As filed with the Securities and Exchange Commission on May 27, 2015

Registration No. 333-_____

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

_____________________________

REIGN SAPPHIRE CORPORATION
(Exact name of registrant as specified in its charter)

Delaware

 

5944

 

47-2573116

(State or Other Jurisdiction of Incorporation)

 

(Primary Standard Classification Code)

 

(IRS Employer

Identification No.)

9465 Wilshire Boulevard
Beverly Hills, California 90212
Telephone: 213 457 3772

(Address, including zip code, and telephone number,
including area code, of registrant’s principal executive offices)

_____________________________

Joseph Segelman
9465 Wilshire Boulevard

Beverly Hills, California 90212
Telephone: 213 457 3772

(Name, address, including zip code, and telephone number,
including area code, of agent for service)

_____________________________

Please send copies of all correspondence to:

Willa Qian, Esq.
Alan S. Gutterman, Esq.
Qian & Company, A California Professional Law Corporation
135 Main Street, Ninth Floor
San Francisco, California 94105
TELEPHONE: 415 267 1880 x 1
FAX: 415 267 1899
Email: willa@qcolaw.com

_____________________________

Approximate date of commencement of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration Statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨

 

Accelerated filer ¨

Non-accelerated filer ¨ (Do not check if a smaller reporting company)

 

Smaller reporting company x

 

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered

 

Amount of Shares to be
Registered

 

Proposed
Maximum
Offering Price
Per Share
(1)

 

Proposed
Maximum
Aggregate Offering Price
(2)

 

Amount of
Registration
Fee

Common Stock, $0.0001 par value

 

 15,000,000

 

$

0.50

 

$

7,500,000

 

$

871.50

____________

(1)    The securities are not traded in any public market and the offering price has been arbitrarily determined by the Company solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(o) of the Securities Act of 1933, as amended (the “Securities Act”) and bears no relationship to assets, earnings, or any other valuation criteria. No assurance can be given that the shares offered hereby will have a market value or that they may be sold at this, or at any price. The offering price is a fixed price at the which the Company and the selling stockholders may sell their shares until the shares are quoted on the OTCBB and/or OTCQB, at which time the selling stockholders may sell their shares at prevailing market prices or in privately negotiated transactions.

(2)    Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(o) of the Securities Act.

In the event of stock splits, stock dividends, or similar transactions involving the registrant’s common shares, the number of shares registered shall, unless otherwise expressly provided, automatically be deemed to cover the additional securities to be offered or issued pursuant to Rule 416 promulgated under the Securities Act.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

 

The information in this preliminary prospectus is not complete and may be changed. The company and the selling shareholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. There is no minimum purchase requirement for the offering by the company to proceed.

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION DATED MAY 26, 2015

REIGN SAPPHIRE CORPORATION

15,000,000 SHARES OF COMMON STOCK

$0.50 PER SHARE

Prior to this offering, no public market has existed for the common stock of Reign Sapphire Corporation (sometimes referred to herein as “RSC”, the “Company”, “us”, “we” or “our”) and it is not presently traded on any market or securities exchange. Upon completion of this offering, we will attempt to have the shares quoted under the symbol “RSAP” on the OTC Bulletin Board (“OTCBB”) operated by FINRA (Financial Industry Regulatory Authority) and OTCQB operated by the OTC Markets Group, Inc. There is no assurance that our shares will ever be quoted on the OTCBB or OTCQB. To be quoted on the OTCBB or OTCQB, a market maker must apply to make a market in our common stock. As of the date of this prospectus, we have not made any arrangement with any market makers to quote our shares.

In this public offering we are offering 10,000,000 shares of our authorized but unissued common stock and our selling shareholders are offering 5,000,000 shares of our common stock which have previously been issued to them and are currently outstanding. We will not receive any of the proceeds from the sale of shares by the selling shareholders. Shareholders may also sell their shares at prevailing market prices or for negotiated prices in private transactions if at such time are shares are quoted on the OTCBB or OTCQB.

This offering is being made on a self-underwritten, “best efforts” basis directly by the Company without the participation of an underwriter to market, distribute or sell the shares offered under this prospectus. The shares offered by the Company will be sold on our behalf by our President and CEO Joseph Segelman. Mr. Segelman is deemed to be an underwriter within the meaning of the Securities Act of 1933, as amended, with respect to the shares offered by the Company in this offering. He will not receive any commissions or proceeds for selling the shares on our behalf, nor will any underwriting discounts be paid. All of the shares being registered for sale by the Company will be sold at a fixed price of $0.50 per share for the duration of the offering. There is no minimum number of shares required to be purchased by any investor. All expenses incurred in this offering are being paid for by Mr. Segelman, who will be reimbursed for amounts paid out of the proceeds from the offering received by the Company.

PRIMARY OFFERING
SHARES OFFERED BY COMPANY

 

Number of Shares

 

Price to Public

 

Underwriting
Discounts &
Commissions

 

Proceeds to
the Company

Per Share

 

1

 

$

0.50

 

$

0.00

 

$

0.50

25% of shares are sold

 

2,500,000

 

$

0.50

 

$

0.00

 

$

1,250,000

50% of shares are sold

 

5,000,000

 

$

0.50

 

$

0.00

 

$

2,500,000

75% of shares are sold

 

7,500,000

 

$

0.50

 

$

0.00

 

$

3,750,000

Maximum Offering

 

10,000,000

 

$

0.50

 

$

0.00

 

$

5,000,000

There is no minimum amount we are required to raise from the shares being offered by the Company and the proceeds from the sale of the securities will be placed directly into the Company’s account and be immediately available to us; any investor who purchases shares will have no assurance that any monies, beside their own, will be subscribed to the prospectus. All proceeds from the sale of the securities are non-refundable, except as may be required by applicable laws. There is no guarantee that we will sell any of the securities being offered in this offering. Additionally, there is no guarantee that this offering will successfully raise enough funds to cover the costs of the offering, which the Company estimates at $100,000, or institute the Company’s business plan. Additionally, there is no guarantee that a public market for our shares will ever develop and you may be unable to sell your shares and your investment in the Company will be illiquid.

This primary offering will automatically terminate upon the earliest of (i) such time as all of the shares of common stock offered by the Company have been sold pursuant to the registration statement covering such shares or (ii) 365 days from the effective date of this prospectus, unless extended by our board of directors for an additional 90 days. We may however, at our discretion terminate the offering at any time.

The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act which became law in April 2012, and thus will be subject to reduced public company reporting requirements. Please refer to “Summary of Consolidated Financial Data” for more information about our status as an “emerging growth company”.

The Company is an early stage company and has a limited history of operations. We presently do not have the funding to execute our business plan. As of the date of this prospectus, we have been primarily involved in organizing the company, and we have developed minimal revenue from our development stage business operations.

THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD THE COMPLETE LOSS OF YOUR INVESTMENT. PLEASE REFER TO ‘RISK FACTORS’ SECTION IN THIS PROSPECTUS BEGINNING ON PAGE 8.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus.

TABLE OF CONTENTS

 

 

PAGE

PART I. INFORMATION REQUIRED IN PROSPECTUS

 

 

PROSPECTUS SUMMARY

 

1

RISK FACTORS

 

8

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

 

16

USE OF PROCEEDS

 

17

DILUTION

 

19

SELECTED FINANCIAL DATA

 

20

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

 

22

DESCRIPTION OF BUSINESS

 

33

DETERMINATION OF OFFERING PRICE

 

40

SECURITY OWNERSHIP OF PRINCIPAL AND SELLING STOCKHOLDERS

 

41

PLAN OF DISTRIBUTION

 

44

DESCRIPTION OF SECURITIES

 

49

REPORTS TO SECURITIES HOLDERS

 

52

INTERESTS OF NAMED EXPERTS AND COUNSEL

 

53

PRINCIPAL ACCOUNTING FEES AND SERVICES

 

54

MANAGEMENT AND CORPORATE GOVERNANCE

 

55

EXECUTIVE COMPENSATION

 

59

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

63

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

 

65

WHERE YOU CAN FIND MORE INFORMATION

 

67

FINANCIAL STATEMENTS

 

F-1

 

 

 

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

 

 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

 

F-21

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

F-21

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

 

F-22

ITEM 16. EXHIBITS TO FINANCIAL STATEMENTS

 

F-22

ITEM 17. UNDERTAKINGS

 

F-22

SIGNATURES

 

F-25

You should rely only on the information contained in this prospectus or contained in any free writing prospectus filed with the Securities and Exchange Commission. We have not authorized anyone to provide you with additional information or information different from that contained in this prospectus filed with the Securities and Exchange Commission. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. If anyone provides you with different information, you should not rely on it. We are offering to sell, and seeking offers to buy, our common stock only in jurisdictions where offers and sales are permitted and we are not making an offer of our common stock in any jurisdiction where the offer is not permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: We have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

i

PROSPECTUS SUMMARY

This summary only highlights selected information contained in greater detail elsewhere in this prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. You should carefully read the entire prospectus, including “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and the condensed financial statement, before making an investment decision. This prospectus contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

In this prospectus, “RSC,’’ the “Company,” the “Registrant,” ‘‘we,’’ ‘‘us,’’ and ‘‘our,’’ refer to Reign Sapphire Corporation, a Delaware corporation, unless the context otherwise requires. Unless otherwise indicated, the term ‘‘fiscal year’’ refers to our fiscal year ending December 31. Unless otherwise indicated, the term ‘‘common stock’’ refers to shares of the Company’s common stock.

“Reign Sapphires,” “Reign Red Carpet,” “Reign Day to Night,” our logo and our other trade names, trademarks and service marks appearing in this prospectus are our property. Other trade names, trademarks and service marks appearing in this prospectus are the property of their respective holders.

The Company

Overview

Reign Sapphire Corporation was established to become the first sapphire company that will vertically integrate from the mine’s gate to the retail supply chain from processing rough Australian sapphires and gem cutting to manufacturing fine jewelry including rings, pendants, bracelets, and cuff links using a variety of metals and finishes.

The Company’s marketing initiatives will focus on: (1) Business-to-Consumer (“B2C”) marketing to attract customers to the website, (2) Business-to-Business (“B2B”) marketing and sales efforts, which will include partnerships with distribution partners, to high-end fashion retailers, and (3) building a strong retail presence to market the products directly to consumers on a retail level. The Company will initially focus marketing efforts in the U.S. and upon encountering significant success in the U.S. with online, wholesale, and retail sales, the Company will expand its marketing efforts to include Europe and the Middle East.

The Company’s product line will consist of a wide range of jewelry pieces, which will initially include women’s rings, bracelets, necklaces, The Company will manufacture pendants and watches as well as men’s rings and cuff links. The sapphires will be predominantly 1.5mm to 2.5mm diamond and princess cut melees. The Company will have 5 product lines: Entry-level His Jewelry; Entry-Level Hers Jewelry; High-End His Jewelry; High-End Hers Jewelry; and Couture. This higher-end merchandise will be targeted primarily to households with annual income of $100,000 and greater. The entry-level merchandise will be marketed primarily to households with income of $60,000 to $100,000.

Strategy

RSC will set itself apart from its competition by offering A-Z production, processing, jewelry manufacturing, wholesale & retail sales making it the only sapphire company to in-house all these processes. The Company will focus primarily on quality and secondly on strategic pricing methods that will allow their gems and precious stones to compete in the U.S. market.

Products

The Company’s product line will consist of a wide range of jewelry pieces, which will initially include women’s rings, bracelets, necklaces, as well as men’s rings and cuff links. Eventually, the Company will manufacture pendants and watches. The sapphires used will be predominantly 1.5mm to 2.5mm diamond and princess cut melees.

The Company will have 5 product lines:

      Entry-level His Jewelry

      Entry-Level Hers Jewelry

1

      High-End His Jewelry

      High-End Hers Jewelry

      Couture

The “His and Hers” entry-level lines will use lower grade materials and less expensive finishes such as 935 Silver.

The high-end line will use high quality, free size gemstones and high quality metals and finishes such as gold and platinum with rhodium plating. The products will be designed according to the latest fashion trends, in consultation with leading Hollywood stylists and jewelry designers.

Market Opportunities & Marketing Strategy

Due to the nature of the industry’s products, households with annual income of $60,000 to $100,000 account for the largest proportion of jewelry industry sales; hence, households with annual income of $60,000 and greater are regarded as the primary target consumer profile. Demand for the industry’s products is largely driven by the needs and preferences of consumers, along with variations in the level of disposable income allocated toward their purchases. The Company will capitalize on fashion market opportunities by having a lower pricing point for his and hers’ jewelry by using lower grade sapphires and less precious metals. The Company will also have high-end his and hers’ jewelry that uses fine blue pave sapphires, as well as an extremely high-end couture brand that uses the finest sapphires available from Australian miners, cut by expert cutters, and set in fine custom jewelry. This higher-end merchandise will be targeted towards households with annual income of $100,000 and greater.

The Company’s marketing initiatives will focus on: (1) Business-to-Consumer (“B2C”) marketing to attract customers to the website, (2) Business-to-Business (“B2B”) marketing and sales efforts, which will include partnerships with distribution partners, to high-end fashion retailers, and eventually (3) building a strong retail presence to market the products directly to consumers on a retail level. The Company will initially focus marketing efforts on the U.S. and upon encountering significant success in the U.S. with online, wholesale, and retail sales, the Company will expand marketing efforts to include Europe and the Middle East.

On a B2C basis, the Company will use a wide array of marketing methods to spread awareness of the Company’s jewelry products, which will include internet marketing, print advertising, promotions, and eventually signage. The Company will identify ideal locations that will contain a lot of walk-by traffic in communities with middle to upper income residents. The Company is confident that a visit to the RSC retail boutique will leave the customer satisfied and eagerly awaiting the next opportunity to purchase jewelry or refer the Company’s products to friends and family.

Plan of Operations

As of the date of this prospectus, we have generated minimal revenue. Our activities have been limited to developing our business and financial plans. We will not have the necessary capital to develop or execute our business plan until we are able to secure financing. There can be no assurance that such financing will be available on suitable terms. Even if we raise 100% of the offering described in this prospectus, we may not have sufficient capital to begin generating further revenues from operations. For further discussion of our plan of operations and future financing requirements, see “Use of Proceeds”.

Risks Associated with Our Business

Our business is subject to the risks and uncertainties discussed more fully in the section entitled “Risk Factors” immediately following this summary. In particular:

      We will require additional funds in the future to achieve our current business strategy and our inability to obtain funding will cause our business to fail.

      We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter because we are a small developing company. As a result, we may not be profitable and we may not be able to generate sufficient revenue to develop as we have planned.

2

      We operate in a highly competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.

      Because we are small and do not have much capital, our marketing campaign may not be enough to attract sufficient clients to operate profitably. If we do not make a profit, we will suspend or cease operations.

      Our future success is dependent, in part, on the performance and continued service of Joseph Segelman, our President and CEO. Without his continued service, we may be forced to interrupt or eventually cease our operations.

      Our business is subject to economic, political and social developments as well as political and currency risks and changes due to judicial, administrative and regulatory actions. For example, businesses like ours that are dependent upon exploration for and extraction of minerals are subject to a high degree of risk.

Going Concern

We are an early stage company and have virtually no financial resources. Our independent registered public accountant included an explanatory paragraph in their opinion on our financial statements as of and for the period ended December 31, 2014 that states that Company losses from operations raise substantial doubt about its ability to continue as a going concern. We may seek additional financing beyond the amounts that may be received from this offering. The financing sought may be in the form of equity or debt financing from various sources as yet unidentified. Until we have completed our offering most if not all of our efforts will be spent on developing the Reign Sapphires brand and the development of our initial jewelry collections. No assurances can be given that we will generate sufficient revenue or obtain the necessary financing to continue as a going concern.

Corporate Information

The Company was incorporated in the State of Delaware on December 15, 2014. Our principal executive offices are located at 9465 Wilshire Boulevard Beverly Hills CA 90212, and our telephone number is (213 457 3772). Our website is www.reignsapphires.com . The information contained in, or that can be accessed through, our website is not a part of this prospectus.

Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act which became law in April 2012, and thus will be subject to reduced public company reporting requirements. Please refer to “Summary of Consolidated Financial Data” for more information about our status as an “emerging growth company”.

3

The Offering

We have authorized capital stock consisting of 100,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”) and 10,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred Stock”). We have 30,195,000 shares of Common Stock issued and outstanding. Through this offering we will register a total of 15,000,000 shares. These shares represent 10,000,000 additional shares of common stock to be issued by us and 5,000,000 shares of common stock currently issued to our selling stockholders. We may endeavor to sell all 10,000,000 shares of common stock to be issued by us after the registration statement for such shares becomes effective. Upon effectiveness of such registration statement, the selling stockholders may also sell their own shares. The price at which we, the Company, will offer our shares will be at a fixed price of $0.50 per share for the duration of the offering. The selling stockholders will also sell shares at a fixed price of $0.50 for the duration of the offering however, if at such time our shares are quoted on the OTC Bulletin Board (“OTCBB”) operated by FINRA (Financial Industry Regulatory Authority) and/or OTCQB operated by the OTC Markets Group, Inc. the selling stockholders may sell their shares at prevailing market prices or at privately negotiated prices. There is no arrangement to address the possible effect of the offering on the price of the stock.

The primary offering on behalf of the Company is separate from the secondary offering of the selling stockholders in that the proceeds from the shares of stock sold by the selling stockholders will go directly to them, not the Company. The same idea applies if the company approaches or is approached by investors who then subsequently decide to invest with the Company. Those proceeds would then go to the Company. Whomever the investors decide to purchase the shares from will be the beneficiary of the proceeds. None of the proceeds from the sale of shares by the selling stockholders will be utilized or given to the Company.

Securities being offered by the Company

 

10,000,000 shares of common stock offered by us in a direct offering. There is no minimum number of shares that must be sold by us for the offering to close.

 

 

 

Securities being offered by the Selling Stockholders

 


5,000,000 shares of common stock offered by selling stockholders in a resale offering.

 

 

 

Offering price per share

 

We and the selling shareholders will sell the shares at a fixed price per share of $0.50 for the duration of this offering. The selling shareholders may, however, if at such time it occurs that our shares are quoted on the OTCBB and/or OTCQB, sell their shares at prevailing market prices or in privately negotiated transactions. The offering price of the common stock has been determined arbitrarily and bears no relationship to any objective criterion of value. The price does not bear any relationship to our assets, book value, historical earnings, if any, or net worth.

 

 

 

Number of shares outstanding before offering of common stock

 


30,195,000 common shares are currently issued and outstanding.

 

 

 

Number of shares outstanding after the offering of common shares

 


40,195,000 common shares will be issued and outstanding if we sell all of the shares we are offering.

 

 

 

The minimum number of shares to be sold in this offering

 


There is no minimum number of shares that must be sold by us for the offering to close, and we will retain the proceeds from the sale of any of the offered shares that are sold.

 

 

 

Market for the common shares; proposed trading symbol

 

There is presently no public market for our common shares. While we plan to find a market maker to file an application to include our common stock on the OTCBB and/or OTCQB using the trading symbol “RSAP”, such efforts may not be successful and our shares may never be quoted and owners of our common stock may not have a market in which to sell the shares. Also, no estimate may be given as to the time that this application process will require . Furthermore, even if our common stock is quoted or granted listing, a market for the common shares may not develop.

 

 

 

4

Use of proceeds

 

We intend to use the net proceeds to us for working capital. The total costs of this offering, which are estimated to be $100,000, may exceed the proceeds we receive from the offering. See “Use of Proceeds”.

 

 

 

Termination of the offering

 

This offering will automatically terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all of the shares registered hereunder for offering by the Company have been sold. We may, at our discretion, extend the offering for an additional 90 days or terminate the offering at any time. We will notify investors by filing an information statement that will be available for public viewing on the SEC Edgar Database of any such extension of the offering.

 

 

 

“Best efforts” offering

 

The offering is being conducted on a self-underwritten, “best efforts” basis, which means our President and CEO, Joseph Segelman, will attempt to sell the shares himself without the participation of an underwriter to market, distribute or sell the shares offered under this prospectus. This prospectus will permit Mr. Segelman to sell the shares directly to the public, with no commission or other remuneration payable to him for any shares he may sell. Mr. Segelman will sell the shares himself and intends to offer them to friends, family members and business acquaintances and distribute the prospectus to potential investors at meetings. In offering the securities on our behalf, he will rely on the safe harbor from broker-dealer registration set out in Rule 3a4-1 under the Securities and Exchange Act of 1934 (the “Exchange Act”). The intended methods of communication include, without limitation, telephone and personal contacts. We do not intend to use any mass-advertising methods such as the Internet or print media.

 

 

 

Subscriptions irrevocable

 

All subscription agreements and checks should be delivered to us at the address provided in the Subscription Agreement (see Exhibit 99.1a to the registration statement which includes this prospectus) and subscriptions once accepted by us are irrevocable (except as to any states that require a statutory cooling-off period or rescission right). There is no minimum number of shares that must be sold. Since there is no minimum amount of shares that must be sold by us, you may receive no proceeds or very minimal proceeds from the offering and potential investors may end up holding shares in a company that has not received enough proceeds from the offering to begin operations; and has no market for its shares.

 

 

 

Registration and offering costs

 

We estimate our total registration and offering costs to be approximately $100,000.

 

 

 

Risk factors

 

See “Risk Factors” and the other information in this prospectus for a discussion of the factors you should consider before deciding to invest in shares of our common stock.

 

 

 

Common stock control

 

Joseph Segelman, our President and CEO, currently owns or otherwise controls 82.8% of the issued and outstanding common stock of the company, and will continue to own sufficient common shares to control the operations of the company after this offering, irrespective of its outcome.

 

 

 

Penny Stock regulation

 

The liquidity of our common stock is restricted as our common stock falls within the definition of a penny stock. These requirements may restrict the ability of broker/dealers to sell our common stock, and may affect your ability to resell common stock that you purchase in this offering.

5

Summary Financial Information

The following selected financial information is derived from the Company’s financial statements appearing elsewhere in this prospectus and should be read in conjunction with the Company’s financial statements, including the notes thereto, appearing elsewhere in this prospectus.

 

 

Fiscal year
Ended
December 31,
2014

 

From Inception
(May 31, 2013)
through
December 31,
2013

 

Fiscal quarter Ended
March 31,
2015

 

Fiscal quarter
Ended
March 31,
2014

Operating Statement Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

$

43,153

 

 

$

8,410

 

 

$

10,768

 

 

$

7,618

 

Gross Profit

 

 

17,904

 

 

 

6,168

 

 

 

7,767

 

 

 

5,149

 

Expenses

 

 

 405,448

 

 

 

 250,891

 

 

 

159,566

 

 

 

83,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Profit (Loss) from Operations

 

 

(387,544

)

 

 

(244,723

)

 

 

(151,799

)

 

 

(78,638

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

 

(387,544

)

 

 

(244,723

)

 

 

(151,799

)

 

 

(78,638

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit (Loss) Per Share

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.01

)

 

 

(0.00

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$

562,268

 

 

$

156,168

 

 

$

627,773

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

 462,835

 

 

 

 131,641

 

 

$

595,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issued and Outstanding

 

 

29,855,000

 

 

 

27,845,000

 

 

 

30,195,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ Equity

 

$

 99,433

 

 

$

 24,527

 

 

$

32,634

 

 

 

 

 

Emerging Growth Company

The recently enacted Jumpstart Our Business Startups Act of 2012, or the JOBS Act, is intended to reduce the regulatory burden on emerging growth companies. The Company meets the definition of an emerging growth company and so long as it qualifies as an “emerging growth company,” it will, among other things:

      be temporarily exempted from the internal control audit requirements Section 404(b) of the Sarbanes-Oxley Act;

      be temporarily exempted from various existing and forthcoming executive compensation-related disclosures, for example: “say-on-pay”, “pay-for-performance”, and “CEO pay ratio”;

      be temporarily exempted from any rules that might be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or supplemental auditor discussion and analysis reporting;

      be temporarily exempted from having to solicit advisory say-on-pay, say-on-frequency and say-on-golden-parachute shareholder votes on executive compensation under Section 14A of the Securities Exchange Act of 1934, as amended;

      be permitted to comply with the SEC’s detailed executive compensation disclosure requirements on the same basis as a smaller reporting company; and,

      be permitted to adopt any new or revised accounting standards using the same timeframe as private companies (if the standard applies to private companies).

Although we are still evaluating our options under the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an “emerging growth company” and thus the level of information we provide may be different than that of other public companies. If we do take advantage of any of these exemptions, some investors may find our securities less attractive, which could result in a less active trading market for our common stock, and our stock price may be more volatile.

6

We are electing to not opt out of the JOBS Act extended accounting transition period. This may make our financial statements more difficult to compare to other companies. Pursuant to the JOBS Act, as an emerging growth company we can elect to opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the standard for the private company. This may make it difficult or impossible to compare our financial statements with any other public company which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition period as possible different or revised standards may be used.

We will continue to be an emerging growth company until the earliest of:

      the last day of the fiscal year during which we have annual total gross revenues of $1 billion or more;

      the last day of the fiscal year following the fifth anniversary of the first sale of our common equity securities in an offering registered under the Securities Act;

      the date on which we issue more than $1 billion in non-convertible debt securities during a previous three-year period; or

      the date on which we become a large accelerated filer, which generally is a company with a public float of at least $700 million (Exchange Act Rule 12b-2).

7

RISK FACTORS

This offering and any investment in our common stock involves a high degree of risk. You should carefully consider the risk factors described below and all of the information contained in this prospectus relating to our business before deciding whether to purchase our common stock. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us which we currently deem immaterial or which are similar to those faced by other businesses in general, may also impair our businesses operations. If any of the following risks actually occur, our business, prospects, financial condition and results of operations could be negatively affected to a significant extent. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment in our common stock. Please also see “Disclosure Regarding Forward-Looking Statements.”

Risks Relating to Our Company and Our Industry

We have virtually no financial resources and our independent public accountants’ report includes an explanatory paragraph stating that there is substantial doubt about our ability to continue as a going concern.

We are an early stage company and have virtually no financial resources. Our independent registered public accounting firm included an explanatory paragraph in their opinion on our financial statements as of and for the period ended December 31, 2014 that states that Company losses from operations raise substantial doubt about its ability to continue as a going concern. We may seek additional financing beyond the amounts that may be received from this offering. The financing sought may be in the form of equity or debt financing from various sources as yet unidentified. Until we have completed our offering most if not all of our efforts will be spent on developing the Reign Sapphires brand and the development of our initial jewelry collections. No assurances can be given that we will generate sufficient revenue or obtain the necessary financing to continue as a going concern.

We will require additional funds in the future to achieve our current business strategy and our inability to obtain funding will cause our business to fail.

We will need to raise additional funds through public or private debt or equity sales in order to fund our future operations and fulfill contractual obligations in the future. These financings may not be available when needed. Even if these financings are available, it may be on terms that we deem unacceptable or are materially adverse to your interests with respect to dilution of book value, dividend preferences, liquidation preferences, covenants, or other terms. Our inability to obtain financing would have an adverse effect on our ability to implement our current business plan and develop our products, and as a result, could require us to diminish or suspend our operations and possibly cease our existence.

Even if we are successful in raising capital in the future, we will likely need to raise additional capital to continue and/or expand our operations. If we do not raise the additional capital, the value of any investment in our company may become worthless. In the event we do not raise additional capital from conventional sources, it is likely that we may need to scale back or curtail implementing our business plan.

The Company, being a start-up company has generated minimal revenue since our inception in December 2014.

We are a start-up company. Our ability to continue as a going concern is dependent upon our ability to commence a commercially viable operation and to achieve profitability. Since our inception in December 2014, we have generated minimal revenue, and currently have only limited operations. These factors raise substantial doubt about our ability to continue as a going concern. We may not be able to generate revenues in the future and as a result the value of our common stock may become worthless. There are no assurances that we will be successful in raising additional capital or successfully developing and commercializing our products and become profitable.

We have a limited operating history that you can use to evaluate us, and the likelihood of our success must be considered in light of the problems, expenses, difficulties, complications and delays that we may encounter because we are a small developing company. As a result, we may not be profitable and we may not be able to generate sufficient revenue to develop as we have planned.

We have no significant assets or financial resources. The likelihood of our success must be considered in light of the expenses and difficulties in development of worldwide clients, customers, recruiting and keeping clients and/ or customers and obtaining financing to meet the needs of our plan of operations. Since we have a limited operating history we may not be profitable and we may not be able to generate sufficient revenues to meet our expenses and support our anticipated activities.

8

Although members of our management team have significant experience in investment, no investments have yet been made by the Company and the Company does not have an established trading record. As a result, prospective investors will have limited historical information available to them with which to evaluate our business, making it more difficult to identify its long-term trends and developments. In evaluating our future performance and prospects, investors should consider the risks, expenses, uncertainties and obstacles that we may face in implementing our strategy and in conducting our current and planned business activities.

We operate in a highly competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.

We operate in a highly competitive environment. Our competition includes Tiffany & Co, Bluenile.com, Gemfields and Zales, all of which may distribute products similar to ours and at competitive prices. Some of our competitors will have greater financial and operational resources than us. New competitors and changes in the competitive environment may increase competitive pressures or reduce market prices for our products and services and the investment opportunities in them. A highly competitive environment could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.

Because we are small and do not have much capital, our marketing campaign may not be enough to attract sufficient clients to operate profitably. If we do not make a profit, we will suspend or cease operations.

Due to the fact we are small and do not have much capital, we must limit our marketing activities and may not be able to make our product known to potential customers. Because we will be limiting our marketing activities, we may not be able to attract enough customers to operate profitably. If we cannot operate profitably, we may have to suspend or cease operations.

We expect our quarterly financial results to fluctuate.

We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including changes in demand for our products; our ability to retain existing customers or encourage repeat purchases; our ability to manage our product inventory; general economic conditions; advertising and other marketing costs; costs of expanding to other products. As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of public market analysts and investors.

Our future success is dependent, in part, on the performance and continued service of Joseph Segelman, our President and CEO. Without his continued service, we may be forced to interrupt or eventually cease our operations.

We are presently dependent to a great extent upon the experience, abilities and continued services of Joseph Segelman, our President and CEO. If he should resign or die we will not have a President or CEO. If that should occur, until we find another person to serve in those capacities our operations could be suspended. In that event it is possible you could lose most if not all of your entire investment.

Our future success is dependent on our implementation of our business plan. We have many significant steps still to take.

Our success will depend in large part in our success in achieving several important steps in the implementation of our business plan, including the following: acquiring business information, development of clients, development of more suppliers of products, implementing order processing and customer service capabilities, and management of business process. If we are not successful, we will not be able to fully implement or expand our business plan.

Our success depends upon our ability to attract and hire key personnel and the pool of potential employees may be small and in high demand by our competitors. Our inability to hire qualified individuals will negatively affect our business, and we will not be able to implement or expand our business plan.

Our business is greatly dependent on our ability to attract key personnel. We will need to attract, develop, motivate and retain highly skilled technical employees. Competition for qualified personnel is intense and we may not be able to hire or retain qualified personnel. Our management has limited experience in recruiting key personnel which may hurt our ability to recruit qualified individuals. If we are unable to retain such employees, we will not be able to implement or expand our business plan.

9

If we cannot effectively increase and enhance our sales and marketing capabilities, we may not be able to increase our revenues.

We need to further develop our sales and marketing capabilities to support our commercialization efforts. If we fail to increase and enhance our marketing and sales force, we may not be able to enter new or existing markets. Failure to recruit, train and retain new sales personnel, or the inability of our new sales personnel to effectively market and sell our products, could impair our ability to gain market acceptance of our products.

Our President and CEO, Joseph Segelman, beneficially owns approximately or has the right to vote as to more than 82% of our outstanding common stock in total. As a result, he will have the ability to control substantially all matters submitted to our stockholders for approval including:

      Election of our board of directors;

      Removal of any of our directors;

      Amendment of our Certificate of Incorporation or bylaws;

      Adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

As a result of his ownership and position, he is able to influence all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, the future prospect of sales of significant amounts of shares held by him could affect the market price of our common stock if the marketplace does not orderly adjust to the increase in shares in the market and the value of your investment in our company may decrease. Mr. Segelman’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.

Our growth will place significant strains on our resources.

The Company is currently in the exploration stage, with only limited operations, and has generated no revenue since inception. The Company’s growth, if any, is expected to place a significant strain on the Company’s managerial, operational and financial resources. Moving forward, the Company’s systems, procedures or controls may not be adequate to support the Company’s operations and/or the Company may be unable to achieve the rapid execution necessary to successfully implement its business plan. The Company’s future operating results, if any, will also depend on its ability to add additional personnel commensurate with the growth of its operations, if any. If the Company is unable to manage growth effectively, the Company’s business, results of operations and financial condition will be adversely affected.

We are an “emerging growth company” under the JOBS Act of 2012, 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 JOBS Act, and we may 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 cannot predict if investors will find our common stock less attractive because we may 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.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.

10

We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.

We are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.

As we are a publicly reporting company, we will continue to incur significant costs in staying current with reporting requirements. Our management will be required to devote substantial time to compliance initiatives. Additionally, the lack of an internal audit group may result in material misstatements to our financial statements and ability to provide accurate financial information to our shareholders.

Our management and other personnel will need to devote a substantial amount of time to compliance initiatives to maintain reporting status. Moreover, these rules and regulations, that are necessary to remain as an SEC reporting Company, will be costly as an external third party consultant(s), attorney, or firm, may have to assist in some regard to following the applicable rules and regulations for each filing on behalf of the company.

We currently do not have an internal audit group, and we will eventually need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge to have effective internal controls for financial reporting.

Moreover, if we are not able to comply with the requirements or regulations as an SEC reporting company, in any regard, we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Our business is subject to economic, political and social developments as well as political and currency risks and changes due to judicial, administrative and regulatory actions.

Various laws, regulations and taxes may affect our ability to conduct business in our chosen sphere of operation. New or amended laws, rules, regulations or ordinances could require significant unanticipated expenditures or impose restrictions on the development of our business. Such laws, rules, regulations or ordinances may also adversely affect our ability to operate our business. The Company’s business and prospects are subject to economic, political and social developments in its main countries of operation, specifically Canada, Australia and the United States of America. In particular, our business may be adversely affected by changes in those countries’ political, economic and social conditions; changes in policies of the government or changes in laws and regulations or the interpretation of laws and regulations; changes in foreign exchange regulations; measures that may be introduced to control inflation, such as interest rate increases; and changes in the rate or method of taxation.

Existing political conditions are subject to the introduction of new legislation, amendments to existing legislation by governments or the interpretation of those laws by governments which could impact adversely on the assets, operations and ultimate financial performance of the Company and its investments. Lack of political stability, changes in political attitudes and changes to government regulations relating to foreign investment and mining are beyond the control of the Company and may adversely affect its business and its investments. Operations may be affected to varying degrees by government regulation with respect to restrictions on various areas, including production, employment costs, price controls, income taxation, expropriation of property, environmental legislation and mine safety.

11

Currency fluctuations may affect the cash flow that the Company’s investments may realize from their operations as mineral, oil and gas production is usually sold in the world market in US Dollars. Much of the Company’s investments’ costs are likely to be denominated in other currencies. Fluctuations in exchange rates between currencies in which they operate and in which it reports may cause fluctuations in its financial results which are not necessarily related to their underlying operations.

The Company’s investments’ intended production activities will be dependent on the grant and maintenance of appropriate licenses, concessions, leases, permits and regulatory consents, and on commercial agreements, which could subsequently be withdrawn or made subject to limitations or subject to breach or other restrictions. There can be no assurance that they will be maintained or renewed, or if so, on what terms. Governmental licenses, concessions, leases, permits and regulatory consents are, as a practical matter, subject to the discretion of the applicable governments or governmental offices. The Company and its investments must comply with existing standards, laws and regulations that may entail greater or lesser costs and delays, depending on the nature of the activity to be permitted and the permitting authority. New laws and regulations, amendments to existing laws and regulations, or more stringent enforcement or re-interpretation of existing laws and regulations, could have a material adverse impact on the Company’s investments’ results of operations and financial condition.

Businesses like ours that are dependent upon exploration for and extraction of minerals are subject to a high degree of risk.

The business of investing in companies in exploration for and extraction of minerals involves a high degree of risk. Few properties that are explored are ultimately developed into producing reserves. Mineral deposits assessed by the Company may not contain economically recoverable volumes of resources. Should any reserves contain economically recoverable resources then delays in the construction and commissioning of resource projects or other technical difficulties may result in any projected target dates for production being delayed or further capital expenditure being required. Mineral exploration is highly speculative in nature, involves many risks and is frequently unsuccessful. There can be no assurance that any resources discovered will result in proven reserves being attributed to the Company’s investments. If reserves are developed, it can take a number of years until production is possible, during which time the economic feasibility of production may change.

Our operations and investments may be disrupted by a variety of risks and hazards which are beyond our reasonable control and which may disrupt our business and subject to us to monetary losses and possible legal liability.

Our operations and investments may be disrupted by a variety of risks and hazards which are beyond our reasonable control, including geological, geotechnical and seismic factors, environmental hazards, industrial accidents, occupational and health hazards, technical failures, employment disputes, unusual or unexpected rock or sedimentary formations, flooding and extended interruptions due to inclement or hazardous weather conditions, explosions and other acts of God. The occurrence of any of these hazards could delay activities of the Company’s investments and/or result in damage to, or destruction of, production facilities, personal injury, environmental damage, business interruption, monetary losses and possible legal liability. No assurance can be given that the Company’s investments will be able to obtain insurance coverage at reasonable rates (or at all), or that any coverage it obtains will be adequate and available to cover any such claims. The Company and its investments may become subject to liability for pollution or other hazards against which it has not insured or cannot insure, including those of past activities for which it was not responsible.

Risks Relating to the Company’s Securities

We may never have a public market for our common stock or may never trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.

There is no established public trading market for our securities. Our shares are not and have not been listed or quoted on any exchange or quotation system.

In order for our shares to be quoted, a market maker must agree to file the necessary documents with the National Association of Securities Dealers, which operates the OTCBB and OTCQB. In addition, it is possible that such application for quotation may not be approved and even if approved it is possible that a regular trading market will not develop or that if it did develop, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.

12

Even if there is a public trading market for our common stock you may have difficulty realizing the value of your investment in our stock.

Prospective investors should be aware that the value of any investment in our company may go down as well as up. Investors may therefore realise less than their original investment and could lose their entire investment. The market value of an investment in our company may not necessarily accurately reflect its underlying value. Although the common shares are proposed to be quoted on the on the OTCBB and or OTCQB, this should not be taken as implying that there will be a liquid market in these securities. An investment in these securities may thus be difficult to realize and you may sustain a total loss of your investment. The market for shares in smaller companies is less liquid than for larger companies. Our common shares may not be suitable as a short-term investment. Consequently, our common shares may be difficult to buy and sell and the price may be subject to greater fluctuations than shares of larger companies. There can be no guarantee that we will achieve our investment objectives or that our investments will achieve returns to justify the initial valuation, or that our common shares will be able to achieve a higher valuation in the future, or if achieved, that such valuation will be maintained.

We may in the future issue additional shares of our common stock, which may have a dilutive effect on our stockholders.

It is possible that we will need to raise further funds in the future. There is no guarantee that the then prevailing market conditions will allow for such fundraising or that new investors will be prepared to subscribe for common shares. Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of common stock, of which 30,195,000 shares are issued and outstanding as of April 30, 2015. The future issuance of our common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. 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.

We may issue shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.

As discussed above, we may need to raise further funds in the future and there is no guarantee that new investors will be prepared to subscribe for common shares and may require that we issue them securities whose rights, preferences and privileges are senior to the holders of common shares. Our Certificate of Incorporation authorizes us to issue up to 10,000,000 shares of preferred stock. Accordingly, our board of directors will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval. Our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as holders of common stock.

We do not currently intend to pay dividends on our common stock and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

We may be exposed to potential risks resulting from requirements under Section 404 of the Sarbanes-Oxley Act of 2002.

As a reporting company we are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, to include in our annual report our assessment of the effectiveness of our internal control over financial reporting. We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees.

13

We do not currently have independent audit or compensation committees. As a result, our directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

The costs to meet our reporting and other requirements as a public company subject to the Exchange Act of 1934 is and will be substantial and may result in us having insufficient funds to expand our business or even to meet routine business obligations.

As a public entity, subject to the reporting requirements of the Exchange Act of 1934, we will continue to incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses for annual reports and proxy statements. We estimate that these costs will range up to $75,000 per year for the next few years and will be higher if our business volume and activity increases. As a result, we may not have sufficient funds to grow our operations.

State securities laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares of our common stock.

Secondary trading in our common stock may 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 cannot 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.

Risks Relating to this Offering

Investors cannot withdraw funds once invested and will not receive a refund.

Investors do not have the right to withdraw invested funds. Subscription payments will be paid to Reign Sapphire Corporation and held in our corporate bank account if the Subscription Agreements are in good order and the Company accepts the investor’s investment. Therefore, once an investment is made, investors will not have the use or right to return of such funds.

The trading in our shares will be regulated by the Securities and Exchange Commission Rule 15G-9 which established the definition of a “Penny Stock.”

The shares being offered are defined as a penny stock under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and rules of the Commission. The Exchange Act and such penny stock rules generally impose additional sales practice and disclosure requirements on broker-dealers who sell our securities to persons other than certain accredited investors who are, generally, institutions with assets in excess of $4,000,000 or individuals with net worth in excess of $1,000,000 or annual income exceeding $200,000 ($300,000 jointly with spouse), or in transactions not recommended by the broker-dealer. For transactions covered by the penny stock rules, a broker dealer must make certain mandated disclosures in penny stock transactions, including the actual sale or purchase price and actual bid and offer quotations, the compensation to be received by the broker-dealer and certain associated persons, and must deliver certain disclosures required by the Commission. Consequently, the penny stock rules may make it difficult for you to resell any shares you may purchase.

We are selling the shares of this offering without an underwriter and may be unable to sell any shares.

This offering is self-underwritten, that is, we are not going to engage the services of an underwriter to market, distribute or sell the shares; we intend to sell our shares through our President, who will receive no commissions. There is no guarantee that he will be able to sell any of the shares. Unless he is successful in selling all of the shares of our offering we may have to seek alternative financing to implement our business plan.

14

Due to the lack of a trading market for our securities, you may have difficulty selling any shares you purchase in this offering.

We are not registered on any market or public stock exchange. There is presently no demand for our common stock and no public market exists for the shares being offered in this prospectus. We plan to contact a market maker immediately following the completion of the offering and apply to have the shares quoted on the OTCBB and or OTCQB. The OTCBB and OTCQB are regulated quotation services that display real-time quotes, last sale prices and volume information in over-the-counter securities. The OTCBB or OTCQB are not issuer listing services, market or exchange. Although the OTCBB or OTCQB do not have any listing requirements per se, to be eligible for quotation on the OTCBB and OTCQB, issuers must remain current in their filings with the SEC or applicable regulatory authority. If we are not able to pay the expenses associated with our reporting obligations we will not be able to apply for quotation on the OTCBB or OTCQB. Market makers are not permitted to begin quotation of a security whose issuer does not meet this filing requirement. Securities already quoted on the OTCBB or OTCQB that become delinquent in their required filings will be removed following a 30 to 60 day grace period if they do not make their required filing during that time. We cannot guarantee that our application will be accepted or approved and our stock listed and quoted for sale. As of the date of this filing, there have been no discussions or understandings between the Company and anyone acting on our behalf, with any market maker regarding participation in a future trading market for our securities. If no market is ever developed for our common stock, it will be difficult for you to sell any shares you purchase in this offering. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares without considerable delay, if at all. In addition, if we fail to have our common stock quoted on a public trading market, your common stock will not have a quantifiable value and it may be difficult, if not impossible, to ever resell your shares, resulting in an inability to realize any value from your investment.

We will incur ongoing costs and expenses for SEC reporting and compliance. Without revenue we may not be able to remain in compliance, making it difficult for investors to sell their shares, if at all.

The estimated cost of this registration statement is $100,000. We will have to utilize funds from Joseph Segelman. After the effective date of this prospectus, we will be required to file annual, quarterly and current reports, or other information with the SEC as provided by the Securities Exchange Act. We plan to contact a market maker immediately following the close of the offering and apply to have the shares quoted on the OTCBB and or OTCQB. To be eligible for quotation, issuers must remain current in their filings with the SEC. In order for us to remain in compliance we will require future revenues to cover the cost of these filings, which could comprise a substantial portion of our available cash resources. The costs associated with being a publicly traded company in the next 12 month will be approximately $75,000.00 If we are unable to generate sufficient revenues to remain in compliance it may be difficult for you to resell any shares you may purchase, if at all. Also, if we are not able to pay the expenses associated with our reporting obligations we will not be able to apply for quotation on the OTCBB or OTCQB.

15

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, and any supplement to this prospectus, includes “forward-looking statements” that involve risk and uncertainties. To the extent that the information presented in this prospectus discusses financial projections, information or expectations about our business plans, results of operations, products or markets, or otherwise makes statements about future events, such statements are forward-looking. Such forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as “intends,” “believes,” “anticipates,” “expects,” “estimates,” “may,” “will,” “might,” “outlook,” “could,” “would,” “pursue,” “target,” “project,” “plan,” “seek,” “should,” “assume,” or similar terms or the negatives thereof. Investors should be aware that all forward-looking statements contained within this filing are good faith estimates of management as of the date of this filing. Although we believe that the expectations reflected in these forward-looking statements are based on reasonable assumptions, there are a number of risks and uncertainties that could cause actual results to differ materially from those anticipated in such forward-looking statements. These include, among others, the cautionary statements in the “Risk Factors” section and the “Management’s Discussion and Analysis of Financial Position and Results of Operations” section in this prospectus. Such statements speak only as of the date of such statement and, except as may be required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements herein to conform such statements to our actual results. Potential investors are urged to carefully consider such factors. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

Market, Industry and Other Data

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products and services, including data regarding the estimated size of those markets, their projected growth rates and the perceptions and preferences of customers, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry and general publications, government data and similar sources that we believe are reliable. We have not commissioned any of the third-party data presented in this prospectus. In some cases, we do not expressly refer to the sources from which this data are derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph are derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

16

USE OF PROCEEDS

Our offering is being made on a self-underwritten, “best efforts” basis, which means that the offering will be made directly by the Company without the participation of an underwriter to market, distribute or sell the shares offered under this prospectus. No minimum number of shares must be sold in order for the offering to proceed. See “Plan of Distribution”.

The offering price per share is $0.50. The following table sets forth the uses of proceeds assuming the sale of 100% of the securities offered for sale by the Company. There is no assurance that we will raise the full $10,000,000 as anticipated.

If 10,000,000 shares (100%) are sold:
Next 12 months

Planned Actions

 

 

Estimated Cost to Complete

Marketing and Product Development

 

$

1,500,000

Purchase inventory

 

$

500,000

Working capital

 

$

1,000,000

Perform financial strategies (including offering expenses).

 

$

175,000

TOTAL

 

$

3,175,000

Next 13-24 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

1,200,000

Working capital

 

$

625,000

TOTAL

 

$

1,825,000

If 7,500,000 shares (75%) are sold:
Next 12 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

1,125,000

Purchase inventory

 

$

375,000

Working capital

 

$

750,000

Perform financial strategies (including offering expenses).

 

$

150,000

TOTAL

 

$

2,400,000

Next 13-24 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

750,000

Working capital

 

$

600,000

TOTAL

 

$

1,350,000

If 5,000,000 shares (50%) are sold:
Next 12 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

750,000

Purchase inventory

 

$

250,000

Working capital

 

$

500,000

Perform financial strategies (including offering expenses).

 

$

150,000

TOTAL

 

$

1,650,000

17

Next 13-24 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

400,000

Working capital

 

$

450,000

TOTAL

 

 

850,000

If 5,000,000 shares (25%) are sold:
Next 12 months

Planned Actions

 

Estimated Cost to Complete

Marketing and Product Development

 

$

400,000

Purchase inventory

 

$

250,000

Working capital

 

$

500,000

Perform financial strategies (including offering expenses).

 

$

100,000

TOTAL

 

$

1,250,000

The above figures represent only estimated costs for the next 24 months. If necessary, Joseph Segelman, our President and CEO, has verbally agreed to loan the company funds to complete the registration process. Also, these loans would be necessary if the proceeds from this offering will not be sufficient to implement our business plan and maintain reporting status and quotation on the OTCBB and OTCQB when/if our common stocks become eligible for trading on the OTCBB and OTCQB.

18

DILUTION

If you purchase any of the shares offered by this prospectus, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the initial public offering price per share is substantially in excess of the book value per share attributable to the existing stockholder for the presently outstanding stock. As of March 31 2015, our net tangible book value was ($48,792) or $(0.0016 per share of common stock. Net tangible book value per share represents the amount of our total tangible assets (excluding deferred offering costs) less total liabilities, divided by 29,855,000, the number of shares of common stock outstanding at March 31, 2015.

The following table sets forth as of March 31, 2015, the number of shares of common stock purchased from us and the total consideration paid by our existing stockholders and by new investors in this offering if new investors purchase 25%, 50%, 75% or 100% of the offering, after deduction of offering expenses, assuming a purchase price in this offering of $0.50 per share of common stock.

 

 

25% of Offering Sold

 

50% of Offering Sold

 

75% of Offering Sold

 

100% of Offering Sold

Offering Price Per share

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

 

$

0.50

 

Post Offering Net Tangible Book Value

 

$

1,132,634

 

 

$

2,382,634

 

 

$

3,632,634

 

 

$

4,882,634

 

Post Offering Net Tangible Book Value Per Share

 

$

0.0346

 

 

$

0.0677

 

 

$

0.0964

 

 

$

0.1215

 

Pre-Offering Net Tangible Book Value Per Share

 

$

(0.0039

)

 

$

(0.0039

)

 

$

(0.0039

)

 

$

(0.0039

)

Increase (Decrease) Net Tangible Book Value Per Share After Offering for Original Shareholder

 

$

0.0385

 

 

$

0.0716

 

 

$

0.1003

 

 

$

0.1254

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilution Per Share for New Shareholders

 

$

0.4654

 

 

$

0.4323

 

 

$

0.4036

 

 

$

0.379

 

Percentage Dilution Per Share for New Shareholders

 

 

93.1

%

 

 

86.5

%

 

 

80.7

%

 

 

75.8

%

Capital Contribution by Purchasers of Shares

 

$

1,250,000

 

 

$

2,500,000

 

 

$

3,750,000

 

 

$

5,000,000

 

Capital Contribution by Existing Shares

 

$

816,700

 

 

$

816,700

 

 

$

816,700

 

 

$

816,700

 

% Contribution by Purchasers of Shares

 

 

60.5

%

 

 

75.4

%

 

 

82.1

%

 

 

86.0

%

% Contribution by Existing Shareholder

 

 

39.5

%

 

 

24.6

%

 

 

17.9

%

 

 

14.0

%

Gross Offering Proceeds

 

$

1,250,000

 

 

$

2,500,000

 

 

$

3,750,000

 

 

$

5,000,000

 

Anticipated Net Offering Proceeds

 

$

1,150,000

 

 

$

2,400,000

 

 

$

3,650,000

 

 

$

4,900,000

 

# of Shares After Offering Held by Public Investors

 

 

2,500,000

 

 

 

5,000,000

 

 

 

7,500,000

 

 

 

10,000,000

 

Total Shares Issued and Outstanding

 

 

32,695,000

 

 

 

35,195,000

 

 

 

37,695,000

 

 

 

40,195,000

 

% of Shares – Purchasers After Offering

 

 

7.6

%

 

 

14.2

%

 

 

19.9

%

 

 

24.9

%

% of Shares – Existing Shareholder After Offering

 

 

92.4

%

 

 

85.8

%

 

 

80.1

%

 

 

75.1

%

19

SELECTED FINANCIAL DATA

The following table summarizes our selected financial data for the periods and as of the dates indicated. Our selected statements of operations data for the year ended December 31, 2014 and for the period from May 31, 2013 (inception) to December 31, 2013, and our selected balance sheet data as of December 31, 2014 and 2013, have been derived from our audited financial statements included elsewhere in this filing. Our selected statements of operations data for the three months ended March 31, 2015 and 2014, and our selected balance sheet data as of March 31, 2015, have been derived from our unaudited interim condensed financial statements included elsewhere in this filing. The unaudited interim condensed financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the information for the periods presented. Our financial statements are prepared and presented in accordance with generally accepted accounting principles in the United States. Our historical results are not necessarily indicative of the results to be expected for any future periods. Our selected financial data should be read together with the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and with our financial statements and their related notes, which are included elsewhere in this prospectus.

 

 

For the Three Months Ended March 31,
2015

 

For the Three Months Ended March 31,
2014

 

For the Year Ended December 31, 2014

 

From Inception (May 31, 2013) through December 31, 2013

Revenues

 

$

10,768

 

 

$

7,618

 

 

$

43,153

 

 

$

8,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

3,001

 

 

 

2,469

 

 

 

25,249

 

 

 

2,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

7,767

 

 

 

5,149

 

 

 

17,904

 

 

 

6,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing expenses

 

 

22,953

 

 

 

 

 

 

5,567

 

 

 

 

General and administrative

 

 

136,613

 

 

 

83,787

 

 

 

399,881

 

 

 

250,891

 

Total operating expenses

 

 

159,566

 

 

 

83,787

 

 

 

405,448

 

 

 

250,891

 

Loss from operations

 

 

(151,799

)

 

 

(78,638

)

 

 

(387,544

)

 

 

(244,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(151,799

)

 

 

(78,638

)

 

 

(387,544

)

 

 

(244,723

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(151,799

)

 

$

(78,638

)

 

$

(387,544

)

 

$

(244,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.01

)

 

$

(0.00

)

 

$

(0.01

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

29,981,033

 

 

 

27,845,000

 

 

 

27,951,849

 

 

 

18,086,995

 

20

 

 

March 31,
2015

 

December 31, 2014

 

December 31, 2013

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

88

 

 

$

95

 

 

$

 

Accounts receivable

 

 

20,199

 

 

 

9,431

 

 

 

8,410

 

Inventory

 

 

419,508

 

 

 

422,509

 

 

 

147,758

 

Prepaid expenses

 

 

34,801

 

 

 

51,768

 

 

 

 

Total current assets

 

 

474,596

 

 

 

483,803

 

 

 

156,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computer equipment, net

 

 

3,177

 

 

 

3,465

 

 

 

 

Deferred offering costs

 

 

150,000

 

 

 

75,000

 

 

 

 

Total assets

 

$

627,773

 

 

$

562,268

 

 

$

156,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,000

 

 

$

 

 

$

 

Accounts payable – related party

 

 

185,498

 

 

 

103,194

 

 

 

 

Accrued compensation – related party

 

 

321,000

 

 

 

276,000

 

 

 

96,000

 

Advance from shareholder

 

 

83,641

 

 

 

83,641

 

 

 

35,641

 

Total current liabilities

 

 

595,139

 

 

 

462,835

 

 

 

131,641

 

Total liabilities

 

 

595,139

 

 

 

462,835

 

 

 

131,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, no shares

 

 

 

 

 

 

 

 

 

 

 

 

issued and outstanding at March 31, 2015, December 31, 2014 and 2013,

 

 

 

 

 

 

 

 

 

 

 

 

respectively

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 30,195,000,

 

 

 

 

 

 

 

 

 

 

 

 

29,855,000 and 27,845,000 shares issued and outstanding at March 31, 2015,

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2014 and 2013, respectively

 

 

3,019

 

 

 

2,985

 

 

 

2,785

 

Additional paid-in-capital

 

 

813,681

 

 

 

728,715

 

 

 

266,465

 

Accumulated deficit

 

 

(784,066

)

 

 

(632,267

)

 

 

(244,723

)

Total stockholders’ equity

 

 

32,634

 

 

 

99,433

 

 

 

24,527

 

Total liabilities and stockholders’ equity

 

$

627,773

 

 

$

562,268

 

 

$

156,168

 

21

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

You should read the following discussion and analysis of our financial condition and results of operations together with the portion of this prospectus entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations, intentions, and beliefs. Our actual results may differ materially from those discussed in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus, and you should not place undue certain on these forward-looking statements, which apply only as of the date of this prospectus. See “Disclosure Regarding Forward-Looking Statements”.

We are an emerging growth company as defined in Section 2(a) (19) of the Securities Act. Pursuant to Section 107 of the Jumpstart Our Business Startups Act, we may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, meaning that we can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have chosen to take advantage of the extended transition period for complying with new or revised accounting standards applicable to public companies to delay adoption of such standards until such standards are made applicable to private companies. Accordingly, our financial statements may not be comparable to the financial statements of public companies that comply with such new or revised accounting standards.

Historical Development

We were established on December 15, 2014 in the State of Delaware with operations in the United States, Australia, and Asia. We are a fine jewelry company and our business will vertically integrate from the mine’s gate to the retail supply chain from processing rough Australian sapphires and gem cutting to manufacturing fine jewelry including rings, pendants, bracelets, and cuff links using a variety of metals and finishes.

We started as UWI Holdings Corporation (previously known as Australian Sapphire Corporation) (“UWI”) and was established on May 31, 2013 in the Province of New Brunswick, Canada and listed on the GXG Markets in the UK.

On December 31, 2014, UWI entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with us, pursuant to which UWI transferred all of its net assets to us. The sole shareholder of UWI along with his spouse retained 100% ownership of Reign and were issued 27,845,000 of Reign common shares in exchange for the 16,000,250 outstanding shares of UWI. There was no significant tax consequence to this exchange. As a result, we are considered to be the continuation of the predecessor UWI. All historical financial information prior to the reorganization is that of UWI.

Prior to the reorganization, we were authorized to issue 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. On May 8, 2015, our articles of incorporation were amended to increase the authorized common shares to 100,000,000 and preferred shares to 10,000,000.

For share and earnings per share information, we have retroactively restated per share and the outstanding shares for weighted average shares used in the basic and diluted earnings per share calculations for all periods presented, as a result of the reorganizations.

We began our planned principal operations, and accordingly, we have prepared our financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Recent Developments

Financing Transactions

We started as UWI (previously known as Australian Sapphire Corporation) and was established on May 31, 2013 in the Province of New Brunswick, Canada. On December 31, 2014, UWI entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with Reign, pursuant to which UWI transferred all of its net assets to Reign. The sole shareholder of UWI along with his spouse retained 100% ownership of Reign and were issued 27,845,000 of Reign common shares in exchange for the 16,000,250 outstanding shares of UWI. There was no significant tax consequence to this exchange.

22

As a result, Reign is considered to be the continuation of the predecessor UWI. All historical financial information prior to the reorganization is that of UWI.

Prior to the reorganization, our articles of incorporation were authorized to issue 50,000,000 shares of common stock, each having a par value of $0.0001, with each share of common stock entitled to one vote for all matters on which a shareholder vote is required or requested. We were also authorized to issue 5,000,000 shares of Preferred Stock, each having a par value of $0.0001. On May 8, 2015, our articles of incorporation were amended to increase the authorized common shares to 100,000,000 and preferred shares to 10,000,000.

For share and earnings per share information, we have retroactively restated per share and the outstanding shares for weighted average shares used in the basic and diluted earnings per share calculations for all periods presented, as a result of the reorganizations.

Our Board of Directors are authorized to provide for the issue of any and all of the unissued and undesignated shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and qualifications, limitations, or restrictions thereof, as shall be stated an expressed in the resolution adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law.

In February and March 2015, we issued an aggregate of 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with our initial public offering.

In February 2015, we issued 40,000 shares of restricted common stock, valued at $10,000 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

On December 30, 2014, we issued 1,200,000 restricted common shares to an unrelated third party for the purchase of inventory with an estimated fair market value of $300,000. We valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

In fiscal year 2014, we issued 110,000 shares of restricted common stock, valued at $23,050 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

In fiscal year 2014, we issued 400,000 shares of restricted common stock, valued at $64,400 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services to be rendered, recorded within prepaid expense in the Balance Sheets, and are amortizing the amount over the period of performance. We recognized expense of $16,100 for the three months ended March 31, 2015 and for the year ended December 31, 2014, respectively, within general and administrative expenses in the Statement of Operations.

On December 31, 2014, we issued 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with our initial public offering.

On August 15, 2013, we issued 15,000,000 restricted common shares for Director’s capital contribution at historical cost of inventory of $150,000. We valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

On August 15, 2013, we issued 11,844,750 restricted common shares to founder’s, valued at $1,185 (based on the par value on the date of grant). The issuance was an isolated transaction not involving a public offering pursuant to Section 4(2) of the Securities Act of 1933.

On July 18, 2013, we entered into a stock purchase agreement with the Director, under which we issued him 1,000,000 shares of restricted common stock, in exchange for $119,000. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

On July18, 2013, we issued 250 shares of restricted common stock, valued at $250 (estimated by us to be $1.00 per share based on the value of the services) to an outside consultant for services rendered.

23

Limited Operating History; Need for Additional Capital

There is limited historical financial information about us on which to base an evaluation of our performance. To date, we have not generated significant revenues from operations. We cannot guarantee we will be successful in our business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, and possible cost overruns due to increases in the cost of services. To become profitable and competitive, we must receive additional capital. We have no assurance that future financing will materialize. If that financing is not available we may be unable to continue operations.

Overview of Presentation

The following Management’s Discussion and Analysis (“MD&A”) or Plan of Operations includes the following sections:

      Plan of Operations

      Results of Operations

      Liquidity and Capital Resources

      Capital Expenditures

      Going Concern

      Critical Accounting Policies

      Off-Balance Sheet Arrangements

Plan of Operations

We had no significant operating revenues through March 31, 2015. Operating revenues are expected to be significant in the first half of 2016 as we launch our B2C marketing initiative. Revenues will be predominately the result of fine jewelry sales. At March 31, 2015 our cash balance was negligible.

Our plan of operations consists of:

      Launch of our B2B marketing and sales efforts through the use of distribution partners and high-end fashion retailers agreements.

      Launch of our B2C marketing and sales efforts through the use of internet marketing, print advertising, promotions, and signage agreements.

      Raising additional capital with which to expand the sales and administrative infrastructure and fund ongoing operations until our operations generate positive cash flow.

How We Generate Revenue

We recognize revenue at the time of sale. Revenues are presented net of refunds and known credits.

General and administrative expenses consist of the cost of customer service, billing, cost of information systems and personnel required to support our operations and growth.

Depending on the extent of our future growth, we may experience significant strain on our management, personnel, and information systems. We will need to implement and improve operational, financial, and management information systems. In addition, we are implementing new information systems that will provide better record-keeping, customer service and billing. However, there can be no assurance that our management resources or information systems will be sufficient to manage any future growth in our business, and the failure to do so could have a material adverse effect on our business, results of operations and financial condition.

24

Results of Operations

Three Months Ended March 31, 2015 Compared to the Three Months Ended March 31, 2014

Revenue

Revenue increased by $3,150, or 41.3%, to $10,768 for the three months ended March 31, 2015 from $7,618 for the three months ended March 31, 2014 primarily due to increases in sales volume of our products offset by sales price reductions.

Cost of Sales

Cost of sales increased by $532, or 21.5%, to $3,001 for the three months ended March 31, 2015 from $2,469 for the three months ended March 31, 2014 primarily due to increases in sales volume of our products.

Operating expenses

Operating expenses increased by $75,779, or 90.4%, to $159,566 for the three months ended March 31, 2015 from $83,787 for the three months ended March 31, 2014 primarily due to increases in consulting services costs, rent, travel costs, professional fees, marketing costs, and general and administration costs.

For the three months ended March 31, 2015, we had general and administrative expenses of $136,613 primarily due to consulting costs of $63,700, travel expenses of $26,983, rent of $8,388, professional fees of $25,791, and general and administration costs of $11,751.

For the three months ended March 31, 2014, we had general and administrative expenses of $83,787 primarily due to consulting costs of $49,898, travel expenses of $14,803, rent of $7,600, professional fees of $7,250, and general and administration costs of $4,236.

Net loss before income taxes

Net loss before income taxes for the three months ended March 31, 2015 totaled $151,799 and $78,638 for the three months ended March 31, 2014 primarily due to consulting services costs, rent, travel costs, professional fees, marketing costs, and general and administration costs.

Assets and Liabilities

Assets were $627,773 as of March 31, 2015. Assets consisted primarily of cash of $88, accounts receivable of $20,199, and inventory of $419,508, prepaid expenses of $34,801, computer equipment of $3,177, and deferred offering costs of $150,000. Liabilities were $595,139 as of March 31, 2015. Liabilities consisted primarily of accrued compensation-related party of $321,000, accounts payable — related party of $185,498, accounts payable of $5,000, and advance from shareholder of $83,641.

Stockholders’ Equity

Stockholders’ equity was $32,634 as of March 31, 2015. Stockholder’s equity consisted primarily of shares issued to founders of $269,250, stock issued for services of $247,450, and stock issued for inventory of $300,000, offset primarily by the accumulated deficit at March 31, 2015 of $784,066.

Year Ended December 31, 2014 Compared to Inception (May 31, 2013) through December 31, 2013

Revenue

Revenue increased by $34,743, or 413.1%, to $43,153 in the year ended December 31, 2014 from $8,410 in the period of inception (May 31, 2013) through December 31, 2013 primarily due to increases in sales volume of our products offset by sales price reductions.

25

Cost of Sales

Cost of sales increased by $23,007, or 1,026.2%, to $25,249 in the year ended December 31, 2014 from $2,242 in the period of inception (May 31, 2013) through December 31, 2013 primarily due to increases in sales volumes of our products.

Operating expenses

Operating expenses increased by $154,557, or 61.6%, to $405,448 in the year ended December 31, 2014 from $250,891 in the period of inception (May 31, 2013) through December 31, 2013 primarily due to increases in consulting services costs, rent, travel costs, professional fees, and general and administration costs.

For the year ended December 31, 2014, we had general and administrative expenses of $399,881 primarily due to consulting costs of $207,778, travel expenses of $78,226, rent of $32,604, professional fees of $52,233, and general and administration costs of $29,040.

For the period of inception (May 31, 2013) through December 31, 2013, we had general and administrative expenses of $250,891 primarily due to consulting costs of $101,550, travel expenses of $40,421, rent of $25,263, professional fees of $61,368, and general and administration costs of $22,289.

Net loss before income taxes

Net loss before income taxes for the year ended December 31, 2014 totaled $387,544 and $244,723 for the period of inception (May 31, 2013) through December 31, 2013 primarily due to consulting services costs, rent, travel costs, professional fees, and general and administration costs.

Liquidity and Capital Resources

General — Overall, we had an increase in cash flows from May 31, 2013 (date of inception) to March 31, 2015 of $88 resulting from cash provided by financing activities of $202,641, offset partially by cash used in operating activities of $199,088, and cash used in investing activities of $3,465.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities during the periods indicated:

 

 

For the Three Months Ended March 31, 2015

 

For the Three Months Ended March 31, 2014

 

For the Year Ended
December 31, 2014

 

Date of Inception through December 31, 2013

 

 

(unaudited)

 

(unaudited)

 

 

 

 

Net cash provided by (used in):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

(7

)

 

$

 

$

(44,440

)

 

$

(154,641

)

Investing activities

 

 

 

 

 

 

 

(3,465

)

 

 

 

Financing acitivities

 

 

 

 

 

 

 

48,000

 

 

 

154,641

 

Net increase in cash and cash equivalents

 

$

(7

)

 

$

 

$

95

 

 

$

 

Cash Flows from Operating Activities — From May 31, 2013 (date of inception) to March 31, 2015, net cash used in operations was $199,088. Net cash used in operations was primarily due to a cumulative net loss from inception of $(784,066), offset primarily by the estimated fair market value of stock issued for services of $33,300, the amortization of stock issued for future services of $32,200, depreciation expense of $288, and the changes in operating assets and liabilities of $519,190, primarily due to the increase in accrued compensation - related party of $321,000, accounts payable — related party of $185,498, inventory of $30,492, and accounts payable of $5,000, offset primarily by prepaid expenses of $2,601, and accounts receivable of $20,199.

Cash Flows from Investing Activities — Net cash flows used in investing activities from May 31, 2013 (date of inception) to March 31, 2015 was $3,465. The increase in net cash used in investing activities was mainly due to purchases of computer equipment of $3,465.

Cash Flows from Financing Activities — Net cash flows provided by financing activities from May 31, 2013 (date of inception) to March 31, 2015 was $202,641. The increase in net cash provided by financing activities was mainly due to shares sold for cash of $119,000 and cumulative advances from shareholder of $83,641.

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Financing — We expect that our current working capital position, together with our expected future cash flows from operations will be insufficient to fund our operations in the ordinary course of business, anticipated capital expenditures, debt payment requirements and other contractual obligations for at least the next twelve months. However, this belief is based upon many assumptions and is subject to numerous risks (see “Risk Factors”), and there can be no assurance that we will not require additional funding in the future.

We have no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or technologies or any other material capital expenditures. However, we will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Due to the ongoing global economic crisis, we believe it may be difficult to obtain additional financing if needed. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Short-Term Financing

Advance from Shareholder

We borrow funds from our CEO/Director for working capital purposes from time to time. As of March 31, 2015, we have recorded the principal balance due of $83,641 in Advance From Shareholder. No repayments have been made through the March 31, 2015. Advances are non-interest bearing and due on demand.

Stock Transactions

In February and March 2015, we issued 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with our initial public offering.

In February 2015, we issued 40,000 shares of restricted common stock, valued at $10,000 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

On December 30, 2014, we issued 1,200,000 restricted common shares to an unrelated third party for the purchase of inventory with an estimated fair market value of $300,000. We valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

In fiscal year 2014, we issued 110,000 shares of restricted common stock, valued at $23,050 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

In fiscal year 2014, we issued 400,000 shares of restricted common stock, valued at $64,400 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered or to be rendered, recorded within prepaid expense in the Balance Sheets, and are amortized over the period of performance. We recognized expense of $16,100 for the three months ended March 31, 2015 and for the year ended December 31, 2014, respectively, within general and administrative expenses in the Statement of Operations.

On December 31, 2014, we issued 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with our initial public offering.

On August 15, 2013, we issued 15,000,000 restricted common shares for Director’s capital contribution at historical cost to inventory of $150,000. We valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

On August 15, 2013, we issued 11,844,750 restricted common shares to founder’s, valued at $1,185 (based on the par value on the date of grant). The issuance was an isolated transaction not involving a public offering pursuant to Section 4(2) of the Securities Act of 1933.

On July 18, 2013, we entered into a stock purchase agreement with the Director, under which we issued him 1,000,000 shares of restricted common stock, in exchange for $119,000. The issuance was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933.

27

On July18, 2013, we issued 250 shares of restricted common stock, valued at $250 (estimated by us to be $1.00 per share based on the value of the services) to an outside consultant for services rendered.

Capital Expenditures

Other Capital Expenditures

We expect to purchase approximately $30,000 of equipment in connection with the expansion of our business.

Fiscal year end

Our fiscal year end is December 31.

Going Concern

Our independent registered accounting firm has added an explanatory paragraph to their audit opinion issued in connection with our financial statements. We had an accumulated deficit of approximately $784,000, $632,000 and $245,000 at March 31, 2015, December 31, 2014 and 2013, respectively, had a net loss of approximately $152,000, $79,000, $388,000 and $245,000 for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively, and net cash used in operating activities of approximately $0, $0, $44,000 and $155,000, respectively, for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively, with limited revenue earned since inception.

While we are attempting to expand operations and increase revenues, our cash position may not be significant enough to support our daily operations. We intend to raise additional funds by way of a public or private offering. We believe that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

Subsequent Events

On May 1, 2015 our board of directors and stockholders authorized the adoption and implementation of our 2015 Equity Incentive Plan (the “2015 Plan”). The principal purpose of the 2015 Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors by providing them the opportunity to acquire a proprietary interest in us and to link their interests and efforts to the long-term interests of our stockholders. The material terms of the 2015 Plan are summarized in “Executive Compensation Plans and Other Benefit Plans” in this prospectus. Under the 2015 Plan, 10,000,000 shares of our common stock have initially been reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other stock and cash-based awards. As of the date of this prospectus, options to issue 10,000,000 shares of our common stock have been issued under the 2015 Plan. All such options were issued to our CEO under a share option agreement which provides, among other things, that the exercise price is $0.005 per share, the term of the option is ten years and that the options shall vest monthly over a two year period commencing on April 1, 2015. This award is also subject to accelerated vesting in certain circumstances, including in connection with certain terminations or the achievement of specified performance milestones including the successful offer and sale of all of the shares of common stock being offered by the Company pursuant to this prospectus. See “Executive Compensation — Agreements with Executive Officers”.

Effective as of April 1, 2015, we entered into an employment agreement with our CEO. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the CEO receives a minimum annual base salary of $180,000. The material terms of the employment agreement with the CEO are summarized in “Agreements with Executive Officers” in this prospectus.

Effective as of April 1, 2015, we entered into an employment agreement with our Secretary. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic

28

one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the Secretary receives a minimum annual base salary of $80,000. The material terms of the employment agreement with the Secretary and are summarized in “Agreements with Executive Officers” in this prospectus.

Critical Accounting Policies

The Commission has defined a company’s critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations and which require us to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies that are significant to understanding our results. For additional information, see Note 3 - Summary of Significant Accounting Policies on page F-9.

The following are deemed to be the most significant accounting policies affecting us.

Use of Estimates

The preparation of these financial statements in accordance 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 disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: inventory valuation, and common stock valuation. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

Revenue Recognition

We recognize revenues in accordance with FASB ASC Topic 605, “Revenue Recognition”, and with the guidelines of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition”.

Under SAB 104, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable, and (iv) collection is reasonably assured.

We recognize revenue from product sales when the product is shipped, provided that collection of the resulting receivable is reasonably assured. Credit is granted generally for terms of 7 to 90 days, based on credit evaluations.

We currently have no return policy. We are currently evaluating our return policy to be more in line with industry standards.

Accounts Receivable

We record trade receivables when revenue is recognized. When appropriate, we will record an allowance for doubtful accounts, which is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. At March 31, 2015, December 31, 2014 and 2013, we had no allowance for doubtful accounts. For the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 and the period May 31, 2013 (date of inception) through December 31, 2013, there were no accounts written-off.

Inventories

Inventories are stated at the lower of cost or market on an average cost basis. Our inventory consists of loose sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of March 31, 2015, December 31, 2014 and 2013, we carried only loose sapphire jewels, and the carrying value of these jewels is included in the jewelry valuation. Our loose sapphire jewels do not degrade in quality over time and are not subject to fashion trends. In view of the foregoing factors, we have concluded that no excess or obsolete loose jewel inventory reserve requirements existed as of March 31, 2015, December 31, 2014 and 2013, respectively.

29

Income Taxes

We account for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on our balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. We must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Changes in our valuation allowance in a period are recorded through the income tax provision on the statements of operations.

From the date of our inception we adopted ASC 740-10-30. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, we recognized no material adjustment in the liability for unrecognized income tax benefits.

Stock Based Compensation

Issuances of our common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, we determine such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for us to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

Non-Cash Equity Transactions

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock.

Fair Value of Financial Instruments

We apply the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2015, December 31, 2014 and 2013, the fair value of inventory, accrued compensation - related party, and advance from shareholder approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 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 , which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability

30

to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our 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). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. We do not expect that the adoption of this ASU to have a material effect on our financial position, operations, or cash flows.

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. In addition, ASU 2014-10 requires an entity that has not commenced principal operations to provide disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. We have elected to adopt this ASU and its adoption resulted in the removal of previously required development stage disclosures. Adoption of this ASU did not impact our financial position, operations or cash flows.

In May 2014, the Financial Accounting Standards Board issued ASU 2014-09, which will update Codification topic: Revenue from Contracts with Customers . The principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Management is currently evaluating the impact ASU 2014-09 will have on our financial position, results of operations and cash flows.

In April 2015, the FASB issued ASU 2015-03, “ Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ”. This standard update requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. Adoption of this ASU is not expected to have a material effect on our financial position, operations or cash flows.

Future Contractual Obligations and Commitment

The following table reflects a summary of our estimates of future contractual obligations as of March 31, 2015. The information in the table reflects future unconditional payments and is based on the terms of the relevant agreements, appropriate classification of items under U.S. GAAP as currently in effect. Future events could cause actual payments to differ from these amounts.

 

 

Payments due by period

Contractual Obligations

 

Total

 

Less than
1 year

 

1-3 year

Consulting agreements

 

$

30,000

 

$

30,000

 

$

Total

 

$

30,000

 

$

30,000

 

$

We incur contractual obligations and financial commitments in the normal course of our operations and financing activities. Contractual obligations include future cash payments required under existing contracts, such as debt and lease agreements. These obligations may result from both general financing activities and from commercial arrangements that are directly supported by related operating activities. Details on these obligations are set forth below.

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Consulting Agreements

We have a consulting agreement with our officer, director, and sole stockholder (collectively, the “Director”) under which he is compensated $120,000 per annum. Beginning June 20, 2013, this contract shall continue unless and until terminated at any time by either us or Director giving two month notice in writing. Deferred compensation totaling $214,000, $184,000 and $64,000 as of March 31, 2015, December 31, 2014 and 2013, respectively, is included in Accrued Compensation-Related Party. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement.

We have a consulting agreement with our secretary and director (“Secretary”) under which she is compensated $60,000 per annum. Beginning June 20, 2013, this contract shall continue unless and until terminated at any time by either us or Secretary giving two month notice in writing. Deferred compensation totaling $107,000, $92,000 and $32,000 as of March 31, 2015, December 31, 2014 and 2013, respectively, is included in Accrued Compensation-Related Party. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement.

Off-Balance Sheet Arrangements

As of March 31, 2015, we have not entered into any transaction, agreement or other contractual arrangement with an entity unconsolidated under which it has:

      a retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit;

      liquidity or market risk support to such entity for such assets;

      an obligation, including a contingent obligation, under a contract that would be accounted for as a derivative instrument; or

      an obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to us, where such entity provides financing, liquidity, market risk or credit risk support to or engages in leasing, hedging, or research and development services with us.

Inflation

We do not believe that inflation has had a material effect on our results of operations.

32

DESCRIPTION OF BUSINESS

Overview

Reign Sapphire Corporation (RSC or “Company”) was founded to become the first sapphire company that will vertically integrate from the mine’s gate to the retail supply chain from processing rough sapphires and gem cutting to manufacturing fine jewelry including rings, pendants, bracelets, and cuff links using a variety of metals and finishes.

The Company’s marketing initiatives will focus on: (1) Business-to-Consumer (“B2C”) marketing to attract customers to the website, (2) Business-to-Business (“B2B”) marketing and sales efforts, which will include partnerships with distribution partners, to high-end fashion retailers, and eventually (3) building a strong retail presence to market the products directly to consumers on a retail level. The Company will initially focus marketing efforts in the U.S. and upon encountering significant success in the U.S. with online, wholesale, and retail sales, the Company will expand its marketing efforts to include Europe and the Middle East.

The Company’s product line will consist of a wide range of celebrity designed jewelry pieces, which will initially include women’s rings, bracelets, necklaces, as well as men’s rings and cuff links. Eventually, the Company will manufacture pendants and watches. The sapphires will be predominantly 1.5mm to 2.5mm diamond and princess cut melees. The Company will have 5 product lines:

      Entry-level His Jewelry

      Entry-Level Hers Jewelry

      High-End His Jewelry

      High-End Hers Jewelry

      Couture

This higher-end merchandise will be targeted primarily to households with annual income of $100,000 and greater. The entry-level merchandise will be marketed primarily to households with income of $60,000 to $100,000.

Development of Our Business

We were incorporated in the State of Delaware as a fine jewelry company. Our business will vertically integrate from the mine’s gate to the retail supply chain from processing rough sapphires and gem cutting to manufacturing fine jewelry including rings, pendants, bracelets, and cuff links using a variety of metals and finishes.

Strategy

RSC will set itself apart from its competition by (eventually) offering A-Z production, processing, jewelry manufacturing, wholesale & retail sales making it the sapphire company to in-house all four processes. The Company will focus primarily on quality and secondly on strategic pricing methods that will allow their gems and precious stones to compete in the U.S. market.

In terms of precious stones and jewelry manufacturing and sales companies, there are few that are designed to establish and dominate the market within all four sectors that the Company will be capable of.

Tiffany is the world’s leading jewelry retailer, which is vertically integrated through most of the precious gem production to sale cycle; though, it has no focus on colored precious gems or sapphires. Zales is a leading player in the U.S. jewelry market; though, only participates on the retail level and is heavily associated with diamonds and brands itself as “The Diamond Store”. Blue Nile is strictly an online retailer that does not participate in the production or processing or precious gems; furthermore, Blue Nile’s branding and product line strategy is heavily focused on diamonds.

While all of these companies have established themselves uniquely within sectors of the market, none have the full range of vertical integration of production, cutting and shaping, manufacturing, and sales of sapphires that RSC will maintain. There is a strong market opportunity for the Company’s products as there is currently growth in U.S. and global jewelry sales. RSC has

33

the assets, knowledge and expertise to capitalize on this opportunity to capitalize upon the uniquely powerful internationally recognized Australian brand image and appeal and become the leading player in this fragmented cottage industry.

The Company will garner market share from the leading precious gem and diamond players by:

(1)    Using and producing the highest quality gems from mines in Australia,

(2)    Delivering flawless cuts that highlight the beauty and color of the products,

(3)    Designing elegant and unique jewelry that will compete against companies such as Tiffany & Co. and Zale’s.

(4)    Offering competitive pricing for all of its precious gem stones.

(5)    Emphasizing the history, uniqueness, and beauty of sapphires.

Products

The Company’s product line will consist of a wide range of jewelry pieces, which will initially include women’s rings, bracelets, necklaces, as well as men’s rings and cuff links. Eventually, the Company will manufacture pendants and watches. The sapphires used will be predominantly 1.5mm to 2.5mm diamond and princess cut melees.

The Company will have 5 product lines:

      Entry-level His Jewelry

      Entry-Level Hers Jewelry

      High-End His Jewelry

      High-End Hers Jewelry

      Couture

The “His and Hers” entry-level lines will use lower grade materials and less expensive finishes such as 935 Silver.

The high-end line will use high quality, free size gemstones and high quality metals and finishes such as gold and platinum with rhodium plating. The products will be designed according to the latest fashion trends, in consultation with leading Hollywood stylists and fashion writers.

The sapphires will be authenticated, guaranteed, and meet the following criteria:

      The Gemstone is natural and of Australian origin.

      No Beryllium treated sapphires or other forms of chemical modification.

      No radiation treated stones.

      No dyed or otherwise artificially colored stone

The Company aims to produce the following products:

      Rings: The Company will manufacture a wide assortment of rings. The high-end brand will use the highest quality sapphires, additional gemstones, and fine metals. The lower-end brand will use lower quality sapphires and metals.

      Bracelets: The Company will manufacture silver, platinum, and gold bracelets with sapphires.

      Cuff Links: The Company will manufacture silver and platinum cuff links with sapphires.

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      Future Products

o       Pendants: The Company will manufacture pendants with sapphire gem stones that can be worn on a necklace.

o       Watches: The Company will eventually manufacture watches with sapphire gems.

Aspects of processing and distribution of the Company:

      Gem Shaping, Cutting, & Processing: The Company’s gem design team will cut, shape, and process raw sapphire material into gem stones.

      Jewelry Manufacturing: The Company’s will initially contract the high-end jewelry manufacturing to quality U.S. providers and the lower priced range to overseas manufacturers. The company will eventfully develop its own manufacturing facilities.

      Packaging: Each jewelry item will be accompanied by a high quality, durable jewelry box, gift bag, certificate of authenticity and warranty.

      RSC Retail Boutiques: Once the Company has grown significantly from a branding and online sales perspective, the Company will launch RSC Retail windows in select boutiques in major U.S. cities and plans to eventually open concept stores and boutiques throughout the U.S. and eventually the world.

Market Overview

Opportunities

Due to the nature of the industry’s products, households with annual income of $60,000 to $100,000 account for the largest proportion of jewelry industry sales; hence, households with annual income of $60,000 and greater are regarded as the primary target consumer profile. Demand for the industry’s products is largely driven by the needs and preferences of consumers, along with variations in the level of disposable income allocated toward their purchases. The Company will capitalize on fashion market opportunities by having a lower pricing point for his and hers’ jewelry by using lower grade sapphires and less precious metals. The Company will also have high-end his and hers’ jewelry that uses fine blue pave sapphires, as well as an extremely high-end couture brand that uses the finest sapphires available from the Company’s Australian miners, cut by expert cutters, and set in fine custom jewelry.

The primary audience for the brand is women — they are the market, in general. However, while women may make the choices, men often oversee the purchase. Speaking to both women and men will be an important aspect of any program. There are 3 main stages of life where a jewelry purchase will come into play:

      Single “The Self Purchaser” (I Love Being Me)

      Married (Engagement/Wedding/Children — Push Present)

      Retired (Gift Giver)

More specific age segmentation within these life stages includes:

      18-25 coming of age/first job

      25-35 career development/children

      35-45 family/career advancement (self-purchaser)

      45-55 self-actualization/empty nest (gift giver to self and others)

An example of women’s networks and influencers include:

      Friends (word-of-mouth)

      Celebrities (aspirational)

35

      Bloggers/online platforms (trusted network)

      Media (3 rd party endorsement)

      Peers in business

Understanding how the various targets receive information and are influenced in making jewelry purchases will help direct various streams of communication.

Because of the flexibility inherent in its model, RSC can adjust its brand voice specifically to reach a variety of women and men desiring a sapphire option in fine jewelry. The ability to focus the price point in various streams will also separate the brand from its competitors.

Marketing and Sales

Marketing Overview & Strategy

The Company’s marketing initiatives will focus on: (1) Business-to-Consumer (“B2C”) marketing to attract customers to the website, (2) Business-to-Business (“B2B”) marketing and sales efforts, which will include partnerships with distribution partners, to high-end fashion retailers, and eventually (3) building a strong retail presence to market the products directly to consumers on a retail level. The Company will initially focus marketing efforts on the U.S. and upon encountering significant success in the U.S. with online, wholesale, and retail sales, the Company will expand marketing efforts to include Europe and the Middle East.

On a B2C basis, the Company will use a wide array of marketing methods to spread awareness of the Company’s jewelry products, which will include internet marketing, print advertising, promotions, and eventually signage. The Company will identify ideal locations that will contain a lot of walk-by traffic in communities with middle to upper income residents. The Company is confident that a visit to the RSC retail boutiques will leave the customer satisfied and eagerly awaiting the next opportunity to purchase jewelry or refer the Company’s products to friends and family.

Branding Strategy

Branding will play a critical role in the success of the Company. The Company will initially perform a capabilities audit, develop and design the products, and perform a marketing and capabilities landscape assessment based upon consumer immersion and research and designed to understand consumer purchase behaviors and values, assess short and long term socio-cultural and market trends, and analyze the marketplace and competitive landscape. The Company will collaborate with an assembled team of experts in the naming and development of a dynamic, inspirational brand using expert level product design and marketing strategy. The Company will then design the look and feel of the logo using a palette, style guide, inspiration boards, design renderings, and production images.

The Company will then develop a tagline (service mark) and comprehensive, consumer-oriented toolkit using consistent language and tone for printed and online media and to target retailers on a sell-in, exclusive basis.

The Company will then develop its website, advertisements for print and online media, and sales materials for retail strategic partners. The Company will maintain a graphics library to be used on all touch points.

The Company’s goal is to evolve the brand voice to embody quality, variety, and a strong market position. The Company is in an enviable position in this ‘space’ whereby it can position itself and develop its identity as a new (mine-gate to retail) gemstone company that provides a direct bridge between mining and the finished products.

With the flexibility and leverage that comes from being vertically integrated, the Company can forge its own path with the creation of product segmented by the consumer and the development of multiple, non-competitive streams of distribution.

Internet Marketing

The Company will maintain a presence on Google , Yelp , Bing , Yahoo and all other online search engines that are used to search for jewelry and sapphires. The Company will engage in significant SEO marketing efforts to ensure that the Company has strong results upon natural searches related to jewelry and sapphires. The Company will also ensure that its products are featured on

36

major online jewelry directories such as jewelrymagazine.com, jewelrydirectory.org, and jewelercentral.com. The Company will also utilize PPC advertising, display advertising, and article marketing. The Company’s website will display a full catalogue of its products, background information regarding the mining of the products, information about the Company and management team, and contact information. The Company will also maintain a strong social media presence on Facebook, Twitter, and other social media websites to have an interactive presence.

Strategic Partnerships with Retailers

The Company will form strategic partnerships with retailers that will sell the products at their retail boutiques, which will have the benefit of promoting the Company brand at the consumer level. Prior to launching the Company’s sales campaign, the Company will develop and use association strategy to identify appropriate and strategic partners for co-marketing opportunities.

The Company will develop a retail channel strategy to bolster the retail/direct to consumer sales approach while maintain a point of differentiation within the competitive landscape. Furthermore, the Company will develop retail adaptation strategies using in-store promotional and retail tactics using the Company’s branding strategy.

Print Advertising

The Company will advertise in lifestyle and fashion magazines that cater to middle to upper income individuals, such as Vogue , Cosmopolitan , and Vanity Fair.

Public Relations

The Company will seek to gain public awareness and gain credibility through a public relations (PR) campaign that will lead to good relationships with the local market. The Company will consistently attend editor events and engage in strategic media outreach planning and become a valued member of the community through community service offerings and support. The Company will work to obtain interviews, print articles, and featured spots in leading fashion, luxury, and bridal magazines, industry publications, television news, radio programming, periodicals, and online websites and publications. The Company will develop short-lead and long-lead editorials and long lead editorials. The PR campaign will highlight the strength and innovation of the Company’s products.

Sponsorships

The Company will sponsor social events that are appropriate to promote jewelry on a consumer level. Examples of such events could be parties, art or photo shows, and charity events.

Signage

Upon launching the RSC retail boutiques, the Company will use prominent street signage to offer solid visibility for seeing the RSC retail boutiques. This signage will feature the Company logo and will set the stage for a high-end and comfortable environment.

Celebrity Endorsement

The Company will identify multiple celebrities to bolster the brand image, and spread awareness of the Company’s brand and products.

Promotions

The Company will develop promotional platforms that will include sales during and after holidays, discounted prices on particular products, and discounts for repeat customers.

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Competition

Competitive Analysis and Strategy

The industry in which we compete is highly competitive. We believe that the most important competitive factors in our industry include the ability to control as much as possible of the supply chain.

Our main competitors are Tiffany & Co, Gemfields, Zales and Bluenile.com Moreover, all of our potential business partners for supply of products and services could also be competitors. To ensure our competitiveness, we strive to continue to successfully acquire new customers and meet the changing needs of our customers and suppliers.

Because we are a small company with a limited operating history, we are at a competitive disadvantage against larger and well-capitalized companies which have a track record of success and operations. Therefore, our primary method of competition involves promoting the benefits of using our services over those of our competitors, including the price, delivery, quality and effectiveness of our services.

The Company is focused on mobilizing its resources to re-introduce sapphires and other precious gems back into the jewelry and precious stones market. The Company will set itself apart from its competition by (eventually) offering A-Z production, processing, jewelry manufacturing, wholesale & retail sales making it the only precious gems company to in-house all four processes. The Company will focus primarily on quality and secondly on strategic pricing methods that will allow their gems and precious stones to compete in the U.S. market.

In terms of precious stones and jewelry manufacturing and sales companies, there are few that are designed to establish and dominate the market within all four sectors that the Company will be capable of.

Tiffany is the world’s leading jewelry retailer, which is vertically integrated through most of the precious gem production to sale cycle; though, it has no focus on colored precious gems or sapphires. Zales is a leading player in the U.S. jewelry market; though, only participates on the retail level and is heavily associated with diamonds and brands itself as “The Diamond Store”. Blue Nile is strictly an online retailer that does not participate in the production or processing or precious gems; furthermore, Blue Nile’s branding and product line strategy is heavily focused on diamonds.

While all of these companies have established themselves uniquely within sectors of the market, none have the full range of vertical integration of production, cutting and shaping, manufacturing, and sales that the Company will maintain. There is a strong market opportunity for the Company’s products as there is currently growth in U.S. and global jewelry sales, U.S. and global diamond and gem stone sales. RSC has the assets, knowledge and expertise to capitalize on this opportunity to capitalize upon the uniquely powerful internationally recognized Australian brand image and appeal and become the leading player in this fragmented cottage industry.

The Company will garner market share from the leading precious gem and diamond players by:

      Using and producing the highest quality gems and diamonds from mines in Australia,

      Delivering flawless cuts that highlight the beauty and color of the products,

      Designing elegant and unique jewelry that will compete against companies such as Zale’s.

      Offering competitive pricing for all of its precious gem stones.

      Emphasizing the history, uniqueness, and beauty of sapphires and re-introducing them as a new solution to address customer needs.

Intellectual Property

We do not own, either legally or beneficially, any patents; however, we do own a number of premium retail domain names, including www.makeherveryhappy.com.

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Governmental Approvals and Regulatio n

We do not require any government approval in order to operate our business. In the event any of our operations or products requires government approval, we will comply with any and all local, state and federal requirements.

Other than federal and state securities laws and common business and tax rules and regulations, we are not subject to any material government regulation. However, there is a risk that we could be adversely affected by current laws, regulations or interpretations or that more restrictive laws, regulations or interpretations will be adopted in the future that could make compliance more difficult or expensive. There is also a risk that a change in current laws could adversely affect our business.

In addition, regulatory authorities have relatively broad discretion to grant, renew and revoke licenses and approvals and to implement regulations. Accordingly, such regulatory authorities could prevent or temporarily suspend us from carrying on some or all of our activities or otherwise penalize us if our practices were found not to comply with the then current regulatory or licensing requirements or any interpretation of such requirements by the regulatory authority. Our failure to comply with any of these requirements or interpretations could have a material adverse effect on our operations.

Procurement and Manufacturing

Our Sapphires are mined in Australia and processed in, Asia, Australia and the U.S, at the present time all of our manufacturing is conducted in the U.S.

Research and Development

Other than time spent researching our business and proposed markets and segmentation, the Company has not spent any funds on research and development activities to date. In the event opportunities arise from our operations, the Company may elect to initiate research and development activities, but the Company has no plans for any activities to date.

Environmental Laws and Regulations

Our operations are not subject to any environmental laws or regulations.

Employees

The Company had 2 full-time employees and 0 part-time employees as of the date of this prospectus.

We do not presently have pension, health, annuity, insurance, profit sharing, or similar benefit plans; however, we may adopt plans in the future.

Properties and Facilities

Our principal executive offices are located at 9465 Wilshire Blvd, Beverly Hills, California. The office space is currently being leased. We believe that our existing facilities are adequate for our current needs and that we will be able to lease suitable additional or alternative space on commercially reasonable terms if and when we need it. If we are able to raise sufficient capital through this offering, we will seek to lease a larger, dedicated space at no more than $5,000 per month.

Legal Proceedings

From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material legal proceedings in the future. To the best our knowledge, none of our directors, officers or affiliates is involved in a legal proceeding adverse to our business or has a material interest adverse to our business.

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DETERMINATION OF OFFERING PRICE

Since our shares are not listed or quoted on any exchange or quotation system, the offering price of the shares of common stock was arbitrarily determined. The offering price was determined by us and is based on our own assessment of our financial condition and prospects, limited offering history, and the general condition of the securities market. It does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. Although our common stock is not listed on a public exchange, we will be filing to obtain a listing on the OTCBB and or OTCQB concurrently with the filing of this prospectus. In order to be quoted on the OTCBB or OTCQB, a market maker must file an application on our behalf in order to make a market for our common stock.

The selling shareholders initially will sell shares of common stock at a price of $0.50 per share until they are quoted on the OTCBB or OTCQB, and thereafter may sell some or all of their shares from time to time at prevailing market prices, once they are quoted on the OTCBB or OTCQB, or at privately negotiated prices, and may sell either directly or through a broker-dealer in transactions between selling shareholders and purchasers, or otherwise.

We intend to file a registration statement under the Exchange Act concurrently with the effectiveness of the registration statement of which this prospectus is a part. If our common shares become quoted on the OTCBB or OTCQB and a market for the shares develops, the actual price of shares will be determined by prevailing market prices at the time of sale or by private transactions. The offering price would thus be determined by market factors.

There is no assurance that our common stock will trade at market prices in excess of the initial public offering price as prices for the common stock in any public market which may develop will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity of the market for the common stock, investor perception of us and general economic and market conditions. See “Risk Factors”.

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SECURITY OWNERSHIP OF PRINCIPAL AND SELLING STOCKHOLDERS

The following table contains information about the beneficial ownership of our common stock as of the date of this prospectus by:

      each person who is known by us to beneficially own more than 5% of the outstanding shares of common stock;

      each of our directors;

      each of our named executive officers;

      all of our directors and executive officers as a group; and

      each of the selling stockholders.

The information in the table below is based upon information derived from our stock records. Except as set forth below, percentages of common stock owned are based on 30,195,000 shares outstanding as of the date of this prospectus. There are not any pending or anticipated arrangements that may cause a change in control.

Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Common stock subject to options, warrants or other convertible securities that are currently exercisable or exercisable within 60 days of the date of this prospectus are deemed to be outstanding and beneficially owned by the person holding the options. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. In computing the percentage ownership of any person, the amount of shares is deemed to include the amount of shares beneficially owned by such person by reason of any of the acquisition rights described above. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe to the best of our knowledge that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. The indication in the table that shares are beneficially owned is not an admission on the part of the stockholder that he, she or it is a direct or indirect beneficial owner of those shares. Unless otherwise indicated, the business address of each of the entities and individuals named in the table below is c/o Reign Sapphire Corporation, 9190 W Olympic Blvd # 263 Beverly Hills CA 90212.

The following table also sets forth the number of common shares being offered by the selling stockholders and the number of shares that would be beneficially owned after the offering if a selling stockholder sold all of the shares offered under this prospectus. The shares being offered by the selling stockholders were offered and sold to them in private placement transactions pursuant to an exemption from the registration requirements under Regulation D and/or Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof. The sales of the securities were made without any form of general solicitation or advertising and all of the foregoing securities are deemed restricted securities for purposes of the Securities Act. Each of the recipients of securities represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the stock certificates. The shares being offered hereby by the selling stockholders are being registered to permit public secondary trading, and the selling stockholders may offer all or part of the shares for resale from time to time. However, the selling stockholders are under no obligation to sell all or any portion of such shares nor are the selling stockholders obligated to sell any shares immediately upon effectiveness of this prospectus. Because the selling stockholders are not obligated to sell all or any portion of the shares of our common stock shown as offered by them, we cannot estimate the actual number of shares (or actual percentage of the class) of our common stock that will be held by any selling stockholder upon completion of this resale offering. However, for purposes of this table, we have assumed that, after completion of the offering, none of the shares covered by this prospectus will be held by the applicable selling stockholder. All information with respect to share ownership has been furnished by the selling stockholders. The 7,695,000 common shares issued to the selling shareholders represent approximately 25.5% of the Company’s common shares outstanding as of the date of this prospectus. If the selling shareholders sell all 5,000,000 shares being registered hereunder, the 2,695,000 common shares that continue to be held by the selling shareholders will represent approximately 8.9% of the common shares outstanding as of the date of this prospectus.

The percentage of shares beneficially owned after completion of the offering is based on the number of common shares outstanding as of the date of this prospectus. If all of the 10,000,000 common shares being offered by the Company pursuant to

41

this prospectus are sold and no other shares are issued by the Company prior to the completion of the offering, Joseph Segelman, our President and CEO, will own or otherwise control (assuming no shares offered for sale by Australian Sapphire Corporation are sold) approximately 62.2 % of the then-outstanding common shares. However, if only 75% of the offered shares, 50% of the offered shares or 25% of the offered shares are sold, he will own 66.3%, 71% or 76.4%, respectively.

Certain of the persons identified in the table below are related to one another, as follows: (1) Mr. Joseph Segelman and Mrs. Chaya Segelman are married to one another; however they each disclaim beneficial ownership and/or voting power to shares owned by one another; and (2) Mr. Joseph Segelman, and Mr. Menachem Dadon are brother in laws. Mr. Joseph Segelman, and Mrs Chaya Segelman are founding stockholders of the Company and acquired all of their common shares at the founding of the Company at a price of $0.0001.

To our knowledge, none of the selling stockholders are broker-dealers.

During the three years prior to the filing of this registration statement, no selling stockholder held any positions or offices or had any other material relationships with the Company or any of its predecessors or affiliate except for Mr Joseph Segelman and Mrs. Chaya Segelman, each of whom currently serve as an executive officer and director of the Company.

 

 

Shares
Beneficially
Owned Prior
to this Offering

 

Maximum
Number of Shares Offered
For Sale in this Offering

 

Shares Beneficially
Owned After
Completion of this Offering
Assuming All Offered
Shares are Sold

Name and Address

 

Number

 

Percentage

 

 

 

Number

 

Percentage

Five Percent Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Australian Sapphire Corporation (1)

 

5,000,000

 

16.6

%

 

2,305,000

 

2,695,000

 

6.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Named Executive Officers and Directors:

 

 

 

 

 

 

 

 

 

 

 

 

Joseph Segelman (1)(2)

 

20,000,000

 

66.2

%

 

 

20,000,000

 

49.8

%

Chaya Segelman

 

2,500,000

 

8.3

%

 

 

2,500,000

 

6.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

All Current Directors and Executive Officers as a Group (2 persons)

 

22,500,000

 

74.5

%

 

 

22,500,000

 

56.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Selling Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

SL Slavin

 

1,200,000

 

4.0

%

 

1,200,000

 

 

 

Willa Qian

 

450,000

 

1.5

%

 

450,000

 

 

 

Alan S. Gutterman

 

450,000

 

1.5

%

 

450,000

 

 

 

Eiden, Inc.

 

250,000

 

 

*

 

250,000

 

 

 

OBK Ltd. (3)

 

100,000

 

 

*

 

100,000

 

 

 

Haytarr LLC

 

100,000

 

 

*

 

100,000

 

 

 

Menachem Dadon

 

25,000

 

 

*

 

25,000

 

 

 

Mimi Jakobson

 

25,000

 

 

*

 

25,000

 

 

 

Tana Consulting

 

25,000

 

 

*

 

25,000

 

 

 

Firerock Capital, Inc.

 

20,000

 

 

*

 

20,000

 

 

 

City One Securities Limited

 

10,000

 

 

*

 

10,000

 

 

 

Gerald Deciccio

 

10,000

 

 

*

 

10,000

 

 

 

Michael Gonzalez

 

10,000

 

 

*

 

10,000

 

 

 

Jaklynn Abesera

 

5,000

 

 

*

 

5,000

 

 

 

Michael Ashikian

 

5,000

 

 

*

 

5,000

 

 

 

Dalia Shoshanah Fishman

 

5,000

 

 

*

 

5,000

 

 

 

Yehudis Lipskier

 

5,000

 

 

*

 

5,000

 

 

 

____________

*       Represents beneficial ownership of less than one percent of our outstanding common stock.

(1)    Mr. Joseph Segelman is the owner of all of the outstanding shares of the selling stockholder and thus has beneficial ownership and voting power of all of the common shares of the Company owned by the selling stockholder, which shares are not included in the number of shares identified as being beneficially owned by Mr. Segelman elsewhere in the table.

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(2)    Does not include 10,000,000 shares of authorized but unissued common that Mr. Segelman has the right to acquire upon exercise of options granted under the Company’s 2015 Equity Incentive Plan as described in “Executive Compensation — Agreements with Executive Officers” elsewhere in this prospectus. The shares subject to such options have not been included since the options are not currently exercisable or exercisable within 60 days of the date of this prospectus and thus are deemed to be outstanding and beneficially owned by Mr. Segelman as the holder of the options.

(3)    Mr. Joseph Segelman is a member of the advisory board of the selling stockholder and a director of one of the portfolio companies owned and managed by the selling stockholder; however, Mr. Segelman disclaims any beneficial ownership and/or voting power with respect to the common shares of the Company owned by the selling stockholder.

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PLAN OF DISTRIBUTION

The Company has 30,195,000 shares of common stock issued and outstanding as of the date of this prospectus. The Company is registering an additional of 10,000,000 shares of its common stock for sale at the price of $0.50 per share. The Company will receive all proceeds from the sale of the 10,000,000 shares being offered on behalf of the company itself. The price per share is fixed at $0.50 for the duration of this offering or until our shares are quoted on the OTC Bulletin Board (“OTCBB”) operated by FINRA (Financial Industry Regulatory Authority) and/or OTCQB operated by the OTC Markets Group, Inc., at which time selling stockholders may sell shares at market prices or at privately negotiated prices. The proceeds from the remaining 5,000,000 shares held by selling shareholders, if sold, will not go to the Company, but will go to the selling shareholders directly.

There is no arrangement to address the possible effect of the offering on the price of the stock.

This is a self-underwritten offering, which means that we will sell the common shares ourselves from time to time directly to purchasers at our discretion and do not plan to use underwriters or pay any commissions. We will be selling our common shares using our best efforts and no one has agreed to buy any of our common shares. This prospectus permits our officers and directors to sell the common shares directly to the public, with no commission or other remuneration payable to them for any common shares they may sell. There is no plan or arrangement to enter into any contracts or agreements to sell the common shares with a broker or dealer and there are no finders. If we elect to retain licensed broker/dealers to assist us in selling our shares, we will file a post-effective amendment to the registration statement of which this prospectus is a part to identify the broker/dealers.

Our common shares are being offered by Joseph Segelman, the Company’s President and CEO, and as a result he is deemed to be an underwriter of this offering within the meaning of that term as defined in Section 2(11) of the Securities Act. In connection with his selling efforts in the offering, Mr. Segelman will not register as a broker-dealer pursuant to Section 15 of the Exchange Act, but rather will rely upon the “safe harbor” provisions of SEC Rule 3a4-1, promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Generally speaking, Rule 3a4-1 provides an exemption from the broker-dealer registration requirements of the Exchange Act for persons associated with an issuer that participate in an offering of the issuer’s securities. Mr. Segelman is not subject to any statutory disqualification, as that term is defined in Section 3(a)(39) of the Exchange Act. Mr. Segelman will not be compensated in connection with his participation in the offering by the payment of commissions or other remuneration based either directly or indirectly on transactions in our securities. Mr. Segelman has not been a broker or dealer or an associated person of a broker or dealer within the preceding 12 months and he has not participated in selling an offering of securities for any issuer more than once every 12 months other than in reliance on paragraph (a)4(i) or (a)4(iii) of Rule 3a4-1 of the Securities Exchange Act of 1934.

The offering will commence on the effective date of this prospectus and will terminate upon the earlier to occur of (i) 365 days after this registration statement becomes effective with the Securities and Exchange Commission, or (ii) the date on which all of the shares registered hereunder for offering by the Company have been sold. There is no minimum amount of common shares we must sell so no money raised from the sale of our common shares will go into escrow, trust or another similar arrangement.

All expenses incidental to the registration of the shares (including registration pursuant to the securities laws of certain states), are being paid for by Joseph Segelman, our President and CEO, and we expect that such expense will be no more than $100,000.

OTCBB and OTCQB Considerations

Although our common stock is not listed on a public exchange or quoted over-the counter, we intend to seek to have our shares of common stock quoted on the OTC Bulletin Board (“OTCBB”) operated by FINRA (Financial Industry Regulatory Authority) and/or OTCQB operated by the OTC Markets Group, Inc. In order to be quoted on the OTCBB or OTCQB, a market maker must file an application on our behalf in order to make a market for our common stock. There can be no assurance that a market maker will agree to file the necessary documents with FINRA, nor can there be any assurance that such an application for quotation will be approved. There is therefore no guarantee that our stock will ever be quoted on the OTCBB or OTCQB.

Although we anticipate listing on the OTCBB or OTCQB will increase liquidity for our stock, investors may have greater difficulty in getting orders filled because it is anticipated that if our stock trades on a public market, it initially will trade on the OTCBB or OTCQB rather than on NASDAQ. Investors’ orders may be filled at a price much different than expected when an order is placed. Trading activity in general is not conducted as efficiently and effectively as with NASDAQ-listed securities.

Investors must contact a broker-dealer to trade OTCBB or OTCQB securities. Investors do not have direct access to the bulletin board service. For bulletin board securities, there only has to be one market maker. Bulletin board transactions are conducted

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almost entirely manually. Because there are no automated systems for negotiating trades on the bulletin board, they are conducted via telephone. In times of heavy market volume, the limitations of this process may result in a significant increase in the time it takes to execute investor orders. Therefore, when investors place market orders - an order to buy or sell a specific number of shares at the current market price - it is possible for the price of a stock to go up or down significantly during the lapse of time between placing a market order and getting execution. Because bulletin board stocks are usually not followed by analysts, there may be lower trading volume than for NASDAQ-listed securities.

Section 15(g) of the Exchange Act/Penny Stock Rules

Our common shares will be covered by Section 15(g) of the Exchange Act, and Rules 15g-1 through 15g-6 promulgated thereunder. They impose additional sales practice requirements on broker-dealers who sell our securities to persons other than established customers and accredited investors (generally institutions with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 excluding revenue or annual income exceeding $200,000 or $300,000 jointly with their spouses).

      Rule 15g-1 exempts a number of specific transactions from the scope of the penny stock rules (but is not applicable to us).

      Rule 15g-2 declares unlawful broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a standardized disclosure document.

      Rule 15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses and subsequently confirms to the customer current quotation prices or similar market information concerning the penny stock in question.

      Rule 15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the customer the amount of compensation or other remuneration received as a result of the penny stock transaction.

      Rule 15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer, at the time of or prior to the transaction, information about the sales persons compensation.

      Rule 15g-6 requires broker-dealers selling penny stocks to provide their customers with monthly account statements.

Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’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 a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience and objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and that that 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 SEC relating to the penny stock market, which, in highlight form, sets forth the basis on which the broker or dealer made the suitability determination and that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading and 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. Additionally, 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.

Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If the Company remains subject to

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the penny stock rules for any significant period, which is likely, it could have an adverse effect on the market, if any, for the Company’s securities. If the Company’s securities are subject to the penny stock rules, investors will find it difficult to dispose of the Company’s securities.

Blue Sky Law Considerations

There is no established public market for our common stock, and there can be no assurance that any market will develop in the foreseeable future. Transfer of our common stock may also be restricted under the securities or securities regulations laws promulgated by various states and foreign jurisdictions, commonly referred to as “Blue Sky” laws. Absent compliance with such individual state laws, our common stock may not be traded in such jurisdictions. Because the securities registered hereunder have not been registered for resale under the blue sky laws of any state, the holders of such shares and persons who desire to purchase them in any trading market that might develop in the future, should be aware that there may be significant state blue-sky law restrictions upon the ability of investors to sell the securities and of purchasers to purchase the securities. Accordingly, investors may not be able to liquidate their investments and should be prepared to hold the common stock for an indefinite period of time.

Thirty-three states have what is commonly referred to as a “manual exemption” for secondary trading of securities such as those to be resold by selling stockholders under this registration statement. In these states, so long as we obtain and maintain a listing in Mergent, Inc., a leading provider of business and financial information on publicly listed companies, or Standard and Poor’s Corporate Manual, secondary trading of our common stock can occur without any filing, review or approval by state regulatory authorities in these states. These states are: Alaska, Arizona, Arkansas, Colorado, Connecticut, District of Columbia, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Texas, Utah, Washington, West Virginia and Wyoming. We cannot secure this listing, and thus this qualification, until after our registration statement is declared effective. Once we secure this listing, secondary trading can occur in these states without further action. However, we may not be accepted for listing in Mergent or similar services designed to obtain manual exemptions if we are considered to be a “shell company” at the time of application.

Upon effectiveness of this prospectus, the Company intends to consider (but may not) becoming a “reporting issuer” under Section 12(g) of the Exchange Act, as amended, by way of filing a Form 8-A with the SEC. A Form 8-A is a “short form” of registration whereby information about the Company will be incorporated by reference to the registration statement on Form S-1, of which this prospectus is a part. Upon filing of the Form 8-A, if done, the Company’s shares of common stock will become “covered securities,” or “federally covered securities” as described in some states’ laws, which means that unless you are an “underwriter” or “dealer,” you will have a “secondary trading” exemption under the laws of most states (and the District of Columbia, Guam, the Virgin Islands and Puerto Rico) to resell the shares of common stock you purchase in this offering. However, four states do impose filing requirements on the Company: Michigan, New Hampshire, Texas and Vermont. The Company may, at its own cost, make the required notice filings in Michigan, New Hampshire, Texas and Vermont immediately after filing its Form 8-A with the SEC.

We currently do not intend to and may not be able to qualify securities for resale in other states which require shares to be qualified before they can be resold by our shareholders.

Procedures for Subscribing

If you decide to subscribe for any shares in this offering, you must execute and deliver a subscription agreement, a copy of which is filed as Exhibit 99.1a to the registration statement of which this prospectus is a part; and deliver a check or certified funds in U.S. currency to us for acceptance or rejection. All checks for subscriptions must be made payable to “Reign Sapphire Corporation”. All subscription agreements and checks are irrevocable (except as to any states that require a statutory cooling-off period or rescission right) and should be delivered to the Company at the address provided on the subscription agreement.

We have the right to accept or reject subscriptions in whole or in part, for any reason or for no reason. Any subscription rejected will be returned to the subscriber within five business days of the rejection date, without interest or deductions. Furthermore, once a subscription agreement is accepted, it will be executed without reconfirmation to or from the subscriber. Once we accept a subscription, the subscriber cannot withdraw it.

All subscribed funds will be held in a noninterest-bearing account until the subscription agreements are accepted by the Company. Any subscribed funds may be immediately utilized by the Company prior to the completion of the offering. The offering will

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be completed 360 days from the effective date of this prospectus (or such earlier date when all 10,000,000 of the shares being offered by the Company are sold), unless extended by our board of directors for an additional 180 days.

The Company will deliver stock certificates attributable to shares of common stock purchased directly by the purchasers within 30 days of the close of this offering or as soon thereafter as practicable.

Distribution of Shares by Selling Shareholders

This prospectus covers the resale by selling shareholders of shares of our Common Stock that they have already acquired from us. The selling shareholders initially will sell shares of common stock at a price of $0.50 per share until they are quoted on the OTCBB or OTCQB, and thereafter may sell some or all of their shares from time to time at prevailing market prices, once they are quoted on the OTCBB or OTCQB, or at privately negotiated prices, and may sell either directly or through a broker-dealer in transactions between selling shareholders and purchasers, or otherwise.

The selling shareholders may use any one or more of the following methods when selling shares:

      ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

      block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

      purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

      privately negotiated transactions;

      short sales;

      agreements with broker-dealers to sell a specified number of such shares at a stipulated price per share;

      a combination of any such methods of sale; and

      any other method permitted pursuant to applicable law.

The selling shareholders may enter into hedging transactions with third parties, which may in turn engage in short sales of the common stock in the course of hedging the position they assume. The selling shareholders may also enter into short positions or other derivative transactions relating to the common stock, or interests in the common stock, and deliver the common stock, or interests in the common stock, to close out their short or other positions or otherwise settle short sales or other transactions, or loan or pledge the common stock, or interests in the common stock, to third parties that in turn may dispose of these securities.

Our obligation to register, or maintain, a registration statement governing the shares registered for resale hereunder will terminate:

      if all the shares have been registered and sold pursuant to this registration effected or pursuant to exempt transactions; or

      at such time as all shares held by the selling shareholders may be sold within a three-month period under Rule 144, either because each selling stockholder holds 1% or less of our then-outstanding common stock or because each selling stockholder can sell all of its shares under Rule 144(k) without volume or time limitations.

The selling shareholders may also sell their shares directly to market makers acting as principals or brokers or dealers, who may act as agent or acquire the common stock as a principal. Any broker or dealer who participates in such transactions as an agent may receive a commission from the selling shareholders, or, if it acts as agent for the purchaser of such common stock, from such purchaser. The selling shareholders will likely pay the usual and customary brokerage fees for such services. Brokers or dealers may agree with the selling shareholders to sell a specified number of shares at a stipulated price per share and, to the extent such broker or dealer is unable to do so acting as agent for the selling shareholders, to purchase, as principal, any unsold shares at the price required to fulfill the respective broker’s or dealer’s commitment to the selling shareholders. Brokers or dealers who acquire shares as principals may thereafter resell such shares from time to time in transactions in a market or on an exchange, in negotiated transactions or otherwise, at market prices prevailing at the time of sale or at negotiated prices, and

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in connection with such re-sales may pay or receive commissions to or from the purchasers of such shares. These transactions may involve cross and block transactions that may involve sales to and through other brokers or dealers. If applicable, the selling shareholders may distribute shares to one or more of their partners who are unaffiliated with us. Such partners may, in turn, distribute such shares as described above. The selling shareholders may also sell shares under Rule 144 under the Securities Act, if available, rather than under this prospectus. We can provide no assurance that all or any of the common stock offered will be sold by the selling shareholders.

We are bearing all costs relating to the registration of the common stock. The selling shareholders, however, will pay any commissions or other fees payable to brokers or dealers in connection with any sale of the common stock. The selling shareholders must comply with the requirements of the Securities Act and the Exchange Act in the offer and sale of the common stock. In particular, during such times as the selling shareholders may be deemed to be engaged in a distribution of the common stock, and therefore be considered to be underwriters, they must comply with applicable law and, among other things, must:

1.      Not engage in any stabilization activities in connection with our common stock;

2.      Furnish each broker or dealer through which common stock may be offered such copies of this prospectus, as amended from time to time, as may be required by such broker or dealer; and

3.      Not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities other than as permitted under the Exchange Act.

Under the Exchange Act and the regulations thereunder, any person engaged in a distribution of the shares of our common stock offered by this prospectus may not simultaneously engage in market making activities with respect to our common stock during the applicable “cooling off” periods prior to the commencement of such distribution. Also, the selling shareholders are subject to applicable provisions that limit the timing of purchases and sales of our common stock by the selling security holders.

We have informed the selling shareholders that, during such time as they may be engaged in a distribution of any of the shares we are registering by this registration statement, they are required to comply with Regulation M. In general, Regulation M precludes any selling stockholder, any affiliated purchasers and any broker-dealer or other person who participates in a distribution from bidding for or purchasing, or attempting to induce any person to bid for or purchase, and any security which is the subject of the distribution until the entire distribution is complete. Regulation M defines a “distribution” as an offering of securities that is distinguished from ordinary trading activities by the magnitude of the offering and the presence of special selling efforts and selling methods. Regulation M also defines a “distribution participant” as an underwriter, prospective underwriter, broker, dealer, or other person who has agreed to participate or who is participating in a distribution.

No stockholder may offer or sell shares of our common stock under this prospectus unless such stockholder has notified us of his or her intention to sell shares of our common stock and the registration statement of which this prospectus is a part has been declared effective by the SEC, and remains effective at the time such selling stockholder offers or sells such shares. We are required to amend the registration statement of which this prospectus is a part to reflect material developments in our business and current financial information. Each time we file a post-effective amendment to our registration statement with the SEC, it must first become effective prior to the offer or sale of shares of our common stock by the selling shareholders.

Offer Restrictions Outside the United States

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

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DESCRIPTION OF SECURITIES

General

We have authorized capital stock consisting of 100,000,000 shares of common stock, $0.0001 par value per share (“Common Stock”) and 10,000,000 shares of preferred stock, $0.0001 par value per share (“Preferred Stock”). As of the date of this prospectus, we have 30,195,000 shares of Common Stock issued and outstanding.

This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and amended and restated by-laws, copies of which have been or will be filed with the SEC as exhibits to the registration statement of which this prospectus is a part. References in this section to the “Company,” “we,” “us” and “our” refer to Reign Sapphire Corporation and not to any of its subsidiaries.

Common Stock

The holders of outstanding shares of Common Stock are entitled to receive dividends out of assets or funds legally available for the payment of dividends of such times and in such amounts as the board from time to time may determine. Holders of Common Stock are entitled to one vote for each share held on all matters submitted to a vote of shareholders. There is no cumulative voting of the election of directors then standing for election. The Common Stock is not entitled to pre-emptive rights and is not subject to conversion or redemption. Upon liquidation, dissolution or winding up of our company, the assets legally available for distribution to stockholders are distributable ratably among the holders of the Common Stock after payment of liquidation preferences, if any, on any outstanding payment of other claims of creditors.

Preferred Stock

Shares of Preferred Stock may be issued from time to time in one or more series, each of which shall have such distinctive designation or title as shall be determined by our Board of Directors (“Board of Directors”) prior to the issuance of any shares thereof. Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of all the then outstanding shares of our capital stock entitled to vote generally in the election of the directors, voting together as a single class, without a separate vote of the holders of the Preferred Stock, or any series thereof, unless a vote of any such holders is required pursuant to any Preferred Stock Designation. Accordingly, the Company’s Board of Directors is empowered, without stockholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the Common Stock. In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company. Although we have no present intention to issue any shares of our authorized Preferred Stock, and no shares of our authorized Preferred Stock are issued and outstanding as of the date of this prospectus, there can be no assurance that we will not do so in the future.

Options, Warrants and Other Convertible Securities

Except for options to purchase 10,000,000 shares of our common stock issued to Joseph Segelman, the Company’s President and CEO, under our 2015 Equity Incentive Plan, there are no outstanding options or warrants to purchase, or securities convertible into, shares of our common stock as of the date of this prospectus. For information on the Company’s 2015 Equity Incentive Plan, see “Executive Compensation — Equity Compensation Plans and Other Benefit Plans” below. For information on the Company’s stock option agreement with Mr. Segelman, see “Executive Compensation — Agreements with Executive Officers” below.

Registration Rights

There are no outstanding registration rights relating to our securities.

Dividend Policy

We have never paid or declared any cash dividends on our common stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our board of

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directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our board of directors deems relevant.

Anti-Takeover Effects or Provisions of Our Certificate of Incorporation, our Bylaws and Delaware Law

Some provisions of Delaware law and our certificate of incorporation and our bylaws contain provisions that could make the following transactions more difficult: acquisition of us by means of a tender offer; acquisition of us by means of a proxy contest or otherwise; or removal of our incumbent officers and directors. It is possible that these provisions could make it more difficult to accomplish or could deter transactions that stockholders may otherwise consider to be in their best interest or in our best interests, including transactions that might result in a premium over the market price for our shares.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging these proposals because negotiation of these proposals could result in an improvement of their terms.

Delaware Anti-Takeover Statute

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits persons deemed “interested stockholders” from engaging in a “business combination” with a publicly held Delaware corporation for three years following the date these persons become interested stockholders unless the business combination is, or the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed exception applies. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status did own, 15% or more of a corporation’s voting stock. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. The existence of this provision may have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, such as discouraging takeover attempts that might result in a premium over the market price of our common stock.

Undesignated Preferred Stock

The ability to authorize undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management of our Company.

Special Stockholder Meetings

Our bylaws provide that a special meeting of stockholders may be called only by the secretary of the company pursuant to a resolution adopted by a majority of our board of directors.

Requirements for Advance Notification of Stockholder Nominations and Proposals

Our bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the board of directors or a committee of the board of directors.

Elimination of Stockholder Action by Written Consent

Our certificate of incorporation eliminates the right of stockholders to act by written consent without a meeting.

Classified Board; Number, Election and Removal of Directors

Upon the consummation of this offering, our board of directors will be divided into three classes. The directors in each class will serve for a three-year term, one class being elected each year by our stockholders, with staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. The total authorized number of directors may be changed only be resolution of the board of directors. Because our stockholders do not have cumulative voting lights, our stockholders holding a majority of the shares of common stock outstanding will be able to elect all of our directors. In addition, a vote of not less than 66 2/3% of all outstanding

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shares of our capital stock is required for removal of a director only for cause (and a director may only be removed for cause). For more information on the classified board, see “Management-Board Composition.” This system of electing and removing directors may tend to discourage a third party from making a tender offer or othe1wise attempting to obtain control of us, because it generally makes it more difficult for stockholders to replace a majority of the directors.

Choice of Forum

Our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, or any action asserting a claim against us that is governed by the internal affairs doctrine.

Amendment of Charter Provisions

The amendment of any of the above provisions, except for the provision making it possible for our board of directors to issue preferred stock, would require approval by holders of at least 66 2/3% of the voting power of our then outstanding voting stock.

The provisions of the Delaware General Corporation Law, our certificate of incorporation and our bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they may also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions may also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders may otherwise deem to be in their best interests.

Limitations of Liability and Indemnification Matters

For a discussion of liability and indemnification, please see “Management-Limitation on Liability and Indemnification Matters.”

Listing

We will apply to list our common stock on the OTCQB under the symbol “RSAP”.

Holders of Our Common Stock

As of the date of this Prospectus, the Company has 20 stockholders of record and there are 30,195,000 shares of the Company’s common stock outstanding.

Transfer Agent

Our stock transfer agent is VStock Transfer Agents. Their mailing address is 18 Lafayette Place, Woodmere, New York, 11598. Our stock transfer agent can be reached by phone at (212) 828 8436.

Penny Stock Regulation

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) of less than $5.00 per share or an exercise price of less than $5.00 per share. Such securities are subject to rules that impose additional sales practice requirements on broker-dealers who sell them. For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchaser of such securities and have received the purchaser’s written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a disclosure schedule prepared by the SEC 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, among other requirements, 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. As the Shares immediately following this Offering will likely be subject to such penny stock rules, purchasers in this Offering will in all likelihood find it more difficult to sell their Shares in the secondary market. See “Plan of Distribution”.

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REPORTS TO SECURITIES HOLDERS

Through the filing of Form 8-A under the Exchange Act within 30-60 days following the effective date of the registration statement of which this prospectus is a part, we intend to become a fully reporting company under the requirements of the Exchange Act, and will file the necessary quarterly and other reports with the Securities and Exchange Commission. Although we will not be required to deliver our annual or quarterly reports to security holders, we intend to forward this information to security holders upon receiving a written request to receive such information. The reports and other information filed by us will be available for inspection and copying at the public reference facilities of the Securities and Exchange Commission located at 100 F Street N.E., Washington, D.C. 20549.

Copies of such material may be obtained by mail from the Public Reference Section of the Securities and Exchange Commission at 100 F. Street N.E., Washington, D.C. 20549, at prescribed rates. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission maintains a World Wide Website on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the Securities and Exchange Commission.

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INTERESTS OF NAMED EXPERTS AND COUNSEL

Except as described below, no expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of our common stock was employed on a contingency basis, or had, or is to receive, in connection with the offering, a substantial interest, direct or indirect, in the Company or any of its subsidiaries. Nor was any such person connected with the registrant or any of its parents or subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer, or employee.

The validity of the shares of common stock offered hereby will be passed upon for us by Qian & Company, A California Professional Law Corporation. Willa Qian, the sole shareholder of Qian & Company, is the owner of 450,000 shares of our common stock, all of which are being offered for resale pursuant to this prospectus, and Alan S. Gutterman, Of Counsel to Qian & Company, is the owner of 450,000 shares of our common stock, all of which are being offered for resale pursuant to this prospectus.

The financial statements included in this prospectus and the registration statement have been audited by Hartley Moore Accountancy Corporation, certified public accountants, to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

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PRINCIPAL ACCOUNTING FEES AND SERVICES

Below is the aggregate amount of fees billed for professional services rendered by Hartley Moore Accountancy Corporation, our principal accountants, with respect to our last two fiscal years.

 

 

2013

 

2014

Audit fees

 

$

3,500

 

$

10,000

Audit related fees

 

$

5,000

 

 

 

Tax fees

 

 

 

 

 

 

All other fees

 

 

 

 

 

 

Total

 

$

8,500

 

$

10,000

All of the professional services rendered by principal accountants for the audit of our annual financial statements that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for last two fiscal years were approved by our board of directors.

There have been no changes in, or disagreements regarding accounting or financial disclosures with, our accountants during the last two fiscal years.

54

MANAGEMENT AND CORPORATE GOVERNANCE

Executive Officers and Directors

The following table sets forth information, as of the date of this prospectus, regarding our executive officers and directors:

Name

 

Age

 

Title

Joseph Segelman

 

38

 

President, Chief Executive Officer and Director

Chaya Segelman

 

35

 

Secretary and Director

Joseph Segelman has served as our President and Chief Executive Officer and a member of our board of directors since December 2014. During the five year period prior to December 2014, Mr. Segelman served as the Chief Executive Officer and Managing Director of UWI Holdings Corporation (previously known as Australian Sapphire Corporation), Shefa Mining Corporation and Spencer Lloyd & Associates. He is an experienced marketing and operations professional with over 17 years of experience in logistics and marketing and extensive experience in the Australian mining and gem industry. He is currently Director of Australian Sapphire Corporation and Spencer Lloyd & Associates. He is also a Director & Board Member of OBK (a Sydney based charity), and a Captain (Chaplain) in the Australian Army reserves. Mr. Segelman is the author of “Take Action: Successful Australians Share their Secrets”, (Lothian Books, 2004).

Chaya Segelman has served as our Secretary and a member of our board of directors since December 2014. During the five year period prior to December 2014, Mrs. Segelman served as the secretary and head of operations and a member of the board of directors of UWI Holdings Corporation (previously known as Australian Sapphire Corporation), Shefa Mining Corporation and Spencer Lloyd & Associates. She has over 15 years of company administration experience.

Our sole directors, Joseph and Chaya Segelman, are married to one another.

Corporate Governance

The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations.

Board Composition

Our business and affairs are managed under the direction of our board of directors, which upon the consummation of this offering will consist of two members. Directors serve for a term of one year and until their successors have been duly elected and qualified.

Committees of the Board

Our Company currently does not have nominating, compensation, or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. Our directors believe that it is not necessary to have such committees, at this time, because the directors can adequately perform the functions of such committees. With the recent addition of independent directors to the Board we anticipate the creation of an audit and a compensation committee.

In lieu of an audit committee, the Company’s Board of Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company’s financial statements and other services provided by the Company’s independent public accountants. The Board of Directors, the Chief Executive Officer and the Chief Financial Officer of the Company review the Company’s internal accounting controls, practices and policies.

Audit Committee Financial Expert

Our Board of Directors has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(D)(5) of Regulation S-K, nor do we have a Board member that qualifies as “independent” as the

55

term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the FINRA Rules.

We believe that our directors are capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The directors of our Company do not believe that it is necessary to have an audit committee because management believes that the Board of Directors can adequately perform the functions of an audit committee. In addition, we believe that retaining an independent Director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the stage of our development and the fact that we have not generated any positive cash flows from operations to date.

Involvement in Certain Legal Proceedings

Our directors and our executive officers have not been involved in or a party in any of the following events or actions during the past ten years:

1.      any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2.      any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

3.      being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4.      being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

5.      Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

6.      Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

7.      Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:(i) Any Federal or State securities or commodities law or regulation; or(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

8.      Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Director Independence

We are not required to have independent members of our Board of Directors, and do not anticipate having independent Directors until such time as we are required to do so.

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Code of Ethics

The Company has not formally adopted a written Code of Ethics that governs the Company’s employees, officers and Directors as the Company is not required to do so. The Board of Directors evaluated the business of the Company and the number of employees and determined that since the business is operated by a small number of persons, general rules of fiduciary duty and federal and state criminal, business conduct and securities laws are adequate ethical guidelines. In the event our operations, employees and/or Directors expand in the future, we may take actions to adopt a formal Code of Ethics.

Compensation Committee Interlocks and Insider Participation

As a smaller reporting company, the Company is not required to provide this disclosure.

Role of Board of Directors in Risk Oversight

Our board of directors oversees an enterprise-wide approach to risk management, designed to support the achievement of business objectives, including organizational and strategic objectives, to improve long-term organizational performance and enhance stockholder value. The involvement of our board of directors in setting our business strategy is a key part of its assessment of management’s plans for risk management and its determination of what constitutes an appropriate level of risk for our company. The participation of our board of directors in our risk oversight process includes receiving regular reports from members of senior management on areas of material risk to our company, including operational, financial, legal and regulatory, and strategic and reputational risks.

While our board of directors has the ultimate responsibility for the risk management process, senior management and various committees of our board of directors, when formed, will also have responsibility for certain areas of risk management. Our senior management team is responsible for day-to-day risk management and regularly reports on risks to our full board of directors or a relevant committee. Our finance and regulatory personnel serve as the primary monitoring and evaluation function for company-wide policies and procedures, and manage the day-to-day oversight of the risk management strategy for our ongoing business. This oversight includes identifying, evaluating, and addressing potential risks that may exist at the enterprise, strategic, financial, operational, compliance and reporting levels.

Director Compensation

All of the Company’s directors are employees of the Company and such persons have not been separately compensated for their services to the Company as a director.

Limitation on Liability and Indemnification Matters

Our certificate of incorporation and bylaws provide that we will indemnify our directors and officers, and may indemnify our employees and other agents, to the fullest extent permitted by the Delaware General Corporation Law, which prohibits our certificate of incorporation from limiting the liability of our directors for the following:

      any breach of the director’s duty of loyalty to the corporation or its stockholders;

      any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

      unlawful payments of dividends or unlawful stock repurchases or redemptions; or

      any transaction from which the director derived an improper personal benefit.

If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. Our certificate of incorporation does not eliminate a director’s duty of care and in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. This provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Under our bylaws, we will also be empowered to purchase insurance on behalf of any person whom we are required or permitted to indemnify.

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In addition to the indemnification required in our certificate of incorporation and bylaws, we have entered or will enter into indemnification agreements with each of our directors and officers. These agreements provide indemnification for certain expenses and liabilities incurred in connection with any action, suit, proceeding, or alternative dispute resolution mechanism, or hearing, inquiry, or investigation that may lead to the foregoing, to which they are a party, or are threatened to be made a party, by reason of the fact that they are or were a director, officer, employee, agent, or fiduciary of our company, or any of our subsidiaries, by reason of any action or inaction by them while serving as an officer, director, agent, or fiduciary, or by reason of the fact that they were serving at our request as a director, officer, employee, agent, or fiduciary of another entity. In the case of an action or proceeding by, or in the right of, our company or any of our subsidiaries, no indemnification will be provided for any claim where a court determines that the indemnified party is prohibited from receiving indemnification. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as we may provide indemnification for liabilities arising under the Securities Act to our directors, officers, and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

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EXECUTIVE COMPENSATION

The following is a discussion and analysis of compensation arrangements of our named executive officers, or NEOs. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

Summary Compensation Table

The particulars of the compensation paid to the following persons: (1) our principal executive officer; and (2) each of our two most highly compensated executive officers who were serving as executive officers at the end of the fiscal year ended December 31, 2014, who we will collectively refer to as the “named executive officers” of the Company, are set out in the following summary compensation table:

SUMMARY COMPENSATION TABLE

Name and Principal Position

 

Year

 

Salary
($)

 

Bonus
($)

 

Stock
Awards
($)

 

Option
Awards
($)

 

Non-Equity
Incentive Plan
Compensation
($)

 

Change in
Pension
Value and
Nonqualified
Deferred
Compensation Earnings
($)

 

All Other
Compensation
($) (i)

 

Total
($) (i)

Joseph Segelman,

 

2014

 

120,000

 

0

 

0

 

0

 

0

 

0

 

$

0

 

$

120,000

Chief Executive Officer

 

2013

 

120,000

 

0

 

0

 

0

 

0

 

0

 

$

0

 

$

120,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chaya Segelman,

 

2014

 

60,000

 

0

 

0

 

0

 

0

 

0

 

$

0

 

$

60,000

Head of Operations

 

2013

 

60,000

 

0

 

0

 

0

 

0

 

0

 

$

0

 

$

60,000

Other than as disclosed below, there are no compensatory plans or arrangements with respect to our executive officers resulting from their resignation, retirement or other termination of employment or from a change of control.

Grants of Plan-Based Awards Table

None of our named executive officers received any grants of stock, option awards or other plan-based awards during the period ended December 31, 2014.

Options Exercised and Stock Vested Table

None of our named executive officers held any stock options or restricted stock units during the period ended December 31, 2014.

Outstanding Equity Awards at 2014 Year End

None of our named executive officers had any outstanding stock or option awards as of December 31, 2014 that would be compensatory to the officer. Except as described below in “Agreements with Executive Officers”, the Company has not issued any awards to its named executive officers. The Company and its Board of Directors may grant awards as it sees fit to its employees as well as key consultants. See the discussion of “Equity Compensation Plans and Other Benefit Plans” below.

Agreements with Executive Officers

We do not have any employment or consulting agreements with any executive officers or directors except as follows:

Joseph Segelman

Effective as of April 1, 2015, we entered into an employment agreement with Joseph Segelman, our President and Chief Executive Officer. The initial term of Mr. Segelman’s employment agreement expires on December 31, 2018, unless earlier terminated by us or Mr. Segelman. The agreement provides for automatic one-year renewals, unless either we or Mr. Segelman

59

give notice of our or his intention not to extend at least 90 days prior to the expiration of any term. Under his employment agreement, Mr. Segelman receives a minimum annual base salary of $180,000. Mr. Segelman is eligible to receive an annual performance bonus each year, if performance goals established by our board of directors are met, and is entitled to participate in customary benefit plans.

If we terminate Mr. Segelman’s employment without cause, he will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by Mr. Segelman and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to 200% of the base salary and (iii) continued participation, at our expense, in our health and welfare programs for a period of two years after the date of termination.

For purposes of Mr. Segelman’s employment agreement with us, a termination for cause will be deemed to have occurred upon the happening of the following, subject to a cure right: (i) his misappropriation or theft of our or any of our subsidiary’s funds or property; (ii) his conviction or entering of a plea of nolo contendere of any fraud, misappropriation, embezzlement or similar act, felony or crime involving dishonesty or moral turpitude; (iii) his engagement in any conduct that is materially injurious to us; (iv) his material breach of his employment agreement or material failure to perform any of his duties owed to us; (v) his commission of any act involving willful malfeasance or gross negligence or his failure to act involving material nonfeasance; or (vi) his material violation of the code of conduct of the Company or its subsidiaries or of any statutory or common law duty of loyalty to the Company or its subsidiaries.

In connection with his employment agreement, Mr. Segelman was granted options to purchase 10,000,000 shares of our common stock in accordance with a share option agreement pursuant to the Company’s 2015 Incentive Equity Plan, which is described below. The share option agreement provides, among other things, that Mr. Segelman’s options shall vest monthly over a two year period commencing on April 1, 2015. This award is also subject to accelerated vesting in certain circumstances, including in connection with certain terminations or the achievement of specified performance milestones including the successful offer and sale of all of the shares of common stock being offered by the Company pursuant to this prospectus.

The foregoing description of Mr. Segelman’s employment and stock option agreements does not purport to be complete and is qualified in its entirety by the text of each of those agreements, copies of which will be filed as exhibits to this registration statement and incorporated by reference herein.

Chaya Segelman

Effective as of April 1, 2015, we entered into an employment agreement with Chaya Segelman, our Secretary and Head of Operations. The initial term of Mrs. Segelman’s employment agreement expires on December 31, 2018, unless earlier terminated by us or Mrs. Segelman. The agreement provides for automatic one-year renewals, unless either we or Mrs. Segelman give notice of our or her intention not to extend at least 90 days prior to the expiration of any term. Under her employment agreement, Mrs. Segelman receives a minimum annual base salary of $80,000.

If we terminate Mrs. Segelman’s employment without cause, she will be entitled to the following: (i) payment of (x) accrued compensation and unpaid base salary through the date of such termination, (y) any amounts previously deferred by Mrs. Segelman and (z) the payment or reimbursement for expenses incurred prior to the date of such termination; (ii) an amount equal to 50% of the base salary and (iii) continued participation, at our expense, in our health and welfare programs for a period of two years after the date of termination. The definition of cause under Mrs. Segelman’s employment agreement is the same as that in Mr. Segelman’s employment agreement.

The foregoing description of Mrs. Segelman’s employment agreement does not purport to be complete and is qualified in its entirety by the text of the agreement, a copy of which will be filed as an exhibit to this registration statement and incorporated by reference herein.

Equity Compensation Plans and Other Benefit Plans

Other than as described below, the Company does not currently have any equity compensation plans and there are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers.

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2015 Equity Incentive Plan

On May 1, 2015 the board of directors and stockholders of the Company authorized the adoption and implementation of the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). The principal purpose of the 2015 Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its related companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company’s stockholders. The material terms of the 2015 Plan are summarized below.

Share Reserve . Under the 2015 Plan, 10,000,000 shares of our common stock have initially been reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other stock and cash-based awards. To the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2015 Plan. As of the date of this prospectus, options to issue 10,000,000 shares of our common stock have been issued under the 2015 Plan. For information on the terms of such issued options, all of which have been issued to Joseph Segelman, our President and CEO, see “Executive Compensation — Agreements with Executive Officers” in this prospectus.

Administration . The 2015 Plan will be administered by the Company’s board of directors as the “administrator”. Except for the terms and conditions explicitly set forth in the 2015 Plan, the administrator shall have full power and exclusive authority, to the extent permitted by applicable law and subject to such orders or resolutions not inconsistent with the provisions of the 2015 Plan as may from time to time be adopted by the Board to (i) select the eligible persons to whom awards may from time to time be granted under the 2015 Plan; (ii) determine the type or types of award to be granted to each participant under the 2015 Plan; (iii) determine the number of shares of common stock to be covered by each award granted under the 2015 Plan; (iv) determine the terms and conditions of any award granted under the 2015 Plan; (v) approve the forms of notice or agreement for use under the 2015 Plan; (vi) determine whether, to what extent and under what circumstances awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of common stock, other property and other amounts payable with respect to an award shall be deferred either automatically or at the election of the participant; (viii) interpret and administer the 2015 Plan and any instrument evidencing an award or notice or agreement entered into under the 2015 Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the 2015 Plan; (x) delegate ministerial duties to such of the Company’s employees as it so determines; and (xi) make any other determination and take any other action that the administrator deems necessary or desirable for administration of the 2015 Plan.

Eligibility . An award may be granted under the 2015 Plan to any employee, officer or director of the Company or a related company whom the administrator from time to time selects. An award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any related company that (a) are not in connection with the offer and sale of the Company’s securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company’s securities.

Awards . The 2015 Plan provides that the administrator may grant or issue stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other stock and cash-based awards. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

Nonstatutory Stock Option , or NSOs, will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years.

Incentive Stock Options , or ISOs, will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2015 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

Restricted Stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase

61

price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and the right to receive dividends, if any, prior to the time when the restrictions lapse; however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire.

Restricted Stock Units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold or otherwise transferred or hypothocated until vesting conditions are removed or expire. Unlike restricted stock, stock underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

Stock Appreciation Rights , or SARs, may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2015 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. Except as required by Section 162(m) of the Code with respect to a SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Code, there are no restrictions specified in the 2015 Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the administrator in the SAR agreements. SARs under the 2015 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

Dividend Equivalents represent the value of the dividends, if any, per share paid by us, calculated with reference to the number of shares covered by the award. Dividend equivalents may be settled in cash or shares and at such times as determined by the compensation committee or board of directors, as applicable.

Qualified Performance-Based Awards.  The administrator has the ability to grant restricted stock or restricted stock units as qualified performance-based awards under Section 162(m)(4)(C) of the Internal Revenue Code.

Change in Control . In the event of a change of control, as defined in the 2015 Plan, the administrator may, in its discretion and without limitation, (i) cancel outstanding awards in exchange for payments of cash, property or a combination thereof having an aggregate value equal to the value of such awards, (ii) substitute other property (including cash or other securities) for shares of common stock subject to outstanding awards, (iii) arrange for the assumption of awards, or replacement of awards with new awards based on other property or securities, and (iv) after giving participants an opportunity to exercise any outstanding stock options and SARs, terminate any or all unexercised options and SARs.

Adjustments of Awards . In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off, recapitalization, distribution of our assets to stockholders (other than normal cash dividends) or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2015 Plan or any awards under the 2015 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to the aggregate number and type of shares subject to the 2015 Plan, the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards), and the grant or exercise price per share of any outstanding awards under the 2015 Plan.

Amendment and Termination . Our board of directors may amend or modify the 2015 Plan at any time and from time to time. However, we must generally obtain stockholder approval to increase the number of shares available under the 2015 Plan (other than in connection with certain corporate events, as described above) and to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule).

Termination . The board of directors may terminate the 2015 Plan at any time. No awards may be granted under the 2015 Plan after the tenth anniversary of the effective date of the 2015 Plan.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of the Company during the last two fiscal years, is or has been indebted to the Company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than compensation arrangements, we describe below transactions and series of similar transactions, since January 1, 2013 (i.e., the last two completed fiscal years), to which we were a party or will be a party, in which the amounts involved exceeded or will exceed the lesser of $120,000 or 1% of the average of our total assets at year end for the last two completed fiscal years; and any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. Compensation arrangements, including employment agreements, for our directors and named executive officers are described elsewhere in “Executive Compensation — Agreements with Executive Officers”

Consulting Agreements

The Company had a consulting agreement beginning on June 20, 2013 with Joseph Segelman, its President and CEO and a director of the Company, under which he was to be compensated at $120,000 per annum and the agreement was to continue unless and until terminated at any time by either the Company or Mr. Segelman giving two month notice in writing. The Company accrued deferred compensation totaling $287,194 and $64,000 as of December 31, 2014 and 2013, respectively, with respect to this agreement. Such consulting agreement was terminated by mutual agreement of the parties as of March 31, 2015 and superseded by the employment agreement described in “Executive Compensation — Agreements with Executive Officers”.

The Company had a consulting agreement beginning June 20, 2013 with Chaya Segelman, its Secretary and a director of the Company, under which she was to be compensated at $60,000 per annum and agreement was to continue unless and until terminated at any time by either the Company or Mrs. Segelman giving two month notice in writing. The Company accrued deferred compensation totaling $92,000 and $32,000 as of December 31, 2014 and 2013, respectively, with respect to this agreement. Such consulting agreement was terminated by mutual agreement of the parties as of March 31, 2015 and superseded by the employment agreement described in “Executive Compensation — Agreements with Executive Officers”.

Joseph and Chaya Segelman are married to one another.

Loan Agreement

The Company has borrowed funds from Josesph Segelman, its President and CEO and a director of the Company, for working capital purposes from time to time. The Company has recorded the principal balance due of $83,641 and $35,641 under Advance From Shareholder in the Balance Sheets included in this registration statement at December 31, 2014 and 2013, respectively. The Company received advances of $48,000 and $35,641 and made no repayments for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013. Advances are non-interest bearing and due on demand.

Stock Issuances to Officers and Directors

On December 31, 2014, the Company issued 27,500,000 shares of its Common Stock to officers and directors of the Company (or their affiliates) for consideration valued by the Board of Directors at $0.005 per share as part of the assignment of assets and liabilities from the successor company.. The issuance was an isolated transaction not involving a public offering pursuant to Section 4(2) of the Securities Act of 1933.

Indemnification Agreements

We have entered or intend to enter into indemnification agreements with each of our directors and executive officers. These agreements, among other things, will require us to indemnify each individual to the fullest extent permitted by Delaware law, including indemnification of expenses such as attorneys’ fees, judgments, fines and settlement amounts incurred by the individual in any action or proceeding, including any action or proceeding by or in right of us, arising out of the person’s services as a director, officer or other employee.

Policies and Procedures for Related Party Transactions

Given our small size and limited financial resources, we have not adopted formal policies and procedures for the review, approval or ratification of transactions with our executive officer(s), Director(s) and significant stockholders. We rely on our board to review related party transactions on an ongoing basis to prevent conflicts of interest. Our board reviews a transaction

63

in light of the affiliations of the director, officer or employee and the affiliations of such person’s immediate family. Transactions are presented to our board for approval before they are entered into or, if this is not possible, for ratification after the transaction has occurred. If our board finds that a conflict of interest exists, then it will determine the appropriate remedial action, if any. Our board approves or ratifies a transaction if it determines that the transaction is consistent with the best interests of the Company. We intend to establish formal policies and procedures in the future, once we have sufficient resources and have appointed additional Directors, so that such transactions will be subject to the review, approval or ratification of our Board of Directors, or an appropriate committee thereof.

64

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

No Established Public Market for Our Common Stock

There is no established public market for our common stock, and a public market may never develop. While we plan to find a market maker to file an application to include our common stock on the OTC Bulletin Board (“OTCBB”) operated by FINRA (Financial Industry Regulatory Authority) and/or OTCQB operated by the OTC Markets Group, Inc. using the trading symbol “RSAP”, such efforts may not be successful and our shares may never be quoted and owners of our common stock may not have a market in which to sell the shares. Also, no estimate may be given as to the time that this application process will require . Even if our common stock were quoted in a market, there may never be substantial activity in such market. If there is substantial activity, such activity may not be maintained, and no prediction can be made as to what prices may prevail in such market.

If we become able to have our shares of common stock quoted on the OTCQB and/or OTCBB, we will then try, through a broker-dealer and its’ clearing firm, to become eligible with the DTC to permit our shares to be traded electronically. If an issuer is not “DTC-eligible,” its shares cannot be electronically transferred between brokerage accounts, which, based on the realities of the marketplace as it exists today (especially the OTCQB and OTCBB), means that shares of an issuer will not be able to be traded (technically the shares can be traded manually between accounts, but this may take days and is not a realistic option for issuers relying on broker-dealers for stock transactions - like all the companies on the OTCQB and OTCBB). What this boils down to is that while DTC-eligibility is not a requirement to trade on the OTCBB, it is however a necessity to efficiently process trades on the OTCQB or OTCBB if a company’s stock is going to trade with any volume. There are no assurances that our shares will ever become DTC-eligible or, if they do, how long it may take.

The Securities and Exchange Commission has adopted rules that regulate broker-dealer practices in connection with transactions in any “penny stock”. Rule 3a51-1 of the Exchange Act establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a minimum bid price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to a limited number of exceptions. It is likely that our shares will be considered to be penny stocks for the immediately foreseeable future. For any transaction involving a penny stock, unless exempt, the penny stock rules require that a broker or dealer approve a person’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. Classification of our shares as a penny stock makes it more difficult for a broker or dealer to sell the stock into a secondary market, which will make it more difficult for you to sell your shares and liquidate your investment. See “Plan of Distribution — Section 15(g) of the Exchange Act/Penny Stock Rules”.

Rule 144

Based on the number of shares outstanding as of the date of this prospectus, upon the closing of this offering, 40,195,000 shares of our common stock will be outstanding, assuming the sale of the maximum number of shares being offered by us pursuant to this prospectus. Of the outstanding shares, all of the shares offered by us and the selling stockholders pursuant to this prospectus will be freely tradable, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations that are described below. The remaining outstanding shares of our common stock will be deemed “restricted securities” as defined in Rule 144. Restricted securities may be sold in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 under the Securities Act, which rules are summarized below.

In general, a person who has beneficially owned restricted shares of our common stock for at least six months would be entitled to sell their securities under Rule 144 provided that: (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding a sale; and (ii) we are subject to the periodic reporting requirements of the Exchange Act, for at least 90 days before the sale. Persons who have beneficially owned restricted shares of our common stock for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:

      l% of the number of shares of our common stock outstanding after this offering, which will equal approximately 401.950 shares immediately after the closing of this offering, based on the number of common stock outstanding as of the date of this prospectus and assuming the sale of all 10,000,000 shares being offered by the Company pursuant to this propsectus; or

65

      the average weekly trading volume of our common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale (this condition is not currently available to the Company because its securities do not trade on a recognized exchange);

provided, in each case, that we are subject to the periodic reporting requirements the Exchange Act for at least 90 days before the sale. Such sales both by affiliates and by non-affiliates must also comply with the manner of sale, availability of current public information, and notice provisions of Rule 144.

Based on the number of shares outstanding as of the date of this prospectus, upon the closing of this offering a total of 15,000,000 shares of our common stock would be available for resale to the public pursuant to Rule 144, subject to the requirements and restrictions of Rule 144 described above.

Effect of Future Sales of Shares on Prevailing Market Price

No prediction can be made as to the effect, if any, that future sales of shares or the availability of shares for future sale will have on the market price prevailing from time to time. Sales of substantial amounts of our common shares, or the perception that such sales could occur, may adversely affect prevailing market prices of the common shares.

66

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1, together with all amendments and exhibits, with the SEC. This Prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this prospectus to any of our contracts or other documents, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contracts or documents. You may read and copy any document that we file at the Commission’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the SEC’s website at http://www.sec.gov.

67

Reign Sapphire Corporation

Financial Statements

As of and for the Three Months Ended March 31, 2015 and 2014 (unaudited), for the Year Ended December 31, 2014 and for the Period May 31, 2013 (Inception) Through December 31, 2013.

F-1

Reign Sapphire Corporation

Index to Financial Statements

CONTENTS

 

 

Page

Report of Independent Registered Public Accounting Firm

 

F-3

 

 

 

Balance Sheets as of March 31, 2015 (unaudited), December 31, 2014 and 2013

 

F-4

 

 

 

Statements of Operations for the three months ended March 31, 2015 and 2014 (unaudited), for the year ended December 31, 2014 and for the period from May 31, 2013 (inception) to December 31, 2013

 

F-5

 

 

 

Statements of Changes in Stockholders’ Equity for the year ended December 31, 2014 and for the period from May 31, 2013 (inception) to December 31, 2013

 

F-6

 

 

 

Statements of Cash Flows for the three months ended March 31, 2015 and 2014 (unaudited), for the year ended December 31, 2014 and for the period from May 31, 2013 (inception) to December 31, 2013

 

F-7

 

 

 

Notes to Financial Statements

 

F-8

F-2

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders
Reign Sapphire Corporation

We have audited the accompanying balance sheets of Reign Sapphire Corporation as of December 31, 2014 and 2013, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year ended December 31, 2014 and the period May 31, 2013 (Inception) through December 31, 2013. These financial statements are the responsibility of the entity’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits 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 Reign Sapphire Corporation as of December 31, 2014 and 2013, and the results of its operations and its cash flows for the year ended December 31, 2014 and the period May 31, 2013 (Inception) through December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the financial statements, the entity had an accumulated deficit, net losses, no significant revenue earned since inception, and a lack of operational history that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Hartley Moore Accountancy Corporation

Hartley Moore Accountancy Corporation

Irvine, California

May 26, 2015

F-3

REIGN SAPPHIRE CORPORATION
BALANCE SHEETS

 

 

March 31,
2015

 

December 31, 2014

 

December 31, 2013

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

88

 

 

$

95

 

 

$

 

Accounts receivable

 

 

20,199

 

 

 

9,431

 

 

 

8,410

 

Inventory

 

 

419,508

 

 

 

422,509

 

 

 

147,758

 

Prepaid expenses

 

 

34,801

 

 

 

51,768

 

 

 

 

Total current assets

 

 

474,596

 

 

 

483,803

 

 

 

156,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Computer equipment, net

 

 

3,177

 

 

 

3,465

 

 

 

 

Deferred offering costs

 

 

150,000

 

 

 

75,000

 

 

 

 

Total assets

 

$

627,773

 

 

$

562,268

 

 

$

156,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

5,000

 

 

$

 

 

$

 

Accounts payable – related party

 

 

185,498

 

 

 

103,194

 

 

 

 

Accrued compensation – related party

 

 

321,000

 

 

 

276,000

 

 

 

96,000

 

Advance from shareholder

 

 

83,641

 

 

 

83,641

 

 

 

35,641

 

Total current liabilities

 

 

595,139

 

 

 

462,835

 

 

 

131,641

 

Total liabilities

 

 

595,139

 

 

 

462,835

 

 

 

131,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding at March 31, 2015, December 31, 2014 and 2013, respectively

 

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized; 30,195,000, 29,855,000 and 27,845,000 shares issued and outstanding at March 31, 2015, December 31, 2014 and 2013, respectively

 

 

3,019

 

 

 

2,985

 

 

 

2,785

 

Additional paid-in-capital

 

 

813,681

 

 

 

728,715

 

 

 

266,465

 

Accumulated deficit

 

 

(784,066

)

 

 

(632,267

)

 

 

(244,723

)

Total stockholders’ equity

 

 

32,634

 

 

 

99,433

 

 

 

24,527

 

Total liabilities and stockholders’ equity

 

$

627,773

 

 

$

562,268

 

 

$

156,168

 

See accompanying notes to financial statements

F-4

REIGN SAPPHIRE CORPORATION
STATEMENTS OF OPERATIONS

 

 

For the Three Months Ended March 31,
2015

 

For the Three Months Ended March 31,
2014

 

For the
Year Ended December 31,
2014

 

From Inception (May 31, 2013) through December 31,
2013

 

 

(unaudited)

 

(unaudited)

 

 

 

 

Revenues

 

$

10,768

 

 

$

7,618

 

 

$

43,153

 

 

$

8,410

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of Sales

 

 

3,001

 

 

 

2,469

 

 

 

25,249

 

 

 

2,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 

7,767

 

 

 

5,149

 

 

 

17,904

 

 

 

6,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketing expenses

 

 

22,953

 

 

 

 

 

 

5,567

 

 

 

 

General and administrative

 

 

136,613

 

 

 

83,787

 

 

 

399,881

 

 

 

250,891

 

Total operating expenses

 

 

159,566

 

 

 

83,787

 

 

 

405,448

 

 

 

250,891

 

Loss from operations

 

 

(151,799

)

 

 

(78,638

)

 

 

(387,544

)

 

 

(244,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(151,799

)

 

 

(78,638

)

 

 

(387,544

)

 

 

(244,723

)

Income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(151,799

)

 

$

(78,638

)

 

$

(387,544

)

 

$

(244,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.01

)

 

$

(0.00

)

 

$

(0.01

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding Basic and diluted

 

 

29,981,033

 

 

 

27,845,000

 

 

 

27,951,849

 

 

 

18,086,995

 

See accompanying notes to financial statements

F-5

REIGN SAPPHIRE CORPORATION
STATEMENTS OF CHANGE IN STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid in

 

 

 

Accumulated

 

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

 

Deficit

 

 

 

Equity

 

Inception (May 31, 2013)

 

 

$

 

$

 

 

$

 

 

$

 

Founder’s shares

 

11,844,750

 

 

1,185

 

 

(1,185

)

 

 

 

 

 

 

Estimated fair market value of stock issued to founders for services

 

250

 

 

 

 

250

 

 

 

 

 

 

250

 

Shares issued to founders for cash

 

1,000,000

 

 

100

 

 

118,900

 

 

 

 

 

 

119,000

 

Estimated fair market value of stock issued to founders for inventory

 

15,000,000

 

 

1,500

 

 

148,500

 

 

 

 

 

 

150,000

 

Net loss

 

 

 

 

 

 

 

 

(244,723

)

 

 

(244,723

)

Balance as of December 31, 2013

 

27,845,000

 

$

2,785

 

$

266,465

 

 

$

(244,723

)

 

$

24,527

 

Estimated fair market value of stock issued for services

 

110,000

 

 

10

 

 

23,040

 

 

 

 

 

 

23,050

 

Stock issued to third parties for future services

 

400,000

 

 

40

 

 

64,360

 

 

 

 

 

 

64,400

 

Stock issued for deferred offering costs

 

300,000

 

 

30

 

 

74,970

 

 

 

 

 

 

75,000

 

Estimated fair market value of stock issued to third party for inventory

 

1,200,000

 

 

120

 

 

299,880

 

 

 

 

 

 

300,000

 

Net loss

 

 

 

 

 

 

 

 

(387,544

)

 

 

(387,544

)

Balance as of December 31, 2014

 

29,855,000

 

$

2,985

 

$

728,715

 

 

$

(632,267

)

 

$

99,433

 

See accompanying notes to financial statements

F-6

REIGN SAPPHIRE CORPORATION
STATEMENTS OF CASH FLOWS

 

 

For the Three Months Ended March 31,
2015

 

For the Three Months Ended March 31,
2014

 

For the Year Ended December 31, 2014

 

From Inception (May 31, 2013) through December 31, 2013

 

 

(unaudited)

 

(unaudited)

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(151,799

)

 

$

(78,638

)

 

$

(387,544

)

 

$

(244,723

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation expense

 

 

288

 

 

 

 

 

 

 

 

 

 

Amortization of stock issued for future services

 

 

16,100

 

 

 

 

 

 

16,100

 

 

 

 

Estimated fair market value of stock issued for services

 

 

10,000

 

 

 

 

 

 

23,050

 

 

 

250

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(10,768

)

 

 

(7,617

)

 

 

(1,021

)

 

 

(8,410

)

Inventory

 

 

3,001

 

 

 

2,468

 

 

 

25,249

 

 

 

2,242

 

Prepaid expenses

 

 

867

 

 

 

 

 

 

(3,468

)

 

 

 

Accounts payable

 

 

5,000

 

 

 

 

 

 

 

 

 

 

Accounts payable – related party

 

 

82,304

 

 

 

38,737

 

 

 

103,194

 

 

 

 

Accrued compensation – related party

 

 

45,000

 

 

 

45,000

 

 

 

180,000

 

 

 

96,000

 

Net cash used in operating activities

 

 

(7

)

 

 

 

 

 

(44,440

)

 

 

(154,641

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchases of computer equipment

 

 

 

 

 

 

 

 

(3,465

)

 

 

 

Net cash used in investing activities

 

 

 

 

 

 

 

 

(3,465

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advance from shareholder

 

 

 

 

 

 

 

 

48,000

 

 

 

35,641

 

Shares sold for cash

 

 

 

 

 

 

 

 

 

 

 

119,000

 

Net cash provided by financing activities

 

 

 

 

 

 

 

 

48,000

 

 

 

154,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

(7

)

 

 

 

 

 

95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash at beginning of period

 

 

95

 

 

 

 

 

 

 

 

 

 

Cash at end of period

 

$

88

 

 

$

 

 

$

95

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock issued to third party in exchange for inventory

 

$

 

 

$

 

 

$

300,000

 

 

$

 

Stock issued for deferred offering costs

 

$

75,000

 

 

$

 

 

$

75,000

 

 

$

 

Stock issued to third parties for future services

 

$

 

 

$

 

 

$

64,400

 

 

$

 

Stock issued to founder in exchange for inventory

 

$

 

 

$

 

 

$

 

 

$

150,000

 

See accompanying notes to financial statements

F-7

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 1 – ORGANIZATION AND PRINCIPAL ACTIVITIES

Corporate History and Background

Reign Sapphire Corporation (the “Company”) was established on December 15, 2014 in the State of Delaware with operations in the United States, Australia, and Asia. The Company is a fine jewelry company and its business will vertically integrate from the mine’s gate to the retail supply chain from processing rough Australian sapphires and gem cutting to manufacturing fine jewelry including rings, pendants, bracelets, and cuff links using a variety of metals and finishes.

The Company’s marketing initiatives will focus on: (1) Business-to-Consumer (“B2C”) marketing to attract customers to the website, (2) Business-to-Business (“B2B”) marketing and sales efforts, which will include partnerships with distribution partners, to high-end fashion retailers, and eventually (3) building a strong retail presence to market the products directly to consumers on a retail level. The Company will initially focus marketing efforts in the U.S. and upon encountering significant success in the U.S. with online, wholesale, and retail sales, the Company will expand its marketing efforts to include Europe and the Middle East.

The Company started as UWI Holdings Corporation (previously known as Australian Sapphire Corporation) (“UWI”) and was established on May 31, 2013 in the Province of New Brunswick, Canada. On December 31, 2014, UWI entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with Reign Sapphire Corporation (“Reign”), pursuant to which UWI transferred all of its net assets to Reign. The sole shareholder of UWI along with his spouse retained 100% ownership of Reign and were issued 27,845,000 of Reign common shares in exchange for the 16,000,250 outstanding shares of UWI. There was no significant tax consequence to this exchange. As a result, Reign is considered to be the continuation of the predecessor UWI. All historical financial information prior to the reorganization is that of UWI.

Prior to the reorganization, the Company was authorized to issue 50,000,000 shares of common stock and 5,000,000 shares of preferred stock. On May 8, 2015, the Company’s articles of incorporation were amended to increase the authorized common shares to 100,000,000 and preferred shares to 10,000,000.

For share and earnings per share information, the Company has retroactively restated per share and the outstanding shares for weighted average shares used in the basic and diluted earnings per share calculations for all periods presented, as a result of the reorganizations.

The Company has begun its planned principal operations, and accordingly, the Company has prepared its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

NOTE 2 – BASIS OF PRESENTATION

Reporting Currency

The financial statements are presented in United States dollars (“USD).

The interim unaudited financial statements as of March 31, 2015, and for the three months ended March 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information on the same basis as the annual financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. They do not include all of the information and footnotes required by GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the year ended December 31, 2014 here within.

Segment Information

The Company operates in one segment in accordance with accounting guidance Financial Accounting Standards Board (“FASB”) ASC Topic 280, Segment Reporting . Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

F-8

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 2 – BASIS OF PRESENTATION ( cont’d)

Description of Business

Fiscal year end

The Company’s fiscal year end is December 31.

Going Concern

The accompanying financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. The Company had an accumulated deficit of approximately $784,000, $632,000 and $245,000 at March 31, 2015, December 31, 2014 and 2013, respectively, had a net loss of approximately $152,000, $79,000, $388,000 and $245,000 for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively, and net cash used in operating activities of approximately $0, $0, $44,000 and $155,000 for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively, with limited revenue earned since inception, and a lack of operational history. These matters raise substantial doubt about our ability to continue as a going concern.

While the Company is attempting to expand operations and increase revenues, the Company’s cash position may not be significant enough to support the Company’s daily operations. Management intends to raise additional funds by way of a public or private offering. Management believes that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for the Company to continue as a going concern. While the Company believes in the viability of its strategy to generate revenues 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 the Company’s ability to further implement its business plan and generate revenues.

The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.

Use of Estimates

The preparation of these financial statements in accordance 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 disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: inventory valuation and common stock valuation. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

Comprehensive Income

The Company reports comprehensive income in accordance with FASB ASC Topic 220 “Comprehensive Income,” which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements.

F-9

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Total comprehensive income is defined as all changes in stockholders’ equity during a period, other than those resulting from investments by and distributions to stockholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income (loss) equals net income (loss) plus or minus adjustments for currency translation. As of March 31, 2015 and 2014, December 31, 2014 and 2013, the Company has no items other than net loss affecting comprehensive loss.

Foreign Currency - Functional and Presentation Currency

The functional currency represents the currency of the primary economic environment in which the entity operates. Management has determined the functional currency of the Company to be the USD, as sales prices and major costs of operating expenses are primarily influenced by fluctuations in the USD.

The results of transactions in foreign currency are remeasured into the functional currency at the average rate of exchange during the reporting period. Aggregate net foreign currency remeasurements included in general and administrative expenses in the accompanying statements of operations was a loss of approximately $0, $0, $266 and $2,800 for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated into the Company’s reporting currency of USD at the exchange rates prevailing at the balance sheet date. All translation adjustments resulting from the translation of the financial statements into the reporting currency at USD are dealt with as a separate component within stockholders’ equity. The Company had no translation adjustments for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 or the period May 31, 2013 (date of inception) through December 31, 2013.

As of March 31, 2015 and 2014, December 31, 2014 and 2013, the exchange rate was AUD 1.3002, 1.0809, 1.2258 and 1.1268 per USD, respectively. The average exchange rate for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013 was AUD 1.2699, 1.1160, 1.1094 and 1.0815, respectively.

Revenue Recognition

The Company recognizes revenues in accordance with FASB ASC Topic 605, “Revenue Recognition”, and with the guidelines of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition”.

Under SAB 104, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable, and (iv) collection is reasonably assured.

The Company recognizes revenue from product sales when the product is shipped, provided that collection of the resulting receivable is reasonably assured. Credit is granted generally for terms of 7 to 90 days, based on credit evaluations.

The Company has a no return policy. We are currently evaluating our return policy to be more in line with industry standards.

Accounts Receivable

The Company records trade receivables when revenue is recognized. When appropriate, the Company will record an allowance for doubtful accounts, which is primarily determined by review of specific trade receivables. Those accounts that are doubtful of collection are included in the allowance. These provisions are reviewed to determine the adequacy of the allowance for doubtful accounts. Trade receivables are charged off when there is certainty as to their being uncollectible. Trade receivables are considered delinquent when payment has not been made within contract terms. At March 31, 2015, December 31, 2014 and 2013, the Company had no allowance for doubtful accounts. For the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 and the period May 31, 2013 (date of inception) through December 31, 2013, there were no accounts written-off.

F-10

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Inventories

Inventories are stated at the lower of cost or market on an average cost basis. Inventory consists of sapphire jewels that meet rigorous grading criteria and are of cuts and sizes most commonly used in the jewelry industry. As of March 31, 2015, December 31, 2014 and 2013, the Company carried only loose sapphire jewels, and the carrying value of these jewels is included in the jewelry valuation (see Note 4). Loose sapphire jewels do not degrade in quality over time and are not subject to fashion trends. In view of the foregoing factors, the Company has concluded that no excess or obsolete loose jewel inventory reserve requirements existed as of March 31, 2015, December 31, 2014 and 2013.

Computer Equipment

Computer equipment is stated at cost. Depreciation is computed over the estimated useful lives of the related asset type using the straight-line method for financial statement purposes. Maintenance and repairs are expensed as incurred and the costs of additions and betterments that increase the useful lives of the assets are capitalized. When equipment is disposed, the cost and related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in other income or expenses.

The estimated useful lives of computer equipment are as follows:

Computer equipment

 

3 years

Long-Lived Assets

The Company’s long-lived assets consisted of equipment and are reviewed for impairment in accordance with the guidance of FASB ASC Topic, 360, Property, Plant and Equipment, and FASB ASC Topic 205, Presentation of Financial Statements. The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the asset exceeds its fair value. Impairment evaluations involve management’s estimates on asset useful lives and future cash flows. Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through March 31, 2015, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that the demand for the Company’s products and services will continue, which could result in an impairment of long-lived assets in the future.

Related Parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and 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. A party which can significantly influence the management or operating policies of the transacting parties or if it has 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 is also a related party.

Deferred Offering Costs

Deferred offering costs, which primarily consist of direct, incremental banking, legal and accounting fees relating to the initial public offering (“IPO”), are capitalized within long-term assets. The deferred issuance costs will be offset against IPO proceeds upon the consummation of the offering. In the event the offering is terminated, deferred offering costs will be expensed. For the

F-11

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

three months ended March 31, 2015 and 2014, and for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013, the Company has recorded deferred offering costs related to a consultant totaling $150,000, $0, $75,000 and $0, respectively.

Income Taxes

The Company accounts for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Company’s balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The Company must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent the Company believes that recovery is not likely, the Company must establish a valuation allowance. Changes in the Company’s valuation allowance in a period are recorded through the income tax provision on the statements of operations.

From the date of its inception the Company adopted ASC 740-10-30. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company recognized no material adjustment in the liability for unrecognized income tax benefits.

Advertising Costs

Advertising expenses are recorded as general and administrative expenses when they are incurred. There was no advertising expense for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013.

Stock Based Compensation

Issuances of the Company’s common stock or warrants for acquiring goods or services are measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The measurement date for the fair value of the equity instruments issued to consultants or vendors is determined at the earlier of (i) the date at which a commitment for performance to earn the equity instruments is reached (a “performance commitment” which would include a penalty considered to be of a magnitude that is a sufficiently large disincentive for nonperformance) or (ii) the date at which performance is complete. However, situations may arise in which counter performance may be required over a period of time but the equity award granted to the party performing the service is fully vested and non-forfeitable on the date of the agreement. As a result, in this situation in which vesting periods do not exist as the instruments fully vested on the date of agreement, the Company determines such date to be the measurement date and will record the estimated fair market value of the instruments granted as a prepaid expense and amortize such amount to general and administrative expense in the accompanying statement of operations over the contract period. When it is appropriate for the Company to recognize the cost of a transaction during financial reporting periods prior to the measurement date, for purposes of recognition of costs during those periods, the equity instrument is measured at the then-current fair values at each of those interim financial reporting dates.

For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “ Equity ” and FASB ASC Topic 718, “ Compensation — Stock Compensation,” we perform an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in the Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our statements of operations and comprehensive income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements. For the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, the Company had no stock based compensation.

F-12

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Non-Cash Equity Transactions

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock.

Fair Value of Financial Instruments

The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of March 31, 2015, December 31, 2014 and 2013, the fair value of cash, accounts receivable, accounts payable and accrued expenses approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

Fair Value Measurements

The FASB ASC Topic 820, Fair Value Measurements and Disclosures , clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These inputs are summarized in the three broad levels listed below.

      Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.

      Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).

      Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.

Concentrations, Risks, and Uncertainties

Business Risk

The Company is subject to the substantial business risks and uncertainties inherent to such an entity, including the potential risk of business failure.

A significant amount of the Company’s operations will be located in Australia and Asia. To date, the Company has generated limited revenues from operations. As the Company generates significant revenues from operations, geographic segment reporting will be provided. There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, price of raw material, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on foreign trade in Australia and Asia, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on transfer of funds, domestic and international customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations.

F-13

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

The Company operates in Australia and Asia, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between USD and the Australian currency AUD. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period. Aggregate net foreign currency transactions included in the income statement was immaterial for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013.

Interest rate risk

Financial assets and liabilities do not have material interest rate risk.

Credit risk

The Company is exposed to credit risk from its cash in bank and accounts receivable. The credit risk on cash in banks is limited because the counterparties are recognized financial institutions.

The Company had one customer that accounted for 10% or more of total revenue, comprising 100.0% of total revenue, for the three months ended March 31, 2015 and 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively, and 68.3% of total revenue for the year ended December 31, 2014. The Company had one customer that accounted for 10% or more of total accounts receivable at March 31, 2015 and 2014, and December 31, 2014 and 2013, comprising 100.0%, respectively, of total accounts receivable.

Foreign currency risk

The Company has transactions settled in AUD and British Pound. Thus, the Company has foreign currency risk exposure.

Recent Accounting Pronouncements

In August 2014, the FASB issued Accounting Standards Update (“ASU”) 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 , which provides guidance regarding management’s responsibility to assess whether substantial doubt exists regarding the ability to continue as a going concern and to provide related footnote disclosures. In connection with preparing financial statements for each annual and interim reporting period, management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’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). This ASU is effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. The Company does not expect that the adoption of this ASU to have a material effect on the Company’s financial position, operations, or cash flows.

In June 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-10, “Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation.” This ASU removes the definition of a development stage entity from the ASC, thereby removing the financial reporting distinction between development stage entities and other reporting entities from GAAP. In addition, the ASU eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of operations, cash flows, and stockholders’ equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. In addition, ASU 2014-10 requires an entity that has not commenced principal operations to provide disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward. This ASU is effective for annual reporting periods beginning after December 15, 2014, and interim periods therein. Early adoption is permitted. We have elected to adopt this ASU and its adoption resulted in the removal of previously required development stage disclosures. Adoption of this ASU did not impact our financial position, operations or cash flows.

F-14

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

In May 2014, the FASB issued ASU 2014-09, which will update Codification topic: Revenue from Contracts with Customers . The principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which entity expects to be entitled in exchange for those goods or services. The guidance in ASU 2014-09 is effective for public entities for annual reporting periods beginning after December 15, 2017, including interim periods therein. Management is currently evaluating the impact ASU 2014-09 will have on our financial position, results of operations and cash flows.

In April 2015, the FASB issued ASU 2015-03, “ Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs ”. This standard update requires an entity to present debt issuance costs on the balance sheet as a direct deduction from the related debt liability as opposed to an asset. Amortization of the costs will continue to be reported as interest expense. The update is effective for annual reporting periods (including interim reporting periods within those periods) beginning after December 15, 2015. Early adoption is permitted for financial statements that have not been previously issued, and the new guidance would be applied retrospectively to all prior periods presented. Adoption of this ASU is not expected to have a material effect on our financial position, operations or cash flows.

NOTE 4 – INVENTORY

On December 30, 2014, the Company purchased 1,000 carats of loose sapphire jewels with an estimated fair market value of $300,000 from an unrelated third party for 1,200,000 of the Company’s restricted common shares (see Note 7). In order to determine the estimated fair value, the sapphires were examined on a lot basis for cut, clarity, and approximate carats of the sapphires.

On August 15, 2013, the founder of the Company contributed approximately 750 carats of loose sapphire jewels at a historical cost of $150,000 (which approximated fair market value) for 15,000,000 of the Company’s restricted common shares (see Note 7). In order to determine the estimated fair value, the sapphires were examined on a lot basis for cut, clarity, and approximate carats of the sapphires.

The Company appraises its inventory on an annual basis to determine if the estimated fair value is greater or less than cost. The estimated fair value is subject to significant change due to changes in popularity of cut, perceived grade of the clarity of the sapphires, the number, type and size of inclusions, the availability of other similar quality and size sapphires, and other factors. As a result, the appraised value of the sapphires could be significantly lower from the current estimated fair value. As of March 31, 2015, December 31, 2014 and 2013, the estimated fair market value approximated cost.

NOTE 5 – COMPUTER EQUIPMENT

Computer equipment consisted of the following:

 

 

Estimated Life

 

As of
March 31,
2015

 

As of
December 31,
2014

 

 

 

 

(unaudited)

 

 

Computer equipment

 

3 years

 

$

3,465

 

 

$

3,465

Accumulated depreciation

 

 

 

 

(288

)

 

 

Total

 

 

 

$

3,177

 

 

$

3,465

For the three months ended March 31, 2015, the Company had depreciation expense of $288. The Company had no depreciation expense for the three months ended March 31, 2014, and for the years ended December 31, 2014 and 2013, as the computer equipment was placed in service in December 2014.

NOTE 6 – ADVANCE FROM SHAREHOLDER

The Company borrows funds from the Company’s Director for working capital purposes from time to time. The Company has recorded the principal balance due of $83,641, $83,641 and $35,641 under Advance From Shareholder in the accompanying Balance Sheets at March 31, 2015, December 31, 2014 and 2013, respectively. The Company received advances of $0, $0, $48,000 and $35,641 and made no repayments for the three months ended March 31, 2015 and 2014, for the year ended December 31, 2014, and for the period May 31, 2013 (date of inception) through December 31, 2013. Advances are non-interest bearing and due on demand.

F-15

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 7 – stock transactionS

The Company started as UWI (previously known as Australian Sapphire Corporation) and was established on May 31, 2013 in the Province of New Brunswick, Canada. On December 31, 2014, UWI entered into an Agreement of Conveyance, Transfer and Assignment of Assets and Assumption of Obligations with Reign, pursuant to which UWI transferred all of its net assets to Reign. The sole shareholder of UWI along with his spouse retained 100% ownership of Reign and were issued 27,845,000 of Reign common shares in exchange for the 16,000,250 outstanding shares of UWI. There was no significant tax consequence to this exchange. As a result, Reign is considered to be the continuation of the predecessor UWI. All historical financial information prior to the reorganization is that of UWI.

Prior to the reorganization, the Company’s articles of incorporation was authorized to issue 50,000,000 shares of common stock, each having a par value of $0.0001, with each share of common stock entitled to one vote for all matters on which a shareholder vote is required or requested. The Corporation was also authorized to issue 5,000,000 shares of Preferred Stock, each having a par value of $0.0001. On May 8, 2015, the Company’s articles of incorporation were amended to increase the authorized common shares to 100,000,000 and preferred shares to 10,000,000.

For share and earnings per share information, the Company has retroactively restated per share and the outstanding shares for weighted average shares used in the basic and diluted earnings per share calculations for all periods presented, as a result of the reorganizations.

The Company’s Board of Directors are authorized to provide for the issue of any and all of the unissued and undesignated shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and qualifications, limitations, or restrictions thereof, as shall be stated an expressed in the resolution adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law.

In February and March 2015, the Company issued an aggregate of 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with the Company’s initial public offering. The Company has recorded the $75,000 as Deferred Offering Costs in the accompanying Balance Sheet at March 31, 2015.

In February 2015, the Company issued 40,000 shares of restricted common stock, valued at $10,000 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

On December 30, 2014, the Company issued 1,200,000 restricted common shares to an unrelated third party for the purchase of inventory with an estimated fair market value of $300,000. The Company valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

In fiscal year 2014, the Company issued 110,000 shares of restricted common stock, valued at $23,050 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services rendered.

In fiscal year 2014, the Company issued 400,000 shares of restricted common stock, valued at $64,400 (based on the estimated fair value of the stock on the date of grant) to outside consultants for services to be rendered, recorded within prepaid expense in the Balance Sheets, and are amortizing the amount to expense over the period of performance. The Company recognized expense of $16,100 for the three months ended March 31, 2015 and for the year ended December 31, 2014, respectively, within general and administrative expenses in the accompanying Statement of Operations.

On December 31, 2014, the Company issued 300,000 shares of restricted common stock, valued at $75,000 (based on the estimated fair value of the stock on the date of grant) for legal services associated with the Company’s initial public offering. The Company has recorded the $75,000 as Deferred Offering Costs in the accompanying Balance Sheet at March 31, 2015 and December 31, 2014.

On August 15, 2013, the Company issued 15,000,000 restricted common shares for Director’s capital contribution at historical cost to inventory of $150,000. The Company valued the shares based on the estimated fair market value of the inventory, which was more readily determinable than the fair value of the stock.

On August 15, 2013, the Company issued 11,844,750 restricted common shares to founder’s, valued at $1,185 (based on the par value on the date of grant). The issuance was an isolated transaction not involving a public offering pursuant to Section 4(2) of the Securities Act of 1933.

F-16

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 7 – stock transactionS (cont’d)

On July 18, 2013, the Company entered into a stock purchase agreement with the Director, under which the Company issued him 1,000,000 shares of restricted common stock, in exchange for $119,000.

On July18, 2013, the Company issued 250 shares of restricted common stock, valued at $250 (estimated by the Company to be $1.00 per share based on the value of the services) to an outside consultant for services rendered.

NOTE 8 – Related Party Transactions

Other than as set forth below, and as disclosed in Notes 4, 6, and 7, the Company has not entered into or been a participant in any transaction in which a related person had or will have a direct or indirect material interest.

The Company has a consulting agreement with its Chief Executive Officer and director (“CEO”) under which he is compensated $120,000 per annum. Beginning June 20, 2013, this contract shall continue unless and until terminated at any time by either the Company or CEO giving two month notice in writing. Deferred compensation totaling $214,000, $184,000 and $64,000 as of March 31, 2015, December 31, 2014 and 2013, respectively, is included in Accrued Compensation in the accompanying Balance Sheet. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement (see Note 12).

The Company has a consulting agreement with its secretary and director (“Secretary”) under which she is compensated $60,000 per annum. Beginning June 20, 2013, this contract shall continue unless and until terminated at any time by either the Company or Secretary giving two month notice in writing. Deferred compensation totaling $107,000, $92,000 and $32,000 as of March 31, 2015, December 31, 2014 and 2013, respectively, is included in Accrued Compensation in the accompanying Balance Sheet. The Secretary is the spouse of the CEO. Such consulting agreement was terminated by mutual agreement as of May 1, 2015 and superseded by the employment agreement (see Note 12).

Through March 31, 2015, the Company has not made any cash payments pursuant to these agreements.

The Company has accrued unpaid amounts related to business expenses paid by the CEO on behalf of the Company. Unpaid business expenses totaling $185,498, $103,194, and $0 as of March 31, 2015, December 31, 2014 and 2013, respectively, is included in Accounts Payable — Related Party in the accompanying Balance Sheet.

NOTE 9 – INCOME TAXES

At March 31, 2015, the Company has an a net operating loss carry forward for Federal and state income tax purposes totaling approximately $790,000 available to reduce future income which, if not utilized, will begin to expire in the year 2032. The Company has no income tax affect due to the recognition of a full valuation allowance on the expected tax benefits of future loss carry forwards based on uncertainty surrounding realization of such assets.

A reconciliation of the statutory income tax rates and the Company’s effective tax rate is as follows:

 

 

For the
Three Months Ended M arch 3 1,
2015

 

For the
Three Months Ended
March 31,
2014

 

For the
Year Ended
December 31,
2014

 

May 31,
2013
(inception)
through
December 31,
2013

 

 

(unaudited)

 

(unaudited)

 

 

 

 

Statutory U.S. federal rate

 

34.0

%

 

34.0

%

 

34.0

%

 

34.0

%

State income tax, net of federal benefit

 

5.9

%

 

5.9

%

 

5.9

%

 

5.9

%

Permanent differences

 

(0.5

)%

 

(0.4

)%

 

(0.8

)%

 

(0.4

)%

Valuation allowance

 

(39.4

)%

 

(39.5

)%

 

(39.1

)%

 

(39.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

0.0

%

 

0.0

%

 

0.0

%

 

0.0

%

F-17

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 9 – INCOME TAXES (cont’d)

The tax effects of the temporary differences and carry forwards that give rise to deferred tax assets consist of the following:

 

 

March 31, 2015

 

December 31, 2014

 

December 31, 2013

 

 

(unaudited)

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 

 

Net operating loss carry forwards

 

$

209,046

 

 

$

183,185

 

 

$

96,474

 

Stock based compensation

 

 

98,768

 

 

 

64,875

 

 

 

100

 

Valuation allowance

 

 

(307,814

)

 

 

(248,060

)

 

 

(96,574

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

 

 

$

 

 

$

 

The Company’s major tax jurisdictions are the United States and California. All of the Company’s tax years will remain open three and four years for examination by the Federal and state tax authorities, respectively, from the date of utilization of the net operating loss. The Company does not have any tax audits pending.

NOTE 10 – EARNINGS PER SHARE

FASB ASC Topic 260, Earnings Per Share , requires a reconciliation of the numerator and denominator of the basic and diluted earnings (loss) per share (EPS) computations.

Basic earnings (loss) per share are computed by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The total number of potential additional dilutive warrants outstanding for all periods presented was none since the Company had net losses for all periods presented and had no additional potential common shares that have an anti-dilutive effect.

The following table sets forth the computation of basic and diluted net income per share:

 

 

For the
Three Months
Ended
March 31,
2015

 

For the
Three Months
Ended
March 31,
2014

 

For the
Year Ended
December 31,
2014

 

For the Period From May 31, 2013
(inception) through December 31,
2013

 

 

(unaudited)

 

(unaudited)

 

 

 

 

Net loss attributable to the common stockholders

 

$

(151,799

)

 

$

(78,638

)

 

$

(387,544

)

 

$

(244,723

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic weighted average outstanding shares of common stock

 

 

29,981,033

 

 

 

27,845,000

 

 

 

27,951,849

 

 

 

18,086,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dilutive effect of options and warrants

 

 

 

 

 

 

 

 

 

 

 

 

Diluted weighted average common stock and common stock equivalents

 

 

29,981,033

 

 

 

27,845,000

 

 

 

27,951,849

 

 

 

18,086,995

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.01

)

 

$

(0.00

)

 

$

(0.01

)

 

$

(0.01

)

F-18

REIGN SAPPHIRE CORPORATION
Notes to Financial Statements

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Operating Lease

The Company has month-to month leases for its headquarters and its sales and marketing office. The total rent is approximately $2,700 per month.

Rent expense was approximately $8,400, $7,600, $32,600 and $25,300 for the three months ended March 31, 2015 and 2014, and for the year ended December 31, 2014 and for the period May 31, 2013 (date of inception) through December 31, 2013, respectively.

Legal

The Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

NOTE 12 – SUBSEQUENT EVENTS

On May 1, 2015 the board of directors and stockholders of the Company authorized the adoption and implementation of the Company’s 2015 Equity Incentive Plan (the “2015 Plan”). The principal purpose of the 2015 Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its related companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company’s stockholders. The material terms of the 2015 Plan are summarized in “Executive Compensation Plans and Other Benefit Plans” in this prospectus. Under the 2015 Plan, 10,000,000 shares of our common stock have initially been reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units and other stock and cash-based awards. Options to issue 10,000,000 shares of our common stock have been issued under the 2015 Plan. All such options were issued to our CEO under a share option agreement which provides, among other things, that the exercise price is $0.005 per share, the term of the option is ten years and that the options shall vest monthly over a two year period commencing on April 1, 2015. This award is also subject to accelerated vesting in certain circumstances, including in connection with certain terminations or the achievement of specified performance milestones including the successful offer and sale of all of the shares of common stock being offered by the Company pursuant to this prospectus. See “Executive Compensation — Agreements with Executive Officers”.

Effective as of April 1, 2015, we entered into an employment agreement with our CEO. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the CEO receives a minimum annual base salary of $180,000.

Effective as of April 1, 2015, we entered into an employment agreement with our Secretary. The initial term of employment agreement expires on December 31, 2018, unless earlier terminated by either party. The agreement provides for automatic one-year renewals, unless either party gives notice of their intention not to extend at least 90 days prior to the expiration of any term. Under this employment agreement, the Secretary receives a minimum annual base salary of $80,000.

F-19

Up to a Maximum of 15,000,000 Common Shares at
$0.50 per Common Share

REIGN SAPPHIRE CORPORATION

__________________________

Preliminary Prospectus

__________________________

May 26, 2015

YOU SHOULD ONLY RELY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO BUY, COMMON SHARES ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED.

Until ____________, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

PART II. INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The estimated expenses of the offering (assuming all shares are sold), all of which are to be paid by the Registrant, are as follows:

SEC Registration Fee

 

$

871.50

Printing Expenses

 

$

5,000

EDGAR Fees

 

$

1,000

Accounting Fees and Expenses

 

$

15,000

Legal Fees and Expenses

 

$

75,000

Blue Sky Fees/Expenses

 

$

500

Transfer Agent Fees

 

$

2,500

TOTAL

 

$

99,872.50

____________

(1)    All amounts are estimates, other than the SEC’s registration fee.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law (the “Delaware Law”) authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, (including reimbursement for expenses incurred) arising under the Securities Act of 1933. The Certificate of Incorporation of Reign Sapphire Corporation (“we”, “us”, “our” or “Corporation”) provides for indemnification of officers, directors and other employees of the Corporation to the fullest extent permitted by Delaware Law. Our Certificate of Incorporation provides that directors shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a director’s duty of loyalty to our company or our stockholders, (ii) acts and omissions that are not in good faith or that involve intentional misconduct or knowing violation of law, (iii) under Section 174 of the Delaware Law, or (iv) for any transaction from which the director derived any improper benefit.

Delaware Law and our Certificate of Incorporation, allow us to indemnify our officers and directors from certain liabilities and our Bylaws (“Bylaws”) state that we shall indemnify every (i) present or former director, advisory director or officer of us and (ii) any person who while serving in any of the capacities referred to in clause (i) served at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise.

Our Bylaws provide that the Corporation shall 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 is or was a director or officer of the Corporation, or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, association or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with which action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal action or proceeding, that he had reasonable cause to believe that his conduct was unlawful.

Except as provided above, our Certificate of Incorporation provides that a director shall be liable to the extent provided by applicable law, (i) for breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted

F-21

by the amended Delaware Law. Neither any amendment to or repeal of our Certificate of Incorporation, nor the adoption of any provision hereof inconsistent with our Certificate of Incorporation, shall adversely affect any right or protection of any director of the Corporation existing at the time of, or increase the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to or at the time of such amendment.

The Company has insurance coverage under a policy insuring its directors and officers against certain liabilities which they may incur in their capacity as such.

Neither our Bylaws, nor our Certificate of Incorporation include any specific indemnification provisions for our officer or directors against liability under the Securities Act of 1933, as amended (the “Act”). Additionally, insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In the three years preceding the filing of this Registration Statement, the Registrant entered into the following transactions involving the sale of its securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”):

(1)    During the period commencing on December 31, 2014 and ending April 30, 2015, the Registrant issued an aggregate of 30,195,000 shares of its common stock to twenty individuals and entities at a purchase price per share of no less than $0.005, which was determined by the board of directors to be the fair market value of a share of the Registrant’s common stock as of the date of issuance.

(2)    On May 1, 2015, the Registrant granted its President and CEO options to purchase 10,000,000 shares of its common stock with a per share exercise price of $0.005 under the Registrant’s 2015 Equity Incentive Plan.

No underwriters were involved in any of the sales of securities and in each case the securities were offered and sold pursuant to an exemption from the registration requirements under Regulation D and/or Section 4(a)(2) of the Securities Act since, among other things, the transactions did not involve a public offering and the securities were acquired by sophisticated purchasers for investment purposes only and not with a view to or for sale in connection with any distribution thereof. The sales of the securities were made without any form of general solicitation or advertising and all of the foregoing securities are deemed restricted securities for purposes of the Securities Act. Each of the recipients of securities represented their intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the stock certificates.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)    The list of exhibits is set forth under “Exhibit Index” at the end of this Registration Statement and is incorporated in this Item 16(a) by reference.

(b)    See the Index to Consolidated Financial Statements included on page F-1 for a list of the financial statements included in this registration statement. All schedules not identified above have been omitted because they are not required, are inapplicable, or the information is included in the consolidated financial statements or notes contained in this registration statement.

ITEM 17. UNDERTAKINGS

A.     The undersigned Registrant hereby undertakes:

(1)    To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to:

(a)    include any prospectus required by Section 10(a)(3) of the Securities Act;

(b)    reflect in the prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement. Notwithstanding the foregoing, any increase

F-22

or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

(c)    include any additional or changed material information with respect to the plan of distribution.

(2)    That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3)    To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4)    For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the Registration Statement as of the time it was declared effective.

(5)    For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(6)    For the purpose of determining liability under the Securities Act to any purchaser:

Each prospectus filed pursuant to Rule 424(b) under the Securities Act as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§§230.430A of this chapter), shall be deemed to be part of and included in the Registration Statement as of the date it is first used after effectiveness. Provided however, that no statement made in a registration statement or prospectus that is part of the Registration Statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the Registration Statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the Registration Statement or made in any such document immediately prior to such date of first use.

(7)    For the purpose of determining liability of the Registrant under the Securities Act to any purchaser in the initial distribution of securities:

The Registrant undertakes that in a primary offering of securities of the Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(a)    Any preliminary prospectus or prospectus of the Registrant relating to the offering required to be filed pursuant to Rule 424 of this chapter;

(b)    Any free writing prospectus relating to the offering prepared by or on behalf of the Registrant or used or referred to by the Registrant;

(c)    The portion of any other free writing prospectus relating to the offering containing material information about the Registrant or its securities provided by or on behalf of the Registrant; and

(d)    Any other communication that is an offer in the offering made by the Registrant to the purchaser.

B.     Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed

F-23

in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

C.     The undersigned Registrant hereby undertakes that:

(1)    For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2)    For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

F-24

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, California on the 26 th day of May, 2015.

 

 

REIGN SAPPHIRE CORPORATION

 

 

 

 

 

 

 

By:

 

/s/ Joseph Segelman

 

 

 

 

Joseph Segelman

 

 

 

 

President and Chief Executive Officer

POWER OF ATTORNEY

KNOWN ALL MEN BY THESE PRESENTS that each person whose signature to this registration statement appears below hereby constitutes and appoints Joseph Segelman as such person’s true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in such person’s name, place and stead, in any and all capacities, to sign any and all amendments to the registration statement, including post-effective amendments, and registration statements filed pursuant to Rule 462 under the Securities Act of 1933, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, and does hereby grant unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities indicated below.

Signature

 

Title

 

Date

 

 

 

 

 

/s/ Joseph Segelman

 

President, Chief Executive Officer and Director

 

May 26, 2015

Joseph Segelman

 

(Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Joseph Segelman

 

Chief Financial Officer

 

May 26, 2015  

Joseph Segelman

 

(Principal Financial and Accounting Officer)

 

 

 

 

 

 

 

/s/ Chaya Segelman

 

Director

 

May 26, 2015

Chaya Segelman

 

 

 

 

 

 

 

 

 

F-25

EXHIBIT INDEX

Exhibit
Number

 

Description

3.1

 

Restated Certificate of Incorporation, as amended and currently in effect.

 

 

 

3.2

 

Bylaws of the Registrant, as currently in effect.

 

 

 

4.1*

 

Form of the Registrant’s common stock certificate.

 

 

 

5.1*

 

Legal Opinion of Qian & Company, a California Professional Law Corporation.

 

 

 

10.1+

 

Form of Indemnification Agreement between the Registrant and each of its directors and executive officers.

 

 

 

10.2+

 

Employment Agreement, dated April 1, 2015, between the Registrant and Joseph Segelman.

 

 

 

10.3+

 

Employment Agreement, dated April 1, 2015, between the Registrant and Chaya Segelman.

 

 

 

10.4+

 

2015 Equity Incentive Plan

 

 

 

10.5+

 

Share Option Agreement, dated May 1, 2015, between the Registrant and Joseph Segelman.

 

 

 

23.1*

 

Consent of Qian & Company, a California Professional Law Corporation (to be included in Exhibit 5.1).

 

 

 

23.2

 

Consent of Hartley Moore Accountancy Corporation, Independent Registered Public Accountants.

 

 

 

24.1

 

Power of Attorney (included in the signature page of this Registration Statement).

 

 

 

99.1

 

Copy of Subscription Agreement

____________

*       To be filed by amendment.

+      Management contract or compensatory plan

F-26

 Exhibit 3.1

 

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION
OF
REIGN SAPPHIRE CORPORATION

(Pursuant to Sections 242 and 245 of the
DGCL of the State of Delaware)

 

Pursuant to Section 242 and Section 245 of the General Corporation Law of the State of Delaware (“ DGCL ”), Reign Sapphire Corporation, a Delaware corporation, has adopted this Amended and Restated Certificate of Incorporation (“ Certificate of Incorporation ”) restating, integrating and further amending its Certificate of Incorporation originally filed with the Secretary of State of Delaware on December 15, 2014. This Amended and Restated Certificate of Incorporation (i) has been duly proposed by the directors of the Corporation, (ii) has been duly approved and adopted by the written consent of the stockholders of the Corporation holding the required majority of the outstanding shares of stock of the Corporation entitled to vote in accordance to Section 228 of the DGCL, and (iii) has been duly adopted in accordance with Sections 242 and 245 of the DGCL.

 

FIRST: The name of this corporation is Reign Sapphire Corporation (the “Corporation”).

 

SECOND: The address of the registered office of the Corporation in the State of Delaware is 1811 Silverside Road, Wilmington, DE 19810 in the County of New Castle. The name of its registered agent at such address is Vcorp Services, LLC.

 

THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the Delaware General Corporation Law.

 

FOURTH: The Corporation is authorized to issue two classes of stock to be designated, respectively, “ Common Stock ” and “ Preferred Stock .” The total number of shares which the Corporation is authorized to issue is One Hundred Ten Million (110,000,000) shares. One Hundred Million (100,000,000) shares shall be Common Stock, each having a par value of $0.0001. Ten Million (10,000,000) shares shall be Preferred Stock, each having a par value of $0.0001.

 

The Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “ Board of Directors ”) is hereby expressly authorized to provide for the issue of any or all of the unissued and undesignated shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the Delaware General Corporation Law. The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the Corporation entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.

 

 
 

 

Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Corporation for their vote;  provided, however , that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series of Preferred Stock are entitled, either separately or together as a class with the holders of one or more other series of Preferred Stock, to vote thereon by law or pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock).

 

FIFTH: Subject to any additional vote required by the Certificate of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

SIXTH: Subject to any additional vote required by the Certificate of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

EIGHTH: Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

 

 
 

 

NINTH: To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article Eighth to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article Eighth by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

TENTH: To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and to any other persons which the Delaware General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law. Any amendment, repeal or modification of the foregoing provisions of this Article Tenth shall not adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification.

 

ELEVENTH: Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or the Corporation’s Certificate of Incorporation or Bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction. If any provision or provisions of this Article Eleventh shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article Eleventh (including, without limitation, each portion of any sentence of this Article Eleventh containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

 

 
 

 

IN WITNESS WHEREOF , this Amended and Restated Certificate of Incorporation of Reign Sapphire Corporation has been executed by a duly authorized officer of this Corporation on this 1 st day of May, 2015.

 

  By:  
    Joseph Segelman, President

 

 

 

Exhibit 3.2

 

BYLAWS

 

OF

 

REIGN SAPPHIRE CORPORATION

 

ARTICLE I

CORPORATE OFFICES

 

1.1           Offices

 

In addition to the corporation’s registered office set forth in the Certificate of Incorporation, the Board of Directors may at any time establish other offices at any place or places where the corporation is qualified to do business.

 

ARTICLE II

MEETINGS OF STOCKHOLDERS

 

2.1           Place of Meetings

 

Meetings of stockholders shall be held at any place, within or outside the state of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation.

 

2.2           Annual Meeting

 

The annual meeting of stockholders shall be held on such date, time and place, either within or without the state of Delaware, as may be designated by resolution of the Board of Directors each year. At the meeting, directors shall be elected and any other proper business may be transacted.

 

2.3           Special Meeting

 

A special meeting of the stockholders may be called at any time by the Board of Directors, the chairman of the board, the chief executive officer, the president or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at that meeting.

 

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If a special meeting is called by any person or persons other than the Board of Directors, the chairman of the board, the chief executive officer or the president, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by email, fax, telegraphic or other facsimile or electronic transmission to the chairman of the board, the chief executive officer, the president or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after the receipt of the request, the person or persons requesting the meeting may give the notice.

 

Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

 

2.4           Notice of Stockholders’ Meetings

 

All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place (if any), date and hour of the meeting, and in the case of a special meeting, the purpose or purposes for which the meeting is called.

 

2.5           Manner of Giving Notice; Affidavit of Notice

 

Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders may be given by electronic mail or other electronic transmission, in the manner provided in Section 232 of the Delaware General Corporation Law. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

 

2.6           Quorum

 

The holders of a majority of the shares of stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (a) the chairman of the meeting or (b) holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, shall have power to adjourn the meeting to another place (if any), date or time.

 

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2.7           Adjourned Meeting; Notice

 

When a meeting is adjourned to another place (if any), date or time, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place (if any), thereof and the means of remote communications (if any) by which stockholders and proxyholders may be deemed to be present and vote at such adjourned meeting, are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the place (if any), date and time of the adjourned meeting and the means of remote communications (if any) by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

 

2.8           Organization; Conduct of Business

 

Such person as the Board of Directors may have designated or, in the absence of such a person, the chief executive officer, or in his or her absence, the president or, in his or her absence, such person as may be chosen by the holders of a majority of the shares entitled to vote who are present, in person or by proxy, shall call to order any meeting of the stockholders and act as chairman of the meeting. In the absence of the secretary of the corporation, the secretary of the meeting shall be such person as the chairman of the meeting appoints. The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including the manner of voting and the conduct of business. The date and time of opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.

 

2.9           Voting

 

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law, all other matters shall be determined by a majority of the votes cast affirmatively or negatively.

 

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2.10         Waiver of Notice

 

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice, or any waiver of notice by electronic transmission, unless so required by the certificate of incorporation or these bylaws.

 

2.11         Stockholder Action by Written Consent Without A Meeting

 

Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice, and without a vote if a consent in writing, setting forth the action so taken, is (a) signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, and (b) delivered to the corporation in accordance with Section 228(a) of the Delaware General Corporation Law.

 

Every written consent shall bear the date of signature of each stockholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within 60 days of the date the earliest dated consent is delivered to the corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the corporation in the manner prescribed in this Section. A telegram, cablegram, electronic mail or other electronic transmission consenting to an action to be taken and transmitted by a stockholder or proxyholder, or by a person or persons authorized to act for a stockholder or proxyholder, shall be deemed to be written, signed and dated for purposes of this Section to the extent permitted by law. Any such consent shall be delivered in accordance with Section 228(d)(1) of the Delaware General Corporation Law.

 

Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

 

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing (including by electronic mail or other electronic transmission as permitted by law). If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.

 

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2.12         Record Date For Stockholder Notice; Voting; Giving Consents

 

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days before the date of such meeting, nor more than 60 days prior to any other action.

 

If the Board of Directors does not so fix a record date:

 

(a)          The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

 

(b)          The record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the day on which the first written consent (including consent by electronic mail or other electronic transmission as permitted by law) is delivered to the corporation.

 

(c)          The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting, if such adjournment is for 30 days or less; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

2.13         Proxies

 

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by an instrument in writing or by an electronic transmission permitted by law filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder’s name is placed on the proxy (whether by manual signature, typewriting, facsimile, electronic or telegraphic transmission or otherwise) by the stockholder or the stockholder’s attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.

 

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ARTICLE III

DIRECTORS

 

3.1           Powers

 

Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

 

3.2           Number of Directors

 

Upon the adoption of these bylaws, the number of directors constituting the entire Board of Directors shall be two (2). Thereafter, this number may be changed by a resolution of the Board of Directors or of the stockholders, subject to Section 3.4 of these bylaws. No reduction of the authorized number of directors shall have the effect of removing any director before such director’s term of office expires.

 

3.3           Election, Qualification and Term of Office of Directors

 

Except as provided in Section 3.4 of these bylaws, and unless otherwise provided in the certificate of incorporation, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Unless otherwise specified in the certificate of incorporation, elections of directors need not be by written ballot.

 

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3.4           Resignation and Vacancies

 

Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. Notwithstanding the provisions of Section 223(a)(1) and 223(a)(2) of the Delaware General Corporation Law, any vacancy, including newly created directorships resulting from any increase in the authorized number of directors or amendment of these bylaws, and vacancies created by removal or resignation of a director, may be filled by a majority of the directors then in office (including any directors that have tendered a resignation effective at a future date), though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced; provided, however, that where such vacancy occurs among the directors elected by the holders of a class or series of stock, the holders of shares of such class or series may override the Board of Directors’ action to fill such vacancy by (i) voting for their own designee to fill such vacancy at a meeting of the Corporation’s stockholders or (ii) written consent, if the consenting stockholders hold a sufficient number of shares to elect their designee at a meeting of the stockholders. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.

 

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.

 

3.5           Place of Meetings; Meetings by Telephone

 

The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the state of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

 

3.6           Regular Meetings

 

Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the board.

 

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3.7           Special Meetings; Notice

 

Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the board, the chief executive officer, the president, the secretary or any two directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail, facsimile, electronic transmission, or telegram, charges prepaid, addressed to each director at that director’s address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least 4 days before the time of the holding of the meeting. If the notice is delivered personally or by facsimile, electronic transmission, telephone or telegram, it shall be delivered at least 24 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose of the meeting. The notice need not specify the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. Unless otherwise indicated in the notice thereof, any and all business may be transacted at a special meeting.

 

3.8           Quorum

 

At all meetings of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

 

3.9           Waiver of Notice

 

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, or waiver by electronic mail or other electronic transmission by such person, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.

 

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3.10         Board Action by Written Consent Without a Meeting

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. Any copy, facsimile or other reliable reproduction of a consent in writing may be substituted or used in lieu of the original writing for any and all purposes for which the original writing could be used, provided that such copy, facsimile or other reproduction shall be a complete reproduction of the entire original writing.

 

3.11         Fees and Compensation of Directors

 

Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation of directors. No such compensation shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

 

3.12         Approval of Loans to Officers

 

The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.

 

3.13         Removal of Directors

 

Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire Board of Directors may be removed, with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to written consent; provided, however, that if the stockholders of the corporation are entitled to cumulative voting, if less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

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3.14         Chairman of the Board of Directors

 

The corporation may also have, at the discretion of the Board of Directors, a chairman of the Board of Directors who shall not be considered an officer of the corporation.

 

ARTICLE IV

COMMITTEES

 

4.1           Committees of Directors

 

The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board may designate 1 or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in these bylaws, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required by the General Corporate Law of Delaware to be submitted to stockholders for approval or (ii) adopting, amending or repealing any Bylaw of the corporation.

 

4.2           Committee Minutes

 

Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

 

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4.3           Meetings and Actions of Committees

 

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting) of these bylaws, with such changes in the context of such provisions as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.

 

ARTICLE V

OFFICERS

 

5.1           Officers

 

The officers of the corporation shall be a president and a secretary. The corporation may also have, at the discretion of the Board of Directors, a chief executive officer, a chief financial officer, a treasurer, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.

 

5.2           Appointment of Officers

 

The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the Board of Directors, subject to the rights (if any) of an officer under any contract of employment.

 

5.3           Subordinate Officers

 

The Board of Directors may appoint, or empower the chief executive officer or the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board of Directors may from time to time determine.

 

5.4           Removal and Resignation of Officers

 

Subject to the rights (if any) of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the board or, except in the case of an officer chosen by the Board of Directors, by any officer upon whom the power of removal is conferred by the Board of Directors.

 

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Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights (if any) of the corporation under any contract to which the officer is a party.

 

5.5           Vacancies in Offices

 

Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

 

5.6           Chief Executive Officer

 

Subject to such supervisory powers (if any) as may be given by the Board of Directors to the chairman of the board (if any), the chief executive officer of the corporation (if such an officer is appointed) shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation and shall have the general powers and duties of management usually vested in the office of chief executive officer of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these bylaws. The person serving as chief executive officer shall also be the acting president of the corporation whenever no other person is then serving in such capacity.

 

5.7           President

 

Subject to such supervisory powers (if any) as may be given by the Board of Directors to the chairman of the board (if any) or the chief executive officer, the president shall have general supervision, direction, and control of the business and other officers of the corporation. He or she shall have the general powers and duties of management usually vested in the office of president of a corporation and such other powers and duties as may be prescribed by the Board of Directors or these bylaws. The person serving as president shall also be the acting chief executive officer, secretary or treasurer of the corporation, as applicable, whenever no other person is then serving in such capacity.

 

5.8           Vice Presidents

 

In the absence or disability of the chief executive officer and president, the vice presidents (if any) in order of their rank as fixed by the Board of Directors or, if not ranked, a vice president designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these bylaws, the president or the chairman of the board.

 

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5.9           Secretary

 

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

 

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation’s transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates (if any) evidencing such shares, and the number and date of cancellation of every certificate (if any) surrendered for cancellation.

 

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these bylaws. He or she shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these bylaws.

 

5.10         Chief Financial Officer

 

The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any member of the Board of Directors.

 

The chief financial officer shall render to the chief executive officer, the president, or the Board of Directors, upon request, an account of all his or her transactions as chief financial officer and of the financial condition of the corporation. He or she shall have the general powers and duties usually vested in the office of chief financial officer of a corporation and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these bylaws.

 

The person serving as the chief financial officer shall also be the acting treasurer of the corporation whenever no other person is then serving in such capacity. Subject to such supervisory powers (if any) as may be given by the Board of Directors to another officer of the corporation, the chief financial officer shall supervise and direct the responsibilities of the treasurer whenever someone other than the chief financial officer is serving as treasurer of the corporation.

 

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5.11         Treasurer

 

The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records with respect to all bank accounts, deposit accounts, cash management accounts and other investment accounts of the corporation. The books of account shall at all reasonable times be open to inspection by any member of the Board of Directors.

 

The treasurer shall deposit, or cause to be deposited, all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors and shall render to the chief financial officer, the chief executive officer, the president or the Board of Directors, upon request, an account of all his or her transactions as treasurer. He or she shall have the general powers and duties usually vested in the office of treasurer of a corporation and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these bylaws.

 

The person serving as the treasurer shall also be the acting chief financial officer of the corporation whenever no other person is then serving in such capacity.

 

5.12         Representation of Shares of Other Corporations

 

The chairman of the board, the chief executive officer, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the Board of Directors or the chief executive officer or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by the person having such authority.

 

5.13         Authority and Duties of Officers

 

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors or the stockholders.

 

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ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS

 

6.1           Indemnification of Directors and Officers

 

The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a “director” or “officer” of the corporation includes any person (a) who is or was a director or officer of the corporation, (b) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

 

6.2           Indemnification of Others

 

The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation.

 

For purposes of this Section 6.2, an “employee” or “agent” of the corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the corporation, (b) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.

 

6.3           Payment of Expenses in Advance

 

Expenses incurred in defending any action or proceeding for which indemnification is required pursuant to Section 6.1 or for which indemnification is permitted pursuant to Section 6.2 following authorization thereof by the Board of Directors shall be paid by the corporation in advance of the final disposition of such action or proceeding upon receipt of an undertaking by or on behalf of the indemnified party to repay such amount if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that the indemnified party is not entitled to be indemnified as authorized in this Article VI.

 

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6.4           Indemnity Not Exclusive

 

The indemnification provided by this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any Bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in an official capacity and as to action in another capacity while holding such office, to the extent that such additional rights to indemnification are authorized in the certificate of incorporation

 

6.5           Insurance

 

The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.

 

6.6           Conflicts

 

No indemnification or advance shall be made under this Article VI, except where such indemnification or advance is mandated by law or the order, judgment or decree of any court of competent jurisdiction, in any circumstance where it appears:

 

(a)          That it would be inconsistent with a provision of the certificate of incorporation, these bylaws, a resolution of the stockholders or an agreement in effect at the time if the accrual of the alleged cause of the action asserted in the proceeding in which the expenses were incurred or other amounts were paid, which prohibits or otherwise limits indemnification; or

 

(b)          That it would be inconsistent with any condition expressly imposed by a court in approving a settlement.

 

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ARTICLE VII

RECORDS AND REPORTS

 

7.1           Maintenance and Inspection of Records

 

The corporation shall, either at its principal executive offices or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

 

A complete list of stockholders entitled to vote at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in each such stockholder’s name, shall be open to the examination of any such stockholder for a period of at least 10 days prior to the meeting in the manner provided by law. The stock list shall also be open to the examination of any stockholder during the whole time of the meeting as provided by law. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

 

7.2           Inspection by Directors

 

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

 

ARTICLE VIII

GENERAL MATTERS

 

8.1           Checks

 

From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

 

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8.2           Execution of Corporate Contracts and Instruments

 

The Board of Directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.

 

8.3           Stock Certificates and Notices; Uncertificated Stock; Partly Paid Shares

 

The shares of the corporation may be certificated or uncertificated, as provided under Delaware law, and shall be entered in the books of the corporation and recorded as they are issued. Any or all of the signatures on any certificate may be a facsimile or electronic signature. In case any officer, transfer agent or registrar who has signed or whose facsimile or electronic signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

 

Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the record owner thereof a written notice that shall set forth the name of the corporation, that the corporation is organized under the laws of Delaware, the name of the stockholder, the number and class (and the designation of the series, if any) of the shares, and any restrictions on the transfer or registration of such shares of stock imposed by the corporation’s certificate of incorporation, these bylaws, any agreement among stockholders or any agreement between stockholders and the corporation.

 

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate (if any) issued to represent any such partly paid shares, or upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

 

8.4           Special Designation on Certificates and Notices of Issuance

 

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock or the notice of issuance to the record owner of uncertificated stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

 

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8.5           Lost Certificates

 

Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or notice of uncertificated stock in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or the owner’s legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

 

8.6           Construction; Definitions

 

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

 

8.7           Dividends

 

The directors of the corporation, subject to any restrictions contained in (a) the General Corporation Law of Delaware or (b) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

 

The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

 

8.8           Fiscal Year

 

The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.

 

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8.9           Transfer of Stock

 

Upon receipt by the corporation or the transfer agent of the corporation of proper transfer instructions from the record holder of uncertificated shares or upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate or, in the case of uncertificated securities, a notice of issuance of shares, to the person entitled thereto, cancel the old certificate (if any) and record the transaction in its books.

 

8.10         Stock Transfer Agreements

 

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

 

8.11         Stockholders of Record

 

The corporation shall be entitled to recognize the exclusive right of a person recorded on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person recorded on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

 

8.12         Facsimile or Electronic Signature

 

In addition to the provisions for use of facsimile or electronic signatures elsewhere specifically authorized in these bylaws, facsimile or electronic signatures of any stockholder, director or officer of the corporation may be used whenever and as authorized by the Board of Directors or a committee thereof.

 

ARTICLE IX

AMENDMENTS

 

The Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.

 

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CERTIFICATE OF ADOPTION BY INCORPORATOR OF

BYLAWS OF REIGN SAPPHIRE CORPORATION

 

The undersigned person appointed in the certificate of incorporation to act as the Incorporator of Reign Sapphire Corporation, a Delaware corporation, hereby adopts the foregoing Bylaws as the Bylaws of the corporation.

 

Executed on December 16, 2014

 

   
Joseph Segelman, Incorporator  

 

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CERTIFICATE BY SECRETARY OF ADOPTION OF

BYLAWS OF LOCUSLABS, INC. BY INCORPORATOR

 

The undersigned hereby certifies that the undersigned is the duly elected, qualified, and acting Secretary of Reign Sapphire Corporation, a Delaware corporation, and that the foregoing Bylaws were adopted as the Bylaws of the corporation on December 16, 2014, by the person appointed in the certificate of incorporation to act as the Incorporator of the corporation.

 

Executed as of December 31, 2014

 

   
Chaya Segelman, Secretary  

 

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Exhibit 10.1

 

REIGN SAPPHIRE CORPORATION

DIRECTOR INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is dated as of December 31, 2014, and is between Reign Sapphire Corporation, a Delaware corporation (the “Company”) and Joseph Segelman (the “Indemnitee”), a director of the Company.

 

RECITALS

 

WHEREAS , Indemnitee’s service to the Company substantially benefits the Company;

 

WHEREAS , Individuals are reluctant to serve as directors of corporations or in certain other capacities unless they are provided with adequate protection through insurance or indemnification against the risks of claims and actions against them arising out of such service;

 

WHEREAS , Indemnitee does not regard the protection currently provided by applicable law, the Company’s governing documents and any insurance as adequate under the present circumstances, and Indemnitee may not be willing to serve as a director without additional protection.

 

WHEREAS , In order to induce Indemnitee to continue to provide services to the Company, it is reasonable, prudent and necessary for the Company to contractually obligate itself to indemnify, and to advance expenses on behalf of, Indemnitee as permitted by applicable law;

 

WHEREAS , This Agreement is a supplement to and in furtherance of the indemnification provided in the Company’s certificate of incorporation and bylaws, and any resolutions adopted pursuant thereto, and this Agreement shall not be deemed a substitute therefor, nor shall this Agreement be deemed to limit, diminish or abrogate any rights of Indemnitee thereunder.

 

NOW THEREFORE , in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows:

 

1. Definitions.

 

(a) A “ Change in Control ” shall be deemed to occur upon the earliest to occur after the date of this Agreement of any of the following events:

 

(i) Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities;

 

 
 

 

(ii) Change in Board Composition. During any period of two consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Company’s board of directors, and any new directors (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 1(a)(i), 1(a)(iii) or 1(a)(iv)) whose election by the board of directors or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Company’s board of directors;

 

(iii) Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

 

(iv) Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

 

(v) Other Events. Any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Company is then subject to such reporting requirement.

 

For purposes of this Section 1(a), the following terms shall have the following meanings:

 

(1) “ Person ” shall have the meaning as set forth in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended; provided, however, that “ Person ” shall exclude (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

(2) “ Beneficial Owner ” shall have the meaning given to such term in Rule 13d-3 under the Securities Exchange Act of 1934, as amended; provided, however, that “ Beneficial Owner ” shall exclude any Person otherwise becoming a Beneficial Owner by reason of (i) the stockholders of the Company approving a merger of the Company with another entity or (ii) the Company’s board of directors approving a sale of securities by the Company to such Person.

 

(b) “ Corporate Status ” describes the status of a person who is or was a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise.

 

(c) “ DGCL ” means the General Corporation Law of the State of Delaware.

 

 
 

 

(d) “ Disinterested Director ” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

(e) “ Enterprise ” means the Company and any other corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary.

 

(f) “ Expenses ” include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees and costs of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond or other appeal bond or their equivalent, and (ii) for purposes of Section 12(d), Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company. Expenses, however, shall not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

 

(g) “ Independent Counsel ” means a law firm, or a partner or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent (i) the Company or Indemnitee in any matter material to either such party (other than as Independent Counsel with respect to matters concerning Indemnitee under this Agreement, or other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “ Independent Counsel ” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(h) “ Proceeding ” means any threatened, pending or completed action, suit, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, including any appeal therefrom and including without limitation any such Proceeding pending as of the date of this Agreement, in which Indemnitee was, is or will be involved as a party, a potential party, a non-party witness or otherwise by reason of (i) the fact that Indemnitee is or was a director or officer of the Company, (ii) any action taken by Indemnitee or any action or inaction on Indemnitee’s part while acting as a director or officer of the Company, or (iii) the fact that he or she is or was serving at the request of the Company as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement.

 

 
 

 

(i) Reference to “ other enterprises ” shall include employee benefit plans; references to “ fines ” shall include any excise taxes assessed on a person with respect to any employee benefit plan; 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 a person who acted in good faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the Company ” as referred to in this Agreement.

 

2. Indemnity in Third-Party Proceedings. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 2 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 2, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she 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 that his or her conduct was unlawful.

 

3. Indemnity in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 3 in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Delaware Court of Chancery or any court in which the Proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification for such expenses as the Delaware Court of Chancery or such other court shall deem proper.

 

4. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. To the extent that Indemnitee is a party to or a participant in and is successful (on the merits or otherwise) in defense of any Proceeding or any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith. To the extent permitted by applicable law, if Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, in defense of one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with (a) each successfully resolved claim, issue or matter and (b) any claim, issue or matter related to any such successfully resolved claim, issuer or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

 
 

 

5. Indemnification for Expenses of a Witness. To the extent that Indemnitee is, by reason of his or her Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified to the extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.

 

6. Additional Indemnification.

 

(a) Notwithstanding any limitation in Sections 2, 3 or 4, the Company shall indemnify Indemnitee to the fullest extent permitted by applicable law if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor) against all Expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee or on his or her behalf in connection with the Proceeding or any claim, issue or matter therein.

 

(b) For purposes of Section 6(a), the meaning of the phrase “ to the fullest extent permitted by applicable law ” shall include, but not be limited to:

 

(i) the fullest extent permitted by the provision of the DGCL that authorizes or contemplates additional indemnification by agreement, or the corresponding provision of any amendment to or replacement of the DGCL; and

 

(ii) the fullest extent authorized or permitted by any amendments to or replacements of the DGCL adopted after the date of this Agreement that increase the extent to which a corporation may indemnify its officers and directors.

 

7. Exclusions. Notwithstanding any provision in this Agreement, the Company shall not be obligated under this Agreement to make any indemnity in connection with any Proceeding (or any part of any Proceeding):

 

(a) for which payment has actually been made to or on behalf of Indemnitee under any statute, insurance policy, indemnity provision, vote or otherwise, except with respect to any excess beyond the amount paid, subject to any subrogation rights set forth in Section 15;

 

(b) for an accounting or disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of federal, state or local statutory law or common law, if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

 

 
 

 

(c) for any reimbursement of the Company by Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by Indemnitee from the sale of securities of the Company, as required in each case under the Securities Exchange Act of 1934, as amended (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “ Sarbanes-Oxley Act ”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act), if Indemnitee is held liable therefor (including pursuant to any settlement arrangements);

 

(d) initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees, agents or other indemnitees, unless (i) the Company’s board of directors authorized the Proceeding (or the relevant part of the Proceeding) prior to its initiation, (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law, (iii) otherwise authorized in Section 12(d) or (iv) otherwise required by applicable law; or

 

(e) if prohibited by applicable law.

 

8. Advances of Expenses. The Company shall advance the Expenses incurred by Indemnitee in connection with any Proceeding, and such advancement shall be made as soon as reasonably practicable, but in any event no later than 60 days, after the receipt by the Company of a written statement or statements requesting such advances from time to time (which shall include invoices received by Indemnitee in connection with such Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditure made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice). Advances shall be unsecured and interest free and made without regard to Indemnitee’s ability to repay such advances. Indemnitee hereby undertakes to repay any advance to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company. This Section 8 shall not apply to the extent advancement is prohibited by law and shall not apply to any Proceeding for which indemnity is not permitted under this Agreement, but shall apply to any Proceeding referenced in Section 7(b) or 7(c) prior to a determination that Indemnitee is not entitled to be indemnified by the Company.

 

9. Procedures for Notification and Defense of Claim.

 

(a) Indemnitee shall notify the Company in writing of any matter with respect to which Indemnitee intends to seek indemnification or advancement of Expenses as soon as reasonably practicable following the receipt by Indemnitee of notice thereof. The written notification to the Company shall include, in reasonable detail, a description of the nature of the Proceeding and the facts underlying the Proceeding. The failure by Indemnitee to notify the Company will not relieve the Company from any liability which it may have to Indemnitee hereunder or otherwise than under this Agreement, and any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights, except to the extent that such failure or delay materially prejudices the Company.

 

 
 

 

(b) If, at the time of the receipt of a notice of a Proceeding pursuant to the terms hereof, the Company has directors’ and officers’ liability insurance in effect, the Company shall give prompt notice of the commencement of the Proceeding to the insurers in accordance with the procedures set forth in the applicable policies. The Company shall thereafter take all commercially-reasonable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies.

 

(c) In the event the Company may be obligated to make any indemnity in connection with a Proceeding, the Company shall be entitled to assume the defense of such Proceeding with counsel approved by Indemnitee, which approval shall not be unreasonably withheld, upon the delivery to Indemnitee of written notice of its election to do so. 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 for any fees or expenses of counsel subsequently incurred by Indemnitee with respect to the same Proceeding. Notwithstanding the Company’s assumption of the defense of any such Proceeding, the Company shall be obligated to pay the fees and expenses of Indemnitee’s counsel to the extent (i) the employment of counsel by Indemnitee is authorized by the Company, (ii) counsel for the Company or Indemnitee shall have reasonably concluded that there is a conflict of interest between the Company and Indemnitee in the conduct of any such defense such that Indemnitee needs to be separately represented, (iii) the fees and expenses are non-duplicative and reasonably incurred in connection with Indemnitee’s role in the Proceeding despite the Company’s assumption of the defense, (iv) the Company is not financially or legally able to perform its indemnification obligations or (v) the Company shall not have retained, or shall not continue to retain, such counsel to defend such Proceeding. The Company shall have the right to conduct such defense as it sees fit in its sole discretion. Regardless of any provision in this Agreement, Indemnitee shall have the right to employ counsel in any Proceeding at Indemnitee’s personal expense. The Company shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Company.

 

(d) Indemnitee shall give the Company such information and cooperation in connection with the Proceeding as may be reasonably appropriate.

 

(e) The Company shall not be liable to indemnify Indemnitee for any settlement of any Proceeding (or any part thereof) without the Company’s prior written consent, which shall not be unreasonably withheld.

 

(f) The Company shall have the right to settle any Proceeding (or any part thereof) without the consent of Indemnitee.

 

10. Procedures upon Application for Indemnification.

 

(a) To obtain indemnification, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and as is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of the Proceeding. The Company shall, as soon as reasonably practicable after receipt of such a request for indemnification, advise the board of directors that Indemnitee has requested indemnification. Any delay in providing the request will not relieve the Company from its obligations under this Agreement, except to the extent such failure is prejudicial.

 

 
 

 

(b) Upon written request by Indemnitee for indemnification pursuant to Section 10(a), a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall be made in the specific case (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (ii) if a Change in Control shall not have occurred, (A) by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (B) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Company’s board of directors, (C) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Company’s board of directors, a copy of which shall be delivered to Indemnitee or (D) if so directed by the Company’s board of directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information that is not privileged or otherwise protected from disclosure and that is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys’ fees and disbursements) reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company, to the extent permitted by applicable law.

 

(c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(b), the Independent Counsel shall be selected as provided in this Section 10(c). If a Change in Control shall not have occurred, the Independent Counsel shall be selected by the Company’s board of directors, and the Company shall give written notice to Indemnitee advising him or her of the identity of the Independent Counsel so selected. If a Change in Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Company’s board of directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within ten days after such written notice of selection shall have been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided , however , that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 1 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 10(a) hereof and (ii) the final disposition of the Proceeding, the parties have not agreed upon an Independent Counsel, either the Company or Indemnitee may petition a court of competent jurisdiction for resolution of any objection which shall have been made by the Company or Indemnitee to the other’s selection of Independent Counsel and for the appointment as Independent Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 10(b) hereof. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, the Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

 
 

 

(d) The Company agrees to pay the reasonable fees and expenses of any Independent Counsel and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto.

 

11. Presumptions and Effect of Certain Proceedings.

 

(a) In making a determination with respect to entitlement to indemnification hereunder, the person, persons or entity making such determination shall, to the fullest extent not prohibited by law, presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption in connection with the making by such person, persons or entity of any determination contrary to that presumption.

 

(b) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.

 

(c) For purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith to the extent Indemnitee relied in good faith on (i) the records or books of account of the Enterprise, including financial statements, (ii) information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, (iii) the advice of legal counsel for the Enterprise or its board of directors or counsel selected by any committee of the board of directors or (iv) information or records given or reports made to the Enterprise by an independent certified public accountant, an appraiser, investment banker or other expert selected with reasonable care by the Enterprise or its board of directors or any committee of the board of directors. The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

 

 
 

 

(d) Neither the knowledge, actions nor failure to act of any other director, officer, agent or employee of the Enterprise shall be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

12. Remedies of Indemnitee.

 

(a) Subject to Section 12(e), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8 or 12(d) of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10 of this Agreement within 90 days after the later of the receipt by the Company of the request for indemnification or the final disposition of the Proceeding, (iv) payment of indemnification pursuant to this Agreement is not made (A) within ten days after a determination has been made that Indemnitee is entitled to indemnification or (B) with respect to indemnification pursuant to Sections 4, 5 and 12(d) of this Agreement, within 30 days after receipt by the Company of a written request therefor, or (v) the Company or any other person or entity takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, Indemnitee the benefits provided or intended to be provided to Indemnitee hereunder, Indemnitee shall be entitled to an adjudication by a court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration with respect to his or her entitlement to such indemnification or advancement of Expenses, to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights under Section 4 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration in accordance with this Agreement.

 

(b) Neither (i) the failure of the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders to have made a determination that indemnification of Indemnitee is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor (ii) an actual determination by the Company, its board of directors, any committee or subgroup of the board of directors, Independent Counsel or stockholders that Indemnitee has not met the applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has or has not met the applicable standard of conduct. In the event that a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted in all respects as a de novo trial, or arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall, to the fullest extent not prohibited by law, have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 

 
 

 

(c) To the fullest extent not prohibited by law, the Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. If a determination shall have been made pursuant to Section 10 of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statements not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 

(d) To the extent not prohibited by law, the Company shall indemnify Indemnitee against all Expenses that are incurred by Indemnitee in connection with any action for indemnification or advancement of Expenses from the Company under this Agreement or under any directors’ and officers’ liability insurance policies maintained by the Company to the extent Indemnitee is successful in such action, and, if requested by Indemnitee, shall (as soon as reasonably practicable, but in any event no later than 60 days, after receipt by the Company of a written request therefor) advance such Expenses to Indemnitee, subject to the provisions of Section 8.

 

(e) Notwithstanding anything in this Agreement to the contrary, no determination as to entitlement to indemnification shall be required to be made prior to the final disposition of the Proceeding.

 

13. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amounts incurred by Indemnitee, whether for Expenses, judgments, fines or amounts paid or to be paid in settlement, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the events and transactions giving rise to such Proceeding; and (ii) the relative fault of Indemnitee and the Company (and its other directors, officers, employees and agents) in connection with such events and transactions.

 

14. Non-exclusivity. The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Company’s certificate of incorporation or bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s certificate of incorporation and bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change, subject to the restrictions expressly set forth herein or therein. Except as expressly set forth herein, no right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as expressly set forth herein, the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

 
 

 

15. Primary Responsibility. The Company acknowledges that Indemnitee has certain rights to indemnification and advancement of expenses provided by [ insert name of fund ] [and certain affiliates thereof] ([collectively,] the “ Secondary Indemnitor[s] ”). The Company agrees that, as between the Company and the Secondary Indemnitor[s], the Company is primarily responsible for amounts required to be indemnified or advanced under the Company’s certificate of incorporation or bylaws or this Agreement and any obligation of the Secondary Indemnitor[s] to provide indemnification or advancement for the same amounts is secondary to those Company obligations. To the extent not in contravention of any insurance policy or policies providing liability or other insurance for the Company or any director, trustee, general partner, managing member, officer, employee, agent or fiduciary of the Company or any other Enterprise, the Company waives any right of contribution or subrogation against the Secondary Indemnitor[s] with respect to the liabilities for which the Company is primarily responsible under this Section 15. In the event of any payment by the Secondary Indemnitor[s] of amounts otherwise required to be indemnified or advanced by the Company under the Company’s certificate of incorporation or bylaws or this Agreement, the Secondary Indemnitor[s] shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee for indemnification or advancement of expenses under the Company’s certificate of incorporation or bylaws or this Agreement or, to the extent such subrogation is unavailable and contribution is found to be the applicable remedy, shall have a right of contribution with respect to the amounts paid. The Secondary Indemnitor[s] [are] [is an] express third-party [beneficiaries] [beneficiary] of the terms of this Section 15.

 

16. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that Indemnitee has otherwise actually received payment for such amounts under any insurance policy, contract, agreement or otherwise, subject to any subrogation rights set forth in Section 15.

 

17. Insurance. To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, trustees, general partners, managing members, officers, employees, agents or fiduciaries of the Company or any other Enterprise, Indemnitee shall be covered by such policy or policies to the same extent as the most favorably-insured persons under such policy or policies in a comparable position.

 

18. Subrogation. In the event of any 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 papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

 
 

 

19. Services to the Company. Indemnitee agrees to serve as a director of the Company or, at the request of the Company, as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of another Enterprise, for so long as Indemnitee is duly elected or appointed or until Indemnitee tenders his or her resignation or is removed from such position. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee. Indemnitee specifically acknowledges that any employment with the Company (or any of its subsidiaries or any Enterprise) is at will, and Indemnitee may be discharged at any time for any reason, with or without cause, with or without notice, except as may be otherwise expressly provided in any executed, written employment contract between Indemnitee and the Company (or any of its subsidiaries or any Enterprise), any existing formal severance policies adopted by the Company’s board of directors or, with respect to service as a director of the Company, the Company’s certificate of incorporation or bylaws or the DGCL. No such document shall be subject to any oral modification thereof.

 

20. Duration. This Agreement shall continue until and terminate upon the later of (a) ten years after the date that Indemnitee shall have ceased to serve as a director of the Company or as a director, trustee, general partner, managing member, officer, employee, agent or fiduciary of any other Enterprise, as applicable; or (b) one year after the final termination of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto.

 

21. Successors. This Agreement shall be binding upon the Company and its successors and assigns, including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s heirs, executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

22. 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 or other applicable law, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (i) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the fullest extent permitted by law; (ii) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (iii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

 
 

 

23. Enforcement. The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director of the Company.

 

24. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided , however , that this Agreement is a supplement to and in furtherance of the Company’s certificate of incorporation and bylaws and applicable law.

 

25. Modification and Waiver. No supplement, modification or amendment to this Agreement shall be binding unless executed in writing by the parties hereto. No amendment, alteration or repeal of this Agreement shall adversely affect any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her Corporate Status prior to such amendment, alteration or repeal. No waiver of any of the provisions of this Agreement shall constitute or be deemed a waiver of any other provision of this Agreement nor shall any waiver constitute a continuing waiver.

 

26. Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or electronic mail or otherwise delivered by hand, messenger or courier service addressed:

 

(a) if to Indemnitee, to Indemnitee’s address, facsimile number or electronic mail address as shown on the signature page of this Agreement or in the Company’s records, as may be updated in accordance with the provisions hereof;

 

(b) if to the Company, to the attention of the President at Reign Sapphire Corporation, 9465 Wilshire Boulevard, Level 3, Beverly Hills, CA 90212, or at such other current address as the Company shall have furnished to Indemnitee, with a copy (which shall not constitute notice) to Willa Qian, Esq., Qian & Co., 135 Main St., 9 th Floor, San Francisco, CA 94105.

 

Each such notice or other communication shall for all purposes of this Agreement be treated as effective or having been given (i) if delivered by hand, messenger or courier service, when delivered (or if sent via a nationally-recognized overnight courier service, freight prepaid, specifying next-business-day delivery, one business day after deposit with the courier), (ii) if sent via mail, at the earlier of its receipt or five days after the same has been deposited in a regularly-maintained receptacle for the deposit of the United States mail, addressed and mailed as aforesaid, or (iii) if sent via facsimile, upon confirmation of facsimile transfer or, if sent via electronic mail, upon confirmation of delivery when directed to the relevant electronic mail address, if sent during normal business hours of the recipient, or if not sent during normal business hours of the recipient, then on the recipient’s next business day.

 

 
 

 

27. Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Delaware Court of Chancery, and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court of Chancery for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, VCorp Services, LLC, 1811 Silverside Road, Wilmington, County of New Castle, 19810 as its agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court of Chancery, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court of Chancery has been brought in an improper or inconvenient forum.

 

28. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. This Agreement may also be executed and delivered by facsimile signature and in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

 

29. Captions. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

( Signature page follows )

 

 
 

 

IN WITNESS WHEREOF, the Parties hereto have executed this Indemnification Agreement as of the date first written above.

 

DIRECTOR   REIGN SAPPHIRE CORPORATION
     
By:     By:  
     
Name: Joseph Segelman   Name: Joseph Segelman
         

 

Address:     Title: President and Chief Executive Officer
       
     
       
Facsimile:        
       
E-Mail:        

 

 

 

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“ Agreement ”) is entered as of the 1 st day of April 2015 (“ Effective Date ”) by and between Reign Sapphire Corporation, a Delaware corporation (“ Company ”), and Joseph Segelman (“ Executive ”).

 

WHEREAS , the Board of Directors of the Company (“ Board ”) has determined that it is in the best interest of the Company to secure the continuing services and employment of the Executive for the period provided in this Agreement and the Executive is willing to render such services on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE , in consideration of the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

 

1.           Term . The initial term (“ Initial Term ”) of employment under this Agreement shall commence and this Agreement shall be effective as of the Effective Date and shall continue for a period ending on December 31, 2018, unless sooner terminated in accordance with the terms hereof. The Initial Term shall be automatically extended for additional one-year periods (each such year an “ Extended Term ”) on the same terms and conditions set forth in this Agreement, unless either party provides notice of his or its intention not to extend this Agreement at least ninety (90) days prior to the expiration of the Initial Term or, if previously extended, any Extended Term. The Initial Term and any Extended Term may be collectively referred to in this Agreement as the “ Term .”

 

2.             Employment Duties .

 

(a)           Position . Commencing upon the Effective Date and continuing through the period of the Executive’s employment by the Company, the Executive shall serve as the President and Chief Executive Officer (“ CEO ”) of the Company and shall report to, and have the duties, responsibilities and authority established by, the Board. As CEO, the Executive shall be responsible for running the Company’s day-to-day operations and shall faithfully, diligently and competently perform the duties and responsibilities of a CEO and such other duties and responsibilities as directed by the Board and are consistent with such position. The Executive shall be appointed as a member of the Board, and thereafter, during the Term and for so long as the Company's common stock is publicly traded, the Company shall cause the nominating and corporate governance committee of the Board (the “ Nominating Committee ”) to nominate the Executive to serve as a member of the Board each year the Executive's term of Board service is to be slated for reelection to the Board. If the Company's stockholders vote in favor of the Nominating Committee's nomination of the Executive to serve as a member of the Board, the Executive agrees to serve in such capacity and also agrees that any such board service shall be without additional compensation. If, during the Term, the Company's common stock becomes no longer publicly traded, the Executive shall be a member of the Board. During the Term, the Executive agrees to serve on all othis boards of directors of subsidiaries of the Company or its affiliates and the Executive agrees that any such board service shall be without additional compensation.

 

 
 

 

(b)           Obligations . The Executive agrees to devote his full business time and attention to the business and affairs of the Company. The foregoing, however, shall not preclude the Executive from serving on corporate, civic or charitable boards or committees or managing personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities hereunder, or leave for vacation or personal leave permitted hereunder or illness.

 

(c)           Confidential Information and Inventions . As a condition of employment, the Executive shall, on or before the Effective Date, sign, deliver and abide by a Confidential Information and Invention Assignment Agreement in the form approved by the Board.

 

3.             Compensation and Benefits .

 

(a)           Base Salary . During the period of the Executive’s employment by the Company, the Executive shall receive an annual base salary of not less than $180,000 (“ Base Salary ”) payable in equal bi-weekly installments, less applicable withholdings. Each year, the Board (or the compensation committee of the Board, if any) shall review the Base Salary and other compensation of the Executive based upon performance and other factors deemed appropriate by the Board and make such increases as it deems fit. For purposes of this Agreement, the term “ Base Salary ” shall mean the amount of the Executive’s base salary established from time to time pursuant to this Section 3(a) .

 

(b)           Annual Performance Bonus . During the period of the Executive’s employment by the Company hiseunder, the Executive shall receive each year an annual performance bonus (“ Annual Performance Bonus ”) based upon objective performance criteria set by the Board.

 

(c)           Employee Benefits . The Executive shall be entitled to the following benefits during the period of the Executive’s employment by the Company hereunder: (i) to the extent permitted by applicable law, the Executive shall be entitled to receive benefits and fringes (whether subsidized in part, or paid for in full by the Company) including, but not limited to, medical, dental and disability insurance, which the Company now or in the future generally offers to its executive officers; (ii) the Company will pay the entire amount of each monthly premium for full family coverage for the benefit of the Executive and the Executive’s family under the Company’s health and dental insurance plans in which the Executive and the Executive’s family members are eligible to participate; (iii) the Executive shall be eligible to participate in any of the Company’s savings, retirement, 401(k), deferred compensation, corporate owned life insurance, and other qualified and non-qualified plans sponsored by the Company; (iv) the Executive shall be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other executives of the Company; and (v) the Executive shall be insured under the Company’s director and officer liability insurance and shall be provided with an indemnification agreement effective as of the Effective Date in the same form previously entered into with members of the Board. In addition, the Executive shall be entitled to perquisites on the same terms and conditions as such perquisites are made available to other executive officers of the Company.

 

 
 

 

(d)           Expenses . The Executive shall be entitled to receive prompt reimbursement of all expenses reasonably incurred by him in connection with the performance of his duties hereunder, in each case in accordance with policies established by the Board from time to time and upon receipt of appropriate documentation. Upon the Executive’s termination of employment (as provided in  Section 4 ), any outstanding reimbursement requests must be submitted promptly and payment shall occur hereafter but no later than December 31st of the calendar year following the calendar year in which such expenses were incurred.

 

(e)           Vacation . The Executive shall be entitled to four (4) weeks of annual vacation in accordance with the policies periodically established by the Board.

 

(f)           Initial Stock Option Grant. The Company shall grant the Executive an initial stock option grant to purchase 10,000,000 shares of the Company’s common stock (the “ Options ”). Such grant will be made and be effective as of the date the Board adopts the Company’s 2015 Equity Incentive Plan (“Equity Incentive Plan”), at an exercise price equal to the Fair Market Value (as defined under such Equity Incentive Plan) per share on the date of grant, shall have a ten-year option term and shall be subject to the terms and conditions set forth in the Equity Incentive Plan and in the form of Share Option Agreement attached hereto as Exhibit A . In addition to the Options, Executive shall, during the Term, be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other executives of the Company.

 

4.             Termination and Payments Upon Termination .

 

(a)           Death . The Executive’s employment hereunder shall terminate upon the Executive’s death.

 

(b)           Disability . Either the Executive or the Company shall be entitled to terminate the Executive’s employment for “Disability” by giving the other party a Notice of Termination (as defined below). For purposes of this Agreement, “ Disability ” shall mean (i) the Executive has, as determined by a doctor selected by the Executive and acceptable to the Company (such acceptance not to be unreasonably withheld), suffered a physical or mental illness or injury that has impaired the Executive’s ability to substantially perform the Executive’s full-time duties with the Company, with or without reasonable accommodation, for a period of one-hundred eighty (180) consecutive days and that qualifies the Executive for benefits under Employer’s group long-term disability plan, and (ii) the Executive has not substantially returned to full time employment before the Termination Date (as defined below) specified in the Notice of Termination.

 

 
 

 

(c)           Cause . The Company shall be entitled to terminate the Executive’s employment for Cause by giving the Executive a Notice of Termination. For purposes of this Agreement, “ Cause ” shall mean: (i) the Executive’s misappropriation or theft of the Company’s or any of its subsidiary’s funds or property, (ii) the Executive’s conviction or entering of a plea of  nolo contendere  of any fraud, misappropriation, embezzlement or similar act, felony or crime involving dishonesty or moral turpitude, (iii) the Executive’s material breach of this Agreement or failure to perform any of his duties owed to the Company, (iv) the Executive’s commission of any act involving willful malfeasance or gross negligence or the Executive’s failure to act involving material nonfeasance or (v) a material violation by the Executive of the code of conduct of the Company or its subsidiaries (to the extent such code of conduct has been provided to or made available to the Executive) or of any statutory or common law duty of loyalty to the Company or its subsidiaries,

 

The Executive’s employment with the Company shall not be terminated for Cause unless he has been given written notice by the Board of its intention to so terminate his employment (a “ Notice of Cause ”), such notice (i) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based and (ii) to be given within six months of the Board’s learning of such acts or failures to act. The Executive shall have 10 days after the date that the Notice of Cause is given in which to cure any breach of this Agreement or acts or failures to act, to the extent such cure is possible.

 

(d)           Without Cause . The Board may terminate the Executive’s employment hereunder, without Cause, at any time and for any reason or for no reason by giving the Executive a Notice of Termination (as defined below).

 

(e)           Voluntary Termination . The Executive may terminate his employment hereunder at any time and for any reason by giving the Company a Notice of Termination.

 

(f)           Notice of Termination . For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which indicates the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail, if applicable, the facts and circumstances claimed to provide a basis (unless not required pursuant to  Section 4(d) ) for termination of the Executive’s employment under the provision so indicated. The Termination Date (as defined below) specified in such Notice of Termination shall be no less than two weeks from the date the Notice of Termination is given; provided, however, that (i) if the Executive’s employment is terminated by the Company due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days (but not more than ninety (90) days) from the date the Notice of Termination is given to the Executive and (ii) if the Executive terminates his employment in accordance with  Section 4(e)  of this Agreement, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Company.

 

 
 

 

(g)           Termination Date . “ Termination Date ” shall mean the date of the termination of the Executive’s employment with the Company and specifically (i) in the case of the Executive’s death, his date of death; (ii) in the case of the expiration of the Term of this Agreement in accordance with  Section 1 , the date of such expiration; and (iii) in all other cases, the date specified in the Notice of Termination, as defined in  Section 4(f) .

 

5.             Compensation Upon Termination of Employment .

 

(a)           Compensation . If during the Term of this Agreement, the Executive’s employment under this Agreement is terminated (i) by the Company for Cause or (ii) by the Executive, the Company’s sole obligation hereunder shall be to pay the Executive the following amounts earned, accrued or owing hereunder but not paid as of the Termination Date (collectively, “ Accrued Compensation ”):

 

(i) Base Salary unpaid through the Termination Date;
(ii) all other compensation which has been earned, accrued or is owing, under the terms of the applicable plan, program or practice, to the Executive as of the Termination Date but not paid, including, without limitation, the Annual Performance Bonus and any incentive awards under any incentive or bonus plan;
(iii) any amounts which the Executive had previously deferred; and
(iv) reimbursement of any and all reasonable expenses incurred in connection with the Executive’s duties and responsibilities under this Agreement in accordance with policies established by the Board from time to time and upon receipt of appropriate documentation; and other or additional benefits and entitlements in accordance with applicable plans, programs and arrangements of the Company.

 

For the purposes of  Section 5(a)(ii) , to the extent that compensation has not been accrued under any incentive and bonus plan, the applicable metrics under each such plan shall be pro-rated so that such metrics and the measurement of the performance applicable to such metrics shall be calculated based on the number of days of the fiscal year in which the Executive was terminated prior to the Termination Date. The Accrued Compensation shall be paid in a single lump-sum cash payment within ten (10) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline. The Executive shall not be entitled to any other payment after payment in full of the Accrued Compensation, other than any payment required under any indemnification obligation of the Company and employee benefits to which the Executive is entitled under COBRA (as defined in Section 5(f)) , which obligations shall survive termination (collectively, “ Post-Termination Obligations ”).

 

 
 

 

(b)           Disability . If the Executive’s employment hereunder is terminated by either party by reason of the Executive’s Disability, the Company’s shall (i) pay the Executive the unpaid Accrued Compensation through the Termination Date within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline and (ii) cause to be accelerated and vested, effective as of the Termination Date, all equity compensation awarded to the Executive.

 

(c)           Death . If the Executive’s employment hereunder is terminated due to his death, the Company shall:

 

(i) pay the Executive’s estate or his beneficiaries (as the case may be) the unpaid Accrued Compensation through the Termination Date within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline
(ii) provide such assistance as is necessary to facilitate the payment of any life insurance proceeds provided for in  Section 3(e)  of this Agreement that may be payable to the Executive’s beneficiary or beneficiaries; and
(iii) cause to be accelerated and vested, effective as of the Termination Date, all equity compensation awarded to the Executive.

 

(d)           Termination by Company Without Cause . If during the Term of this Agreement, the Executive’s employment is terminated by the Company without Cause pursuant to  Section 4(d) , the Company’s shall pay the Executive the following amounts:

(i) the Accrued Compensation;
(ii) an amount equal to the product of (x) two (2) times the sum of (y) Executive’s then current annual Base Salary (such product referred to herein as the “ Severance Payment ”); and
(iii) the Post-Termination Obligations.

 

The Accrued Compensation and Severance Payment shall be paid in a single lump-sum cash payment within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline.

 

(e)           Determination of Base Salary . For purposes of this  Section 5 , Base Salary shall be determined by the Base Salary at the annualized rate in effect on the Termination Date.

 

 
 

 

(f)           Continuation of Employee Benefits . The Company shall, at its expense, provide to the Executive and his beneficiaries continued participation in all medical, dental, vision, prescription drug, hospitalization and life insurance coverages and in all other employee benefit plans, programs and arrangements in which the Executive was participating immediately prior to the Termination Date, on terms and conditions that are no less favorable than those that applied on the Termination Date, for a period of two years following the Termination Date, if the Executive’s employment is terminated by the Company other than for Cause; provided that, if the continued participation would reasonably give rise to any fines, penalties, or negative tax consequences to the Company or the Executive (including without limitation, under the Patient Protection and Affordable Care Act), as determined by the Company in good faith, the Company and the Executive shall, in good faith, discuss an alternative but mutually agreeable arrangement. In each case, benefits required pursuant to the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) will commence after the applicable period has been completed. Notwithstanding the foregoing, the Company’s obligation under this  Subsection 5(f)  shall be reduced to the extent that equivalent coverages and benefits (determined on a coverage-by-coverage and benefit-by-benefit basis) are provided under the plans, programs or arrangements of a subsequent employer.

 

(g)           No Mitigation: No Offset . In the event of any termination of his employment hereunder, the Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise and, except as set forth expressly under the proviso in  Subsection 5(f) , no such payment or benefit shall be offset or reduced by the amount of any compensation or benefit provided to the Executive in any subsequent employment.

 

(h)           Section 409A . It is the intent of this Agreement that no payment to the Executive shall result in nonqualified deferred compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Treasury Regulations and applicable guidance promulgated thereunder. However, in the event that all, or a portion, of the payments set forth in this Agreement meet the definition of nonqualified deferred compensation, the Company intends that such payments be made in a manner that complies with Section 409A of the Code and any guidance issued thereunder. The Company shall take all necessary steps to fulfill this intent, including, but not limited to, making any amendments to this Agreement as may be necessary to comply with the provisions of Section 409A of the Code. In addition, the following delay of payment will not in and of itself constitute a violation of the deferral or distribution requirements of Section 409A of the Code so long as such delay is based on the Company’s reasonable understanding that such payment would violate U.S. federal securities laws or other applicable laws; provided payment shall be made at the earliest date at which the Company reasonably anticipates making the payment will not cause such violation.

 

Payment or reimbursement of any expenses incurred by Executive pursuant to this Agreement, if any, other than reimbursements that would otherwise be exempt from income or the application of Code Section 409A, shall be made promptly and in no event later than December 31 of the year following the year in which such expenses were incurred, and the amount of such expenses eligible for payment or reimbursement, or in-kind benefits provided, in any year shall not affect the amount of such expenses eligible for payment or reimbursement, or in-kind benefits to be provided, in any other year, except for any limit on the amount of expenses that may be reimbursed under an arrangement described in Code Section 105(b). Additionally, any right to expense reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

 
 

 

For purposes of this Agreement, phrases like “termination of employment,” “termination of Executive’s employment,” “Executive terminates his employment”, and similar phrases shall be interpreted to comply with the requirements of Code Section 409A and the Treasury regulations and applicable guidance promulgated thereunder.

 

6.           Successors and Assigns .

 

(a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and any successor or assign shall perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term “ Company ” as used herein shall include any such successors and assigns. The term “ successors and assigns ” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise.

 

(b)          Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative.

 

7.           Venue . In the event of any controversy or claim between the Company or any of its affiliates and the Executive arising out of or relating to this Agreement that is not settled by mutual agreement or arbitration pursuant to  Section 18 , such controversy or claim (only to the extent arbitration is not required pursuant to  Section 18 ) shall be determined in a court of competent jurisdiction in Los Angeles County, California, or the federal court for Los Angeles County, California, and each party waives any claim to have the matter heard in any other local, state, or federal jurisdiction.

 

8.           Severability . If, for any reason, any provision of this Agreement is held invalid, illegal or unenforceable such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement not held so invalid, illegal or unenforceable, and each such other provision shall, to the full extent consistent with law, continue in full force and effect. In addition, if any provision of this Agreement shall be held invalid, illegal or unenforceable in part, such invalidity, illegality or unenforceability shall in no way affect the rest of such provision not held so invalid, illegal or unenforceable and the rest of such provision, together with all other provisions of this Agreement, shall, to the full extent consistent with law, continue in full force and effect. If any provision or part thereof shall be held invalid, illegal or unenforceable, to the fullest extent permitted by law, a provision or part thereof shall be substituted therefor that is valid, legal and enforceable.

 

 
 

 

9.           Headings . The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

10.          Withholding . All amounts paid pursuant to this Agreement shall be subject to withholding for taxes (federal, state, local or otherwise) to the extent required by applicable law.

 

11.          No Conflicts . Each of the Company and Executive represents and warrants to the other party that neither the execution, delivery and performance by the such person of this Agreement will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, any agreement to which such person is a party or which it or she may be subject.

 

12.          Notice . For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or three days after being sent by sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows:

 

     
To the Executive:   Joseph Segelman
    ________
    ________
   
To the Company:   Reign Sapphire Corporation
    9465 Wilshire Boulevard
    Beverly Hills, California 90212
    Attn: Chief Executive Officer

 

13.          Settlement of Claims . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive.

 

14.          Survivorship . Except as otherwise set forth in this Agreement, the respective rights and obligations of the Executive and the Company hereunder shall survive any termination of the Executive’s employment.

 

 
 

 

15.          Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company except for increases in the Base Salary, other compensation and benefits provided for in  Section 3 . No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

 

16.          Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware (without regard to principles of conflicts of law thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware).

 

17.          Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the employment of the Executive by the Company and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may be executed in one or more counterparts.

 

18.          Arbitration . All disputes or controversies arising in connection with this Agreement or the Executive's employment with the Company (whether based on contract or tort or upon any federal, state or local statute, including but not limited to claims asserted under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, any state Fair Employment Practices Act and/or the Americans with Disability Act) shall be submitted to JAMS/ENDISPUTE for resolution in arbitration. The arbitration shall be conducted in Los Angeles, California before a single arbitrator in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §l, et. seq. The arbitrator shall have the right to award to any party to such proceedings any right or remedy that is available under applicable law (including, without limitation, ordering the losing party to reimburse the reasonable legal fees and expenses incurred by the winning party with respect to such proceedings as may be provided by applicable law);  provided   that  if the arbitrator determines that the Executive has prevailed on at least one material issue in connection with such arbitration Executive shall be awarded reasonable attorney's fees and expenses from the Company. The resolution of any such dispute or controversy by the arbitrator appointed in accordance with the procedures of JAMS/ENDISPUTE shall be final and binding upon the parties hereto, subject to 9 U.S.C. §10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Pending the resolution of any claim under this Agreement, the Executive (and his beneficiaries) shall continue to receive all payments and benefits due under this Agreement, except to the extent that the arbitrator otherwise provides.

 

19.          Attorneys’ Fees . In the event of any action for the breach of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and expenses incurred in connection with such action.

 

[Remainder of page intentionally left blank. Signature page follows].

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.

 

  COMPANY:
   
  Reign Sapphire Corporation
  A Delaware corporation
     
  By:  
  Name: Joseph Segelman
  Title: Chief Executive Officer
   
  EXECUTIVE:
   
   
  Joseph Segelman

 

 
 

 

EXHIBIT A

FORM OF SHARE OPTION AGREEMENT

 

SHARE OPTION AGREEMENT

 

THIS SHARE OPTION AGREEMENT (this “ Agreement ”) is made and entered into as of the __ day of _____ 2015 (“ Grant Date ”), between Reign Sapphire Corporation, a corporation formed under the laws of the State of Delaware (the “ Company ”), and Joseph Segelman (“ Employee ”).

 

The Company and Employee desire to enter into this Agreement whereby the Company will grant Employee the options specified herein to acquire shares of the Company’s common stock. Defined terms used in this Agreement without definition will have the meanings ascribed thereto in the Company’s 2015 Incentive Equity Plan (the “ Plan ”), a copy of which is attached hereto as  Exhibit A . In the event a provision of this Agreement is inconsistent or conflicts with the provisions of the Plan, the provisions of this Agreement will govern and prevail.

 

The parties hereto agree as follows:

 

1.  Plan Acknowledgment . Each of the undersigned agree that this Agreement has been executed and delivered, and the share options have been granted hereunder, in connection with and as a part of the compensation and incentive arrangements between the Company and Employee and, except as otherwise specified herein, pursuant to each of the terms and conditions of the Plan.

 

2.  Options .

 

(a)  Option Grants . The Company hereby grants to Employee, pursuant to the Plan, an option (the “ Option ”) to purchase up to 10,000,000 shares of the Company’s common stock at an exercise price per share of $0.005 (the “ Option Price ”), which is not less than the fair market value of a share of the Company’s common stock on the Grant Date. The Option Price and the number of Option Shares issuable upon exercise of the Option will be equitably adjusted for any share split, share dividend, reclassification or recapitalization of the Company’s common stock which occurs subsequent to the date of this Agreement. The Option will expire on the close of business on the tenth anniversary of the date of this Agreement, subject to earlier expiration in connection with the termination of Employee’s employment, as provided in  Section 2(c)  below. The Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Code.

 

 
 

 

(b)  Exercisability . Except as otherwise provided for herein, 50% of the shares of common stock subject to the Option shall vest on the first anniversary of the Grant Date and the remaining 50% of the shares shall vest in twelve (12) equal installments on the first day of each calendar month following the first anniversary of the Grant Date beginning on _____ 1, 2016 and ending on _____ 1, 2017, provided that Employee is continuously employed by the Company or its Subsidiaries from the Grant Date through such applicable vesting date. Notwithstanding the foregoing, 100% of the shares of the Company’s common stock subject to the Option shall fully vest if the Company shall successfully sell all of the shares of its common stock included in the primary offering of such common stock by the by the Company pursuant to the registration statement on Form S-1 to be filed with the Securities and Exchange Commission within ninety (90) days of the Grant Date; provided, however, that the failure of the Company to sell of the shares shall not interfere with the regular vesting schedule in the previous sentence.

 

(c)  Certain Terminations of Employment . Notwithstanding anything in this Agreement or the Plan to the contrary, if Employee’s employment with the Company is terminated by the Company without Cause (as defined in that certain Employment Agreement by and between the Company and the Employee, dated the same date hereof (“ Employment Agreement ”)), then the number of shares of the Company’s common stock subject to the Option that would have vested if the Employee had remained continuously employed by the Company through the next six (6) calendar months immediately following the Termination Date (determined pursuant to  Section 2(b)  above) shall be deemed to be vested and, together with all other vested shares of common stock, shall not be forfeited upon such termination of employment.

 

(d)  Sale of the Company . Notwithstanding anything in the Plan to the contrary, 100% of the shares of the Company’s common stock subject to the Option shall fully vest upon the consummation of a Sale of the Company and may be exercised in connection with such Sale of the Company, if Employee’s employment with the Company or its subsidiaries has not terminated prior to the consummation of such Sale of the Company. Notwithstanding the foregoing, if Employee’s employment with the Company is terminated by the Company without Cause (as defined in the Employment Agreement) within three (3) months prior to the execution of a definitive agreement that results in the Sale of the Company contemplated by such Agreement, then 100% of the shares of common stock subject to the Option shall fully vest upon the consummation of a Sale of the Company and may be exercised in connection with such Sale of the Company.

 

(e)  Early Expiration of Options . Any portion of the Options granted hereunder that have not vested and become exercisable prior to the Termination Date (or that have not been deemed to have vested and become exercisable pursuant to Section 2(c)  above) will expire on the Termination Date and may not be exercised under any circumstance. Any portion of the Options granted hereunder that have vested and become exercisable prior to the Termination Date will expire on the earlier of (i) 30 days after the Termination Date (provided that such period shall be extended to (A) six (6) months after the Termination Date in the event of Employee’s termination due to death or “disability” (as defined in the Employment Agreement) or (B) two (2) years after the Termination Date in the event of Employee’s termination by the Company without Cause (as defined in the Employment Agreement) and (ii) the close of business on the tenth anniversary of the date of this Agreement. Notwithstanding any provision in this Agreement to the contrary, any portion of the Options granted hereunder which have not been exercised prior to or in connection with a Sale of the Company shall expire upon the consummation of any such transaction.

 

 
 

 

(f)  Procedure for Exercise . At any time after all or any portion of the Options granted hereunder have become exercisable with respect to any Option Shares and prior to the close of business on the tenth anniversary of the date of this Agreement (except as provided for in  Section 2(e)  above), Employee may exercise all or any portion of the Options granted hereunder with respect to Option Shares vested pursuant to  Section 2(b)  above by delivering written notice of exercise to the Company, together with (i) a written acknowledgment that Employee has read and has been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to Employee regarding the Company, and (ii) payment in full by delivery of a cashier’s, personal or certified check or wire transfer of immediately available funds to the Company in the amount equal to the number of Option Shares to be acquired multiplied by the applicable option exercise price.

 

(g)  Securities Laws Restrictions . Employee represents that when Employee exercises any portion of the Options he or she will be purchasing the Option Shares represented thereby for Employee’s own account and not on behalf of others. Employee understands and acknowledges that federal, state and foreign securities laws govern and restrict Employee’s right to offer, sell or otherwise dispose of any Option Shares unless Employee’s offer, sale or other disposition thereof is registered under the Securities Act and federal, state and foreign securities laws or, in the opinion of the Company’s counsel, such offer, sale or other disposition is exempt from registration thereunder. Employee agrees that he or she will not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement (or similar filing under applicable securities law) with the Securities and Exchange Commission or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other applicable securities law. Employee further understands that the certificates for any Option Shares which Employee purchases will bear the legend set forth in the Plan or such other legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws.

 

(h)  Limited Transferability of the Options . The Options granted hereunder are personal to Employee and are not transferable by Employee except pursuant to the laws of descent or distribution. Only Employee or his legal guardian or representative may exercise the Options granted hereunder.

 

(i)  Section 83(b) Election . Within 30 days after Employee has exercised any portion of the Options, in the event Employee is subject to United States federal income tax, Employee may make an effective election with the Internal Revenue Service under Section 83(b) of the Code relative to the Option Shares received by Employee pursuant to the exercise of such portion of the Options.

 

 
 

 

3.  Employee’s Representations . Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he or she is bound, (ii) except as has been expressly disclosed to the Company prior to the date of this Agreement, Employee is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company or one of its Subsidiaries) and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that he or she has consulted with (or has had an opportunity to consult with) independent legal counsel regarding his or her rights and obligations under this Agreement (including, without limitation, the Plan) and that he or she fully understands the terms and conditions contained herein and therein.

 

4.  Notices . Any notices required or permitted under this Agreement or the Plan will be delivered in accordance with the requirements of the Plan.

 

5.  Third Party Beneficiaries; Successors and Assigns . The parties hereto acknowledge and agree that the Investors are third party beneficiaries of this Agreement and the Plan. Except as otherwise provided herein, this Agreement and the Plan shall bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns.

 

6.  Complete Agreement . This Agreement and the Plan and the other documents referred to herein and therein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

7.  No Strict Construction . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

8.  Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

9.  Governing Law . This Agreement will be subject to the governing law provisions of the Plan as if fully set forth in this Agreement.

 

10.  Remedies . Each of the parties to this Agreement will be entitled to any of the remedies specified in the Plan.

 

 
 

 

11.  Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Board and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

IN WITNESS WHEREOF, the parties hereto have executed this Share Option Agreement as of the date first written above.

 

  Reign Sapphire Corporation
     
  By:  
    Joseph Segelman
  Its:

President and

Chief Executive Officer

   
   
  Joseph Segelman (“Employee”)

 

 

 

 

Exhibit 10.3

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (“ Agreement ”) is entered as of the 1 st day of April 2015 (“ Effective Date ”) by and between Reign Sapphire Corporation, a Delaware corporation (“ Company ”), and Chaya Segelman (“ Executive ”).

 

WHEREAS , the Board of Directors of the Company (“ Board ”) has determined that it is in the best interest of the Company to secure the continuing services and employment of the Executive for the period provided in this Agreement and the Executive is willing to render such services on the terms and conditions set forth in this Agreement.

 

NOW, THEREFORE , in consideration of the mutual covenants herein contained, the Company and the Executive hereby agree as follows:

 

1.           Term . The initial term (“ Initial Term ”) of employment under this Agreement shall commence and this Agreement shall be effective as of the Effective Date and shall continue for a period ending on December 31, 2018, unless sooner terminated in accordance with the terms hereof. The Initial Term shall be automatically extended for additional one-year periods (each such year an “ Extended Term ”) on the same terms and conditions set forth in this Agreement, unless either party provides notice of her or its intention not to extend this Agreement at least ninety (90) days prior to the expiration of the Initial Term or, if previously extended, any Extended Term. The Initial Term and any Extended Term may be collectively referred to in this Agreement as the “ Term .”

 

2.             Employment Duties .

 

(a)           Position . Commencing upon the Effective Date and continuing through the period of the Executive’s employment by the Company, the Executive shall serve as the Secretary and Head of Operations of the Company and shall have the duties, responsibilities and authority established by the Board. The Executive shall report to the Chief Executive Officer of the Company.

 

(b)           Obligations . The Executive agrees to devote her full business time and attention to the business and affairs of the Company. The foregoing, however, shall not preclude the Executive from serving on corporate, civic or charitable boards or committees or managing personal investments, so long as such activities do not interfere with the performance of the Executive’s responsibilities hereunder, or leave for vacation or personal leave permitted hereunder or illness.

 

(c)            Confidential Information and Inventions . As a condition of employment, the Executive shall, on or before the Effective Date, sign, deliver and abide by a Confidential Information and Invention Assignment Agreement in the form approved by the Board.

 

 
 

 

3.             Compensation and Benefits .

 

(a)           Base Salary . During the period of the Executive’s employment by the Company, the Executive shall receive an annual base salary of not less than $80,000 (“ Base Salary ”) payable in equal bi-weekly installments, less applicable withholdings. Each year, the Board (or the compensation committee of the Board, if any) shall review the Base Salary and other compensation of the Executive based upon performance and other factors deemed appropriate by the Board and make such increases as it deems fit. For purposes of this Agreement, the term “ Base Salary ” shall mean the amount of the Executive’s base salary established from time to time pursuant to this Section 3(a) .

 

(b)            Annual Performance Bonus . During the period of the Executive’s employment by the Company hereunder, the Executive shall receive each year an annual performance bonus (“ Annual Performance Bonus ”) based upon objective performance criteria set by the Board.

 

(c)            Employee Benefits . The Executive shall be entitled to the following benefits during the period of the Executive’s employment by the Company hereunder: (i) to the extent permitted by applicable law, the Executive shall be entitled to receive benefits and fringes (whether subsidized in part, or paid for in full by the Company) including, but not limited to, medical, dental and disability insurance, which the Company now or in the future generally offers to its executive officers; (ii) the Company will pay the entire amount of each monthly premium for full family coverage for the benefit of the Executive and the Executive’s family under the Company’s health and dental insurance plans in which the Executive and the Executive’s family members are eligible to participate; (iii) the Executive shall be eligible to participate in any of the Company’s savings, retirement, 401(k), deferred compensation, corporate owned life insurance, and other qualified and non-qualified plans sponsored by the Company; (iv) the Executive shall be entitled to participate in all cash incentive, equity incentive, savings and retirement plans, practices, policies, and programs applicable generally to other executives of the Company; and (v) the Executive shall be insured under the Company’s director and officer liability insurance and shall be provided with an indemnification agreement effective as of the Effective Date in the same form previously entered into with members of the Board. In addition, the Executive shall be entitled to perquisites on the same terms and conditions as such perquisites are made available to other executive officers of the Company.

 

(d)            Expenses . The Executive shall be entitled to receive prompt reimbursement of all expenses reasonably incurred by him in connection with the performance of her duties hereunder, in each case in accordance with policies established by the Board from time to time and upon receipt of appropriate documentation. Upon the Executive’s termination of employment (as provided in  Section 4 ), any outstanding reimbursement requests must be submitted promptly and payment shall occur thereafter but no later than December 31st of the calendar year following the calendar year in which such expenses were incurred.

 

 
 

 

(e)            Vacation . The Executive shall be entitled to four (4) weeks of annual vacation in accordance with the policies periodically established by the Board.

 

4.              Termination and Payments Upon Termination .

 

(a)            Death . The Executive’s employment hereunder shall terminate upon the Executive’s death.

 

(b)            Disability . Either the Executive or the Company shall be entitled to terminate the Executive’s employment for “Disability” by giving the other party a Notice of Termination (as defined below). For purposes of this Agreement, “ Disability ” shall mean (i) the Executive has, as determined by a doctor selected by the Executive and acceptable to the Company (such acceptance not to be unreasonably withheld), suffered a physical or mental illness or injury that has impaired the Executive’s ability to substantially perform the Executive’s full-time duties with the Company, with or without reasonable accommodation, for a period of one-hundred eighty (180) consecutive days and that qualifies the Executive for benefits under Employer’s group long-term disability plan, and (ii) the Executive has not substantially returned to full time employment before the Termination Date (as defined below) specified in the Notice of Termination.

 

(c)            Cause . The Company shall be entitled to terminate the Executive’s employment for Cause by giving the Executive a Notice of Termination. For purposes of this Agreement, “ Cause ” shall mean: (i) the Executive’s misappropriation or theft of the Company’s or any of its subsidiary’s funds or property, (ii) the Executive’s conviction or entering of a plea of  nolo contendere  of any fraud, misappropriation, embezzlement or similar act, felony or crime involving dishonesty or moral turpitude, (iii) the Executive’s material breach of this Agreement or failure to perform any of her duties owed to the Company, (iv) the Executive’s commission of any act involving willful malfeasance or gross negligence or the Executive’s failure to act involving material nonfeasance or (v) a material violation by the Executive of the code of conduct of the Company or its subsidiaries (to the extent such code of conduct has been provided to or made available to the Executive) or of any statutory or common law duty of loyalty to the Company or its subsidiaries,

 

The Executive’s employment with the Company shall not be terminated for Cause unless he has been given written notice by the Board of its intention to so terminate her employment (a “ Notice of Cause ”), such notice (i) to state in detail the particular act or acts or failure or failures to act that constitute the grounds on which the proposed termination for Cause is based and (ii) to be given within six months of the Board’s learning of such acts or failures to act. The Executive shall have 10 days after the date that the Notice of Cause is given in which to cure any breach of this Agreement or acts or failures to act, to the extent such cure is possible.

 

(d)            Without Cause . The Board may terminate the Executive’s employment hereunder, without Cause, at any time and for any reason or for no reason by giving the Executive a Notice of Termination (as defined below).

 

 
 

 

(e)            Voluntary Termination . The Executive may terminate her employment hereunder at any time and for any reason by giving the Company a Notice of Termination.

 

(f)            Notice of Termination . For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which indicates the specific termination provision in this Agreement relied upon and which sets forth in reasonable detail, if applicable, the facts and circumstances claimed to provide a basis (unless not required pursuant to  Section 4(d) ) for termination of the Executive’s employment under the provision so indicated. The Termination Date (as defined below) specified in such Notice of Termination shall be no less than two weeks from the date the Notice of Termination is given; provided, however, that (i) if the Executive’s employment is terminated by the Company due to Disability, the date specified in the Notice of Termination shall be at least thirty (30) days (but not more than ninety (90) days) from the date the Notice of Termination is given to the Executive and (ii) if the Executive terminates her employment in accordance with  Section 4(e)  of this Agreement, the date specified in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to the Company.

 

(g)            Termination Date . “ Termination Date ” shall mean the date of the termination of the Executive’s employment with the Company and specifically (i) in the case of the Executive’s death, her date of death; (ii) in the case of the expiration of the Term of this Agreement in accordance with  Section 1 , the date of such expiration; and (iii) in all other cases, the date specified in the Notice of Termination, as defined in  Section 4(f) .

 

5.              Compensation Upon Termination of Employment .

 

(a)            Compensation . If during the Term of this Agreement, the Executive’s employment under this Agreement is terminated (i) by the Company for Cause or (ii) by the Executive, the Company’s sole obligation hereunder shall be to pay the Executive the following amounts earned, accrued or owing hereunder but not paid as of the Termination Date (collectively, “ Accrued Compensation ”):

 

(i) Base Salary unpaid through the Termination Date;
(ii) all other compensation which has been earned, accrued or is owing, under the terms of the applicable plan, program or practice, to the Executive as of the Termination Date but not paid, including, without limitation, the Annual Performance Bonus and any incentive awards under any incentive or bonus plan;
(iii) any amounts which the Executive had previously deferred; and
(iv) reimbursement of any and all reasonable expenses incurred in connection with the Executive’s duties and responsibilities under this Agreement in accordance with policies established by the Board from time to time and upon receipt of appropriate documentation; and other or additional benefits and entitlements in accordance with applicable plans, programs and arrangements of the Company.

 

 
 

 

For the purposes of  Section 5(a)(ii) , to the extent that compensation has not been accrued under any incentive and bonus plan, the applicable metrics under each such plan shall be pro-rated so that such metrics and the measurement of the performance applicable to such metrics shall be calculated based on the number of days of the fiscal year in which the Executive was terminated prior to the Termination Date. The Accrued Compensation shall be paid in a single lump-sum cash payment within ten (10) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline. The Executive shall not be entitled to any other payment after payment in full of the Accrued Compensation, other than any payment required under any indemnification obligation of the Company and employee benefits to which the Executive is entitled under COBRA (as defined in Section 5(f)) , which obligations shall survive termination (collectively, “ Post-Termination Obligations ”).

 

(b)            Disability . If the Executive’s employment hereunder is terminated by either party by reason of the Executive’s Disability, the Company’s shall (i) pay the Executive the unpaid Accrued Compensation through the Termination Date within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline and (ii) cause to be accelerated and vested, effective as of the Termination Date, all equity compensation awarded to the Executive.

 

(c)            Death . If the Executive’s employment hereunder is terminated due to her death, the Company shall:

 

(i) pay the Executive’s estate or her beneficiaries (as the case may be) the unpaid Accrued Compensation through the Termination Date within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline
(ii) provide such assistance as is necessary to facilitate the payment of any life insurance proceeds provided for in  Section 3(e)  of this Agreement that may be payable to the Executive’s beneficiary or beneficiaries; and
(iii) cause to be accelerated and vested, effective as of the Termination Date, all equity compensation awarded to the Executive.

 

(d)            Termination by Company Without Cause . If during the Term of this Agreement, the Executive’s employment is terminated by the Company without Cause pursuant to  Section 4(d) , the Company’s shall pay the Executive the following amounts:

(i) the Accrued Compensation;
(ii) an amount equal to the product of (x) one-half (1/2) times the sum of (y) Executive’s then current annual Base Salary (such product referred to herein as the “ Severance Payment ”); and

 

 
 

 

(iii) the Post-Termination Obligations.

 

The Accrued Compensation and Severance Payment shall be paid in a single lump-sum cash payment within thirty (30) days following the Executive’s Termination Date, except that any portion thereof required to be paid sooner under applicable law shall be paid by the applicable deadline.

 

(e)            Determination of Base Salary . For purposes of this  Section 5 , Base Salary shall be determined by the Base Salary at the annualized rate in effect on the Termination Date.

 

(f)            Continuation of Employee Benefits . The Company shall, at its expense, provide to the Executive and her beneficiaries continued participation in all medical, dental, vision, prescription drug, hospitalization and life insurance coverages and in all other employee benefit plans, programs and arrangements in which the Executive was participating immediately prior to the Termination Date, on terms and conditions that are no less favorable than those that applied on the Termination Date, for a period of two years following the Termination Date, if the Executive’s employment is terminated by the Company other than for Cause; provided that, if the continued participation would reasonably give rise to any fines, penalties, or negative tax consequences to the Company or the Executive (including without limitation, under the Patient Protection and Affordable Care Act), as determined by the Company in good faith, the Company and the Executive shall, in good faith, discuss an alternative but mutually agreeable arrangement. In each case, benefits required pursuant to the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) will commence after the applicable period has been completed. Notwithstanding the foregoing, the Company’s obligation under this  Subsection 5(f)  shall be reduced to the extent that equivalent coverages and benefits (determined on a coverage-by-coverage and benefit-by-benefit basis) are provided under the plans, programs or arrangements of a subsequent employer.

 

(g)            No Mitigation: No Offset . In the event of any termination of her employment hereunder, the Executive shall not be required to mitigate the amount of any payment or benefit provided for in this Agreement by seeking other employment or otherwise and, except as set forth expressly under the proviso in  Subsection 5(f) , no such payment or benefit shall be offset or reduced by the amount of any compensation or benefit provided to the Executive in any subsequent employment.

 

 
 

 

(h)            Section 409A . It is the intent of this Agreement that no payment to the Executive shall result in nonqualified deferred compensation within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), and the Treasury Regulations and applicable guidance promulgated thereunder. However, in the event that all, or a portion, of the payments set forth in this Agreement meet the definition of nonqualified deferred compensation, the Company intends that such payments be made in a manner that complies with Section 409A of the Code and any guidance issued thereunder. The Company shall take all necessary steps to fulfill this intent, including, but not limited to, making any amendments to this Agreement as may be necessary to comply with the provisions of Section 409A of the Code. In addition, the following delay of payment will not in and of itself constitute a violation of the deferral or distribution requirements of Section 409A of the Code so long as such delay is based on the Company’s reasonable understanding that such payment would violate U.S. federal securities laws or other applicable laws; provided payment shall be made at the earliest date at which the Company reasonably anticipates making the payment will not cause such violation.

 

Payment or reimbursement of any expenses incurred by Executive pursuant to this Agreement, if any, other than reimbursements that would otherwise be exempt from income or the application of Code Section 409A, shall be made promptly and in no event later than December 31 of the year following the year in which such expenses were incurred, and the amount of such expenses eligible for payment or reimbursement, or in-kind benefits provided, in any year shall not affect the amount of such expenses eligible for payment or reimbursement, or in-kind benefits to be provided, in any other year, except for any limit on the amount of expenses that may be reimbursed under an arrangement described in Code Section 105(b). Additionally, any right to expense reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

For purposes of this Agreement, phrases like “termination of employment,” “termination of Executive’s employment,” “Executive terminates her employment”, and similar phrases shall be interpreted to comply with the requirements of Code Section 409A and the Treasury regulations and applicable guidance promulgated thereunder.

 

6.              Successors and Assigns .

 

(a)           This Agreement shall be binding upon and shall inure to the benefit of the Company, its successors and assigns and any successor or assign shall perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place. The term “ Company ” as used herein shall include any such successors and assigns. The term “ successors and assigns ” as used herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets and business of the Company (including this Agreement) whether by operation of law or otherwise.

 

(b)          Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, her beneficiaries or legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal personal representative.

 

7.            Venue . In the event of any controversy or claim between the Company or any of its affiliates and the Executive arising out of or relating to this Agreement that is not settled by mutual agreement or arbitration pursuant to  Section 18 , such controversy or claim (only to the extent arbitration is not required pursuant to  Section 18 ) shall be determined in a court of competent jurisdiction in Los Angeles County, California, or the federal court for Los Angeles County, California, and each party waives any claim to have the matter heard in any other local, state, or federal jurisdiction.

 

 
 

 

8.             Severability . If, for any reason, any provision of this Agreement is held invalid, illegal or unenforceable such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement not held so invalid, illegal or unenforceable, and each such other provision shall, to the full extent consistent with law, continue in full force and effect. In addition, if any provision of this Agreement shall be held invalid, illegal or unenforceable in part, such invalidity, illegality or unenforceability shall in no way affect the rest of such provision not held so invalid, illegal or unenforceable and the rest of such provision, together with all other provisions of this Agreement, shall, to the full extent consistent with law, continue in full force and effect. If any provision or part thereof shall be held invalid, illegal or unenforceable, to the fullest extent permitted by law, a provision or part thereof shall be substituted therefor that is valid, legal and enforceable.

 

9.              Headings . The headings of sections are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.

 

10.            Withholding . All amounts paid pursuant to this Agreement shall be subject to withholding for taxes (federal, state, local or otherwise) to the extent required by applicable law.

 

11.             No Conflicts . Each of the Company and Executive represents and warrants to the other party that neither the execution, delivery and performance by the such person of this Agreement will conflict or be inconsistent with or result in any breach of any of the terms, covenants, conditions or provisions of, any agreement to which such person is a party or which it or she may be subject.

 

12.            Notice . For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or three days after being sent by sent by registered or certified mail, return receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows:

 

To the Executive:   Chaya Segelman
    ________
    ________
   
To the Company:   Reign Sapphire Corporation
    9465 Wilshire Boulevard
    Beverly Hills, California 90212
    Attn: Chief Executive Officer

 

 
 

 

13.            Settlement of Claims . The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Executive.

 

14.            Survivorship . Except as otherwise set forth in this Agreement, the respective rights and obligations of the Executive and the Company hereunder shall survive any termination of the Executive’s employment.

 

15.            Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and the Company except for increases in the Base Salary, other compensation and benefits provided for in  Section 3 . No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.

 

16.            Governing Law . This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware (without regard to principles of conflicts of law thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware).

 

17.            Entire Agreement . This Agreement constitutes the entire agreement between the parties hereto with respect to the employment of the Executive by the Company and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may be executed in one or more counterparts.

 

 
 

 

18.            Arbitration . All disputes or controversies arising in connection with this Agreement or the Executive's employment with the Company (whether based on contract or tort or upon any federal, state or local statute, including but not limited to claims asserted under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, as amended, any state Fair Employment Practices Act and/or the Americans with Disability Act) shall be submitted to JAMS/ENDISPUTE for resolution in arbitration. The arbitration shall be conducted in Los Angeles, California before a single arbitrator in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. §l, et. seq. The arbitrator shall have the right to award to any party to such proceedings any right or remedy that is available under applicable law (including, without limitation, ordering the losing party to reimburse the reasonable legal fees and expenses incurred by the winning party with respect to such proceedings as may be provided by applicable law);  provided   that  if the arbitrator determines that the Executive has prevailed on at least one material issue in connection with such arbitration Executive shall be awarded reasonable attorney's fees and expenses from the Company. The resolution of any such dispute or controversy by the arbitrator appointed in accordance with the procedures of JAMS/ENDISPUTE shall be final and binding upon the parties hereto, subject to 9 U.S.C. §10. Each party shall have the right to have the award made the judgment of a court of competent jurisdiction. Pending the resolution of any claim under this Agreement, the Executive (and her beneficiaries) shall continue to receive all payments and benefits due under this Agreement, except to the extent that the arbitrator otherwise provides.

 

19.            Attorneys’ Fees . In the event of any action for the breach of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs and expenses incurred in connection with such action.

 

[Remainder of page intentionally left blank. Signature page follows].

 

 
 

 

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Executive has executed this Agreement as of the day and year first above written.

 

  COMPANY:
   
  Reign Sapphire Corporation
  A Delaware corporation
     
  By:  
  Name: Joseph Segelman
  Title: Chief Executive Officer
   
  EXECUTIVE:
   
   
  Chaya Segelman

 

 

 

Exhibit 10.4

 

REIGN SAPPHIRE CORPORATION

2015 EQUITY INCENTIVE PLAN

 

SECTION 1. PURPOSE

 

The purpose of the Reign Sapphire Corporation 2015 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company's stockholders.

 

SECTION 2. DEFINITIONS

Certain terms used in the Plan have the meanings set forth in Appendix A.

 

 

SECTION 3. ADMINISTRATION

 

3.1 Administration of the Plan

 

The Plan shall be administered by the Board. All references in the Plan to the " Plan Administrator " shall be to the Board.

 

3.2 Administration and Interpretation by Plan Administrator

 

(a)            Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have full power and exclusive authority, to the extent permitted by applicable law and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of Common Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any instrument evidencing an Award or notice or agreement entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company's employees as it so determines; and (xi) make any other determination and take any other action that the Plan Administrator deems necessary or desirable for administration of the Plan.

 

 
 

 

(b)            The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's reduction in hours of employment or service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Board, whose determination shall be final.

 

(c)            Decisions of the Plan Administrator shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Plan Administrator may determine its actions.

 

SECTION 4. SHARES SUBJECT TO THE PLAN

 

4.1 Authorized Number of Shares

 

Subject to adjustment from time to time as provided in Section 14.1, a maximum of 10,000,000 (Ten Million) shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

 

4.2 Share Usage

 

(a)            Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award or (ii) covered by an Award that is settled in cash or in a manner such that some or all of the shares covered by the Award are not issued shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.

 

(b)            The Plan Administrator shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

 

(c)            Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Substitute Awards under the Plan. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator.

 

 
 

 

(d)            Notwithstanding the foregoing, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 14.1.

 

SECTION 5. ELIGIBILITY

 

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Plan Administrator from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.

 

SECTION 6. AWARDS

 

6.1 Form, Grant and Settlement of Awards

 

The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone, in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine.

 

6.2 Evidence of Awards

 

Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.

 

6.3 Deferrals

 

The Plan Administrator may permit or require a Participant to defer receipt of the payment of any Award if and to the extent set forth in the notice or agreement evidencing the Award at the time of grant. If any such deferral election is permitted or required, the Plan Administrator, in its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits to deferred stock unit equivalents; provided, however, that the terms of any deferrals under this Section 6.3 shall comply with all applicable law, rules and regulations, including, without limitation, Section 409A of the Code.

 

 
 

 

6.4 Dividends and Distributions

 

Participants may, if and to the extent the Plan Administrator so determines and sets for in the notice or agreement evidencing the Award at the time of grant, be credited with dividends paid with respect to shares underlying an Award or dividend equivalents in a manner determined by the Plan Administrator in its sole discretion. The Plan Administrator may apply any restrictions to the dividends or dividend equivalents that the Plan Administrator deems appropriate. The Plan Administrator, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units.

 

SECTION 7. OPTIONS

 

7.1 Grant of Options

 

The Plan Administrator may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.

 

7.2 Option Exercise Price

 

The exercise price for shares purchased under an Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date as determined by the Board, but shall not be less than the minimum exercise price required by Section 8.3 with respect to Incentive Stock Options, except in the case of Substitute Awards.

 

7.3 Term of Options

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option (the " Option Term ") shall be ten years from the Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.

 

7.4 Exercise of Options

 

The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:

 

Period of Participant's Continuous
Employment or Service With the
Company or Its Related Companies
From the Vesting Commencement Date
  Portion of Total Option That
Is Vested and Exercisable
     
Annually   Equal Installments
     
After 3 years   100%

 

 
 

 

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Sections 7.5 and 12. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.

 

7.5 Payment of Exercise Price

 

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase, which forms may include:

 

(a)            cash;

 

(b)            check or wire transfer;

 

(c)            having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option and, if applicable, shares equal to or less than the withholding required by Section 12 hereof;

 

(d)            tendering (either actually or, if and as so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that on the day prior to the exercise date have a Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

 

(e)            if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or

 

(f)            such other consideration as the Plan Administrator may permit.

 

 
 

 

In addition, to assist a Participant (including directors and executive officers) in acquiring shares of Common Stock pursuant to an Option granted under the Plan, the Plan Administrator, in its sole discretion and to the extent permitted by applicable law, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Option, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party. Such notes or loans must be full recourse to the extent necessary to avoid adverse accounting charges to the Company's earnings for financial reporting purposes. Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate and terms of and security for repayment.

 

7.6 Effect of Termination of Service

 

The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:

 

(a)            Any portion of an Option that is not vested and exercisable on the date of a Participant's Termination of Service shall expire on such date.

 

(b)            Any portion of an Option that is vested and exercisable on the date of a Participant's Termination of Service shall expire on the earliest to occur of:

 

(i)             if the Participant's Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;

 

(ii)            if the Participant's Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and

 

(iii)           the Option Expiration Date.

  

Notwithstanding the foregoing, if a Participant dies after the Participant's Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Plan Administrator determines otherwise.

 

Notwithstanding the foregoing, to the extent required by applicable law, unless employment or services are terminated for Cause, the right to exercise an Option in the event of Termination of Service, to the extent that the Participant is otherwise entitled to exercise an Option on the date of Termination of Service, shall be

 

a.            at least six months from the date of a Participant's Termination of Service if termination was caused by death or Disability; and

 

 
 

 

b.            at least 30 days from the date of a Participant's Termination of Service if termination was caused by other than death or Disability;

 

c.            but in no event later than the Option Expiration Date.

 

Also notwithstanding the foregoing, in case a Participant's Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant's employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant's rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant's Termination of Service, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.

 

(c)            A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company shall not be considered a Termination of Service for purposes of this Section 7.6.

 

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

 

Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following:

 

8.1 Dollar Limitation

 

To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant's Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.

 

8.2 Eligible Employees

 

Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

 

 
 

 

8.3 Exercise Price

 

The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date and, in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a " Ten Percent Stockholder "), shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

 

8.4 Option Term

 

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the Option Term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, shall not exceed five years.

 

8.5 Exercisability

 

An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant's Termination of Service if termination was for reasons other than death or Disability, (b) more than one year after the date of a Participant's Termination of Service if termination was by reason of Disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant's reemployment rights are guaranteed by statute or contract.

 

8.6 Taxation of Incentive Stock Options

 

In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.

 

8.7 Code Definitions

 

For the purposes of this Section 8, "disability," "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code.

 

 
 

 

8.8 Promissory Notes

 

The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes.

 

SECTION 9. STOCK APPRECIATION RIGHTS

 

9.1 Grant of Stock Appreciation Rights

 

The Plan Administrator may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Plan Administrator shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone (" freestanding "). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Plan Administrator determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

 

9.2 Payment of SAR Amount

 

Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock for the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Plan Administrator as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Plan Administrator in its sole discretion.

 

9.3 Waiver of Restrictions

 

Subject to Section 17.3, the Plan Administrator, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

 

 
 

 

SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS

 

10.1 Grant of Stock Awards, Restricted Stock and Stock Units

 

The Plan Administrator may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Plan Administrator shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

 

10.2 Vesting of Restricted Stock and Stock Units

 

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Plan Administrator, and subject to the provisions of Section 12, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become transferable by the Participant subject to the terms and conditions of the Plan, the instrument evidencing the Award, and applicable securities laws, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.

 

10.3 Waiver of Restrictions

 

Subject to Section 17.3, the Plan Administrator, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

 

SECTION 11. OTHER STOCK OR CASH-BASED AWARDS

 

Subject to the terms of the Plan and such other terms and conditions as the Plan Administrator deems appropriate, the Plan Administrator may grant other incentives payable in cash or in shares of Common Stock under the Plan as it determines.

 

SECTION 12. WITHHOLDING

 

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award (" tax withholding obligations ") and (b) any amounts due from the Participant to the Company or to any Related Company (" other obligations "). The Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

 

 
 

 

The Plan Administrator may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld or tendered may not exceed the employer's minimum required tax withholding rate.

 

SECTION 13. ASSIGNABILITY

 

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit transfer to a revocable trust or as otherwise permitted by Rule 701 of the Securities Act, subject to such terms and conditions as the Plan Administrator shall specify.

 

SECTION 14. ADJUSTMENTS

 

14.1 Adjustment of Shares

 

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or any other company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2(d); and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.

 

 
 

 

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 14.1 but shall be governed by Sections 14.2 and 14.3, respectively.

 

14.2 Dissolution or Liquidation

 

To the extent not previously exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Options, Stock Appreciation Rights and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

 

14.3 Company Transaction

 

14.3.1 Effect of a Company Transaction

 

Notwithstanding any other provision of the Plan to the contrary, unless the Plan Administrator shall determine otherwise with respect to a particular Award in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Company Transaction that is not a Related Party Transaction, all outstanding Awards shall become fully vested and exercisable or payable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Company Transaction, and then terminate upon effectiveness of the Company Transaction, unless such Awards are assumed or substituted for by the Successor Company. Notwithstanding the foregoing, with respect to outstanding Options or Stock Appreciation Rights, the Plan Administrator, in its sole discretion, may instead provide that such Awards shall terminate upon consummation of such Company Transaction and that each such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (a) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options or SARs (either to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Plan Administrator in its sole discretion) exceeds (b) the respective aggregate exercise price for such Options or grant price for such SARs. If and to the extent the Successor Company assumes or substitutes outstanding Awards, the vesting and exercisability or payment provisions applicable to such Awards shall remain in full effect and continue with respect to the Awards or any awards that may be issued in exchange or in substitution for such Awards, and the forfeiture provisions applicable to Restricted Stock shall not lapse, and all such restrictions shall continue with respect to any shares of the Successor Company or other consideration that may be issued in exchange or in substitution for such Restricted Stock.

 

 
 

 

14.3.2 Assumption or Substitution

 

For the purposes of this Section 14.3, an Award shall be considered assumed or substituted for if following the Company Transaction, an option or right confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash, or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator, and its determination shall be conclusive and binding.

 

14.4 Further Adjustment of Awards

 

Subject to Sections 14.2 and 14.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

 

14.5 No Limitations

 

The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

 

 
 

 

14.6 Fractional Shares

 

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

 

14.7 Section 409A of the Code

 

Notwithstanding anything in this Plan to the contrary, (a) any adjustments made pursuant to this Section 14 to Awards that are considered "deferred compensation" within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (b) any adjustments made pursuant to Section 14 to Awards that are not considered "deferred compensation" subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code; and (c) in any event, the Plan Administrator shall not have the authority to make any adjustments pursuant to Section 14 to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the time of grant to be subject thereto.

 

SECTION 15. FIRST REFUSAL RIGHTS

 

15.1 First Refusal Rights

 

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Company shall have the right of first refusal with respect to any proposed sale or other disposition by a Participant of any shares of Common Stock issued pursuant to an Award. Such right of first refusal shall be exercisable in accordance with the terms and conditions established by the Plan Administrator and set forth in the agreement evidencing the Participant's receipt of the shares.

 

15.2 General

 

The Company's first refusal rights under this Section 15 are assignable by the Company at any time.

 

SECTION 16. MARKET STANDOFF

 

In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriter as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule 2711). The limitations of this Section 16 shall in all events terminate two years after the effective date of the Company's initial public offering.

 

 
 

 

In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding Common Stock effected as a class without the Company's receipt of consideration, any new, substituted or additional securities distributed with respect to the shares issued under the Plan shall be immediately subject to the provisions of this Section 16, to the same extent the shares issued under the Plan are at such time covered by such provisions.

 

In order to enforce the limitations of this Section 16, the Company may impose stop-transfer instructions with respect to the purchased shares until the end of the applicable standoff period.

 

SECTION 17. AMENDMENT AND TERMINATION

 

17.1 Amendment, Suspension or Termination

 

The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan. Subject to Section 17.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.

 

17.2 Term of the Plan

 

The Plan shall terminate upon the earlier of (a) ten years after the adoption of the Plan by the Board and (b) the approval of the Plan by the stockholders.  After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions.

 

17.3 Consent of Participant

 

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 14 shall not be subject to these restrictions.

 

 
 

 

Notwithstanding any provision contained in the Plan to the contrary, the Board shall have broad authority to amend the Plan or any outstanding Award without the consent of a Participant to the extent the Board deems necessary or advisable to (a) comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules and other applicable law, rules and regulations or (b) to ensure that an Award is not subject to additional taxes under Section 409A of the Code.

 

SECTION 18. GENERAL

 

18.1 No Individual Rights

 

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

 

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.

 

18.2 Issuance of Shares

 

Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

 

The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.

 

As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

 

 
 

 

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

 

18.3 Indemnification

 

Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. Notwithstanding the prior sentence, the indemnification provisions of this Section 18.3 shall not apply if such loss, cost, liability or expense is a result of such person's own willful misconduct.

 

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificateof incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.

 

18.4 No Rights as a Stockholder

 

Unless otherwise provided by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement, no Option, Stock Appreciation Right or Stock Unit shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

 

18.5 Compliance with Laws and Regulations

 

In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code.

 

 
 

 

Any Award granted pursuant to the Plan is intended to comply with the requirements of Section 409A of the Code, including any applicable regulations and guidance issued thereunder, and including transition guidance, to the extent Section 409A of the Code is applicable thereto and the terms of the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with this intention to the extent the Company deems necessary to comply with Section 409A of the Code and any official guidance issued thereunder. Notwithstanding any other provision in the Plan, the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A of the Code; provided, however, that the Company makes no representations that the Awards shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan. Also notwithstanding the foregoing, if at the time of a scheduled vesting date for an Award granted under the Plan that is subject to Section 409A of the Code the Participant is a “specified employee” of the Company within the meaning of that term under Section 409A of the Code and as determined by the Company, and payment would be treated as a payment made on “separation from service” within the meaning of that term under Section 409A of the Code, then, if such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A of the Code, the payment shall be delayed until the date which is six months after the date of such separation from service or, if earlier, the date of the Participant's death.

 

18.6 Participants in Other Countries or Jurisdictions

 

Without amending the Plan, the Plan Administrator may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan, which may, in the judgment of the Plan Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.

 

18.7 No Trust or Fund

 

The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

 

 
 

 

18.8 Successors

 

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

 

18.9 Severability

 

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

 

18.10 Choice of Law and Venue

 

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of California without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of California.

 

18.11 Legal Requirements

 

The granting of Awards and the issuance of shares of Common Stock under the Plan is subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

SECTION 19. EFFECTIVE DATE

 

The effective date (the " Effective Date ") is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options. To the extent required under applicable law, any Award exercised before the stockholders of the Company approve the Plan shall be rescinded if the stockholders of the Company do not approve the Plan by the later of (a) within 12 months before or after the date on which the Board adopts the Plan and (b) prior to or within 12 months of the date on which any Award under the Plan is granted in California.

 

 
 

 

PLAN ADOPTION
SUMMARY PAGE

  

Date of
Board Action
  Action   Date of
Stockholder
Approval
May 1, 2015   Initial Plan Adoption   May 1, 2015

 

 
 

 

APPENDIX A

 

" Acquired Entity " means any entity acquired by the Company or a Related Company or with which the Company or a Related Company merges or combines.

 

" Acquisition Price " means the fair market value of the securities, cash or other property, or any combination thereof, receivable upon consummation of a Company Transaction in respect of a share of Common Stock.

 

" Award " means any Option, Stock Appreciation Right, Stock Award, Restricted Stock, Stock Unit or cash-based award or other incentive payable in cash or in shares of Common Stock, as may be designated by the Plan Administrator from time to time.

 

" Board " means the Board of Directors of the Company.

 

" Cause ," unless otherwise defined in the instrument evidencing an Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure of confidential information or trade secrets, or conduct prohibited by law (except minor violations), in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, whose determination shall be conclusive and binding.

 

" Code " means the Internal Revenue Code of 1986, as amended from time to time.

 

" Common Stock " means the common stock, par value $0.0001 per share, of the Company.

 

" Company " means Reign Sapphire Corporation, a Delaware corporation.

 

" Company Transaction ," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means consummation of:

 

(a)        a merger or consolidation of the Company with or into any other company or other entity,

 

(b)        a sale in one transaction or a series of transactions undertaken with a common purpose of all of the Company's outstanding voting securities, or

 

(c)        a sale, lease, exchange or other transfer in one transaction or a series of related transactions undertaken with a common purpose of all or substantially all of the Company's assets.

 

Where a series of transactions undertaken with a common purpose is deemed to be a Company Transaction, the date of such Company Transaction shall be the date on which the last of such transactions is consummated.

 

 
 

 

" Disability ," unless otherwise defined by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means a mental or physical impairment of the Participant that is expected to result in death or that has lasted or is expected to last for a continuous period of 12 months or more and that causes the Participant to be unable to perform his or her material duties for the Company or a Related Company and to be engaged in any substantial gainful activity, in each case as determined by the Company's chief human resources officer or other person performing that function or, in the case of directors and executive officers, the Board, each of whose determination shall be conclusive and binding.

 

" Effective Date " has the meaning set forth in Section 19.

 

" Eligible Person " means any person eligible to receive an Award as set forth in Section 5.

 

" Exchange Act " means the Securities Exchange Act of 1934, as amended from time to time.

 

" Fair Market Value " means the per share fair market value of the Common Stock as established in good faith by the Plan Administrator or, if the Common Stock is publicly traded, the average of the high and low trading prices for the Common Stock on any given date during regular trading, or if not trading on that date, such price on the last preceding date on which the Common Stock was traded, unless determined otherwise by the Plan Administrator using such methods or procedures as it may establish.

 

" Grant Date "means the later of (a) the date on which the Plan Administrator completes the corporate action authorizing the grant of an Award or such later date specified by the Plan Administrator and (b) the date on which all conditions precedent to an Award have been satisfied, provided that conditions to the exercisability or vesting of Awards shall not defer the Grant Date.

 

" Incentive Stock Option "means an Option granted with the intention that it qualify as an "incentive stock option" as that term is defined for purposes of Section 422 of the Code or any successor provision.

 

" Nonqualified Stock Option "means an Option other than an Incentive Stock Option.

 

" Option "means a right to purchase Common Stock granted under Section 7.

 

" Option Expiration Date " means the last day of the maximum term of the Option.

 

" Option Term " means the maximum term of an Option as set forth in Section 7.3.

 

" Participant " means any Eligible Person to whom an Award is granted.

 

" Plan " means the Reign Sapphire Corporation 2015 Equity Incentive Plan.

 

" Plan Administrator " has the meaning set forth in Section 3.1.

 

 
 

 

" Related Company " means any entity that, directly or indirectly, is in control of, is controlled by or is under common control with the Company.

 

" Related Party Transaction " means (a) a merger or consolidation of the Company in which the holders of the outstanding voting securities of the Company immediately prior to the merger or consolidation hold at least a majority of the outstanding voting securities of the Successor Company immediately after the merger or consolidation; (b) a sale, lease, exchange or other transfer of all or substantially all of the Company's assets to a majority-owned subsidiary company; or (c) a transaction undertaken for the principal purpose of restructuring the capital of the Company, including, but not limited to, reincorporating the Company in a different jurisdiction, converting the Company to a limited liability company or creating a holding company.

 

" Restricted Stock " means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are subject to restrictions prescribed by the Plan Administrator.

 

" Retirement ," unless otherwise defined in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, means "retirement" as defined for purposes of the Plan by the Plan Administrator or the Company's chief human resources officer or other person performing that function or, if not so defined, means Termination of Service on or after the date the Participant reaches "normal retirement age," as that term is defined in Section 411(a)(8) of the Code.

 

" Securities Act " means the Securities Act of 1933, as amended from time to time.

 

" Stock Appreciation Right " or " SAR " means a right granted under Section 9.1 to receive the excess of the Fair Market Value of a specified number of shares of Common Stock over the grant price.

 

" Stock Award " means an Award of shares of Common Stock granted under Section 10, the rights of ownership of which are not subject to restrictions prescribed by the Plan Administrator.

 

" Stock Unit " means an Award denominated in units of Common Stock granted under Section 10.

 

" Substitute Awards " means Awards granted or shares of Common Stock issued by the Company in substitution or exchange for, awards previously granted by an Acquired Entity.

 

" Successor Company " means the surviving company, the successor company, the acquiring company or its parent, as applicable, in connection with a Company Transaction.

 

 
 

 

" Termination of Service " means a termination of employment or service relationship with the Company or a Related Company for any reason, whether voluntary or involuntary, including by reason of death, Disability or Retirement. Any question as to whether and when there has been a Termination of Service for the purposes of an Award and the cause of such Termination of Service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors and executive officers, by the Board, whose determination shall be conclusive and binding. Transfer of a Participant's employment or service relationship between the Company and any Related Company shall not be considered a Termination of Service for purposes of an Award. Unless the Board determines otherwise, a Termination of Service shall be deemed to occur if the Participant's employment or service relationship is with an entity that has ceased to be a Related Company.

 

" Vesting Commencement Date " means the Grant Date or such other date selected by the Plan Administrator as the date from which an Award begins to vest.

 

 

 

Exhibit 10.5

 

SHARE OPTION AGREEMENT

 

 

THIS SHARE OPTION AGREEMENT (this “ Agreement ”) is made and entered into as of the 1 st day of May 2015 (“ Grant Date ”), between Reign Sapphire Corporation, a corporation formed under the laws of the State of Delaware (the “ Company ”), and Joseph Segelman (“ Employee ”).

 

The Company and Employee desire to enter into this Agreement whereby the Company will grant Employee the options specified herein to acquire shares of the Company’s common stock. Defined terms used in this Agreement without definition will have the meanings ascribed thereto in the Company’s 2015 Incentive Equity Plan (the “ Plan ”), a copy of which is attached hereto as  Exhibit A . In the event a provision of this Agreement is inconsistent or conflicts with the provisions of the Plan, the provisions of this Agreement will govern and prevail.

 

The parties hereto agree as follows:

 

1.  Plan Acknowledgment . Each of the undersigned agree that this Agreement has been executed and delivered, and the share options have been granted hereunder, in connection with and as a part of the compensation and incentive arrangements between the Company and Employee and, except as otherwise specified herein, pursuant to each of the terms and conditions of the Plan.

 

2.  Options .

 

(a)  Option Grants . The Company hereby grants to Employee, pursuant to the Plan, an option (the “ Option ”) to purchase up to 10,000,000 shares of the Company’s common stock at an exercise price per share of $0.005 (the “ Option Price ”), which is not less than the fair market value of a share of the Company’s common stock on the Grant Date. The Option Price and the number of Option Shares issuable upon exercise of the Option will be equitably adjusted for any share split, share dividend, reclassification or recapitalization of the Company’s common stock which occurs subsequent to the date of this Agreement. The Option will expire on the close of business on the tenth anniversary of the date of this Agreement, subject to earlier expiration in connection with the termination of Employee’s employment, as provided in  Section 2(c)  below. The Option is not intended to be an “incentive stock option” within the meaning of Section 422 of the Code.

 

(b)  Exercisability . Except as otherwise provided for herein, 50% of the shares of common stock subject to the Option shall vest on the first anniversary of the Grant Date and the remaining 50% of the shares shall vest in twelve (12) equal installments on the first day of each calendar month following the first anniversary of the Grant Date beginning on June 1, 2016 and ending on June 1, 2017, provided that Employee is continuously employed by the Company or its Subsidiaries from the Grant Date through such applicable vesting date. Notwithstanding the foregoing, 100% of the shares of the Company’s common stock subject to the Option shall fully vest if the Company shall successfully sell all of the shares of its common stock included in the primary offering of such common stock by the by the Company pursuant to the registration statement on Form S-1 to be filed with the Securities and Exchange Commission within ninety (90) days of the Grant Date; provided, however, that the failure of the Company to sell of the shares shall not interfere with the regular vesting schedule in the previous sentence.

 

 
 

 

(c)  Certain Terminations of Employment . Notwithstanding anything in this Agreement or the Plan to the contrary, if Employee’s employment with the Company is terminated by the Company without Cause (as defined in that certain Employment Agreement by and between the Company and the Employee, dated the same date hereof (“ Employment Agreement ”)), then the number of shares of the Company’s common stock subject to the Option that would have vested if the Employee had remained continuously employed by the Company through the next six (6) calendar months immediately following the Termination Date (determined pursuant to  Section 2(b)  above) shall be deemed to be vested and, together with all other vested shares of common stock, shall not be forfeited upon such termination of employment.

 

(d)  Sale of the Company . Notwithstanding anything in the Plan to the contrary, 100% of the shares of the Company’s common stock subject to the Option shall fully vest upon the consummation of a Sale of the Company and may be exercised in connection with such Sale of the Company, if Employee’s employment with the Company or its subsidiaries has not terminated prior to the consummation of such Sale of the Company. Notwithstanding the foregoing, if Employee’s employment with the Company is terminated by the Company without Cause (as defined in the Employment Agreement) within three (3) months prior to the execution of a definitive agreement that results in the Sale of the Company contemplated by such Agreement, then 100% of the shares of common stock subject to the Option shall fully vest upon the consummation of a Sale of the Company and may be exercised in connection with such Sale of the Company.

 

(e)  Early Expiration of Options . Any portion of the Options granted hereunder that have not vested and become exercisable prior to the Termination Date (or that have not been deemed to have vested and become exercisable pursuant to Section 2(c)  above) will expire on the Termination Date and may not be exercised under any circumstance. Any portion of the Options granted hereunder that have vested and become exercisable prior to the Termination Date will expire on the earlier of (i) 30 days after the Termination Date (provided that such period shall be extended to (A) six (6) months after the Termination Date in the event of Employee’s termination due to death or “disability” (as defined in the Employment Agreement) or (B) two (2) years after the Termination Date in the event of Employee’s termination by the Company without Cause (as defined in the Employment Agreement) and (ii) the close of business on the tenth anniversary of the date of this Agreement. Notwithstanding any provision in this Agreement to the contrary, any portion of the Options granted hereunder which have not been exercised prior to or in connection with a Sale of the Company shall expire upon the consummation of any such transaction.

 

 
 

 

(f)  Procedure for Exercise . At any time after all or any portion of the Options granted hereunder have become exercisable with respect to any Option Shares and prior to the close of business on the tenth anniversary of the date of this Agreement (except as provided for in  Section 2(e)  above), Employee may exercise all or any portion of the Options granted hereunder with respect to Option Shares vested pursuant to  Section 2(b)  above by delivering written notice of exercise to the Company, together with (i) a written acknowledgment that Employee has read and has been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to Employee regarding the Company, and (ii) payment in full by delivery of a cashier’s, personal or certified check or wire transfer of immediately available funds to the Company in the amount equal to the number of Option Shares to be acquired multiplied by the applicable option exercise price.

 

(g)  Securities Laws Restrictions . Employee represents that when Employee exercises any portion of the Options he or she will be purchasing the Option Shares represented thereby for Employee’s own account and not on behalf of others. Employee understands and acknowledges that federal, state and foreign securities laws govern and restrict Employee’s right to offer, sell or otherwise dispose of any Option Shares unless Employee’s offer, sale or other disposition thereof is registered under the Securities Act and federal, state and foreign securities laws or, in the opinion of the Company’s counsel, such offer, sale or other disposition is exempt from registration thereunder. Employee agrees that he or she will not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement (or similar filing under applicable securities law) with the Securities and Exchange Commission or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other applicable securities law. Employee further understands that the certificates for any Option Shares which Employee purchases will bear the legend set forth in the Plan or such other legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws.

 

(h)  Limited Transferability of the Options . The Options granted hereunder are personal to Employee and are not transferable by Employee except pursuant to the laws of descent or distribution. Only Employee or his legal guardian or representative may exercise the Options granted hereunder.

 

(i)  Section 83(b) Election . Within 30 days after Employee has exercised any portion of the Options, in the event Employee is subject to United States federal income tax, Employee may make an effective election with the Internal Revenue Service under Section 83(b) of the Code relative to the Option Shares received by Employee pursuant to the exercise of such portion of the Options.

 

 
 

 

3.  Employee’s Representations . Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Employee does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Employee is a party or by which he or she is bound, (ii) except as has been expressly disclosed to the Company prior to the date of this Agreement, Employee is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity (other than the Company or one of its Subsidiaries) and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Employee, enforceable in accordance with its terms. Employee hereby acknowledges and represents that he or she has consulted with (or has had an opportunity to consult with) independent legal counsel regarding his or her rights and obligations under this Agreement (including, without limitation, the Plan) and that he or she fully understands the terms and conditions contained herein and therein.

 

4.  Notices . Any notices required or permitted under this Agreement or the Plan will be delivered in accordance with the requirements of the Plan.

 

5.  Third Party Beneficiaries; Successors and Assigns . The parties hereto acknowledge and agree that the Investors are third party beneficiaries of this Agreement and the Plan. Except as otherwise provided herein, this Agreement and the Plan shall bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns.

 

6.  Complete Agreement . This Agreement and the Plan and the other documents referred to herein and therein embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

 

7.  No Strict Construction . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party.

 

8.  Counterparts . This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement.

 

9.  Governing Law . This Agreement will be subject to the governing law provisions of the Plan as if fully set forth in this Agreement.

 

10.  Remedies . Each of the parties to this Agreement will be entitled to any of the remedies specified in the Plan.

 

11.  Amendment and Waiver . The provisions of this Agreement may be amended or waived only with the prior written consent of the Board and Employee, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

 
 

 

IN WITNESS WHEREOF, the parties hereto have executed this Share Option Agreement as of the date first written above.

 

Reign Sapphire Corporation
   
By:  
  Joseph Segelman
Its: President and
  Chief Executive Officer
 
 
Joseph Segelman (“Employee”)

 

 
 

 

EXHIBIT A

REIGN SAPPHIRE CORPORATION

2015 EQUITY INCENTIVE PLAN

 

REIGN SAPPHIRE CORPORATION

2015 EQUITY INCENTIVE PLAN

 

SECTION 1. PURPOSE

The purpose of the Reign Sapphire Corporation 2015 Equity Incentive Plan is to attract, retain and motivate employees, officers, directors, consultants, agents, advisors and independent contractors of the Company and its Related Companies by providing them the opportunity to acquire a proprietary interest in the Company and to link their interests and efforts to the long-term interests of the Company's stockholders.

 

SECTION 2. DEFINITIONS

Certain terms used in the Plan have the meanings set forth in Appendix A.

 

SECTION 3. ADMINISTRATION

 

3.1 Administration of the Plan

The Plan shall be administered by the Board. All references in the Plan to the " Plan Administrator " shall be to the Board.

3.2 Administration and Interpretation by Plan Administrator

(a)          Except for the terms and conditions explicitly set forth in the Plan, the Plan Administrator shall have full power and exclusive authority, to the extent permitted by applicable law and subject to such orders or resolutions not inconsistent with the provisions of the Plan as may from time to time be adopted by the Board to (i) select the Eligible Persons to whom Awards may from time to time be granted under the Plan; (ii) determine the type or types of Award to be granted to each Participant under the Plan; (iii) determine the number of shares of Common Stock to be covered by each Award granted under the Plan; (iv) determine the terms and conditions of any Award granted under the Plan; (v) approve the forms of notice or agreement for use under the Plan; (vi) determine whether, to what extent and under what circumstances Awards may be settled in cash, shares of Common Stock or other property or canceled or suspended; (vii) determine whether, to what extent and under what circumstances cash, shares of Common Stock, other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the Participant; (viii) interpret and administer the Plan and any instrument evidencing an Award or notice or agreement entered into under the Plan; (ix) establish such rules and regulations as it shall deem appropriate for the proper administration of the Plan; (x) delegate ministerial duties to such of the Company's employees as it so determines; and (xi) make any other determination and take any other action that the Plan Administrator deems necessary or desirable for administration of the Plan.

 

 
 

 

(b)          The effect on the vesting of an Award of a Company-approved leave of absence or a Participant's reduction in hours of employment or service shall be determined by the Company's chief human resources officer or other person performing that function or, with respect to directors or executive officers, by the Board, whose determination shall be final.

(c)          Decisions of the Plan Administrator shall be final, conclusive and binding on all persons, including the Company, any Participant, any stockholder and any Eligible Person. A majority of the members of the Plan Administrator may determine its actions.

 

SECTION 4. SHARES SUBJECT TO THE PLAN

 

4.1 Authorized Number of Shares

Subject to adjustment from time to time as provided in Section 14.1, a maximum of 10,000,000 (Ten Million) shares of Common Stock shall be available for issuance under the Plan. Shares issued under the Plan shall be drawn from authorized and unissued shares or shares now held or subsequently acquired by the Company as treasury shares.

4.2 Share Usage

(a)          Shares of Common Stock covered by an Award shall not be counted as used unless and until they are actually issued and delivered to a Participant. If any Award lapses, expires, terminates or is canceled prior to the issuance of shares thereunder or if shares of Common Stock are issued under the Plan to a Participant and thereafter are forfeited to or otherwise reacquired by the Company, the shares subject to such Awards and the forfeited or reacquired shares shall again be available for issuance under the Plan. Any shares of Common Stock (i) tendered by a Participant or retained by the Company as full or partial payment to the Company for the purchase price of an Award or to satisfy tax withholding obligations in connection with an Award or (ii) covered by an Award that is settled in cash or in a manner such that some or all of the shares covered by the Award are not issued shall be available for Awards under the Plan. The number of shares of Common Stock available for issuance under the Plan shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional shares of Common Stock or credited as additional shares of Common Stock subject or paid with respect to an Award.

(b)          The Plan Administrator shall also, without limitation, have the authority to grant Awards as an alternative to or as the form of payment for grants or rights earned or due under other compensation plans or arrangements of the Company.

(c)          Notwithstanding anything in the Plan to the contrary, the Plan Administrator may grant Substitute Awards under the Plan. In the event that a written agreement between the Company and an Acquired Entity pursuant to which a merger or consolidation is completed is approved by the Board and that agreement sets forth the terms and conditions of the substitution for or assumption of outstanding awards of the Acquired Entity, those terms and conditions shall be deemed to be the action of the Plan Administrator without any further action by the Plan Administrator.

 

 
 

 

(d)          Notwithstanding the foregoing, the maximum number of shares that may be issued upon the exercise of Incentive Stock Options shall equal the aggregate share number stated in Section 4.1, subject to adjustment as provided in Section 14.1.

 

SECTION 5. ELIGIBILITY

An Award may be granted to any employee, officer or director of the Company or a Related Company whom the Plan Administrator from time to time selects. An Award may also be granted to any consultant, agent, advisor or independent contractor for bona fide services rendered to the Company or any Related Company that (a) are not in connection with the offer and sale of the Company's securities in a capital-raising transaction and (b) do not directly or indirectly promote or maintain a market for the Company's securities.

 

SECTION 6. AWARDS

 

6.1 Form, Grant and Settlement of Awards

The Plan Administrator shall have the authority, in its sole discretion, to determine the type or types of Awards to be granted under the Plan. Such Awards may be granted either alone, in addition to or in tandem with any other type of Award. Any Award settlement may be subject to such conditions, restrictions and contingencies as the Plan Administrator shall determine.

6.2 Evidence of Awards

Awards granted under the Plan shall be evidenced by a written, including an electronic, instrument that shall contain such terms, conditions, limitations and restrictions as the Plan Administrator shall deem advisable and that are not inconsistent with the Plan.

6.3 Deferrals

The Plan Administrator may permit or require a Participant to defer receipt of the payment of any Award if and to the extent set forth in the notice or agreement evidencing the Award at the time of grant. If any such deferral election is permitted or required, the Plan Administrator, in its sole discretion, shall establish rules and procedures for such payment deferrals, which may include the grant of additional Awards or provisions for the payment or crediting of interest or dividend equivalents, including converting such credits to deferred stock unit equivalents; provided, however, that the terms of any deferrals under this Section 6.3 shall comply with all applicable law, rules and regulations, including, without limitation, Section 409A of the Code.

6.4 Dividends and Distributions

Participants may, if and to the extent the Plan Administrator so determines and sets for in the notice or agreement evidencing the Award at the time of grant, be credited with dividends paid with respect to shares underlying an Award or dividend equivalents in a manner determined by the Plan Administrator in its sole discretion. The Plan Administrator may apply any restrictions to the dividends or dividend equivalents that the Plan Administrator deems appropriate. The Plan Administrator, in its sole discretion, may determine the form of payment of dividends or dividend equivalents, including cash, shares of Common Stock, Restricted Stock or Stock Units.

 

 
 

 

SECTION 7. OPTIONS

 

7.1 Grant of Options

The Plan Administrator may grant Options designated as Incentive Stock Options or Nonqualified Stock Options.

7.2 Option Exercise Price

The exercise price for shares purchased under an Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date as determined by the Board, but shall not be less than the minimum exercise price required by Section 8.3 with respect to Incentive Stock Options, except in the case of Substitute Awards.

7.3 Term of Options

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the maximum term of an Option (the " Option Term ") shall be ten years from the Grant Date. For Incentive Stock Options, the Option Term shall be as specified in Section 8.4.

7.4 Exercise of Options

The Plan Administrator shall establish and set forth in each instrument that evidences an Option the time at which, or the installments in which, the Option shall vest and become exercisable, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall vest and become exercisable according to the following schedule, which may be waived or modified by the Plan Administrator at any time:

 

Period of Participant's Continuous

Employment or Service With the

Company or Its Related Companies

From the Vesting Commencement Date

 

Portion of Total Option That

Is Vested and Exercisable

Annually   Equal Installments
After 3 years   100%

 

To the extent an Option has vested and become exercisable, the Option may be exercised in whole or from time to time in part by delivery to the Company of a properly executed stock option exercise agreement or notice, in a form and in accordance with procedures established by the Plan Administrator, setting forth the number of shares with respect to which the Option is being exercised, the restrictions imposed on the shares purchased under such exercise agreement or notice, if any, and such representations and agreements as may be required by the Plan Administrator, accompanied by payment in full as described in Sections 7.5 and 12. An Option may be exercised only for whole shares and may not be exercised for less than a reasonable number of shares at any one time, as determined by the Plan Administrator.

7.5 Payment of Exercise Price

The exercise price for shares purchased under an Option shall be paid in full to the Company by delivery of consideration equal to the product of the Option exercise price and the number of shares purchased. Such consideration must be paid before the Company will issue the shares being purchased and must be in a form or a combination of forms acceptable to the Plan Administrator for that purchase, which forms may include:

 

 
 

 

(a)          cash;

(b)          check or wire transfer;

(c)          having the Company withhold shares of Common Stock that would otherwise be issued on exercise of the Option that have a Fair Market Value on the date of exercise of the Option equal to the exercise price of the Option and, if applicable, shares equal to or less than the withholding required by Section 12 hereof;

(d)          tendering (either actually or, if and as so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by attestation) shares of Common Stock owned by the Participant that on the day prior to the exercise date have a Fair Market Value equal to the aggregate exercise price of the shares being purchased under the Option;

(e)          if and so long as the Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, and to the extent permitted by law, delivery of a properly executed exercise agreement or notice, together with irrevocable instructions to a brokerage firm designated or approved by the Company to deliver promptly to the Company the aggregate amount of proceeds to pay the Option exercise price and any withholding tax obligations that may arise in connection with the exercise, all in accordance with the regulations of the Federal Reserve Board; or

(f)          such other consideration as the Plan Administrator may permit.

In addition, to assist a Participant (including directors and executive officers) in acquiring shares of Common Stock pursuant to an Option granted under the Plan, the Plan Administrator, in its sole discretion and to the extent permitted by applicable law, may authorize, either at the Grant Date or at any time before the acquisition of Common Stock pursuant to the Option, (i) the payment by a Participant of the purchase price of the Common Stock by a promissory note or (ii) the guarantee by the Company of a loan obtained by the Participant from a third party. Such notes or loans must be full recourse to the extent necessary to avoid adverse accounting charges to the Company's earnings for financial reporting purposes. Subject to the foregoing, the Plan Administrator shall in its sole discretion specify the terms of any loans or loan guarantees, including the interest rate and terms of and security for repayment.

7.6 Effect of Termination of Service

The Plan Administrator shall establish and set forth in each instrument that evidences an Option whether the Option shall continue to be exercisable, and the terms and conditions of such exercise, after a Termination of Service, any of which provisions may be waived or modified by the Plan Administrator at any time. If not so established in the instrument evidencing the Option, the Option shall be exercisable according to the following terms and conditions, which may be waived or modified by the Plan Administrator at any time:

(a)         Any portion of an Option that is not vested and exercisable on the date of a Participant's Termination of Service shall expire on such date.

(b)         Any portion of an Option that is vested and exercisable on the date of a Participant's Termination of Service shall expire on the earliest to occur of:

(i)          if the Participant's Termination of Service occurs for reasons other than Cause, Retirement, Disability or death, the date that is three months after such Termination of Service;

(ii)         if the Participant's Termination of Service occurs by reason of Retirement, Disability or death, the one-year anniversary of such Termination of Service; and

(iii)        the Option Expiration Date.

Notwithstanding the foregoing, if a Participant dies after the Participant's Termination of Service but while an Option is otherwise exercisable, the portion of the Option that is vested and exercisable on the date of such Termination of Service shall expire upon the earlier to occur of (y) the Option Expiration Date and (z) the one-year anniversary of the date of death, unless the Plan Administrator determines otherwise.

 

 
 

 

Notwithstanding the foregoing, to the extent required by applicable law, unless employment or services are terminated for Cause, the right to exercise an Option in the event of Termination of Service, to the extent that the Participant is otherwise entitled to exercise an Option on the date of Termination of Service, shall be

a.          at least six months from the date of a Participant's Termination of Service if termination was caused by death or Disability; and

b.          at least 30 days from the date of a Participant's Termination of Service if termination was caused by other than death or Disability;

c.           but in no event later than the Option Expiration Date.

Also notwithstanding the foregoing, in case a Participant's Termination of Service occurs for Cause, all Options granted to the Participant shall automatically expire upon first notification to the Participant of such termination, unless the Plan Administrator determines otherwise. If a Participant's employment or service relationship with the Company is suspended pending an investigation of whether the Participant shall be terminated for Cause, all the Participant's rights under any Option shall likewise be suspended during the period of investigation. If any facts that would constitute termination for Cause are discovered after a Participant's Termination of Service, any Option then held by the Participant may be immediately terminated by the Plan Administrator, in its sole discretion.

(c)          A Participant's change in status from an employee of the Company or a Related Company to a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company or a change in status from a nonemployee director, consultant, advisor or independent contractor of the Company or a Related Company to an employee of the Company or a Related Company shall not be considered a Termination of Service for purposes of this Section 7.6.

 

SECTION 8. INCENTIVE STOCK OPTION LIMITATIONS

 

Notwithstanding any other provisions of the Plan, the terms and conditions of any Incentive Stock Options shall in addition comply in all respects with Section 422 of the Code or any successor provision, and any applicable regulations thereunder, including, to the extent required thereunder, the following:

8.1 Dollar Limitation

To the extent the aggregate Fair Market Value (determined as of the Grant Date) of Common Stock with respect to which a Participant's Incentive Stock Options become exercisable for the first time during any calendar year (under the Plan and all other stock option plans of the Company and its parent and subsidiary corporations) exceeds $100,000, such portion in excess of $100,000 shall be treated as a Nonqualified Stock Option. In the event the Participant holds two or more such Options that become exercisable for the first time in the same calendar year, such limitation shall be applied on the basis of the order in which such Options are granted.

 

 
 

 

8.2 Eligible Employees

Individuals who are not employees of the Company or one of its parent or subsidiary corporations may not be granted Incentive Stock Options.

8.3 Exercise Price

The exercise price of an Incentive Stock Option shall be at least 100% of the Fair Market Value of the Common Stock on the Grant Date and, in the case of an Incentive Stock Option granted to a Participant who owns more than 10% of the total combined voting power of all classes of the stock of the Company or of its parent or subsidiary corporations (a " Ten Percent Stockholder "), shall not be less than 110% of the Fair Market Value of the Common Stock on the Grant Date. The determination of more than 10% ownership shall be made in accordance with Section 422 of the Code.

8.4 Option Term

Subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the Option, the Option Term of an Incentive Stock Option shall not exceed ten years, and in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, shall not exceed five years.

8.5 Exercisability

An Option designated as an Incentive Stock Option shall cease to qualify for favorable tax treatment as an Incentive Stock Option to the extent it is exercised (if permitted by the terms of the Option) (a) more than three months after the date of a Participant's Termination of Service if termination was for reasons other than death or Disability, (b) more than one year after the date of a Participant's Termination of Service if termination was by reason of Disability, or (c) after the Participant has been on leave of absence for more than 90 days, unless the Participant's reemployment rights are guaranteed by statute or contract.

8.6 Taxation of Incentive Stock Options

In order to obtain certain tax benefits afforded to Incentive Stock Options under Section 422 of the Code, the Participant must hold the shares acquired upon the exercise of an Incentive Stock Option for two years after the Grant Date and one year after the date of exercise. A Participant may be subject to the alternative minimum tax at the time of exercise of an Incentive Stock Option. The Participant shall give the Company prompt notice of any disposition of shares acquired on the exercise of an Incentive Stock Option prior to the expiration of such holding periods.

8.7 Code Definitions

For the purposes of this Section 8, "disability," "parent corporation" and "subsidiary corporation" shall have the meanings attributed to those terms for purposes of Section 422 of the Code.

8.8 Promissory Notes

The amount of any promissory note delivered pursuant to Section 7.5 in connection with an Incentive Stock Option shall bear interest at a rate specified by the Plan Administrator, but in no case less than the rate required to avoid imputation of interest (taking into account any exceptions to the imputed interest rules) for federal income tax purposes.

 

 
 

 

SECTION 9. STOCK APPRECIATION RIGHTS

 

9.1 Grant of Stock Appreciation Rights

The Plan Administrator may grant Stock Appreciation Rights to Participants at any time on such terms and conditions as the Plan Administrator shall determine in its sole discretion. An SAR may be granted in tandem with an Option or alone (" freestanding "). The grant price of a tandem SAR shall be equal to the exercise price of the related Option. The grant price of a freestanding SAR shall be established in accordance with procedures for Options set forth in Section 7.2. An SAR may be exercised upon such terms and conditions and for the term as the Plan Administrator determines in its sole discretion; provided, however, that, subject to earlier termination in accordance with the terms of the Plan and the instrument evidencing the SAR, the maximum term of a freestanding SAR shall be ten years, and in the case of a tandem SAR, (a) the term shall not exceed the term of the related Option and (b) the tandem SAR may be exercised for all or part of the shares subject to the related Option upon the surrender of the right to exercise the equivalent portion of the related Option, except that the tandem SAR may be exercised only with respect to the shares for which its related Option is then exercisable.

9.2 Payment of SAR Amount

Upon the exercise of an SAR, a Participant shall be entitled to receive payment in an amount determined by multiplying: (a) the difference between the Fair Market Value of the Common Stock for the date of exercise over the grant price of the SAR by (b) the number of shares with respect to which the SAR is exercised. At the discretion of the Plan Administrator as set forth in the instrument evidencing the Award, the payment upon exercise of an SAR may be in cash, in shares, in some combination thereof or in any other manner approved by the Plan Administrator in its sole discretion.

9.3 Waiver of Restrictions

Subject to Section 17.3, the Plan Administrator, in its sole discretion, may waive any other terms, conditions or restrictions on any SAR under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

 

SECTION 10. STOCK AWARDS, RESTRICTED STOCK AND STOCK UNITS

 

10.1 Grant of Stock Awards, Restricted Stock and Stock Units

The Plan Administrator may grant Stock Awards, Restricted Stock and Stock Units on such terms and conditions and subject to such repurchase or forfeiture restrictions, if any, which may be based on continuous service with the Company or a Related Company or the achievement of any performance goals, as the Plan Administrator shall determine in its sole discretion, which terms, conditions and restrictions shall be set forth in the instrument evidencing the Award.

10.2 Vesting of Restricted Stock and Stock Units

Upon the satisfaction of any terms, conditions and restrictions prescribed with respect to Restricted Stock or Stock Units, or upon a Participant's release from any terms, conditions and restrictions of Restricted Stock or Stock Units, as determined by the Plan Administrator, and subject to the provisions of Section 12, (a) the shares of Restricted Stock covered by each Award of Restricted Stock shall become transferable by the Participant subject to the terms and conditions of the Plan, the instrument evidencing the Award, and applicable securities laws, and (b) Stock Units shall be paid in shares of Common Stock or, if set forth in the instrument evidencing the Awards, in cash or a combination of cash and shares of Common Stock. Any fractional shares subject to such Awards shall be paid to the Participant in cash.

 

 
 

 

10.3 Waiver of Restrictions

Subject to Section 17.3, the Plan Administrator, in its sole discretion, may waive the repurchase or forfeiture period and any other terms, conditions or restrictions on any Restricted Stock or Stock Unit under such circumstances and subject to such terms and conditions as the Plan Administrator shall deem appropriate.

 

SECTION 11. OTHER STOCK OR CASH-BASED AWARDS

 

Subject to the terms of the Plan and such other terms and conditions as the Plan Administrator deems appropriate, the Plan Administrator may grant other incentives payable in cash or in shares of Common Stock under the Plan as it determines.

 

SECTION 12. WITHHOLDING

 

The Company may require the Participant to pay to the Company the amount of (a) any taxes that the Company is required by applicable federal, state, local or foreign law to withhold with respect to the grant, vesting or exercise of an Award (" tax withholding obligations ") and (b) any amounts due from the Participant to the Company or to any Related Company (" other obligations "). The Company shall not be required to issue any shares of Common Stock or otherwise settle an Award under the Plan until such tax withholding obligations and other obligations are satisfied.

The Plan Administrator may permit or require a Participant to satisfy all or part of the Participant's tax withholding obligations and other obligations by (a) paying cash to the Company, (b) having the Company withhold an amount from any cash amounts otherwise due or to become due from the Company to the Participant, (c) having the Company withhold a number of shares of Common Stock that would otherwise be issued to the Participant (or become vested in the case of Restricted Stock) having a Fair Market Value equal to the tax withholding obligations and other obligations, or (d) surrendering a number of shares of Common Stock the Participant already owns having a value equal to the tax withholding obligations and other obligations. The value of the shares so withheld or tendered may not exceed the employer's minimum required tax withholding rate.

 

SECTION 13. ASSIGNABILITY

 

No Award or interest in an Award may be sold, assigned, pledged (as collateral for a loan or as security for the performance of an obligation or for any other purpose) or transferred by a Participant or made subject to attachment or similar proceedings otherwise than by will or by the applicable laws of descent and distribution, except to the extent the Participant designates one or more beneficiaries on a Company-approved form who may exercise the Award or receive payment under the Award after the Participant's death. During a Participant's lifetime, an Award may be exercised only by the Participant. Notwithstanding the foregoing and to the extent permitted by Section 422 of the Code, the Plan Administrator, in its sole discretion, may permit transfer to a revocable trust or as otherwise permitted by Rule 701 of the Securities Act, subject to such terms and conditions as the Plan Administrator shall specify.

 

 
 

 

SECTION 14. ADJUSTMENTS

 

14.1 Adjustment of Shares

In the event, at any time or from time to time, a stock dividend, stock split, spin-off, combination or exchange of shares, recapitalization, merger, consolidation, distribution to stockholders other than a normal cash dividend, or other change in the Company's corporate or capital structure results in (a) the outstanding shares of Common Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or kind of securities of the Company or any other company or (b) new, different or additional securities of the Company or any other company being received by the holders of shares of Common Stock, then the Plan Administrator shall make proportional adjustments in (i) the maximum number and kind of securities available for issuance under the Plan; (ii) the maximum number and kind of securities issuable as Incentive Stock Options as set forth in Section 4.2(d); and (iii) the number and kind of securities that are subject to any outstanding Award and the per share price of such securities, without any change in the aggregate price to be paid therefor. The determination by the Plan Administrator as to the terms of any of the foregoing adjustments shall be conclusive and binding.

Notwithstanding the foregoing, the issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services rendered, either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, outstanding Awards. Also notwithstanding the foregoing, a dissolution or liquidation of the Company or a Company Transaction shall not be governed by this Section 14.1 but shall be governed by Sections 14.2 and 14.3, respectively.

14.2 Dissolution or Liquidation

To the extent not previously exercised or settled, and unless otherwise determined by the Plan Administrator in its sole discretion, Options, Stock Appreciation Rights and Stock Units shall terminate immediately prior to the dissolution or liquidation of the Company. To the extent a vesting condition, forfeiture provision or repurchase right applicable to an Award has not been waived by the Plan Administrator, the Award shall be forfeited immediately prior to the consummation of the dissolution or liquidation.

 

 
 

 

14.3 Company Transaction

14.3.1           Effect of a Company Transaction

Notwithstanding any other provision of the Plan to the contrary, unless the Plan Administrator shall determine otherwise with respect to a particular Award in the instrument evidencing the Award or in a written employment, services or other agreement between the Participant and the Company or a Related Company, in the event of a Company Transaction that is not a Related Party Transaction, all outstanding Awards shall become fully vested and exercisable or payable, and all applicable deferral and restriction limitations or forfeiture provisions shall lapse, immediately prior to the Company Transaction, and then terminate upon effectiveness of the Company Transaction, unless such Awards are assumed or substituted for by the Successor Company. Notwithstanding the foregoing, with respect to outstanding Options or Stock Appreciation Rights, the Plan Administrator, in its sole discretion, may instead provide that such Awards shall terminate upon consummation of such Company Transaction and that each such Participant shall receive, in exchange therefor, a cash payment equal to the amount (if any) by which (a) the Acquisition Price multiplied by the number of shares of Common Stock subject to such outstanding Options or SARs (either to the extent then vested and exercisable or whether or not then vested and exercisable, as determined by the Plan Administrator in its sole discretion) exceeds (b) the respective aggregate exercise price for such Options or grant price for such SARs. If and to the extent the Successor Company assumes or substitutes outstanding Awards, the vesting and exercisability or payment provisions applicable to such Awards shall remain in full effect and continue with respect to the Awards or any awards that may be issued in exchange or in substitution for such Awards, and the forfeiture provisions applicable to Restricted Stock shall not lapse, and all such restrictions shall continue with respect to any shares of the Successor Company or other consideration that may be issued in exchange or in substitution for such Restricted Stock.

14.3.2           Assumption or Substitution

For the purposes of this Section 14.3, an Award shall be considered assumed or substituted for if following the Company Transaction, an option or right confers the right to purchase or receive, for each share of Common Stock subject to the Award immediately prior to the Company Transaction, the consideration (whether stock, cash, or other securities or property) received in the Company Transaction by holders of Common Stock for each share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares); provided, however, that if such consideration received in the Company Transaction is not solely common stock of the Successor Company, the Plan Administrator may, with the consent of the Successor Company, provide for the consideration to be received upon the exercise of the Option, for each share of Common Stock subject thereto, to be solely common stock of the Successor Company substantially equal in fair market value to the per share consideration received by holders of Common Stock in the Company Transaction. The determination of such substantial equality of value of consideration shall be made by the Plan Administrator, and its determination shall be conclusive and binding.

14.4 Further Adjustment of Awards

Subject to Sections 14.2 and 14.3, the Plan Administrator shall have the discretion, exercisable at any time before a sale, merger, consolidation, reorganization, liquidation, dissolution or change in control of the Company, as defined by the Plan Administrator, to take such further action as it determines to be necessary or advisable with respect to Awards. Such authorized action may include (but shall not be limited to) establishing, amending or waiving the type, terms, conditions or duration of, or restrictions on, Awards so as to provide for earlier, later, extended or additional time for exercise, lifting restrictions and other modifications, and the Plan Administrator may take such actions with respect to all Participants, to certain categories of Participants or only to individual Participants. The Plan Administrator may take such action before or after granting Awards to which the action relates and before or after any public announcement with respect to such sale, merger, consolidation, reorganization, liquidation, dissolution or change in control that is the reason for such action.

 

 
 

 

14.5 No Limitations

The grant of Awards shall in no way affect the Company's right to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

14.6 Fractional Shares

In the event of any adjustment in the number of shares covered by any Award, each such Award shall cover only the number of full shares resulting from such adjustment.

14.7 Section 409A of the Code

Notwithstanding anything in this Plan to the contrary, (a) any adjustments made pursuant to this Section 14 to Awards that are considered "deferred compensation" within the meaning of Section 409A of the Code shall be made in compliance with the requirements of Section 409A of the Code; (b) any adjustments made pursuant to Section 14 to Awards that are not considered "deferred compensation" subject to Section 409A of the Code shall be made in such a manner as to ensure that after such adjustment the Awards either (i) continue not to be subject to Section 409A of the Code or (ii) comply with the requirements of Section 409A of the Code; and (c) in any event, the Plan Administrator shall not have the authority to make any adjustments pursuant to Section 14 to the extent the existence of such authority would cause an Award that is not intended to be subject to Section 409A of the Code at the time of grant to be subject thereto.

 

SECTION 15. FIRST REFUSAL RIGHTS

 

15.1 First Refusal Rights

Until the date on which the initial registration of the Common Stock under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the Company shall have the right of first refusal with respect to any proposed sale or other disposition by a Participant of any shares of Common Stock issued pursuant to an Award. Such right of first refusal shall be exercisable in accordance with the terms and conditions established by the Plan Administrator and set forth in the agreement evidencing the Participant's receipt of the shares.

15.2 General

The Company's first refusal rights under this Section 15 are assignable by the Company at any time.

 

 
 

 

SECTION 16. MARKET STANDOFF

In the event of an underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act, including the Company's initial public offering, no person may sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose of or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to any shares issued pursuant to an Award granted under the Plan without the prior written consent of the Company or its underwriters. Such limitations shall be in effect for such period of time as may be requested by the Company or such underwriters; provided, however, that in no event shall such period exceed (a) 180 days after the effective date of the registration statement for such public offering or (b) such longer period requested by the underwriter as is necessary to comply with regulatory restrictions on the publication of research reports (including, but not limited to, NYSE Rule 472 or NASD Conduct Rule 2711). The limitations of this Section 16 shall in all events terminate two years after the effective date of the Company's initial public offering.

In the event of any stock split, stock dividend, recapitalization, combination of shares, exchange of shares or other change affecting the Company's outstanding Common Stock effected as a class without the Company's receipt of consideration, any new, substituted or additional securities distributed with respect to the shares issued under the Plan shall be immediately subject to the provisions of this Section 16, to the same extent the shares issued under the Plan are at such time covered by such provisions.

In order to enforce the limitations of this Section 16, the Company may impose stop-transfer instructions with respect to the purchased shares until the end of the applicable standoff period.

 

SECTION 17. AMENDMENT AND TERMINATION

 

17.1 Amendment, Suspension or Termination

The Board may amend, suspend or terminate the Plan or any portion of the Plan at any time and in such respects as it shall deem advisable; provided, however, that, to the extent required by applicable law, regulation or stock exchange rule, stockholder approval shall be required for any amendment to the Plan. Subject to Section 17.3, the Board may amend the terms of any outstanding Award, prospectively or retroactively.

17.2 Term of the Plan

The Plan shall terminate upon the earlier of (a) ten years after the adoption of the Plan by the Board and (b) the approval of the Plan by the stockholders.  After the Plan is terminated, no future Awards may be granted, but Awards previously granted shall remain outstanding in accordance with their applicable terms and conditions and the Plan's terms and conditions.

17.3 Consent of Participant

The amendment, suspension or termination of the Plan or a portion thereof or the amendment of an outstanding Award shall not, without the Participant's consent, materially adversely affect any rights under any Award theretofore granted to the Participant under the Plan. Any change or adjustment to an outstanding Incentive Stock Option shall not, without the consent of the Participant, be made in a manner so as to constitute a "modification" that would cause such Incentive Stock Option to fail to continue to qualify as an Incentive Stock Option. Notwithstanding the foregoing, any adjustments made pursuant to Section 14 shall not be subject to these restrictions.

Notwithstanding any provision contained in the Plan to the contrary, the Board shall have broad authority to amend the Plan or any outstanding Award without the consent of a Participant to the extent the Board deems necessary or advisable to (a) comply with, or take into account, changes in applicable tax laws, securities laws, accounting rules and other applicable law, rules and regulations or (b) to ensure that an Award is not subject to additional taxes under Section 409A of the Code.

 

 
 

 

SECTION 18. GENERAL

 

18.1 No Individual Rights

No individual or Participant shall have any claim to be granted any Award under the Plan, and the Company has no obligation for uniformity of treatment of Participants under the Plan.

Furthermore, nothing in the Plan or any Award granted under the Plan shall be deemed to constitute an employment contract or confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Related Company or limit in any way the right of the Company or any Related Company to terminate a Participant's employment or other relationship at any time, with or without cause.

18.2 Issuance of Shares

Notwithstanding any other provision of the Plan, the Company shall have no obligation to issue or deliver any shares of Common Stock under the Plan or make any other distribution of benefits under the Plan unless, in the opinion of the Company's counsel, such issuance, delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act or the laws of any state or foreign jurisdiction) and the applicable requirements of any securities exchange or similar entity.

The Company shall be under no obligation to any Participant to register for offering or resale or to qualify for exemption under the Securities Act, or to register or qualify under the laws of any state or foreign jurisdiction, any shares of Common Stock, security or interest in a security paid or issued under, or created by, the Plan, or to continue in effect any such registrations or qualifications if made.

As a condition to the exercise of an Option or any other receipt of Common Stock pursuant to an Award under the Plan, the Company may require (a) the Participant to represent and warrant at the time of any such exercise or receipt that such shares are being purchased or received only for the Participant's own account and without any present intention to sell or distribute such shares and (b) such other action or agreement by the Participant as may from time to time be necessary to comply with the federal, state and foreign securities laws. At the option of the Company, a stop-transfer order against any such shares may be placed on the official stock books and records of the Company, and a legend indicating that such shares may not be pledged, sold or otherwise transferred, unless an opinion of counsel is provided (concurred in by counsel for the Company) stating that such transfer is not in violation of any applicable law or regulation, may be stamped on stock certificates to ensure exemption from registration. The Plan Administrator may also require the Participant to execute and deliver to the Company a purchase agreement or such other agreement as may be in use by the Company at such time that describes certain terms and conditions applicable to the shares.

To the extent the Plan or any instrument evidencing an Award provides for issuance of stock certificates to reflect the issuance of shares of Common Stock, the issuance may be effected on a noncertificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange.

 

 
 

 

18.3 Indemnification

Each person who is or shall have been a member of the Board shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be a party or in which such person may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof, with the Company's approval, or paid by such person in satisfaction of any judgment in any such claim, action, suit or proceeding against such person; provided, however, that such person shall give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to handle and defend it on such person's own behalf. Notwithstanding the prior sentence, the indemnification provisions of this Section 18.3 shall not apply if such loss, cost, liability or expense is a result of such person's own willful misconduct.

The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such person may be entitled under the Company's certificateof incorporation or bylaws, as a matter of law, or otherwise, or of any power that the Company may have to indemnify or hold harmless.

18.4 No Rights as a Stockholder

Unless otherwise provided by the Plan Administrator or in the instrument evidencing the Award or in a written employment, services or other agreement, no Option, Stock Appreciation Right or Stock Unit shall entitle the Participant to any cash dividend, voting or other right of a stockholder unless and until the date of issuance under the Plan of the shares that are the subject of such Award.

18.5 Compliance with Laws and Regulations

In interpreting and applying the provisions of the Plan, any Option granted as an Incentive Stock Option pursuant to the Plan shall, to the extent permitted by law, be construed as an "incentive stock option" within the meaning of Section 422 of the Code.

Any Award granted pursuant to the Plan is intended to comply with the requirements of Section 409A of the Code, including any applicable regulations and guidance issued thereunder, and including transition guidance, to the extent Section 409A of the Code is applicable thereto and the terms of the Plan and any Award granted under the Plan shall be interpreted, operated and administered in a manner consistent with this intention to the extent the Company deems necessary to comply with Section 409A of the Code and any official guidance issued thereunder. Notwithstanding any other provision in the Plan, the Company, to the extent it deems necessary or advisable in its sole discretion, reserves the right, but shall not be required, to unilaterally amend or modify the Plan and any Award granted under the Plan so that the Award qualifies for exemption from or complies with Section 409A of the Code; provided, however, that the Company makes no representations that the Awards shall be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to Awards granted under the Plan. Also notwithstanding the foregoing, if at the time of a scheduled vesting date for an Award granted under the Plan that is subject to Section 409A of the Code the Participant is a “specified employee” of the Company within the meaning of that term under Section 409A of the Code and as determined by the Company, and payment would be treated as a payment made on “separation from service” within the meaning of that term under Section 409A of the Code, then, if such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A of the Code, the payment shall be delayed until the date which is six months after the date of such separation from service or, if earlier, the date of the Participant's death.

 

 
 

 

18.6 Participants in Other Countries or Jurisdictions

Without amending the Plan, the Plan Administrator may grant Awards to eligible persons who are foreign nationals on such terms and conditions different from those specified in the Plan, which may, in the judgment of the Plan Administrator, be necessary or desirable to foster and promote achievement of the purposes of the Plan and shall have the authority to adopt such modifications, procedures, subplans and the like as may be necessary or desirable to comply with provisions of the laws or regulations of other countries or jurisdictions in which the Company or any Related Company may operate or have employees to ensure the viability of the benefits from Awards granted to Participants employed in such countries or jurisdictions, meet the requirements that permit the Plan to operate in a qualified or tax efficient manner, comply with applicable foreign laws or regulations and meet the objectives of the Plan.

18.7 No Trust or Fund

The Plan is intended to constitute an "unfunded" plan. Nothing contained herein shall require the Company to segregate any monies or other property, or shares of Common Stock, or to create any trusts, or to make any special deposits for any immediate or deferred amounts payable to any Participant, and no Participant shall have any rights that are greater than those of a general unsecured creditor of the Company.

18.8 Successors

All obligations of the Company under the Plan with respect to Awards shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all the business and/or assets of the Company.

18.9 Severability

If any provision of the Plan or any Award is determined to be invalid, illegal or unenforceable in any jurisdiction, or as to any person, or would disqualify the Plan or any Award under any law deemed applicable by the Plan Administrator, such provision shall be construed or deemed amended to conform to applicable laws, or, if it cannot be so construed or deemed amended without, in the Plan Administrator's determination, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, person or Award, and the remainder of the Plan and any such Award shall remain in full force and effect.

18.10 Choice of Law and Venue

The Plan, all Awards granted thereunder and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by the laws of the United States, shall be governed by the laws of the State of California without giving effect to principles of conflicts of law. Participants irrevocably consent to the nonexclusive jurisdiction and venue of the state and federal courts located in the State of California.

 

 
 

 

18.11 Legal Requirements

The granting of Awards and the issuance of shares of Common Stock under the Plan is subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

 

SECTION 19. EFFECTIVE DATE

 

The effective date (the " Effective Date ") is the date on which the Plan is adopted by the Board. If the stockholders of the Company do not approve the Plan within 12 months after the Board's adoption of the Plan, any Incentive Stock Options granted under the Plan will be treated as Nonqualified Stock Options. To the extent required under applicable law, any Award exercised before the stockholders of the Company approve the Plan shall be rescinded if the stockholders of the Company do not approve the Plan by the later of (a) within 12 months before or after the date on which the Board adopts the Plan and (b) prior to or within 12 months of the date on which any Award under the Plan is granted in California.

 

 

 

Exhibit 23.2

 

May 26, 2015

 

To the Board of Directors and Stockholders of

Reign Sapphire Corporation

 

We hereby consent to the use in the Prospectus constituting a part of this Registration Statement on Form S-1 (No. XXX-XXXXXX) of our report dated May 26, 2015, relating to the financial statements of Reign Sapphire Corporation (which report expresses an unqualified opinion on the financial statements and includes an explanatory paragraph referring to the Company’s ability to continue as a going concern) for the year ended December 31, 2014 and the period from May 31, 2013 (Inception) through December 31, 2013, which are contained in that Prospectus, which is contained in Part II of this Registration Statement on Form S-1 (No. XXX-XXXXXX).

 

We also consent to the reference to us under the caption “Interests of Named Experts and Counsel” in the Prospectus. 

 

/s/ Hartley Moore Accountancy Corporation

 

HARTLEY MOORE ACCOUNTANCY CORPORATION

May 26, 2015

Irvine, CA

 

 

 

 

 

Exhibit 99.1

 

Reign Sapphire Corporation

Subscription Agreement

 

1. Investment:

 

The undersigned (“Buyer”) subscribes for ____________ Shares of Common Stock of Reign Sapphire Corporation, a Delaware corporation (the “Company”) at $0.50 per share.

 

Total subscription price ($0.50 times the number of Shares): = $_____________________.

 

PLEASE MAKE CHECKS PAYABLE TO: “Reign Sapphire Corporation”

 

2. Investor Information:

 

Name (type or print) _______________________________________________________

 

SSN/EIN/Taxpayer I.D. _____________________________________________________

 

Address: _______________________________________________________________

 

E-Mail address: __________________________________________________________

 

Joint Name (type or print) ___________________________________________________

 

SSN/EIN/Taxpayer I.D _____________________________________________________

 

E-Mail address: __________________________________________________________

 

Address (If different from above) _____________________________________________

 

Mailing Address (if different from above):_______________________________________

Street City/State Zip

 

Business Phone: __________________________________________________________

 

Home Phone: ____________________________________________________________

 

3. Type of Ownership:

 

(You must check one box)

 

¨ Individual
¨ Custodian for
¨ Tenants in Common
¨ Uniform Gifts to Minors Act of the State of: __________
¨ Joint Tenants with rights of Survivorship
¨ Corporation (Inc., LLC, LP) – Please List all officers, directors, partners, managers, etc.:

 

¨ TrustCommunity Property
¨ Other (please explain)

 

 
 

 

4. Further Representations, Warrants and Covenants.

 

Buyer hereby represents warrants, covenants and agrees as follows:

 

(a) Buyer is at least eighteen (18) years of age with an address as set forth in this Subscription Agreement.

(b) Except as set forth in the Prospectus and the exhibits thereto, no representations or warranties, oral or otherwise, have been made to Buyer by the Company or any other person, whether or not associated with the Company or this offering. In entering into this transaction, Buyer is not relying upon any information, other than that contained in the Prospectus and the exhibits thereto and the results of any independent investigation conducted by Buyer at Buyer’s sole discretion and judgment.

(c) Buyer is under no legal disability nor is Buyer subject to any order, which would prevent or interfere with Buyer’s execution, delivery and performance of this Subscription Agreement or his or her purchase of the Shares. The Shares are being purchased solely for Buyer’s own account and not for the account of others and for investment purposes only, and are not being purchased with a view to or for the transfer, assignment, resale or distribution thereof, in whole or part. Buyer has no present plans to enter into any contract, undertaking, agreement or arrangement with respect to the transfer, assignment, resale or distribution of any of the Shares.

(d) Buyer acknowledges that the Company is offering for sale a maximum of 10,000,000 shares of its common stock at a fixed price of $0.50 per share and that there is no minimum number of shares that must be sold in order for the offering to close.

 

Acceptance of Subscription.

 

It is understood that this subscription is not binding upon the Company until accepted by the Company, and that the Company has the right to accept or reject this subscription, in whole or in part, in its sole and complete discretion. If this subscription is rejected in whole, the Company shall return to Buyer, without interest, the Payment tendered by Buyer, in which case the Company and Buyer shall have no further obligation to each other hereunder. In the event of a partial rejection of this subscription, Buyer’s Payment will be returned to Buyer, without interest, whereupon Buyer agrees to deliver a new payment in the amount of the purchase price for the number of Shares to be purchased hereunder following a partial rejection of this subscription.

 

5. Governing Law.

 

This Subscription Agreement shall be governed and construed in all respects in accordance with the laws of the State of Delaware without giving effect to any conflict of laws or choice of law rules.

 

IN WITNESS WHEREOF, this Subscription Agreement has been executed and delivered by the Buyer and by the Company on the respective dates set forth below.

  

   
Signature of Buyer  

 

   
Printed Name  

 

   
Date  

 

INVESTOR SUBSCRIPTION ACCEPTED AS OF ____ day of _____, 201_.

 

REIGN SAPPHIRE CORPORATION

 

By:   

President

 

Deliver completed subscription agreements and checks to:

 

Reign Sapphire Corporation

9465 Wilshire Boulevard
Beverly Hills, California 90212