7. Entire Agreement . This Agreement supersedes any and all oral or written agreements previously made relating to the subject matter of this Agreement, and constitutes the entire agreement of the parties with respect to such subject matter.

 

8. Amendment . This Agreement may be modified or amended only in writing signed by both parties.

 

9. Further Assurances . Each party shall execute and deliver any and all additional documents and instruments and shall take all actions reasonably requested by the other party in order to carry out the intent of this Agreement.

 

10. Counterparts . This Agreement may be executed in counterparts and by facsimile or scanned e-mail attachment, each of which shall considered an original, but both of which together shall constitute the same document.

 

[signature page follows]

 

 
2

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above.

 

 

  COMPANY:  
 
FIRST AMERICAN GROUP, INC.:
       
By: /s/ Mazen Kouta  
  Name: Mazen Kouta    
  Title:   President  
       
   

SELLING SHAREHOLDER:

   
By:

/s/ Zeeshan Sajid

Name:   Zeeshan Sajid

 

 

3


EXHIBIT 10.7

 

TECHNOLOGY TRANSFER AGREEMENT

 

This Technology Transfer Agreement (“Agreement”) is entered into on June 22, 2015 (“Effective Date”) by and between 8198381 Canada Inc., a corporation duly formed and existing under the laws of Canada (“Seller”), and Loop Holdings, Inc., a corporation duly formed and existing under the laws of Nevada (“Purchaser”). The parties hereby agree as follows:

 

1. Background .

 

1.1 Daniel Solomita, is (i) the sole beneficial holder of securities and the sole officer and director of Seller, and (ii) the majority holder of shares of common stock and the sole officer and director of Purchaser.

 

1.2 Purchaser has paid good and valuable consideration to Seller, and Seller will invoice Purchaser on a monthly basis in the future, to perform certain services related to the development of PET depolymerization technology, including but not limited to, the design and engineering of production facilities, equipment testing, cost reduction assessment of chemical processes, product purity testing and research and development related to PET plastic production facilities (the “PET Depolymerization Technology”).

 

1.3 Seller’s services enumerated in Section 1.1 have never been memorialized in a writing but have previously agreed by way of oral contract to assign the PET Depolymerization Technology to Purchaser. Seller hereby acknowledges that it has received all consideration necessary for the assignment of the PET Depolymerization Technology.

 

1.4 Seller wishes to confirm in writing that it has sold its right, title and interest in PET Depolymerization Technology and related know-how, technology and plan for commercializing the same to Purchaser.

 

1.5 Purchaser wishes to confirm in writing that it has purchased such PET Depolymerization Technology and related know-how, technology and plan for commercializing the same.

 

2. Definitions . Certain terms are defined in the text of this Agreement, and in addition, the following terms shall have the following definitions:

 

2.1 “Closing Date” means the date on which Purchaser shall transfer title to the Patents (as defined below) and Subject Technology (as defined below) to Purchaser.

 

2.2 “Patents” means those patents and applications related to the PET Depolymerization Technology, and all reissues, reexaminations, extensions, continuations, continuations in part, continuing prosecution applications, and divisions of such patents and applications; provisional patent applications that are or will be continuations or continuations in part of such patents and applications; and foreign counterparts to any of the foregoing including without limitation utility models.

 

 
1

 

 2.3 “Subject Technology” means: all technology, know-how, methods, documents, materials, Patents and information as of the Effective Date and in the future relating to the PET Depolymerization Technology, and the idea and plan to commercialize the same.

 

4. Transfer of Patents and Subject Technology .

 

4.1 Subject Technology Assignment . Seller hereby sells, assigns, transfers and conveys to Purchaser all right, title and interest it has in and to the Subject Technology and all inventions and discoveries described therein.

 

4.2 Assignment of Causes of Action . Seller hereby sells, assigns, transfers and conveys to Purchaser all right, title and interest it has in and to all causes of action and enforcement rights, whether currently pending, filed, or otherwise, related to the Subject Technology.

 

5. Additional Obligations .

 

5.1 Further Assurances . At the reasonable request of Purchaser and without demanding further consideration from Purchaser, Seller agrees to execute and deliver such other instruments and do and perform such other acts and things as may be reasonably necessary for effecting completely the consummation of the transfer of ownership in and to the Subject Technology or any part thereof as contemplated hereby, including without limitation execution, acknowledgment and recordation of other such papers, and using all reasonable best efforts to obtain the same from the respective inventors, as necessary or desirable for fully perfecting and conveying unto Purchaser the benefit of the transfer of ownership in and to the Subject Technology as contemplated hereby.

 

5.2 Further Assistance . Subject to the terms and conditions hereof, Seller agrees, upon the reasonable request of Purchaser, to do all things necessary, proper, or advisable, including without limitation the execution, acknowledgment and recordation of specific assignments, oaths, declarations and other documents on a country-by-country basis, to assist Purchaser in obtaining, perfecting, sustaining, and/or enforcing the Subject Technology. Such assistance may also include providing, and obtaining from the respective inventors, prompt production of pertinent facts and documents, giving of testimony, execution of petitions, oaths, powers of attorney, specifications, declarations or other papers and other assistance reasonably necessary for filing patent applications, complying with any duty of disclosure, and conducting prosecution, reexamination, reissue, interference or other priority proceedings, opposition proceedings, cancellation proceedings, public use proceedings, infringement or other court actions and the like with respect to the Subject Technology. Seller’s agreement to render any of the foregoing assistance is subject to Purchaser’s payment of all reasonable expenses of Seller incurred in connection therewith and the availability of Seller’s personnel.

 

 
2

 

6. Representations and Warranties .

 

Seller hereby warrants to Purchaser as follows:

 

6.1 Authority . Seller has the right and authority to enter into this Agreement and to carry out its obligations hereunder.

 

6.2 Title and Contest . Seller has good and marketable title to the Subject Technology, including without limitation all rights, title, and interest in the Subject Technology to sue for infringement thereof. The Subject Technology is free and clear of all liens, mortgages, security interests or other encumbrances, and restrictions on transfer. There are no actions, suits, claims or proceedings threatened, pending or in progress on the part of any named inventor of the Subject Technology relating in any way to the Subject Technology and Seller has not received notice of (and Seller is not aware of any facts or circumstances which could reasonably be expected to give rise to) any other actions, suits, investigations, claims or proceedings threatened, pending or in progress relating in any way to the Subject Technology. There are no existing contracts, agreements, options, commitments, proposals, bids, offers, or rights with, to, or in any person to acquire any of the Subject Technology.

 

6.3 Existing Licenses . No rights or licenses have been granted under the Subject Technology.

 

6.4 Restrictions on Rights . Purchaser will not be subject to any covenant not to sue or similar restrictions on its enforcement or enjoyment of the Subject Technology as a result of the transaction contemplated in this Agreement, or any prior transaction related to the Subject Technology.

 

6.5 Conduct . To Seller’s knowledge, none of Seller or its representatives has engaged in any conduct, or omitted to perform any necessary act, the result of which would invalidate any of the Subject Technology or hinder its enforcement.

 

6.6 Enforcement . Seller has not put a third party on notice of actual or potential infringement of any of the Subject Technology or considered enforcement action(s) with respect to the Subject Technology.

 

6.7 Patent Office Proceedings . None of the patents part of the Subject Technology have been or are currently involved in any reexamination, reissue, interference proceeding, or any similar proceeding and that no such proceedings are pending or threatened.

 

6.8 Related Assets . There are no other patents issued and/or applications pending for or on behalf of Seller which are subject to a “Terminal Disclaimer” under 37 C.F.R. §1.321 that require any of such patents issued and/or applications and any of the patents part of the Subject Technology conveyed in this Agreement to remain under common ownership.

 

6.9 Fees . All maintenance fees, annuities, and the like due on any patents related to the Subject Technology have been timely paid through the Effective Date.

 

 
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6.10 Validity and Enforceability . To Seller’s knowledge, any patents related to the Subject Technology have never been found invalid or unenforceable for any reason in any administrative, arbitration, judicial or other proceeding, and Seller has not received any notice or information of any kind from any source suggesting that the patents related to the Subject Technology may be invalid or unenforceable.

 

7. Miscellaneous .

 

7.1 No Representation or Warranty . Seller makes no representations or warranties whatsoever that any of the patents related to the Subject Technology covered by this agreement are either valid or are infringed by any other parties.

 

7.2 Limitation on Consequential Damages . Except in the case of fraud by seller, neither party shall be liable to the other for loss of profits, or any other indirect or special, consequential, punitive or incidental damages, however caused, even if advised of the possibility of such damage. The parties acknowledge that these limitations on potential liabilities were an essential element in setting consideration under this agreement.

 

7.3 Limitation of Liability . Except in the case of fraud by Seller, in no event shall either party’s total liability under this Agreement exceed the consideration paid by such party. The parties acknowledge that these limitations on potential liabilities were an essential element in setting consideration under this agreement.

 

7.4 Compliance with Laws . Notwithstanding anything contained in this Agreement to the contrary, the obligations of the parties shall be subject to all laws, present and future, of any government having jurisdiction over the parties and this transaction, and to orders, regulations, directions or requests of any such government.

 

7.5 Governing Law . Any claim arising under or relating to this Agreement shall be governed by the internal substantive laws of the State of California without regard to principles of conflict of laws.

 

7.6 Jurisdiction . Each party hereby agrees to jurisdiction and venue in the courts of the State of California or the Federal courts sitting therein for all disputes and litigation arising under or relating to this Agreement.

 

7.7 Entire Agreement . The terms and conditions of this Agreement, including its exhibits, constitutes the entire agreement between the parties with respect to the subject matter hereof, and merges and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions. Neither of the parties shall be bound by any conditions, definitions, warranties, understandings, or representations with respect to the subject matter hereof other than as expressly provided herein. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. No oral explanation or oral information by either party hereto shall alter the meaning or interpretation of this Agreement. No amendments or modifications shall be effective unless in a writing signed by authorized representatives of both parties. These terms and conditions will prevail notwithstanding any different, conflicting or additional terms and conditions which may appear on any purchase order, acknowledgment or other writing not expressly incorporated into this Agreement. This Agreement may be executed in two (2) or more counterparts, all of which, taken together, shall be regarded as one and the same instrument.

 

 
4

 

7.8 Notices : All notices required or permitted to be given hereunder shall be in writing, shall make reference to this Agreement, and shall be delivered by hand, or dispatched by prepaid air courier or by registered or certified airmail, postage prepaid, addressed as follows:

 

 

In the case of Seller:

 

In the case of Purchaser:

 

 

 

Loop Holdings Inc.

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

8198381 Canada Inc.

1999 Avenue of the Stars, Suite 2520

Los Angeles, California 90067

 

Such notices shall be deemed served when received by addressee or, if delivery is not accomplished by reason of some fault of the addressee, when tendered for delivery. Either party may give written notice of a change of address and, after notice of such change has been received, any notice or request shall thereafter be given to such party at such changed address.

 

7.9 Relationship of Parties . Neither party has any express or implied right or authority to assume or create any obligations on behalf of the other or to bind the other to any contract, agreement or undertaking with any third party. Nothing in this Agreement shall be construed to create a partnership, joint venture, employment or agency relationship between Seller and Purchaser.

 

7.10 Equitable Relief . Each party agrees that damages alone would be insufficient to compensate the other for any material breach of this Agreement, acknowledges that irreparable harm would result from a breach of this Agreement, and consents to the entering of an order for injunctive relief to prevent a breach or further breach, and the entering of an order for specific performance to compel performance of any obligations under this Agreement.

 

7.11 Severability . The terms and conditions stated herein are declared to be severable. If any paragraph, provision, or clause in this Agreement shall be found or be held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the remainder of this Agreement shall be valid and enforceable and the parties shall use good faith to negotiate a substitute, valid and enforceable provision which most nearly effects the parties’ intent in entering into this Agreement.

 

7.12 Waiver . Failure by either party to enforce any term of this Agreement shall not be deemed a waiver of future enforcement of that or any other term in this Agreement or any other agreement that may be in place between the parties.

 

7.13 Assignment . This Agreement shall be binding upon the parties hereto and their respective successors and assigns, with the further understandings, however, that neither party shall have the right to assign this Agreement (or any or its rights hereunder) to any person, firm or corporation in the absence of having received the other party’s prior written consent therefore, which consent shall not be unreasonably withheld or denied.

 

[signature page follows]

 

 
5

 

IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first written above.

 

 

Seller:

 

Purchaser:

 

 

 

 

 

8198381 CANADA INC.

 

LOOP HOLDINGS INC.

 

 

 

 

 

 

 

By:

/s/ Daniel Solomita

 

By:

/s/ Daniel Solomita

 

Name:

Daniel Solomita

 

Name:

Daniel Solomita

 

Title:

President

 

Title:

President

 

 

 

6


 

EXHIBIT 99.1

 

Loop Holdings, Inc.

February 28, 2015

 

Index to the Financial Statements

 

Contents

  Page(s)  

 

   

Report of Independent Registered Public Accounting Firm

 

F-2

 
       

Balance sheet at February 28, 2015

   

F-3

 
       

Statement of operations for the period from October 23, 2014 (inception) through February 28, 2015

   

F-4

 
       

Statement of changes in stockholders’ equity for the period from October 23, 2014 (inception) through February 28, 2015

   

F-5

 
       

Statement of cash flows for the period from October 23, 2014 (inception) through February 28, 2015

   

F-6

 
       

Notes to the financial statements

   

F-7

 

 

 
F-1

  

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Stockholders

Loop Holdings, Inc.

 

We have audited the accompanying balance sheet of Loop Holdings, Inc. (“Loop Holdings” or the “Company”) as of February 28, 2015 and the related statements of operations, changes in stockholders’ equity, and cash flows for the period from October 23, 2014 (inception) through February 28, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

 

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of February 28, 2015 and the statements of its operations and its cash flows for the period from October 23, 2014 (inception) through February 28, 2015, in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at February 28, 2015, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Li and Co mpany , PC  

Li and Company, PC

 

Skillman, New Jersey 

June 30, 2015

 

 
F-2

 

Loop Holdings, Inc.

Balance Sheet

    February 28,
2015
 
     
     

Assets

     
Current Assets    

Cash

 

$

182,492

 

Prepayments

   

5,950

 
       

Total current assets

   

188,442

 
       

Intellectual Property

       

Intellectual property

   

445,050

 

Accumulated amortization

 

(9,892

)

       

Intellectual property, net

   

435,158

 
       

Total assets

 

$

623,600

 
       

Liabilities and Stockholders' Equity

       

Current Liabilities

       

Accounts payable

 

$

-

 

Accrued expenses

   

-

 

Advances from stockholder

   

1,130

 

Intellectual property acquisition obligation

   

212,880

 
       

Total current liabilities

   

214,010

 
       

Commitments and Contingencies

       
       

Stockholders' Equity

       

Common stock par value $0.00001: 50,000,000 shares authorized; 20,498,750 shares issued and outstanding

   

205

 

Additional paid-in capital

   

1,198,985

 

Accumulated deficit

 

(789,600

)

       

Total stockholders' equity

   

409,590

 
       

Total liabilities and stockholders' equity

 

$

623,600

 

 

See accompanying notes to the financial statements.

 

 
F-3

 

Loop Holdings, Inc.

Statement of Operations

    For the Period from October 23,
2014 (inception) through
February 28,
2015
 
     

Revenue

 

$

-

 
       

Operating Expenses

       

Consulting fees

   

712,000

 

Consulting fees - related party

   

50,000

 

Professional fees

   

42,050

 

General and administrative expenses

   

26,962

 
       

Total operating expenses

   

831,012

 
       

Loss from Operations

 

(831,012

)

       

Other (Income) Expense

       

Foreign currency transaction (gain) loss

 

(41,412

)

       

Other (income) expense, net

 

(41,412

)

       

Loss before Income Tax Provision

 

(789,600

)

       

Income Tax Provision

   

-

 
       

Net Loss

 

$

(789,600

)

  

See accompanying notes to the financial statements.

 

 
F-4

 

Loop Holdings, Inc.

Statement of Changes in Stockholders' Equity
For the period from October 23, 2014 (inception) through February 28, 2015

    Common stock par value $0.00001     Additional         Total  
    Number of Shares     Amount      Paid-in
Capital
    Accumulated Deficit     Stockholders' Equity  
                     

October 23, 2014 ( inception )

 

-

   

$

-

   

$

-

   

$

-

   

$

-

 
                                       

Issuance of common shares for cash at $0.00001 per share upon formation

   

17,000,000

     

170

                     

170

 
                                       

Issuance of common shares for cash at $0.00001 per share in October 2014

   

2,000,000

     

20

                     

20

 
                                       

Issuance of common shares for cash at $0.80 per share in December 2014

   

225,000

     

2

     

179,998

             

180,000

 
                                       

Issuance of common shares for service valued at $0.80 per share in December 2014

   

890,000

     

9

     

711,991

             

712,000

 
                                       

Issuance of common shares for cash at $0.80 per share in January 2015

   

225,000

     

2

     

179,998

             

180,000

 
                                       

Issuance of common shares for service valued at $0.80 per share in January 2015

   

15,000

     

1

     

11,999

             

12,000

 
                                       

Issuance of common shares for cash at $0.80 per share in February 2015

   

143,750

     

1

     

114,999

             

115,000

 
                                       

Net loss

                         

(789,600

)

 

(789,600

)

                                       

Balance, February 28, 2015

   

20,498,750

   

$

205

   

$

1,198,985

   

$

(789,600

)

 

$

409,590

 

  

See accompanying notes to the financial statements.

 

 
F-5

 

Loop Holdings, Inc.
Statement of Cash Flows

    For the Period from October 23, 2014 (inception) through February 28,
2015
 
     

Cash Flows from Operating Activities

   

Net loss

 

$

(789,600

)

Adjustments to reconcile net loss to net cash used in operating activities:

       

Amortization expense

   

9,892

 

Common shares issued for services

   

724,000

 

Changes in operating assets and liabilities:

       

Prepayments

 

(5,950

)

       

Net Cash Used in Operating Activities

 

(61,658

)

       

Cash Flows from Investing Activities

       

Acquisition of intellectual property

 

(232,170

)

       

Net Cash Used in Investing Activities

 

(232,170

)

       

Cash Flows from Financing Activities

       

Advances from stockholder

   

1,130

 

Proceeds from sale of common shares

   

475,190

 
       

Net Cash Provided by Financing Activities

   

476,320

 
       

Net Change in Cash

   

182,492

 
       

Cash - beginning of period

   

-

 
       

Cash - end of period

 

$

182,492

 
       

Supplemental disclosure of cash flow information:

       

Interest paid

 

$

-

 
       

Income tax paid

 

$

-

 
       

Non Cash Financing and Investing Activities

       

Acquisition of intellectual property with debt

 

$

212,880

 

  

 See accompanying notes to the financial statements.

  

 
F-6

 

Loop Holdings, Inc.

February 28, 2015

Notes to the Financial Statements

 

Note 1 - Organization and Operations

 

Loop Holdings, Inc.

 

Loop Holdings, Inc. (the “Company”) was incorporated on October 23, 2014 under the laws of the State of Nevada. The Company engages in the designing, prototyping and building a closed loop plastics recycling business leverage a proprietary de-polymerization technology.

 

Note 2 - Significant and Critical Accounting Policies and Practices

 

The 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 generally accepted accounting principles.

 

Basis of Presentation

 

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Fiscal Year-End

 

The Company elected the last day of February as its fiscal year ending date.

 

Use of E stimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

 

 
F-7

  

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

 

 

(i)

Assumption as a going concern : Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

 

 
 

(ii)

Fair value of long-lived assets : Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; (v) a significant decline in the Company’s stock price for a sustained period of time; and (vi) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

 

 
 

(iii)

Valuation allowance for deferred tax assets : Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

  

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.

 

Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1

Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

   

Level 2

Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

   

Level 3

Pricing inputs that are generally observable inputs and not corroborated by market data.

 

 
F-8

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepayments, accounts payable and intellectual property acquisition obligation approximate their fair values because of the short maturity of these instruments.

  

Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

 

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

 

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses.

 

 
F-9

  

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

 

Intangible Assets Other Than Goodwill

 

The Company has adopted Subtopic 350-30 of the FASB Accounting Standards Codification for intangible assets other than goodwill. Under the requirements, the Company amortizes the acquisition costs of intangible assets other than goodwill on a straight-line basis over the estimated useful lives of the respective assets as follows:

 

     

Estimated Useful Life (Years)

 
           

Intellectual property (*)

     

15

 

_____________

(*) Amortized on a straight-line basis over the terms of the exclusive licenses and/or agreements, or the terms of legal lives of the patents, whichever is shorter.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

 
F-10

 

Commitment and Contingencies 

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the 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 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.

 

Foreign Currency Transactions

 

The Company applies the guidelines as set out in Section 830-20-35 of the FASB Accounting Standards Codification (“Section 830-20-35”) for foreign currency transactions. Pursuant to Section 830-20-35 of the FASB Accounting Standards Codification, foreign currency transactions are transactions denominated in currencies other than U.S. Dollar, the Company’s reporting currency or Canadian Dollar, the Company’s operating functional currency. Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the functional currency and the currency in which a transaction is denominated increases or decreases the expected amount of functional currency cash flows upon settlement of the transaction. That increase or decrease in expected functional currency cash flows is a foreign currency transaction gain or loss that generally shall be included in determining net income for the period in which the exchange rate changes. Likewise, a transaction gain or loss (measured from the transaction date or the most recent intervening balance sheet date, whichever is later) realized upon settlement of a foreign currency transaction generally shall be included in determining net income for the period in which the transaction is settled. The exceptions to this requirement for inclusion in net income of transaction gains and losses pertain to certain intercompany transactions and to transactions that are designated as, and effective as, economic hedges of net investments and foreign currency commitments. Pursuant to Section 830-20-25 of the FASB Accounting Standards Codification, the following shall apply to all foreign currency transactions of an enterprise and its investees: (a) at the date the transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction shall be measured and recorded in the functional currency of the recording entity by use of the exchange rate in effect at that date as defined in section 830-10-20 of the FASB Accounting Standards Codification; and (b) at each balance sheet date, recorded balances that are denominated in currencies other than the functional currency or reporting currency of the recording entity shall be adjusted to reflect the current exchange rate.

 

Revenue Recognition

 

The Company follows paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

Pursuant to ASC paragraph 505-50-25-7, if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

 

 
F-11

   

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with non-employees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty's performance is complete. If the Company is a newly formed corporation, or the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company is a newly formed corporation or the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

 

a.

The exercise price of the option.

   

b.

The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

   

c.

The current price of the underlying share.

   

d.

The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

   

e.

The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

   

f.

The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

 
F-12

  

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

 

Research and Development

 

The Company follows paragraph 730-10-25-1 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2 “Accounting for Research and Development Costs” ) and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 68 “Research and Development Arrangements” ) for research and development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily of remuneration for material and testing costs for research and development.

 

Deferred Tax Assets and Income T ax Provision

 

The Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its balance sheets and provides valuation allowances as management deems necessary.

 

 
F-13

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Tax years that remain subject to examination by major tax jurisdictions

 

The Company discloses tax years that remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15.

  

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph 830-230-45-1 of the FASB Accounting Standards Codification.

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

 
F-14

  

Recently Issued Accounting Pronouncements

 

In August 2014, the FASB issued the FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).

 

In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued (or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.

 

When management identifies conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

 

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration of management’s plans, the entity should disclose information that enables users of the financial statements to understand all of the following (or refer to similar information disclosed elsewhere in the footnotes):

 

 

a.

Principal conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before consideration of management’s plans)

 

 

 
 

b.

Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations

 

 

 
 

c.

Management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

  

If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements to understand all of the following:

 

 

a.

Principal conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern

 

 

 
 

b.

Management’s evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations

 

 

 
 

c.

Management’s plans that are intended to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

  

The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted.

 

In January 2015, the FASB issued the FASB Accounting Standards Update No. 2015-01 “ Income Statement—Extraordinary and Unusual Items (Subtopic 225-20) : Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”).

 

This Update eliminates from GAAP the concept of extraordinary items and the requirements in Subtopic 225-20 for reporting entities to separately classify, present, and disclose extraordinary events and transactions.

 

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying financial statements.

 

 
F-15

  

Note 3 – Going Concern

 

The Company has elected to adopt early application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”) .

 

The Company’s 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.

 

As reflected in the financial statements, the Company had an accumulated deficit at February 28, 2015, a net loss and net cash used in operating activities for the reporting period then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is attempting to commence operations and generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to commence operations and generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. 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 revenue and its ability to raise additional funds by way of a public or private offering.

 

The 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 – Intellectual Property

 

Entry into Intellectual Property Assignment Agreement

 

On October 27, 2014, the Company (“Assignee”) entered into an Intellectual Property Assignment Agreement ("Assignment Agreement") with Hatem Essaddam (“Assignor”), whereas (a) The Assignor has developed a certain technique and method allowing for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure (“Technique”); (b) The Assignee wishes to develop a Polyethylene terephthalate depolymerization processing plant; and (c) The Assignor wishes to assign to the Assignee all of his rights, title and interests (including Intellectual Property rights), present and future, in and to the Technique.

  

Currency

 

Unless otherwise indicated, all dollar amounts referred to in this Agreement are stated in Canadian dollars.

 

Assignment

 

On the terms and subject to the conditions set forth in this Assignment Agreement, the Assignor agrees to assign, sell, transfer and deliver to the Assignee at the Closing Time, free and clear of all Encumbrances, all of the Assignor's rights, title and interest in and to the Technique and the Intellectual Property Rights (collectively, the "Purchased Assets"), and the Assignee agrees to purchase and accept from the Assignor at the Closing Time, the Purchased Assets.

 

 
F-16

  

Purchase Price

 

The purchase price payable by the Assignee to the Assignor for the Purchased Assets shall be ONE MILLION THREE HUNDRED THOUSAND DOLLARS (CAD1,300,000.00) (the "Purchase Price"), exclusive of all Taxes, payable as follows:

  

 

(a)

Within five (5) days following the receipt, by the Assignee, of results confirming that the Technique meets the Specifications under the testing conditions of Techsolutions Environment Inc. and analysis by the University of Montreal for purity levels exceeding the Specifications, the Assignor will remit the Technique Sheet to the Assignee and the Assignee will deposit an amount of TWO HUNDRED FIFTY THOUSAND DOLLARS (CAD250,000.00) with the escrow agent, in trust, to be held in accordance with the Escrow Agreement (the "Deposit");

 

 

 
 

(b)

Subject to the conditions set out in the Assignment Agreement having been complied with and subject to the terms of the Escrow Agreement, on the Closing Date, the Assignee shall give irrevocable instructions to the escrow agent to proceed to the transfer of the Deposit to Me Charles Derome, in trust for the benefit of the Assignor, and the Company shall remit an additional amount of TWO HUNDRED FIFTY THOUSAND DOLLARS (CAD250,000.00) to Me Charles Derome, in trust for the benefit of the Assignor, by wire transfer;

 

 

(c)

Subject to the Closing, TWO HUNDRED THOUSAND DOLLARS (CAD200,000) will be paid by wire transfer to the Assignor within sixty (60) days of each of the following milestones having been met (collectively, the "Milestones"), which Milestones are to be calculated separately one from the other and not cumulatively:

 

 

 

(i)

An average of twenty (20) metric tons per day of terephthalic acid meeting the Specifications is produced at the Plant for twenty (20) Operating days.

 

 

 

 
 

 

(ii)

An average of thirty (30) metric tons per day of terephthalic acid meeting the Specifications having been produced at the Plant for thirty (30) Operating days;

 

 

 

 
 

 

(iii)

An average of sixty (60) metric tons per day of terephthalic acid meeting the Specifications having been produced a the Plant for sixty (60) Operating days; and

 

 

 

 
 

 

(iv)

An average of one hundred (100) metric tons per day of terephthalic acid meeting the Specifications having been produced at the Plant for sixty (60) Operating days.

 

Transition Period Payment

 

In addition to the payment of the Purchase Price, during the Transition Period (a period of sixty (60) days following the reception of the Technique Sheet by the Assignee), the Assignee shall make a consulting payment for services in the amount of up to SIXTEEN THOUSAND DOLLARS (CAD16,000) to the Assignor payable as follows:

 

 

(a)

EIGHT THOUSAND DOLLARS (CAD8,000) payable concurrently with the Deposit by check made payable to the Assignor; and

 

 

 
 

(b)

subject to the conditions set out in the Assignment Agreement having been complied with, EIGHT THOUSAND DOLLARS (CAD8,000) payable on the Closing Date by check made payable to the Assignor.

 

 
F-17

 

Royalties 

  

In addition to the payment of the Purchase Price, the Assignee shall provide the Assignor a royalty payment as follows up to a maximum aggregate amount of TWENTY-FIVE MILLION SEVEN HUNDRED THOUSAND DOLLARS (CAD25,700,000):

 

 

(a)

10% of gross profits on the sale of all products derived by the Assignee from the Technique;

 

 

 
 

(b)

10% of any license fee paid to the Assignee in respect of any licensing or other right to use the Technique granted to a third party by the Assignee;

 

 

 
 

(c)

5% of any royalty or other similar payment made to the Assignee by a third party to whom a license or other right to use the Technique has been granted by the Assignee; and

 

 

 
 

(d)

5% of any royalty or other similar payment made to the Assignee by a third party in respect of a sub-license or other right to use the Technique granted by the third party.

 

Exclusivity and Non-compete

 

In consideration of the substantial expenditure of time and effort undertaken and to be undertaken by the Assignee, the Assignor shall not, until the date which is six (6) months from the termination of this Agreement pursuant to Section 6.2 or Section 6.4, (i) offer to assign or sell, solicit any offer to assign or purchase, or engage in any negotiations relating to the purchase of the Technique or any Intellectual Property Right by any person or entity other than the Assignee, (ii) offer to license the Technique or any of the Intellectual Property Rights or enter into any negotiation related thereto, or (iii) provide any information related to the Technique or any Intellectual Property Rights to any person or entity other than the Assignee.

 

The Assignor agrees that he shall not, directly or indirectly, be involved in any business or project, whether personally or as a shareholder, director, officer, employee, consultant, lender or otherwise, which is similar to the business of commercializing the Technique or is competitive therewith anywhere in North America or Europe for a period of five (5) years following receipt of the last payment made pursuant to the terms and conditions set out in the Transition Period Payment clause.

 

Accounting Treatment of Intellectual Property Assignment Agreement

 

The Company recorded CAD500,000 (approximately $445,050 using the midpoint spot rate of 1CAD=$0.8901) as the purchase price of the intellectual property on October 27, 2014, which is being amortized over the estimated useful life of 15 years from the date of the assignment.

 

The Company did not make any Milestone payment as none of the Milestones have been met as of February 28, 2015.

    

 
F-18

  

(i) Impairment Testing

 

The Company completed its annual impairment testing of the intellectual property and determined that there was no impairment at February 28, 2015.

 

(ii) Amortization Expense

 

Amortization expense was $9,892 for the reporting period ended February 28, 2015.

 

Note 5 – Related Party Transactions

 

Related Parties

 

Related parties with whom the Company had transactions are:

 

Related Parties

 

Relationship

 

Related Party Transactions

 

Business Purpose of transactions

 

       

Management and significant stockholder

     
       

Daniel Solomita

 

Chairman, CEO and significant stockholder

 

(i) Advances to the Company; (ii) Operating lease

 

(i) Working capital; (ii) Office lease

 

       

Entity controlled by significant stockholder

     
       

8198381 Canada Inc.

 

An entity majority-owned and controlled by the Chairman, CEO and significant stockholder

 

Consulting services

 

Consulting services

 

 

Free Office Space

 

The Company has been provided office space by its Chief Executive Officer at no cost. Management determined that such cost is nominal and did not recognize the rent expense in its financial statement.

 

Advances from Current Shareholder

 

From time to time, a shareholder of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.

 

At February 28, 2015, a stockholder of the Company advanced $1,130 to the Company for working capital purposes.

 

 
F-19

  

Note 6 – Commitments and Contingencies

 

Entry into Consulting Agreements

 

Business Advisory Agreements

 

On December 1, 2014, the Company entered into consulting agreements with certain consultants (“the Consultants”) with the following terms and conditions:

 

Services

 

The Consultants will provide consulting support and advisory services to include business expansion strategies and corporate finance.

 

Terms

 

The Agreement shall commence on the date above and shall continue for a period of twelve (12) months.

 

Consideration

 

In consideration for services rendered herein; upon signing of the Agreements, the Consultants will be granted 890,000 shares of Loop common stock. The shares will be fully vested, and fully earned.

 

Accounting Treatment of the Consideration

 

The Company valued the 890,000 shares of its common stock issued to the Consultants at $0.80 per share, the most recent PPM price, or $712,000 and recorded the value of the issuance as consulting fees on the date of grant due to the fact that these shares are fully-vested and fully earned.

 

Entry into Investor Relations Agreement  

 

On January 15, 2015, the Company engaged John H. Shaw ("Consultant"), as a corporate communications consultant with the following terms and conditions:

 

Responsibilities and Scope

 

Effective January 15, 2015, the Company ("Client") retained the Consultant for a period of three months to consult on corporate communications matters ("Corporate Communication Agreement").

 

Terms

 

a. Six thousand dollars ($6,000) for Month One, and four thousand dollars ($4,000) for each of both Months Two and Three. (For companies with a "Going Concern" or negative cash flow, fees are invoiced as a retainer due and are payable by the 1st of each month.) Retainers shall be pro-rated in the first and last months: January 15 to the end of the month is $3,000; February 1: $5,000; March 1: $4,000; April 1: $2,000). The initial retainer is due at program commencement. Thereafter, Client will be invoiced in advance and, if retainer or any other fee is not received by the 10th of the month or within 10 calendar days after being invoiced -- whichever comes last -- services are automatically suspended without deferral until the account is brought current.

 

b. Fifteen thousand (15,000) shares of Loop Industries restricted common stock as a one-time non-refundable retainer in consideration of Consultant's dedicated allocation of time on Client's behalf. The Restricted Stock shall be issued as fully-paid and non-assessable securities. The Company shall take all corporate action necessary for the issuance of Restricted Stock to be legally valid and irrevocable. For a period of thirteen months from the date of this Agreement, Client shall maintain its "status" as (1) a fully SEC reporting company, (2) listed on the OTCQB or a more senior exchange. Should Client fail to maintain said status for "five or more consecutive trading days", Client shall pay Consultant a one-time-ever fee of $6,500 cash due within ten days of the above referenced "fifth consecutive trading day."

  

Accounting Treatment of the Compensation Arrangement

 

a. $8,000 was recorded as professional fees - investor relations for the reporting period ended February 28, 2015.

 

b. The Company granted 15,000 shares of its common stock to the Consultant which was valued at $0.80 per share, the most recent PPM price, or $12,000 which was recorded as professional fees - investor relations on the date of grant due to the fact that these shares are issued as fully-paid and non-assessable securities.

  

 
F-20

  

Note 7 – Stockholders’ Equity

 

Shares Authorized

 

Upon formation the total number of shares of all classes of stock the Company is authorized to issue is Fifty Million (50,000,000) shares all of which shall be Common Stock, par value $0.0001 per share.

 

Common Stock

 

Common Shares Issued for Cash

 

Upon formation, the Company issued 17,000,000 shares of common stock to the founders of the Company for cash at $0.0001 per share, or $170.

 

On October 23, 2014, the Company issued 2,000,000 shares of common stock to an investor for cash at $0.0001 per share, or $20.

 

In December 2014, the Company sold 225,000 shares of common stock to four (4) investors at $0.80 per share, or $180,000 in aggregate for cash.

 

In January 2015, the Company sold 225,000 shares of common stock to three (3) investors at $0.80 per share, or $180,000 in aggregate for cash.

 

In February 2015, the Company sold 143,750 shares of common stock to three (3) investors at $0.80 per share, or $115,000 in aggregate for cash.

  

Note 8 – Deferred Tax Assets and Income Tax Provision

 

Deferred Tax Assets

 

At February 28, 2015, the Company had net operating loss (“NOL”) carry–forwards for Federal income tax purposes of $789,600 that may be offset against future taxable income through 2035. No tax benefit has been recorded with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements as the management of the Company believes that the realization of the Company’s net deferred tax assets of approximately $268,464 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by the full valuation allowance.

  

Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realization.The valuation allowance increased by $268,464 for the reporting period ended February 28, 2015

  

 
F-21

  

Components of deferred tax assets are as follows:

 

    February 28,
2015
 

Net deferred tax assets – Non-current:

   
     

Expected income tax benefit from NOL carry-forwards

 

$

268,464

 
       

Less valuation allowance

 

(268,464

)

       

Deferred tax assets, net of valuation allowance

 

$

-

 

  

Income Tax Provision in the Statements of Operations

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:

 

    For the reporting period ended
February 28,
2015
 
     

Federal statutory income tax rate

 

34.0

%

       

Increase (reduction) in income tax provision resulting from:

       
       

Net operating loss (“NOL”) carry-forwards

 

(34.0

)

       

Effective income tax rate

   

0.0

%

 

 
F-22

  

The Company's corporation income tax returns are subject to audit under the statute of limitations by the Internal Revenue Service and the State of California for a period of three (3) years from the date they are filed. The table below summarizes the tax years for which the Company's corporation income tax returns remain subject to audit under the statute of limitations by the Internal Revenue Service and the State of California:

 

Tax Year Ending Date

  Date Tax Return Filed     Remaining Subject to Audit (Y/N)  
         

February 28, 2015

 

Not yet

   

Y

 

  

Note 9 – Subsequent Events

 

The Company has evaluated all events that occur after the balance sheet date through the date when the financial statements were issued to determine if they must be reported. The Management of the Company determined that there were certain reportable subsequent event(s) to be disclosed as follows:

 

Common Shares Issued for Cash

 

In March 2015, the Company sold 202,500 shares of its common stock to five (5) investors at $0.80 per share, or $162,000 in aggregate for cash.

 

In April 2015, the Company sold 2,406,250 shares of its common stock to certain investors at $0.80 per share, or $1,917,000 for cash.

 

In May 2015, the Company sold 150,000 shares of its common stock to certain investors at $0.80 per share, or $120,000 for cash.

 

Entry into a Technology Transfer Agreement with 8198381 Canada, Inc., a Related Party

 

On June 22, 2015, Loop Holdings, Inc. entered into a Technology Transfer Agreement with 8198381 Canada Inc. whereby 8198381 Canada Inc. and the Company memorialized the transfer of technology and information from 8198381 Canada Inc. to the Company under the 8198381 Canada Inc. Oral Contract.

 

Entry into a Share Exchange Agreement and Stock Redemption Agreements

 

On June 29, 2015, First American Group Inc. (the “First American Group”), entered into a share exchange agreement (the “Share Exchange Agreement”) and stock redemption agreements (the “Stock Redemption Agreements”), by and among the First American Group, Loop Holdings, Inc., and all of the stockholders of Loop Holdings, Inc.

 

Pursuant to a Stock Redemption Agreement dated June 29, 2015, the First American Group redeemed from Mazen Kouta, who served as President, Treasurer and a director from April 27, 2010 until June 29, 2015, 56,250,000 shares of common stock of the First American Group for an aggregate redemption price of $9,000 and a mutual release of claims with the First American Group, the effect of which is that Mr. Kouta no longer holds any shares of common stock or any other securities of the First American Group immediately following the redemption. Pursuant to a Stock Redemption Agreement dated June 29, 2015, the First American Group redeemed from Zeeshan Sajid, who served as Secretary and director from April 27, 2010 until June 29, 2015, 43,750,000 shares of common stock of the First American Group for an aggregate redemption price of $7,000 and a mutual release of claims with the First American Group, the effect of which is that Mr. Sajid no longer holds any shares of common stock or any other securities of the First American Group immediately following the redemption. Neither the First American Group nor Mr. Sajid had any known claims against the other and released each other from any claims in order to mitigate the likelihood of claims being made in the future by any of the parties against the other.

 

Under the terms and conditions of the Share Exchange Agreement, the First American Group issued 93,030,000 shares of its common stock for the acquisition of all of the issued and outstanding shares of Loop Holdings. The number of common shares issued represented approximately 78.1% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement and Stock Redemption Agreements. The board of directors and the members of the management of the First American Group resigned and the board of directors and the member of the management of Loop Holdings became the board of directors and the member of the management of the combined entities upon consummation of the Share Exchange Agreement.

 

As a result of the controlling financial interest of the former stockholders of Loop Holdings, Inc., for financial statement reporting purposes, the merger between First American Group and Loop Holdings was treated as a reverse acquisition, with Loop Holdings deemed the accounting acquirer and the First American Group deemed the accounting acquiree under the acquisition method of accounting in accordance with the Section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction and the net assets of Loop Holdings, Inc. (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination.  The acquisition process utilizes the capital structure of the First American Group and the assets and liabilities of Loop Holdings, Inc. which were recorded at their historical costs.  The equity of the combined entity is the historical equity of Loop Holdings, Inc. retroactively restated to reflect the number of shares issued by the First American Group in the transaction.

  

 

F-23


EXHIBIT 99.2

 

 

 

Loop Holdings, Inc.

 

And

 

  First American Group Inc.  

 

As of and for the Period from October 23, 2014 (inception) through February 28, 2015  

 

Index to the Pro Forma Combined Financial Statements  

 

(Unaudited)

 

Contents

  Page(s)  
     

Pro Forma Combined Balance Sheet at February 28, 2015

  2  
       

Pro Forma Combined Statement of Operations for the Period from October 23, 2014 (inception) through February 28, 2015

    3  
       

Notes to the Pro Forma Combined Financial Statements

    4  

 

 
1

 

Loop Holdings, Inc. and First American Group, Inc.

Pro Forma Combined Balance Sheet

February 28, 2015

(Unaudited)

 

Historical Pro Forma
 Loop Holdings, Inc. 

 

 First American Group, Inc. 
February 28,
2015

 

March 31,
2015
 Adjustments   Combined 
ASSETS 

 

CURRENT ASSETS:

 

 

Cash   $ 182,492    

$

1,775   (a) $ (16,000 )   168,267  
Prepayments and other current assets     5,950     540       -       6,490  
                               
Total current assets     188,442       2,315     (16,000 )     174,757  
                               
INTELLECTUAL PROPERTY                                
Intellectual property     445,050       -       -       445,050  
Accumulated amortization   (9,892 )     -       -     (9,892 )
                               
Intellectual property, net     435,158       -       -       435,158  
                               
Total assets   $ 623,600       2,315     $ (16,000 )   $ 609,915  
                               
LIABILITIES AND EQUITY                                
CURRENT LIABILITIES:                                
Accounts payable     -       5,750    

$

-     $ 5,750  
Advances from related party     1,130       35,243       -       36,373  
Intellectual property acquisition obligation     212,880       -               212,880  
                               
Total current liabilities     214,010       40,993       -       255,003  
                               
Total liabilities     214,010       40,993       -       255,003  
                               
COMMITMENTS AND CONTENGENCIES                                
                               
STOCKHOLDERS' EQUITY:                                
                             
Common stock par value $0.0001: 250,000,000 shares authorized; 119,093,200 shares issued and outstanding     205       12,606   (a)(b)(d)  (902 )     11,909  
Additional paid-in capital     1,198,985       55,211   (a)(b)(c)(d) (121,593 )     1,132,603  
Accumulated deficit   (789,600 )   (106,495 ) (c)   106,495     (789,600 )
                               
Total stockholders' equity     409,590     (38,678 )   (16,000 )     354,912  
                               
Total liabilities and equity   $ 623,600       2,315     $ (16,000 )   $ 609,915  

 

(a)  To reflect the redemption of 100,000,000 shares of common stock of First American Group Inc. for $16,000 per stock redemption agreements.
(b)  To reclassify Loop Holdings's common stock to Additional paid-in capital
(c)  To reclassify First American Group's accumulated deficit to Additional paid-in capital
(d)  To reflect the issuance of 93,030,000 shares of common stock of First American Group Inc. for the acquisition of all of the issued and outstanding capital stock of Loop Holdings, Inc.

 

See accompanying notes to pro forma combined financial statements.

 

 
2

 

Loop Holdings, Inc. and First American Group, Inc.

Pro Forma Combined Statement of Operations

For the Period from October 23, 2014 (inception) through February 28, 2015

(Unaudited)

  

 

Historical

Pro Forma

 

Loop Holdings, Inc.

 

 

 

 

For the
Period from

 

First
American

 

 

 

October 23,
2014

 

 Group, Inc.
For the Six

 

 

 

(inception)
through

 

Months
Ended 

 

 

 

February 28, 2015

 

March 31, 2015

Adjustments

Combined

REVENUES 

 

 

 

 

  Revenue  

$

-    

$

-    

$

-    

$

-  
                     
OPERATING EXPENSES:                
  Consulting fees      712,000       -       -       712,000  
  Consulting fees - related party      50,000       -       -       50,000  
  Professional fees      42,050       2,732       -       44,782  
  General and administrative expenses      26,962       11,214       -       38,176  
                                     
    Total operating expenses      831,012       13,946       -       844,958  
                                     
INCOME (LOSS) FROM OPERATIONS    (831,012 )   (13,946 )     -     (844,958 )
                                     
OTHER (INCOME) EXPENSE:                                 
  Foreign exchange translation (gain) loss    (41,412 )     -       -     (41,412 )
                                     
    Other (income) expense, net    (41,412 )     -       -     (41,412 )
                                     
LOSS BEFORE INCOME TAX PROVISION    (789,600 )   (13,946 )     -     (803,546 )
                                     
INCOME TAX PROVISION      -       -       -       -  
                                     
NET LOSS    $ (789,600 )   $ (13,946 )  

$

-     $ (803,546 )
                                     
Earnings per share - basic and diluted    $ (0.01 )   $ (0.00  

$

-     $ (0.01
                                     
Weighted average number of shares issued and outstanding                                 
- Basic and diluted     79,414,300       126,063,200     (100,000,000 )     105,477,500  

 

See accompanying notes to pro forma combined financial statements.

 

 
3

 

Note 1 - Organization and Operations

 

First American Group Inc.

 

Radikal Phones Inc. (“Radikal Phones”) was incorporated under the laws of the State of Nevada on March 11, 2010. On October 7, 2010 Radikal Phones Inc. changed its name to First American Group Inc. ("First American Group" or "the Company"). The First American Group plans to engage in the development, sales and marketing of voice-over-Internet-protocol (“VOIP”) telephone services to enable end-users to place free phones calls over the internet in return for viewing and listening to advertising.

 

Loop Holdings, Inc.

 

Loop Holdings, Inc. (the “Loop Holdings”) was incorporated on October 23, 2014 under the laws of the State of Nevada.  Loop Holdings, Inc. engages in the designing, prototyping and building a closed loop plastics recycling business leverage a proprietary de-polymerization technology.

 

Acquisition of Loop Holdings, Inc. Recognized as a Reverse Acquisition

 

On June 29, 2015, First American Group Inc. (the “First American Group”), entered into a share exchange agreement (the “Share Exchange Agreement”) and stock redemption agreements (the “Stock Redemption Agreements”), by and among the First American Group, Loop Holdings, Inc., and all of the stockholders of Loop Holdings, Inc.

 

Pursuant to a Stock Redemption Agreement dated June 29, 2015, the First American Group redeemed from Mazen Kouta, who served as President, Treasurer and a director from April 27, 2010 until June 29, 2015, 56,250,000 shares of common stock of the First American Group for an aggregate redemption price of $9,000 and a mutual release of claims with the First American Group, the effect of which is that Mr. Kouta no longer holds any shares of common stock or any other securities of the First American Group immediately following the redemption.  Pursuant to a Stock Redemption Agreement dated June 29, 2015, the First American Group redeemed from Zeeshan Sajid, who served as Secretary and director from April 27, 2010 until June 29, 2015, 43,750,000 shares of common stock of the First American Group for an aggregate redemption price of $7,000 and a mutual release of claims with the First American Group, the effect of which is that Mr. Sajid no longer holds any shares of common stock or any other securities of the First American Group immediately following the redemption.  Neither the First American Group nor Mr. Sajid had any known claims against the other and released each other from any claims in order to mitigate the likelihood of claims being made in the future by any of the parties against the other.

 

Under the terms and conditions of the Share Exchange Agreement, the First American Group issued 93,030,000 shares of its common stock for the acquisition of all of the issued and outstanding shares of Loop Holdings.  The number of common shares issued represented approximately 78.1% of the issued and outstanding common stock immediately after the consummation of the Share Exchange Agreement and Stock Redemption Agreements. The board of directors and the members of the management of the First American Group resigned and the board of directors and the member of the management of Loop Holdings became the board of directors and the member of the management of the combined entities upon consummation of the Share Exchange Agreement.

 

 
4

 

As a result of the controlling financial interest of the former stockholders of Loop Holdings, Inc., for financial statement reporting purposes, the merger between First American Group and Loop Holdings was treated as a reverse acquisition, with Loop Holdings deemed the accounting acquirer and the First American Group deemed the accounting acquiree under the acquisition method of accounting in accordance with the Section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction and the net assets of Loop Holdings, Inc. (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the combination.  The acquisition process utilizes the capital structure of the First American Group and the assets and liabilities of Loop Holdings, Inc. which were recorded at their historical costs.  The equity of the combined entity is the historical equity of Loop Holdings, Inc. retroactively restated to reflect the number of shares issued by the First American Group in the transaction.

 

Note 2 - Basis of Presentation

 

Assumptions of Pro Forma Combined Financial Statements

 

The pro forma combined balance sheet as of February 28, 2015 and the pro forma combined statement of operations for the period from October 23, 2014 (inception) through February 28, 2015 are based on the historical financial statements of Loop Holdings, Inc.  and First American Group Inc. after giving effect to Loop Holdings, Inc.’s acquisition of First American Group Inc. using the acquisition method of accounting and applying the assumptions and adjustments described in the notes to the pro forma combined financial statements as if such acquisition had occurred as of February 28, 2015 for the combined balance sheet, and for the period from October 23, 2014 (inception) through February 28, 2015 for the combined statement of operations for pro forma financial statements purposes.

 

The pro forma combined financial statements have been prepared by management for illustrative purposes only and are not necessarily indicative of the combined financial position or combined results of operations in future periods or the results that actually would have been realized had Loop Holdings, Inc. and First American Group Inc. been a combined entity during the specified period(s).  The pro forma adjustments are based on the preliminary information available at the time of the preparation of this document and assumptions that management believes are reasonable.  The pro forma combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with Loop Holdings, Inc.’s historical financial statements included elsewhere in this Current Statement on Form 8-K for the period from October 23, 2014 (inception) through February 28, 2015 as an Exhibit filed with SEC herewith and assuming First American Group Inc. is inactive.

 

The pro forma combined financial statements do not purport to represent what the results of operations or financial position of the combined entity would actually have been if the merger had in fact occurred on February 28, 2015, nor do they purport to project the results of operations or financial position of the combined entity for any future period or as of any date, respectively.

 

These pro forma combined financial statements do not give effect to any restructuring costs or to any potential cost savings or other operating efficiencies that could result from the merger between Loop Holdings, Inc. and First American Group Inc. since such amounts, if any, are not presently determinable.

 

 
5

 

Note 3 - Pro Forma Adjustments

 

The pro forma combined financial statements have been prepared as if the acquisition was completed on February 28, 2015 for combined balance sheet purpose and on October 23, 2014 for combined statement of operations purpose and reflects the following pro forma adjustment(s):

 

a)

To reflect the redemption of 100,000,000 shares of common stock of First American Group Inc. for $16,000 per stock redemption agreements.

 

Cash

   

(16,000

)

         

Common stock: $0.0001 par value

   

10,000

 
         

Additional paid-in capital

   

6,000

 

 

b)

To reclassify Loop Holdings's common stock to Additional paid-in capital.

 

Common stock: $0.0001 par value

   

205

 
         

Additional paid-in capital

   

(205

)

 

c)

To reclassify First American Group's accumulated deficit to Additional paid-in capital.

 

Accumulated deficit

   

(106,495

)

         

Additional paid-in capital

   

106,495

 

 

d)

To reflect the issuance of 93,030,000 shares of common stock of First American Group Inc. for the acquisition of all of the issued and outstanding capital stock of Loop Holdings, Inc.

 

Common stock: $0.0001 par value

   

(9,303

)

         

Additional paid-in capital

   

9,303

 

 

 

6